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Registration No. 333-49160
As filed with the Securities and Exchange Commission on January 2, 2001
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
FORM SB-2
TO CONVERT TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------
BITWISE DESIGNS, INC.
(Exact name of Registrant as specified in charter)
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Delaware 14-1673067
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
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2165 Technology Drive
Schenectady, New York 12308
(518) 346-7799
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-----------------
John T. Botti
President and Chief Executive Officer
2165 Technology Drive
Schenectady, New York 12308
(518) 346-7799
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
-----------------
With copies to:
Victor J. DiGioia, Esq.
Michael A. Goldstein, 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. [ ]
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If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ___________________.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE*
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==============================================================================================================================
Title of Shares to be Registered Amount to be Proposed Proposed Amount of
Registered Maximum Maximum Registration
Offering Price per Aggregate Fee
Share (1) Offering Price(1)
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Common Stock, par value $.001......... 2,053,081 $5.75 $11,805,215.75 $3,281.85
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Common Stock underlying Privately Issued 728,500 $5.75 $4,186,000 $1,163.71
Warrants, par value $.001(2)...................
------------------------------------------------------------------------------------------------------------------------------
Common Stock underlying Series B 666,667 $5.75 $3,833,335.25 $1,065.67
Preferred Stock, par value $.001(3)..........
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Common Stock underlying Series B 1,500,000 $5.75 $8,625,000 $2,397.75
Warrants, par value $.001(4)..................
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Common Stock underlying Privately Issued 360,000 $14.375(5) $5,175,000 $1,438.65
Warrants, par value $.001(2)...................
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Common Stock underlying Privately Issued 520,000 $4.75(6) $2,470,000 $ 652.08
Warrants, par value $.001(2)..........
------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001............. 25,000 $4.75(6) $ 118,750 $ 31.35
------------------------------------------------------------------------------------------------------------------------------
Common Stock underlying Privately Issued 90,000 $3.46875(7) $ 312,187.50 $ 82.42
Warrants, par value $.001 ..........
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Total............................... 5,943,248 $36,525,488.50 $10,113.48
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* Pursuant to Rule 429, this Registration Statement and the Prospectus
contained herein includes (1) 2,053,081 shares of Common Stock; (2)
1,088,500 shares of Common Stock issuable upon exercise of certain
privately-issued Common Stock Purchase Warrants; (3) 666,667 shares of
Common Stock issuable upon the conversion of outstanding shares of Series
B Preferred Stock; and (4) 1,500,000 shares of Common Stock issuable upon
exercise of Series B Common Stock Purchase Warrants previously registered
by the Registrant (Registration Statement No. 333-91475). The Registrant
has previously filed and paid a registration fee of $9,347.63 with
respect to the foregoing shares previously registered.
(1) Total estimated solely for the purpose of determining the registration
fee. Based upon the average high and low prices of Bitwise's Common Stock
as reported on the Nasdaq SmallCap Market on November 16, 1999 ($5.75).
(2) Represents Shares of Common Stock issuable upon exercise of outstanding
privately issued Common Stock purchase warrants held by certain security
holders. Pursuant to Rule 416 of the Securities Act of 1933, as amended
(the "Act"),
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there are being registered such additional number of shares of Common
Stock as may become issuable pursuant to the anti-dilution provisions of
the Warrants.
(3) Represents Shares of Common Stock issuable upon exercise of the
conversion of outstanding shares of Series B Preferred Stock held by
certain security holders. Bitwise is registering a maximum of 666,667
shares issuable upon conversion, based on the rate of the issue price of
$25 per share divided by $1.875. Pursuant to Rule 416 of the Securities
Act of 1933, as amended (the "Act"), there are being registered such
additional number of shares of Common Stock as may become issuable
pursuant to the anti-dilution provisions of the Series B Preferred Stock
as it relates to stock splits, recapitalizations and the like.
(4) Represents Shares of Common Stock issuable upon exercise of outstanding
Series B Common Stock purchase warrants held by certain security holders.
Pursuant to Rule 416 of the Securities Act of 1933, as amended (the
"Act"), there are being registered such additional number of shares of
Common Stock as may become issuable pursuant to the anti-dilution
provisions of the Warrants.
(5) Total estimated solely for the purpose of determining the registration
fee. Based upon the average high and low prices of Bitwise's Common Stock
as reported on the Nasdaq SmallCap Market on January 28, 2000 ($14.375).
(6) Total estimated solely for the purpose of determining the registration
fee. Based upon the average high and low prices of Bitwise's Common Stock
as reported on the Nasdaq National Market on October 31, 2000 ($4.75).
(7) Total estimated solely for the purpose of determining the registration
fee. Based upon the average high and low prices of Bitwise's Common Stock
as reported on the Nasdaq National Market on December 28, 2000
($3.34375).
---------------------------
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.
===================================================================
EXPLANATORY NOTE
This pre-effective amendment No. 1 to the Registration Statement on Form
S-3 is being filed to update and convert a registration statement on Form SB-2
to a Registration Statement on Form S-3. In addition, included in this
Registration Statement are 25,000 shares of common stock and 610,000 shares of
the common stock of the registrant issuable upon the exercise of certain common
stock purchase warrants.
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5,943,248 Shares
BITWISE DESIGNS, INC.
Common Stock
We are registering (1) 2,588,500 shares of Bitwise's common stock, par
value $.001, which will be issued upon the exercise of (a) 1,500,000 Series B
Warrants; and (b) 1,088,500 privately issued common stock purchase warrants; (2)
666,667 shares of our common stock which will be issued upon the conversion of
50,000 shares of our Series B Preferred Stock; and (3) the resale of 2,053,081
shares held by certain selling shareholders. We are also registering an
additional 25,000 shares of common stock and 610,000 shares of our common stock
which will be issued upon the exercise of privately issued common stock purchase
warrants.
We will not receive any of the proceeds from the sale of the Shares by
the Selling Security Holders.
Bitwise's common stock is traded in the over-the counter market and is
quoted on the Nasdaq National Market under the symbol "BTWS" and on the Pacific
Stock Exchange under the symbol "BTWS". On December 28, 2000, the closing price
for the common stock as reported on Nasdaq was $3.3125.
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 7 TO READ ABOUT
CERTAIN FACTORS YOU SHOULD CONSIDER BEFORE BUYING SHARES OF
COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER
REGULATORY BODY HAS APPROVED OR DISAPPROVED THESE SECURITIES
OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Shares of common stock, including the Shares underlying the Series
B Warrants and Private Warrants and the Shares issuable upon the conversion of
the Series B Preferred Stock will be issued by Bitwise upon exercise or
conversion by the holders of the warrants or preferred stock, or the transferees
of the holders. The shares of common stock will be offered and sold from time to
time by the Selling Security Holders and their transferees in the
over-the-counter market, or otherwise, at prices and terms then prevailing or at
prices related to the then-current market price, or in privately negotiated
transactions.
Prospectus dated , 2001
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TABLE OF CONTENTS
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PAGE
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AVAILABLE INFORMATION................................................................1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................................1
PROSPECTUS SUMMARY...................................................................2
THE COMPANY..........................................................................2
THE OFFERING.........................................................................6
RISK FACTORS.........................................................................7
USE OF PROCEEDS ....................................................................13
SELLING SECURITY HOLDERS............................................................14
PLAN OF DISTRIBUTION................................................................18
REPORTS TO SHAREHOLDERS.............................................................19
LEGAL MATTERS.......................................................................19
EXPERTS ...........................................................................19
ADDITIONAL INFORMATION..............................................................19
FORWARD LOOKING STATEMENTS .........................................................20
PART II-INFORMATION NOT REQUIRED IN THE PROSPECTUS..................................21
SIGNATURES..........................................................................27
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AVAILABLE INFORMATION
We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended, and, in accordance therewith, file
reports and other information with the Securities and Exchange Commission.
Reports, proxy and information statements and other information that we file
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,
500 West Madison Street, Room 1400, Chicago, Illinois 60661. 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. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC maintains an Internet site, http://www.sec.gov,
that contains reports, proxy and information statements and other information
that we file electronically with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by Bitwise Designs with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. Our Annual Report on Form 10-KSB, as amended, for the fiscal year
ended June 30, 2000.
2. Our Quarterly Report on Form 10-Q for the quarter ended September
30, 2000.
3. A description of our common stock contained in our registration
statement on Form 8-A filed April 17, 2000.
Each document filed subsequent to the date of this prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of this offering shall be deemed to be incorporated by reference in this
prospectus and shall be part hereof from the date of filing of such document.
All documents filed by the registrant after the date of filing the
initial registration statement on Form S-3 of which this prospectus forms a part
and prior to the effectiveness of such registration statement pursuant to
Section 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 shall
be deemed to be incorporated by reference into this prospectus and to be part
hereof from the date of filing of such documents.
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., 2165 Technology
Drive, Schenectady, New York 12308, telephone (518) 346-7799, Attention: Chief
Financial Officer.
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PROSPECTUS SUMMARY
The following summary is intended to set forth certain pertinent facts
and highlights from material contained in our Annual Report on Form 10-KSB, as
amended, for the fiscal year ended June 30, 2000, incorporated by reference
into this, prospectus.
BITWISE DESIGNS, INC.
OUR BUSINESS
Bitwise Designs, Inc., and its subsidiaries DJS Marketing Group, Inc.,
Authentidate, Inc. and Authentigraph.com, Inc., are engaged in the manufacture
and distribution of document imaging systems, computer systems and related
peripheral equipment, components, and accessories, network and internet services
and Internet-based authentication services.
In March 1996, we acquired DJS (d.b.a Computer Professionals), a system
integrator, and computer reseller in Albany, New York. DJS is an authorized
sales and support provider for Novell, Microsoft Solutions and Lotus Notes.
We established our Authentidate subsidiary during the fiscal year ended
June 30, 2000 to engage in the business of providing end users with a service
providing for the storage, confirmation and authentication of electronic data
and images. Subsequent to the formation of Authentidate, we established with an
German entity, Authentidate International, A.G., a German corporation, to
market the Authentidate service in certain foreign countries. Authentigraph,
also established during the fiscal year ended June 30, 2000, applies the
Authentidate technology to the field of signature authentication as it relates
to sports memorabilia and entertainment collectibles.
PRODUCTS AND SERVICES
Document Management Systems
In January 1996, Bitwise, on a national level, introduced its document
imaging management system under the tradename DocStar which enables users to
scan paper documents onto an optical disk, hard drive or other storage medium
from which they can be retrieved in seconds. This system allows users to
eliminate or significantly reduce paper filing systems. We believe that a broad
spectrum of businesses and governmental agencies experience the problem of
storage, management and security of paper documents. The DocStar product line is
intended to provide a cost effective method of reducing the space necessary to
store documents while granting a user the ability to instantly retrieve
documents.
The operation of a document management system is similar to the operation
of a facsimile machine. Documents are fed into an optical scanner that reads the
documents and stores the information on one of several alternative mass storage
devices. Documents can also be transmitted from or to the system via facsimile
machine or modem. Documents can be retrieved almost instantaneously for viewing,
printing or faxing thereby offering a significant time-saving tool to the modern
office.
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We market the document management system under the tradename DocStar
through a national dealer network. We own one dealership in the Albany, New York
region, which also serves as a test market for new applications and software.
Internet Authentication Services
During the fiscal year ended June 30, 2000, we established the following
subsidiaries to provide authentication services:
- Authentidate, Inc. - to provide a service to accept and store
electronic files via the Internet and date and time stamps those
files with a secure clock to proved content, date and time
authenticity;
- Authentigraph.com, Inc. - to develop an authentication service for
use in the sports memorabilia and collectibles industries; and
- Authentidate International, A.G. - a joint venture with a German
entity to market the Authentidate service in certain foreign
countries.
Computer Products and Services
Along with our subsidiary, DJS, we primarily market the following
different products and services:
- Computer Products and Integration Services;
- Network Services; and
- Internet/Intranet Development Services.
AUTHENTIDATE, INC. AND AUTHENTIGRAPH.COM, INC.
We recently established a majority owned subsidiary named Authentidate,
Inc., to engage in a new business line of providing end users with a service
which will:
- accept and store electronic images from networks and personal
computers throughout the world and from different operating
systems via the Internet;
- indelibly date and time stamp all electronic images received using
a secure clock;
- allow users to transmit only the "secure codes" to Authentidate
fileservers while maintaining the original within the customers
"firewall"; and
- allow users to prove authenticity of time, date and content of
stored electronic documents.
Authentigraph was also recently created to market Authentidate services
to the sports memorabilia and collectibles industries.
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We formed a joint venture in March, 2000, known as Authentidate
International, AG, with a German company to develop the Authentidate software in
foreign languages and to market that product outside the Americas, Japan,
Australia, New Zealand and India. We own 39% of the joint venture.
SERVICES
Authentidate is in the process of developing a Business to Business
product. There currently exists a Retail version on the Internet which was
developed in large part to generate interest and to publicize the B to B
version. Only minor income is expected from the retail version. We retained a
third party consulting firm, Cap Gemini America, Inc., to program and develop
the B to B version. This version is currently being tested and we anticipate a
general release in early 2001.
DJS MARKETING GROUP, INC.
DJS (d/b/a "Computer Professionals") is a network and systems integrator
of computer and peripheral products for a variety of customers, including
corporations, schools, government agencies, manufacturers and distributors. DJS
is one of the largest systems integrators in the Albany, New York region.
DJS provides network integration, Internet/Intranet development,
accounting solutions, service, consultation, document management and video
conferences. DJS also services the products it sells by employing factory
trained computer technicians and network engineers.
PRODUCTS AND SERVICES
Computer Products and Integration Services
DJS purchases personal computers and peripheral computer products from
many different suppliers. Peripheral computer products are products that operate
in conjunction with computers, including but not limited to, printers, monitors,
scanners, modems and software. DJS configures various computer hardware and
peripheral products such as software together, to satisfy a customer's
individual needs.
Network Integration Services
DJS' network integration group designs, implements, installs, manages and
supports enterprise networks with products from Novell, Microsoft, UNIX,
Tricord, Synoptics, Compaq, Cisco and others. Applications that the network
system provides include E-mail, accounting systems, word processing,
communication and any other applications that require the sharing of
information. DJS designs customized solutions for its clients with precise
objectives and its engineers analyze hardware, software, and cabling to ensure
effective and affordable solutions.
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Internet/Intranet Development
DJS offers services related to the Internet, including Internet
connectivity, web page development, and hardware installation. Additionally, DJS
assists its clients through the buying and implementation process with
Internet/Intranet training and ongoing support.
Accounting Solutions
DJS also markets accounting systems from State-of-the-Art to various
end-users such as distributors, manufacturers and wholesalers. DJS analyzes each
particular client's needs and custom designs an accounting system to satisfy
these needs.
Service and Consultation
DJS's service department is authorized to repair and maintain all major
brand products sold by DJS, including warranty and post-warranty equipment. DJS
generally guarantees a four hour response time for all service calls, with an
average resolution time of next day. DJS's engineers also provide complete
system configuration services, which includes installation of all hardware,
including memory, disk drives, network or communication adapters, as well as any
associated software or driver. All units are thoroughly tested after
configuration and all malfunctioning units are eliminated.
Document Management
DJS also offers document imaging services which it believes is an
efficient and financially attainable alternative to conventional, costly paper
trails. Management believes digital documents can be stored, searched, retrieved
and edited in a fraction of the time with complete access to the network and
quality control features. Among other product lines, DJS offers customers our
DocStar line.
Sales and Marketing
DJS markets its products and services throughout New York State, parts of
Vermont and Massachusetts. DJS intends to expand its national and international
sales and marketing departments. Clients include corporations, small office/home
office owners, schools, government agencies, manufacturers and distributors.
OUR OFFICES
We were initially organized in August 1985 and reincorporated under the
laws of the state of Delaware in May 1992. Our executive offices are located at
2165 Technology Drive, Schenectady, New York 12308, our telephone number is
(518) 346-7799, and our Internet address is www.docstar.com.
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THE OFFERING
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Common Stock Offered by the
Selling Security Holders......................... 5,943,248
Common Stock Outstanding
Prior to Offering (1) ......................... 14,856,730
Common Stock Outstanding
After the Offering (2) ........................ 18,721,897
Use of Proceeds (3).............................. Bitwise will not receive any proceeds from
the sales of the Selling Shareholders. We
anticipate that proceeds received from the
exercise of any of privately issued Warrants
will be used for working capital and general
corporate purposes. Please see "Use of
Proceeds."
Nasdaq National Market Symbol
(Common Stock): "BTWS"
Pacific Stock Exchange Symbol
(Common Stock): "BTWS"
</TABLE>
---------------------
(1) Based on the number of shares actually outstanding as of December 4, 2000.
Unless otherwise specifically stated, information throughout this prospectus
excludes as of November 27, 2000:
- 3,000,000 shares of Common Stock reserved for issuance under our 1992 Employee
Stock Option Plan, of which 2,094,713 shares have been reserved for currently
outstanding options and
- 160,000 shares of Common Stock reserved for currently outstanding options
under our Directors Plan.
(2) This assumes the exercise of all of the Series B Warrants and Private
Warrants for which underlying shares are being registered and the conversion of
all shares of Series B Preferred Stock for which the Conversion Shares are
hereby being registered.
(3) We will receive up to approximately $10,465,775 in proceeds upon the
exercise of all of the Series B Warrants, and Private Warrants. We plan to use
all such proceeds for working capital and general corporate purposes. Please see
"Use of Proceeds."
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RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk. The following factors, in addition to those discussed elsewhere, should be
considered carefully in evaluating us and our business. An investment in the
securities is suitable only for those investors who can bear the risk of loss of
their entire investment.
IF WE CONTINUE TO FACE UNCERTAINTIES IN MARKETING THE DOCSTAR SYSTEM, WE MAY
CONTINUE TO LOSE MONEY.
We incurred losses of $5,274,043, $3,166,488 and $5,464,059 for the
fiscal years ended June 30, 2000, 1999 and 1998, respectively. We also incurred
a loss of $1,575,896 for the three months ended September 30, 2000. Furthermore,
for the last three years we have been expanding our marketing and sales efforts
of the DocStar line of document imaging systems which has led to increased costs
associated with the product line. We have also been investing in new
technologies, namely Authentidate. We will continue to incur these costs in the
future as we attempt to increase market awareness and sales of DocStar and
Authentidate. Our 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 we operate. There can be no
assurance that we will be able to achieve profitable operations in future
operating periods.
WE HAVE LIMITED WORKING CAPITAL AND MAY NEED ADDITIONAL FUNDS TO FINANCE FUTURE
OPERATIONS.
Our capital requirements have been and will continue to be significant.
We have been substantially dependent upon public offerings and private
placements of our securities and on short-term and long-term loans from lending
institutions to fund such requirements. We are expending significant amounts of
capital to promote and market the Authentidate and DocStar products. Due to
these expenditures, we have incurred significant losses to date. In the future,
we may need additional funds from loans and/or the sale of equity securities to
fully implement our business plans. No assurance can be given that such funds
will be available or, if available, will be on commercially reasonable terms
satisfactory to us. In the event such funds are not available, we will be forced
to reduce its current and proposed operations.
OUR PRODUCTS MAY NOT BE ACCEPTED BY OUR CONSUMERS WHICH WOULD SERIOUSLY HARM OUR
BUSINESS.
Although we introduced our DocStar imaging system products on a national
level in January 1996, demand and market acceptance for the DocStar imaging
system remains subject to a high level of uncertainty. Achieving widespread
acceptance of this product line will continue to 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. The Authentidate product
line is a new product line and there can 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.
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IF WE CANNOT CONTINUOUSLY ENHANCE OUR PRODUCTS IN RESPONSE TO RAPID CHANGES IN
THE MARKET, OUR BUSINESS WILL BE HARMED.
The computer industry and Internet services industry are characterized by
extensive research and development efforts which result in the frequent
introduction of new products which render existing products obsolete. Our
ability to compete successfully in the future will depend in large part on our
ability to maintain a technically competent research and development staff and
our ability to adapt to technological changes in the industry and enhance and
improve existing products and successfully develop and market new products that
meet the changing needs of our customers. Although we are dedicated to continued
research and development of our products with a view towards offering products
with the most advanced capabilities, there can be no assurance that we will be
able to continue to develop new products on a regular basis which will be
competitive with products offered by other manufacturers. At the present time,
we do not have a targeted level of expenditures for research and development. We
will evaluate all opportunities but believe the majority of our research and
development will be devoted to enhancements of our existing products.
Technological improvements in new products that we and our competitors
offer, which, among other things, results in the rapid decline of the value of
inventories, as well as the general decline in the economy and other factors,
have resulted in recent declines in retail prices for computer products. As
competitive pressures have increased, many companies have ceased operation and
liquidated inventories, further increasing downward pricing pressure. Such
declines have, in the past, and may in the future, reduce our profit margins.
WE DO NOT HAVE PATENTS ON ALL THE TECHNOLOGY WE USE WHICH COULD HARM OUR
COMPETITIVE POSITION.
We do not currently hold any patents and the technology embodied in our
current products cannot be patented. We have three patents pending for the
innovative technology underlying the Authentidate business plan that can verify
the authenticity of digital images by employing a secure clock to stamp the date
and time on each image captured and have registered as trademarks the logo
"BitWise Designs," "DocStar" and "Authentidate". We rely on confidentiality
agreements with our key employees to the extent we deem it to be necessary. We
further intend to file a patent application for any new products we 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 our products from duplication by other
manufacturers. In addition, there can be no assurance that any patents that may
be issued will be effective to protect our products from duplication by other
developers.
Other companies operating within our business segment may independently
develop substantially equivalent proprietary information or otherwise obtain
access to the our know-how. In addition, there can be no assurance that we will
be able to afford the expense of any litigation which may be necessary to
enforce its rights under any patent. Although we believe that the products we
sell 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 we sell are deemed to infringe upon the
patents or proprietary rights of others, we could be required to modify our
products or obtain a license for the
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<PAGE> 14
manufacture and/or sale of such products. There can be no assurance that, in
such an event, we 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 our business. Moreover, there can be
no assurance that we will have the financial or other resources necessary to
enforce or defend a patent infringement or proprietary rights violation action.
In addition, if our products or proposed products are deemed to infringe upon
the patents or proprietary rights of others, we could, under certain
circumstances, become liable for damages, which could also have a material
adverse effect on our business.
WE DEPEND ON OTHERS FOR COMPONENTS OF OUR PRODUCTS, WHICH MAY RESULT IN DELAYS
AND QUALITY-CONTROL ISSUES.
We do not own or lease any manufacturing facilities and do not
manufacture any of the component parts for our products. Rather, we purchase all
of these components from unaffiliated suppliers. All of our products are
assembled at our facilities. We believe that at the present time we have
sufficient sources of supply of component parts, and that in the event any
existing supplier ceases to furnish component parts to us, alternative sources
are available. However, there can be no assurance that the future production
capacity of our current suppliers and manufacturers will be sufficient to
satisfy our requirements or that alternate suppliers and manufacturers will be
available on commercially reasonable terms, or at all. Further, there can be no
assurance that the availability of such supplies will continue in the future.
IF OUR PRODUCTS ARE NOT COMPETITIVE, OUR BUSINESS WILL SUFFER.
Bitwise and its subsidiaries are engaged in the highly competitive
businesses of assembling and distributing document imaging systems, Internet
products, computer hardware and software as well as technical support services
for such businesses. The document imaging business is competitive and we compete
with major manufacturers. Many of these companies have substantially more
experience, greater sales, as well as greater financial and distribution
resources than do we. The most significant aspects of competition are the
quality of products, including advanced capabilities, and price. There can be no
assurance the Company can effectively continue to compete in the future.
The Authentidate business is a new business line and the level of
competition in unknown at this point in time. There can be no assurances,
however, that Authentidate products will achieve market acceptance.
Our DJS subsidiary is engaged in the highly competitive business of
systems integration, computer services and computer reselling. 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.
IF WE LOSE OUR PRESIDENT, OUR BUSINESS WILL BE HARMED.
Our success is largely dependent upon the services of our Chairman of the
Board and President, John T. Botti. The loss of his services would have a
material adverse affect on our business and prospects. We have entered into a
three-year employment agreement with Mr. Botti
9
<PAGE> 15
expiring in January, 2003. We have obtained, for our benefit, "key man" life
insurance in the amount of $1,000,000 on Mr. Botti's life.
SINCE WE HAVE NOT PAID DIVIDENDS ON OUR COMMON STOCK, YOU MAY NOT RECEIVE INCOME
FROM THIS INVESTMENT.
We have not paid any dividends on our Common Stock since our inception
and do not contemplate or anticipate paying any dividends on our Common Stock in
the foreseeable future. Earnings, if any, will be used to finance the
development and expansion of our business.
IF OUR COMMON STOCK IS DELISTED FROM NASDAQ, LIQUIDITY IN OUR COMMON STOCK MAY
BE AFFECTED.
Our Common Stock is listed for trading on the Nasdaq National Market. In
order to continue to be listed on Nasdaq, however, we must meet certain
criteria, including one of the following:
- maintaining $4,000,000 in net tangible assets, a minimum bid price
of $1.00 per share and a market value of its public float of
$5,000,000; or
- having a market capitalization of at least $50,000,000, a minimum
bid price of $5.00 per share and a market value of its public
float of $15,000,000.
On June 30, 2000, our bid price was $5.875. The dilution to our
shareholders which could be caused by the widespread conversion of the Series B
Preferred Stock could cause the per share value of our common stock to drop
below the minimum bid of $1.00 required for continued listing. As of June 30,
2000, we had net tangible assets of approximately $15,700,000 and the market
value of our public float was $60,215,435.
If in the future should we fail to meet Nasdaq maintenance criteria, our
Common Stock may be delisted from Nasdaq, and trading, if any, in our securities
would thereafter be conducted in the non-Nasdaq over-the-counter market. As a
result of such delisting, an investor could find it more difficult to dispose
of, or to obtain accurate quotations as to the market value of, our securities.
Although we anticipate that our Common Stock will continue to be listed
for trading on Nasdaq, if the Common Stock were to become delisted from trading
on Nasdaq and the trading price of the Common Stock were to fall below $5.00 per
share on the date the Common Stock was delisted, trading in such securities
would also be subject to the requirements of certain rules promulgated under the
Exchange Act, which require additional disclosure by broker-dealers in
connection with any trades involving a stock defined as a penny stock
(generally, any non-Nasdaq equity security that has a market price of less than
$5.00 per share, subject to certain exceptions). Such rules require the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. The additional
burdens imposed
10
<PAGE> 16
upon broker-dealers by such requirements may discourage broker-dealers from
effecting transactions in our securities, which could severely limit the market
price and liquidity of such securities and the ability of purchasers to sell
their securities in the secondary market.
OUR PREFERRED STOCK FINANCING MAY RESULT IN DILUTION TO OUR COMMON SHAREHOLDERS.
Dilution of the per share value of our common shares could result from
the conversion of most or all of the Series B Preferred Stock we sold in a
private placement in October 1999. Holders of our Series B Preferred Stock may
convert these shares into shares of our common stock at a conversion price of
$1.875 beginning one year after the issuance of the Series B Preferred Stock.
However, after three years from the closing, the conversion price is subject to
a floating rate equal to the lower of $1.875 or the average of the closing bid
and asked prices of our common stock for the immediately preceding ten
consecutive trading days ending one day prior to the notice of conversion.
The following chart presents the maximum number of common shares issuable
on conversion of the Series B Preferred Stock based on different conversion
rates. While we expect to issue a maximum of 666,667 shares of common stock upon
conversion of the Series B Preferred Stock during the first three years
following the private placement, we could issue a significantly greater number
of common shares upon conversion of the Series B Preferred Stock after October
5, 2002, when the floating conversion rate is triggered.
<TABLE>
<CAPTION>
====================================================================================================
Percentage of Total Shares
Conversion Conversion Maximum Number of Shares of Common Stock
Period Rate of Common Stock Issuable Outstanding
====================================================================================================
<S> <C> <C> <C>
10/5/1999 - N/A 0 0
10/5/2000
----------------------------------------------------------------------------------------------------
10/6/2000 - $1.875 666,667 4.9%
10/5/2002
----------------------------------------------------------------------------------------------------
10/6/2002 - $1.875 666,667 4.9%
----------------------------------------------------------------------------------------------------
10/6/2002 - $1.50 833,333 6.1%
----------------------------------------------------------------------------------------------------
10/6/2002 - $1.00 1,250,000 8.9%
----------------------------------------------------------------------------------------------------
10/6/2002 - $0.75 1,666,667 11.5%
====================================================================================================
</TABLE>
Regardless of the date of exercise, dilution could occur from the
widespread conversion of the Series B Preferred Stock. The following scenarios
could result in dilution to our common shareholders:
- In either period, the conversion price could be lower than the
actual trading price on the day of conversion. This could result
in the holder immediately selling all of its converted common
shares, which would have a dilutive effect on the value of the
outstanding common shares.
11
<PAGE> 17
- After three years, if the average trading price falls below
$1.875, the lower the average trading price, the greater the
number of common shares that a holder of our Series B Preferred
Stock will receive upon conversion. This might further encourage
the holders of the Series B Preferred Stock to covert their shares
into common shares. The increased number of common shares would
further depress the average trading price of our common stock.
- The significant downward pressure on the trading price of our
common stock as Series B Preferred Stock holders converted these
securities and sell the common shares received on conversion could
encourage short sales by the holders of Series B Preferred Stock
or other shareholders. This would place further downward pressure
on the trading price of our common stock. Even the mere perception
of eventual sales of common shares issued on the conversion of the
Series B Preferred Stock could lead to a decline in the trading
price of our common stock.
WE HAVE SOLD RESTRICTED SHARES WHICH MAY DEPRESS OUR STOCK PRICE WHEN IT IS
SELLABLE UNDER RULE 144.
Approximately 2,290,862 shares of Common Stock currently outstanding,
including the Shares being registered for resale pursuant to this Prospectus,
may be deemed "restricted securities" as that term is defined 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. Rule 144 provides, that, in general, a
person holding restricted securities for a period of one year may, every three
months thereafter, sell in brokerage transactions an amount of shares which does
not exceed the greater of one percent of our 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 ours and was not an affiliate at any time during the 90 day period
prior to sale and who has satisfied a two year holding period. Sales of our
Common Stock by certain present stockholders under Rule 144 may, in the future,
have a depressive effect on the market price of our 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 our securities.
OUR OUTSTANDING OPTIONS AND WARRANTS MAY DEPRESS OUR STOCK PRICE.
As of November 30, 2000, there were outstanding immediately exercisable
stock options to purchase an aggregate of 2,094,713 shares of Common Stock at
exercise prices ranging from $0.84 to $11.250 per share, and outstanding
immediately exercisable warrants to purchase an aggregate of 3,115,477 shares of
Common Stock at exercise prices ranging from $.88 to $11.25 per share, including
the Shares underlying the Series B Warrants and the Private Warrants being
registered for resale pursuant to this Prospectus. In addition, there are
outstanding 50,000 shares of our Series B Preferred Stock, which is convertible
into an aggregate of 666,667 Shares of Common Stock. These Conversion Shares are
also being registered for resale pursuant to this Prospectus. To the extent that
outstanding stock options and warrants are exercised or the Series B Preferred
Stock is converted, dilution to our shareholders will occur. Moreover, the terms
upon which we 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 or convert them at a
12
<PAGE> 18
time when we would, in all likelihood, be able to obtain any needed capital on
terms more favorable to us than the exercise and conversion terms provided by
the outstanding options, warrants and preferred stock.
IF WE CANNOT OFFSET FUTURE TAXABLE INCOME OUR TAX LIABILITIES WILL INCREASE.
At June 30, 2000, the date of our most recent fiscal year end, we had net
operating loss carryforwards ("NOLS") for federal income tax purposes of
approximately $17,600,000 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 corporation's outstanding stock
immediately before the date of the ownership change multiplied by the federal
long-term exempt tax rate. Use of our NOLS could also be limited as a result of
grants of stock options under stock option plans and other events. In the event
we achieve profitable operations, any significant limitation on the utilization
of NOLS would have the effect of increasing our current tax liability.
SINCE THE HOLDERS OF OUR OUTSTANDING SERIES A PREFERRED STOCK CONTROL OUR BOARD
OF DIRECTORS, OTHER SHAREHOLDERS MAY NOT BE ABLE TO INFLUENCE OUR DIRECTION.
Our Certificate of Incorporation authorizes our Board of Directors to
issue up to 5,000,000 shares of Preferred Stock, from time to time, in one or
more series. The Board of Directors is authorized, without further approval of
the stockholders, to fix the dividend rights and terms, conversion rights,
voting rights, redemption rights and terms, liquidation preferences, and any
other rights, preferences, privileges and restrictions applicable to each new
series of Preferred Stock. We previously established 200 shares of Series A
Preferred Stock which are owned by John Botti and Ira Whitman, our founders and
officers. Currently there are only 100 shares of Series A Preferred Stock
outstanding, all of which are owned by Mr. Botti. The Series A Preferred Stock
entitles the holders to elect a majority of the Board of Directors. The
existence of such stock could adversely affect the voting power of the holders
of Common Stock and, under certain circumstances, make it more difficult for a
third party to gain control of us, discourage bids for the Common Stock at a
premium, or otherwise adversely affect the market price of the Common Stock. In
addition, we issued 50,000 shares of our Series B Preferred Stock in our
October, 1999 private offering.
USE OF PROCEEDS
Some of the Shares being registered will be acquired from us upon the
exercise of currently outstanding Series B and Private Warrants. We would
receive $10,465,775 in proceeds if all of the Series B and Private Warrants are
exercised. We plan to use all proceeds generated from the exercise of warrants
for working capital and general corporate purposes. We will receive none of the
proceeds from the sale of the Shares.
13
<PAGE> 19
SELLING SECURITY HOLDERS
We have agreed to register the resale of outstanding Shares of Common
Stock and the Shares underlying the Series B Warrants and Private Warrants and
the Shares into which the Series B Preferred Stock is convertible under the
Securities Act and to pay all expenses in connection therewith. An aggregate of
5,943,248 Shares and may be offered and sold pursuant to this prospectus by the
Selling Shareholders. Except as set forth below, none of the Selling
Shareholders has ever held any position or office with us or had any other
material relationship with us.
<TABLE>
<CAPTION>
SHARES/ PERCENTAGE OF
WARRANT SHARES
SHARES/ SHARES/ SHARES/ OWNED AFTER
WARRANT SHARES/ WARRANT SHARES/ CONVERSION OFFERING
CONVERSION SHARES CONVERSION SHARES SHARES (1)
NAME AND ADDRESS OF BENEFICIALLY OWNED OFFERED OWNED AFTER
SELLING SECURITY HOLDER PRIOR TO OFFERING OFFERING
<S> <C> <C> <C> <C>
Windhorst New Technologies, Agi.G 0/125,000/0 0/125,000/0 0 ++
(29)
PFK Acquisition Company I, LLC(30) 0/125,000/0 0/125,000/0 0 ++
Paul F. Klapper (31) (32) 0/67,500/0 0/67,500/0 0 ++
Harvey Birdman (31) 0/27,000/0 0/27,000/0 0 ++
Boston Holdings, LLC (31) 0/54,000/0 0/54,000/0 0 ++
Norman Berman and Karen Kaskey 0/146,500/0 0/146,500/0 0 ++
as Joint Tenants (31) (36)
AmTrust Financial Services, Inc. (33) 25,000/0/0 25,000/0/0 0 ++
Gregory McCauley (34) 0/35,000/0 0/35,000/0 0 ++
Michael R. Hayes (35) 0/10,000/0 0/10,000/0 0 ++
David McCammon (35) 0/10,000/0 0/10,000/0 0 ++
Nicholas Themelis (2) (35) 7,500/10,000/0 0/10,000/0 7,500/0/0 ++
Corporate Funding Group, LLC (3) 131,180/0/26,667 0/0/26,667 131,180/0/0 ++
Shore Venture Group, LLC (4) 0/300,000/0 0/300,000/0 0 ++
Tami Skelly (5) 0/150,000/66,667 0/150,000/66,667 0 ++
1800 Patrick Corp.(11) 189,800/0/0 150,000/0/0 39,800/0/0 ++
Interpacific Capital Corp. (6) 400,000/0/0 400,000/0/0 0 ++
Bantry Bay Associates, LLC (7) 284,000/150,000/ 150,000/150,000/ 134,000/0/0 ++
66,667 66,667
Gateway Network, LLC (8) 181,800/300,000/ 181,800/300,000/ 0 ++
133,333 133,333
Azure Capital, LLC (9) 311,750/240,000/0 311,750/240,000/0 0 ++
RW Capital, LLC (10) 311,748/240,000/0 311,748/240,000/0 0 ++
Charles Schwab & Co. F/B/O Craig 133,398/0/0 133,398/0/0 0 ++
Gross, IRA
</TABLE>
14
<PAGE> 20
<TABLE>
<CAPTION>
SHARES/ PERCENTAGE OF
WARRANT SHARES
SHARES/ SHARES/ SHARES/ OWNED AFTER
WARRANT SHARES/ WARRANT SHARES/ CONVERSION OFFERING
CONVERSION SHARES CONVERSION SHARES SHARES (1)
NAME AND ADDRESS OF BENEFICIALLY OWNED OFFERED OWNED AFTER
SELLING SECURITY HOLDER PRIOR TO OFFERING OFFERING
<S> <C> <C> <C> <C>
Charles Schwab & Co. F/B/O Frank 129,398/0/0 129,398/0/0 0 ++
Skelly, IRA
Continental Capital & Equity Corp. 72,750/200,000/0 72,750/200,000/0 0 ++
(12)
Stonewall Capital, Inc. (13) 0/120,000/0 0/120,000/0 0 ++
Canterbury Companies, Inc. (14) 0/20,000/0 0/20,000/0 0 ++
Candle Business Systems, Inc. (15) 0/10,000/0 0/10,000/0 0 ++
B.E. Associates, Inc. (16) 0/7,000/0 0/7,000/0 0 ++
Jack Erlanger (17) 0/174,286/0 0/160,000/0 0/14,286/0 ++
Jack Ferraro (18) 0/160,000/0 0/160,000/0 0 ++
Kevin Kelly (19) 0/20,000/0 0/20,000/0 0 ++
Greener Fairways, Inc. (20) 100,001/0/373,333 100,001/0/373,333 0 ++
New Perspectives, Inc. (21) 100,000/400,000/0 100,000/400,000/0 0 ++
Michael Wu (22) 0/2,500/0 0/2,500/0 0 ++
JERB Associates, Inc. (23) 0/40,000/0 0/40,000/0 0 ++
Victor DiGioia (24) 1,000/47,500/0 0/47,500/0 1,000/0/0/0 ++
Brian Daughney (25) 0/20,000/0 0/20,000/0 0 ++
Barry Lax (26) 0/1,500/0 0/1,500/0 0 ++
Michael Goldstein (27) 10,824/0/0 10,824/0/0 0 ++
Barbara Cereghino (28) 706/0/0 706/0/0 0 ++
Dorothy Philipps (28) 706/0/0 706/0/0 0 ++
</TABLE>
-------------------------------------
++ Percentage is less than 1%.
-------------------------------------
(1) Computed for purposes herein to give effect to the exercise of all
Warrants held by such Selling Security Holder and not any other Selling Security
Holder. Figures are computed based upon 17,819,513 shares of Common Stock
outstanding on the effective date of this Registration Statement.
15
<PAGE> 21
(2) Mr. Themelis is a director and the Chief Technology Officer of Bitwise
and entered into an agreement, September 23, 1999, to provide business advisory
services to Bitwise. Includes warrants to purchase 10,000 shares at an exercise
price of $4.00, which are being registered pursuant to this Registration
Statement. Excludes options to purchase 250,000 shares, which are not being
registered in this prospectus.
(3) Corporate Funding Group, LLC entered into an agreement, dated September
21, 1999, to provide financial consulting services to Bitwise. Includes 26,667
Shares issuable upon Conversion of Series B Preferred Stock. Mr. Craig Gross
possesses investment control of these shares.
(4) Shore Venture Group, LLC has entered into a contract with Bitwise to
perform services related to the formation of the web-site for Authentidate.com,
Inc.
(5) Includes 150,000 Shares issuable upon exercise of Series B Warrants which
are being registered pursuant to this Registration Statement. Also includes
66,667 Shares issuable upon Conversion of Series B Preferred Stock.
(6) Mr. Douglas Luce possesses investment control of these shares.
(7) Includes 150,000 Shares issuable upon exercise of Series B Warrants which
are being registered pursuant to this Registration Statement. Also includes
66,667 Shares issuable upon Conversion of Series B Preferred Stock. Ms. Tami
Skelly possesses investment control of these shares.
(8) Includes 300,000 Shares issuable upon exercise of Series B Warrants which
are being registered pursuant to this Registration Statement. Also includes
133,333 Shares issuable upon Conversion of Series B Preferred Stock. Mr. Craig
Gross possesses investment control of these shares.
(9) Includes 240,000 Shares issuable upon exercise of Series B Warrants which
are being registered pursuant to this Registration Statement.
(10) Includes 240,000 Shares issuable upon exercise of Series B Warrants which
are being registered pursuant to this Registration Statement.
(11) Investment control of these shares held by Mr. Frank Skelly.
(12) Continental Capital will provide certain financial consulting services to
Bitwise. Includes 25,000 warrants to purchase common stock at an exercise price
of $3.00 per share; 25,000 warrants to purchase common stock at an exercise
price of $5.50 per share; 50,000 warrants to purchase common stock at an
exercise price of $6.88 per share; 50,000 warrants to purchase common stock at
an exercise price of $8.25 per share; and 50,000 warrants to purchase common
stock at an exercise price of $11.25 per share.
(13) Includes three warrants each to purchase 40,000 shares of common stock at
exercise prices of $1.56, $2.07, and $3.58. All three warrants are exercisable
until September 1, 2000.
(14) Includes warrants to purchase 20,000 shares of common stock at an
exercise price of $3.4375 and is exercisable until August 15, 2002.
(15) Includes warrants to purchase 10,000 shares of common stock at an
exercise price of $6.4375 and is exercisable until February 26, 2001.
(16) Includes warrants to purchase 7,000 shares of common stock at an exercise
price of $5.3125 and is exercisable until November 21, 2000.
16
<PAGE> 22
(17) Includes warrants to purchase 160,000 shares of common stock at an
exercise price of $3.25 and which expire on August 8, 2002.
(18) Includes warrants to purchase 160,000 shares of common stock at an
exercise price of $3.25 and which expire on August 8, 2002.
(19) Includes 20,000 shares issuable upon exercise of Series B Warrants.
(20) Includes 100,001 shares underlying Series C Common Stock Purchase
Warrants and 373,333 shares issuable upon conversion of Series B Preferred
Stock. Mr. Paul Savage possesses investment control of these securities.
(21) Includes 400,000 shares underlying Series B Common Stock Purchase
Warrants and 100,000 shares underlying Series C Common Stock Purchase Warrants.
Ms. Jane Lucci possesses investment control of these securities.
(22) Includes warrants to purchase 2,500 shares at an exercise price of $0.875
and expire on September 9, 2004.
(23) JERB Associates is owned by Stanley R. Goldstein, Esq., a principal of
Goldstein & DiGioia, LLP, counsel to Bitwise. The 40,000 Shares are underlying
warrants exercisable at $0.875 and expire on September 9, 2004 and are
beneficially owned by JERB Associates. Mr. Goldstein disclaims beneficial
ownership of these securities.
(24) Mr. DiGioia is a principal of Goldstein & DiGioia, LLP, counsel to
Bitwise. The 47,500 Shares are underlying warrants exercisable at $0.875 and
expire on September 9, 2004.
(25) Mr. Daughney is a principal of Goldstein & DiGioia, LLP, counsel to
Bitwise. The 20,000 Shares are underlying warrants exercisable at $0.875 and
expire on September 9, 2004.
(26) Mr. Lax is an associate with of Goldstein & DiGioia, LLP, counsel to
Bitwise. The listed Shares are underlying warrants exercisable at $0.875 and
expire on September 9, 2004.
(27) Mr. Goldstein is an associate with Goldstein & DiGioia, LLP, counsel to
Bitwise.
(28) Is an employee of Goldstein & DiGioia, LLP, counsel to Bitwise.
(29) Includes warrants to purchase 125,000 shares at an exercise price of
$8.03125 per share. Listed holder entered into joint venture agreement and
license agreement with Bitwise and Authentidate to establish a German company to
develop and market the Authentidate service in certain foreign countries. Mr.
Lars Windhorst possesses investment control of these securities.
(30) Includes warrants to purchase 125,000 shares at an exercise price of
$8.03125 per share. Mr. Paul Klapper possesses investment control of these
securities.
(31) Includes shares underlying warrants exercisable at $8.00 per share
beneficially owned by the listed holders.
(32) Mr. Klapper serves as a director of Authentidate International Holdings,
A.G., a subsidiary of the registrant.
(33) Listed holder is the direct landlord of Authentidate, Inc., pursuant to
an Underlease dated October 19, 2000. Shares beneficially owned by listed holder
are held in escrow to secure obligations of Authentidate as subtenant.
(34) Includes warrants to purchase 25,000 shares of the common stock of
Bitwise exercisable at $1.00 per share and warrants to purchase 10,000 shares of
the common stock of Bitwise exercisable at $4.00 per share.
(35) Warrants issued to listed holder in connection with holder's service on
Bitwise's Internet Advisory Board and are exercisable at $4.00 per share.
(36) Includes warrants to purchase 25,000 shares of the common stock of
Bitwise exercisable at $1.00 per share, beneficially owned by Norman Berman.
17
<PAGE> 23
PLAN OF DISTRIBUTION
The common stock covered by this prospectus, including the shares
underlying the warrants which we will issue upon the exercise by the holders of
the warrants, may be offered and sold from time to time by the selling
stockholders, including in one or more of the following transactions:
- on the over the counter market;
- in transactions other than on the over the counter market;
- in connection with short sales;
- by pledge to secure debts and other obligations;
- in connection with the writing of options, in hedge transactions,
and in settlement of other transactions in standardized or
over-the-counter options;
- in a combination of any of the above transactions; or
- pursuant to Rule 144 under the Securities Act, assuming the
availability of an examination from registration.
The selling security holders may sell their shares at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
at negotiated prices, or at fixed prices.
Broker-dealers that are used to sell shares will either receive discounts
or commissions from the selling share holders, or will receive commissions from
the purchasers for whom they acted as agents.
The selling security holders and intermediaries through whom shares are
sold may be deemed underwriters within the meaning of the Securities Act with
respect to the shares offered.
There can be no assurance that the selling security holders will sell all
or any of the common stock.
We have agreed to keep this prospectus effective for a period expiring on
the earlier of the date on which all of the selling security holders' shares
have been sold, the date on which all such shares are eligible for sale pursuant
to Rule 144 under the Securities Act or the third anniversary of the effective
date of the registration statement.
The selling shareholders and us have agreed to customary indemnification
obligations with respect to the sale of common stock by use of this prospectus.
None of the Selling Security Holders listed in this prospectus are
broker-dealers. However, Azure Capital, LLC and RW Capital, LLC are affiliates
of a broker-dealer registered with the Commission. Both entities, however,
purchased the securities which they beneficially own in the ordinary course of
business. At the time of the purchase, these entities had no
18
<PAGE> 24
agreements or other understandings, directly or indirectly, with any person to
distribute the common shares to be received upon conversion or exercise of the
Series B Preferred Stock or warrants.
REPORTS TO SHAREHOLDERS
Our company distributes annual reports to its stockholders, including
financial statements examined and reported on by independent public accountants,
and will provide such other reports as management may deem necessary or
appropriate to keep stockholders informed of our company's operations.
LEGAL MATTERS
The legality of the offering of the shares will be passed upon for us by
Goldstein & DiGioia, LLP, 369 Lexington Avenue, New York, New York l00l7.
Goldstein & DiGioia, LLP (or members thereof) hold warrants to purchase 122,500
shares of Common Stock, which underlying shares are included in this Prospectus
and Goldstein & DiGioia (or members thereof) is included as a selling security
holder.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-KSB for the years ended June 30, 2000 and 1999 have
been so incorporated in reliance on the report of PriceWaterhouseCoopers, LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
We have filed a Registration Statement under the Act with the Securities
and Exchange 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 our 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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FORWARD LOOKING STATEMENTS
Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. We desire to avail ourselves of certain "safe harbor" provisions of the
1995 Reform Act and are therefore including this special note to enable us to do
so. Forward-looking statements included in this Prospectus or hereafter included
in other publicly available documents filed with the Securities and Exchange
Commission, reports to our stockholders and other publicly available statements
issued or released by us involve known and unknown risks, uncertainties, and
other factors which could cause our actual results, performance (financial or
operating) or achievements to differ from the future results, performance
(financial or operating) achievements expressed or implied by those forward
looking statements. These future results are based upon management's best
estimates of current conditions and the most recent results of our operations.
The statements appear in a number of places in this Prospectus and include
statements regarding our intent, belief or current expectations, and those of
our directors or officers with respect to: (i) future revenues,(ii) product
development, (iii) success in implementing the Authentidate business plan, (iv)
the document imaging system industry, and (v) other matters. Our actual results
could differ materially from those anticipated in the forward looking statements
as a result of certain factors, including those discussed throughout this
Prospectus. These risks include, but are not limited to, risks associated with
recent and accumulated losses, competition, conflicts of interest, limited
operating history, dependence upon one product line, and other risks detailed in
this Prospectus and our Securities and Exchange Commission filings, including
our Annual Report on Form 10-KSB, Form 10-QSB as well as recently filed Reports
on Form 8-K, if any, each of which could adversely affect our business and the
accuracy of the forward looking statements contained herein.
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<PAGE> 26
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses in connection with the issuance and distribution of the
securities being registered herein are estimated.
<TABLE>
<CAPTION>
Amount
------
<S> <C>
Securities and Exchange Commission Registration Fee.................... $10,113.48
Printing and Engraving Expenses........................................ $5,000*
Accounting Fees and Expenses........................................... $15,000*
Legal Fees and Expenses................................................ $15,000*
Blue Sky Fees and Expenses............................................. $2,500.00*
Transfer Agent and Registrar Fees...................................... $2,000*
Miscellaneous Fees and Expenses........................................ $1,500*
Total......................................................... $51,113.48*
==========
</TABLE>
* Estimated.
ITEM 15. 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
to procure a judgment in its favor, 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
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<PAGE> 27
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.
Our By-Laws provide for indemnification of our officers and directors 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
us, 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, our Certificate of Incorporation
contains provisions eliminating the personal liability of directors, except for
breach of a director's fiduciary duty of loyalty to the us or to our
stockholders, acts or omission not in good faith or which involve intentional
misconduct or a knowing violation of the law, and in respect of 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 Bitwise nor our 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.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and therefore is unenforceable.
ITEM 16. EXHIBITS
The following Exhibits have been previously filed with the Securities and
Exchange Commission and, pursuant to Rule 17 C.F.R. 230.411, are incorporated by
reference to the document referenced in brackets following the descriptions of
such exhibits. Exhibits designated by (*) are filed herewith. Portions of
exhibits designated by (**) have been omitted and request for confidential
treatment filed with the Commission.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
---------- -----------
<S> <C>
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 (Exhibit 3.1.1 to Registration
Statement on Form SB-2, File No. 333-91475)
3.2 By-Laws (Exhibit 3.2 to Registration Statement on Form S-18, File No. 33-46246-
NY)
</TABLE>
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<PAGE> 28
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 Note and Warrant Purchase, Paying and Conversion/Exercise
agency agreement dated as of August 8, 1997 between the Company
and Banca del Gottardo (Exhibit 4.7 to the Company's Form 10-KSB
dated June 30, 1997).
4.4 Terms of 8% Convertible Notes due August 11, 2002 (Exhibit 4.8 to
the Company's Form 10-KSB dated June 30, 1997).
4.5 Form of Series B Warrant (Exhibit 4.5 to Registration Statement on
Form SB-2, File No. 333-91475)
4.6 Form of Series C Warrant (Exhibit 4.6 to Registration Statement on
Form SB-2, File No. 333-91475)
4.7 Form of Warrant held by members of Goldstein & DiGioia, LLP
(Exhibit 4.7 to Registration Statement on Form SB-2, File No.
333-91475)
4.8 Form of Series B Convertible Preferred Stock (Exhibit 4.8 to
Registration Statement on Form SB-2, File No. 333-91475)
4.10 Form of Warrant issued to Windhorst New Technologies, Agi.G and
PFK Development Group I, LLC (Exhibit 4.10 to Form 10-KSB, filed
on September 28, 2000)
5 Opinion of Goldstein & DiGioia, LLP re legality of shares offered,
10.1 Employment agreement with John T. Botti, dated April, 1992
(Exhibit 10.8 to Registration Statement on Form S-18, File No.
33-46246-NY)
10.2 Employment agreement with Ira C. Whitman, dated April, 1992
(Exhibit 10.9 to Registration Statement on Form S-18, File No.
33-46246-NY)
10.3 1992 Employee stock option plan (Exhibit 10.10 to Registration
Statement on Form S-18, File No. 33-46246-NY)
10.4 1992 Nonexecutive Directors stock option plan (Exhibit 10.11 to
Registration Statement on Form S-18, File No. 33-46246-NY)
10.5 Loan agreement with Norstar Bank dated February 6, 1992 (Exhibit
10.13 to Registration Statement on Form S-18, File No.
33-46246-NY)
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<PAGE> 29
10.6 Form of Conversion Agency Agreement between the Company and Banca
del Gottardo dated as of August 8, 1997 (Exhibit 10.24 to Form
10-KSB dated June 30, 1997).
10.7 Form of Warrant Agency Agreement between the Company and Banca del
Gottardo dated as of August 8, 1997 (Exhibit to Form 10-KSB dated
June 30, 1997).
10.8 Stock Purchase and Merger Agreement dated April 7, 1998 between
the Company USI and SST. (Exhibit A to Proxy Statement dated May
8, 1998).
10.9 Financial Consulting Agreement, dated September 21, 1999, by and
between Bitwise Designs and Corporate Funding Group, LLC (Exhibit
10.9 to Registration Statement on Form SB-2, File No. 333-91475)
10.10 Consulting Agreement, dated September 23, by and between Bitwise
Designs, Inc. and Nicholas Themelis (Exhibit 10.10 to Registration
Statement on Form SB-2, File No. 333-91475)
10.11 Line of Credit Agreement with Bank of America, dated October 1,
1999 (Exhibit 10.11 to Registration Statement on Form SB-2, File
No. 333-91475)
10.12 Service Agreement, dated September 15, 1999, by and between
Bitwise Designs, Inc. and Shore Venture Group, L.L.C.(Exhibit
10.12 to Registration Statement on Form SB-2, File No. 333-91475)
10.13 Form of Series B Preferred Stock Subscription Agreement executed
by all Holders of Series B Preferred Stock (Exhibit 10.13 to
Registration Statement on Form SB- 2, File No. 333-91475)
10.27 Employment Agreement between John Botti and the Company dated
January 1, 2000 (Exhibit 10.27 to Form 10-KSB, filed on September
28, 2000)
10.28 Employment Agreement between Nicholas Themelis and the Company
dated February 28, 2000 (Exhibit 10.28 to Form 10-KSB, filed on
September 28, 2000)
10.29 Employment Agreement between Robert Van Naarden and
Authentidate.com, Inc. dated July 5, 2000 (Exhibit 10.29 to Form
10-KSB, filed on September 28, 2000)
10.30** Joint Venture Agreement between The Company, Authentidate, Inc.
and Windhorst New Technologies, AGi.G (Exhibit 10.30 to Form
10-KSB, filed on September 28, 2000)
10.31** Technology License Agreement between The Company, Authentidate,
Inc. and Windhorst New Technologies, AGi.G (Exhibit 10.31 to Form
10-KSB, filed on September 28, 2000)
21 Subsidiaries of Registrant. (Exhibit 21 to Form 10-KSB, filed
September 29, 2000)
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<PAGE> 30
23.1* Consent of PricewaterhouseCoopers, LLP
23.2 Consent of Goldstein & DiGioia, LLP, contained in Exhibit 5.
ITEM 17. 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) For purposes of determining any liability under the
Securities Act of 1933, each filing of our 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 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
25
<PAGE> 31
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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<PAGE> 32
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
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Schenectady, State of New York, on the 29th day of
December, 2000.
BITWISE DESIGNS, INC.
By: /s/John T. Botti
--------------------------
John T. Botti
President, Chief Executive Officer and
Chairman
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below substitutes and appoints John T. Botti as his true and lawful
attorney-in-fact and agents, 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, and to file the 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 don 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, 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:
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/John T. Botti President, Chief Executive October 31, 2000
------------------------------- Officer and Chairman
John T. Botti
/s/Ira C. Whitman Senior Vice President, Secretary, October 31, 2000
----------------------------- and Director
Ira C. Whitman
/s/Robert Van Naarden Director and Chief Executive October 31, 2000
-------------------------- Officer of Authentidate, Inc.
Robert Van Naarden
/s/Nicholas Themelis Chief Technology Officer, October 31, 2000
---------------------------- Vice President and Director
Nicholas Themelis
/s/Steven A. Kriegsman Director October 31, 2000
--------------------------
Steven A. Kriegsman
/s/Charles C. Johnston Director October 31, 2000
----------------------------
Charles C. Johnston
</TABLE>
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<PAGE> 33
<TABLE>
<S> <C> <C>
/s/J. Edward Sheridan Director October 31, 2000
--------------------------
J. Edward Sheridan
/s/Dennis H. Bunt Chief Financial Officer October 31, 2000
-------------------------------
Dennis H. Bunt
</TABLE>
28
