<PAGE>
As filed with the Securities and Exchange Commission on October 15, 1996
Registration No. 333-6023
_______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________
DIVERSIFAX, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3637458
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
IRWIN A. HOROWITZ, PRESIDENT
DIVERSIFAX, INC.
39 STRINGHAM AVENUE 39 STRINGHAM AVENUE
VALLEY STREAM, NEW YORK 11580 VALLEY STREAM, NEW YORK 11580
(516) 872-0650 (516) 872-0650
(Address, including zip code, and (Name, address, including zip
telephone number, including area code, and telephone number,
code, of Registrant's principal including area code, of
executive offices) agent for service)
_________________________
Copies of all communications, including all communications sent to the agent
for service, should be sent to:
GARY T. MOOMJIAN, ESQ.
BRESLOW & WALKER
875 THIRD AVENUE
NEW YORK, NEW YORK 10022-7597
(212) 832-1930
_________________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(c) 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. [ ]
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 becomes effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
________________________
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Proposed
Maximum Proposed
Amount Offering Maximum Amount
Title of Each Class of Securities to be Price Per Aggregate Registration
to be Registered Registered Share(1) Offering Price Fee
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per share 5,000 $4.25 $21,250 $6.44
- ----------------------------------------------------------------------------------------------------------------
Total Registration Fee .............................................................................. $6.44
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
_______________
(1) Represents the average of the bid and asked prices as quoted on NASDAQ on
October 8, 1996. Estimated solely for the purpose of calculating the
amount of the registration fee pursuant to Rule 457(c) under the Securities
Act of 1933, as amended.
Pursuant to Rule 416 of the Securities Act of 1933, this Registration
Statement also relates to such additional indeterminate number of shares of
Common Stock as may become issuable by reason of stock splits, dividends and
similar adjustments.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1996
DIVERSIFAX, INC.
2,216,538 SHARES OF COMMON STOCK
________________________
This Prospectus relates to up to 2,216,538 shares of common stock, par
value $.001 per share ("Common Stock"), of Diversifax, Inc. (the "Company").
The Common Stock may be offered hereby from time to time by any and all of the
Selling Stockholders (as hereinafter defined) for their own benefit. Certain
directors and executive officers of the Company, as well as members of their
families, are among the Selling Stockholders. The Company will not receive any
of the proceeds from the sale by the Selling Stockholders of the Common Stock.
The Company has agreed to bear all expenses (other than stock transfer taxes,
brokerage commissions and other selling expenses) in connection with the
registration and sale of the Common Stock, which expenses are currently
estimated at $41,000.00 in the aggregate.
The Company's Common Stock is traded on the NASDAQ Small Cap Market
("NASDAQ") under the symbol DFAX. On October 11, 1996, the last reported sale
price of the Common Stock was $4.25 per share.
________________________
THESE ARE SPECULATIVE SECURITIES. THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5 OF THIS PROSPECTUS.
________________________
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY 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 _________, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company can 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: Chicago Regional Office, 219 South Dearborn Street, Chicago,
Illinois 60604 and New York Regional Office, 14th Floor, 75 Park Place, New
York, New York 10007. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference herein:
1. Annual Report on Form 10-KSB/A No. 2 for the fiscal year ended
November 30, 1995.
2. Quarterly Report on Form 10-QSB/No. 1 for the quarters ended
February 29, 1996 and May 31, 1996.
3. Registration Statement on Form S-1 (Registration No. 33-46580),
declared effective by the Commission on November 18, 1992.
Each document 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
prior to the termination of this offering shall be deemed to be incorporated by
reference in this Prospectus and shall be a part hereof from the date of filing
for such document.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered, upon written
or oral request of such person, a copy of any and all of the information that
was incorporated by reference in the Prospectus (not including exhibits to the
information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that the Prospectus
incorporates). Requests may be made to Diversifax, Inc. 39 Stringham Avenue,
Valley Stream, New York 11580, Attn: Dr. Irwin A. Horowitz, (516) 872-0650.
2
<PAGE>
THE COMPANY
Since November 1, 1993, the Company, through its wholly owned subsidiaries
IMSG Systems, Inc. ("IMSG") and IMSG's affiliated companies, National Copy
Corp., Capital Copy Corp. and Advanced Business Systems, Inc., has been engaged
in the business of owning, leasing, operating and servicing coin and debit card
pay-per-copy photocopiers and microfilm reader-printers and accessory equipment.
The Company operates its copiers in various states throughout the Eastern United
States, Wisconsin and Illinois in differing sites including libraries,
courthouses, colleges, drug stores, office supply stores and similar high
traffic outlets. The Company has over 2,400 copiers at various locations.
Generally, the Company is responsible for the collection of payments from each
site and, at most locations, the site operators share in the revenues derived
from the copy sales at their site. The Company has the ability to service and
repair its copiers seven days a week. Users can pay per copy by inserting coins
in the copier or by using a debit access card, which the user may purchase at
the site of the copier.
The Company commenced its Smart Switch-TM- fax operations in April 1995,
upon the acquisition of the Smart Switch assets of Faxit Corporation. The
Company either owns or leases "off the shelf" fax machines onto which it
installs a dialer, preprogrammed to call the Smart Switch. The Smart Switch, a
computerized switching device located at a central location (either on-site or
at the Company's offices), has an automated switching system to permit the use
of any "off the shelf" fax machine as a public fax machine. Billing of a public
fax message is effected without the need for human intervention or the
incorporation of a high cost credit card reading device into the fax machine.
The Smart Switch software gives the Company the capacity to offer a variety of
fax and voice services for hotels, libraries and airline lounges, and domestic
and international fax transmission services. The Smart Switch permits hotels to
offer in-room fax machines for guests' confidential use, thereby converting each
room into a "Smart Suite". The Smart Switch software has been upgraded by the
Company following its acquisition to permit billing of the user not only through
the user's credit card but also by billing to the user's hotel bill either by a
transfer of the billing information to the hotel's computer or by a scanning of
calls to listen for a fax tone.
The Company has recently commenced marketing of the Smart Switch and has
placed a small number of units under lease at hotels, airport lounges, libraries
and colleges, principally in the Northeast. Customers include the Western Hotel
(formerly the Grand Hotel) in Washington D.C. and TWA Ambassador Lounges. The
term of the agreements range from one to four years, and the hotel, airline
lounge or other party is responsible to pay the Company for the cost of the
equipment as well as per minute usage charge. In November 1995, the Company
entered into an agreement with AT&T Corp. ("AT&T") to jointly market the
Company's in-room fax services on an exclusive basis to AT&T hotel accounts.
There can be no assurance that any material sales or leases will result from
this agreement or that AT&T will not terminate such agreement. The Company
currently has 157 units installed, and has derived approximately $32,000 in
sales revenues from these operations through July 31, 1996.
The executive offices of the Company are located at 39 Stringham Avenue,
Valley Stream, New York 11580. The telephone number is (516) 872-0650.
3
<PAGE>
THE OFFERING
Securities Offered:.................. 2,216,538 shares of Common Stock.
Shares of Common Stock Outstanding as
of August 9, 1996................... 14,040,215(1)
Net Proceeds......................... The Company will not receive any of
the proceeds from the sale by the
Selling Stockholders.
Risk Factors......................... Investment in the securities
offered hereby involves a high
degree of risk and immediate
substantial dilution. See "Risk
Factors."
NASDAQ Symbol of
Common Stock........................ DFAX
_________________
(1) Does not include (i) an aggregate of 325,000 shares of Common Stock
issuable upon the exercise of outstanding stock options and (ii) 1,762,520
shares of Common Stock issuable upon the exercise of outstanding warrants.
4
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk. Only those persons economically able to lose their entire investment
should purchase these securities. Prospective investors, prior to making an
investment decision, should carefully consider, along with other matters
referred to herein, the following risk factors.
HISTORY OF LOSSES AND ACCUMULATED DEFICIT. The Company has incurred net
losses for the fiscal years ended November 30, 1994 and 1995 of $1,165,627
and $3,218,962, respectively, and $629,109 for the six month period ended May
31, 1996. At May 31, 1996, the Company had an accumulated deficit of
$5,430,023. No assurance can be given that the Company will not continue to
report losses on an annual basis or that the Company's business operations
will ultimately prove to be profitable. In the event such losses continue,
the Company would be required to seek to raise additional financing. If
additional funds are not available, the Company may be required to curtail or
discontinue some of its operations.
WORKING CAPITAL DEFICIT; NEED FOR ADDITIONAL FUNDS. At May 31, 1996, the
Company had a working capital deficit of $827,397. In view of the Company's
operating losses and need for capital to finance the purchase of capital
equipment and to market the Smart Switch, such working capital deficiency may
increase. Also, the cash requirements needed to pursue opportunities or to
address problems not now anticipated may put a strain on the Company's available
cash resources. In April 1996, May 1996 and June 1996, Dr. Irwin A. Horowitz,
Chairman of the Board, Chief Executive Officer and President of the Company,
loaned an aggregate of $150,000 to the Company. There is no assurance that
additional capital will be available to the Company if required or that capital,
if any, will be available on terms acceptable to the Company.
DEPENDENCE ON KEY PERSONNEL. The Company is dependent upon the services of
its Chairman, Chief Executive Officer and President, Dr. Irwin A. Horowitz, and
of Mario DiNatale, the President of the subsidiary of the Company conducting
Smart Switch operations and a director of the Company, for the successful
operation and development of its business. Dr. Horowitz and Mr. DiNatale have
employment contracts with the Company through November 1997 and March 1997,
respectively. The loss of services of either Dr. Horowitz or Mr. DiNatale could
materially and adversely affect its operations. In addition, in order to
market, produce and upgrade its products, the Company will have to attract and
retain additional technically qualified personnel with backgrounds in
engineering, production and marketing. The Company currently does not maintain
key man life insurance on the life of either Dr. Horowitz or Mr. DiNatale.
UNCERTAINTY OF MARKET ACCEPTANCE OF SMART SWITCH. In connection with its
Smart Switch, the Company faces the types of problems, delays, expenses and
difficulties which are frequently encountered by a company trying to introduce a
new line of products to the market. The Company only has limited operating
experience with the Smart Switch and, to date, revenues derived from the Smart
Switch have been minimal. The initial results from the Company's Smart Switch
operations have varied. A number of hotels, airport lounges, libraries and
colleges have installed and are currently utilizing the Smart Switch. A number
of other hotels, which primarily installed the Smart Switch on a trial basis,
have canceled or determined not to permanently install such machines, apparently
primarily due to insufficient usage by guests. The Company believes that these
hotels did not adequately market to their guests the availability of the fax
machines. While other customers are generally showing a greater degree of
usage, there can be no assurance that there will not be a material amount of
cancellations, or that significant new orders will develop so as to make the
Smart Switch operations of the Company profitable. There can be no assurance
that the Smart Switch services will gain broad market acceptance. In November
1995 the Company entered
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into an agreement with AT&T to jointly market the Company's in-room fax services
on an exclusive basis to AT&T hotel accounts. There can be no assurance that
any material sales or leases will result from this agreement or that AT&T will
not terminate the agreement.
NO MARKET RESEARCH OF POTENTIAL DEMAND FOR SMART SWITCH. The Company has
neither conducted nor have others made available to the Company any results of
market research that would give management sufficient information to estimate
potential demand for its Smart Switch with certainty. There can be no assurance
that sufficient market penetration can be achieved or the planned placement of
the Company's equipment will be absorbed by the market in the event such demand
can be identified.
COMPETITION.
COPIERS. The Company markets its copier services to those users who need
to copy documents, books, and other materials that are located at the sites
where the Company's copiers have been placed. Other companies that offer
similar services include Continental Copy Products Limited, Dual Office
Suppliers, Inc., Boston Copico and Compucopy. Each of these competitors
competes with the Company in a different limited geographic region.
Continental Copy Products Limited principally conducts operations in
Connecticut and downstate New York; Dual Office Supplies principally conducts
operations in Illinois; Boston Copico principally conducts operations in
Massachusetts, Connecticut and downstate New York; and Compucopy principally
conducts operations in southern Florida. Competition between companies is
generally based on price and quality of service offered.
FAX MACHINES. The public fax business is in an early stage of
development. The Company does not know of any other company that offers a
computer software switching device which can convert any "off-the-shelf" fax
machine into a public fax. The Company's principal competitors must
physically reconfigure each fax machine they install using a procedure that
can only be used on a particular model of fax machine in which they usually
specialize (the same procedure cannot be used on different models).
AlphaNet, the Company's largest competitor, is able to reconfigure a
particular model thermal paper fax machine and has placed these reconfigured
machines at a large number of locations. Other competitors, Teledex and
Action Fax, offer products which do not currently offer the various features
of the Company's Smart Switch, such as the range of useable fax machines,
customized billing by floor or room and voice mail. In general, AlphaNet
competes in all of the Company's markets while Teledex and Action Fax offer
only limited competition and are located in limited markets. Competition
between companies is generally based on price and quality of service offered.
It should be noted, however, that if the public fax business generates
substantial profits and appears to be capable of significant growth, other
companies with greater resources than the Company's may enter the business
and present intense competition. The Company believes that if this were to
occur, it could expect to encounter significant competition from two general
areas: (i) other companies organized to provide public facsimile
transmission services and/or equipment; and (ii) assisted facsimile
transmission services. In addition, it should be noted that facsimile
transmission also competes with alternative methods of document delivery,
principally overnight small package express services such as Federal Express
and United Parcel Service, as well as the United States Post Office Express
Mail Service. In all of the foregoing areas, virtually all competitors can
be expected to be considerably better established and larger than the Company
in total assets and resources.
CREDIT CARD REGULATIONS. The Company's business is dependent on its
securing processing for its credit card transactions. Credit card companies
establish the rules and regulations for processing eligibility and determine
which businesses may accept their cards, and on what terms. While the Company's
facsimile machines are presently processed through all major credit card
companies, there can be no assurance that
6
<PAGE>
in the future some or all credit card companies may not change the terms on or
circumstances under which their credit cards will be accepted so as to adversely
effect the business of the Company.
GOVERNMENT REGULATION. There are no known federal or state regulations
which regulate the public facsimile transmission business, other than the
regulations of the telephone industry, whose services the Company utilizes.
There can be no assurance that the Company's business will not be regulated in
the future or that such regulations will not have an adverse effect upon the
Company's profitability.
LACK OF PATENT PROTECTION; TECHNOLOGICAL CHANGES; RISK OF PRODUCT
OBSOLESCENCE.
COPIERS. The Company does not, in general, rely on patented technology
with respect to its copier operations, although the Company does purchase and
operate copiers which may contain patented technology. However, management
believes that the proprietary nature of this technology does not affect the
Company's operations. There can be no assurance, however, that patented
technology will not affect the Company in the future if the Company is unable
to obtain copiers that have a patented feature which make them more desirable
than copiers currently being used by the Company or that will be acquired by
the Company in the future. The Company is presently seeking a patent on a
photocopy machine cover that allows books to be copied without damage to the
binding. There is no assurance that a patent will be granted or that the
patent will be of economic importance to the Company.
FAX MACHINES. Although the Company has applied for a patent covering the
technologies upon which the Company's Smart Switch systems are based, there
is no assurance that the patent applied for will be issued or, if issued,
will provide the Company with meaningful protection from competition, or that
the Company will have the financial resources necessary to enforce any patent
rights that it may have. Other companies may have been or may be involved in
research and development which may lead to patents similar to or superior to
those developed by the Company or relating to specific aspects of the
Company's products and technologies, and the Company has not engaged counsel
to determine whether its products in general are free from patent
infringement. Unless so protected or protected by nondisclosure agreements,
the Smart Switch is susceptible to being analyzed and reconstructed by an
existing or potential competitor. The Company is not aware of any claims
that its products infringe upon the proprietary rights of third parties.
However, there can be no assurance that third parties will not assert
infringement claims against the Company in the future, and the cost of
responding to such assertions, regardless of their validity, could be
significant. In addition, such claims may be found to be valid and could
result in awards against the Company, which could have a material adverse
effect on the Company's business. As a result, the cost to the Company of
protecting its patent rights could be substantial. The market for the
Company's public-fax products is characterized by rapidly changing
technologies and evolving industry standards. The Company's success will
depend in large part on the Company having a technically competent staff and
on its ability to anticipate changes in technology and industry standards
and, to the extent such changes impact the Company's technology and products,
to respond to market and technological developments on a timely basis. There
can be no assurance that the Company will be able to keep pace with the
technological demands of the market place. Moreover, there can be no
assurance that new products or technologies will not render the Company's
Smart Switch less competitive or obsolete.
DEPENDENCE ON SUPPLIERS.
COPIERS. The Company currently purchases both new and used copiers from
a variety of sources. The Company has not experienced any difficulties in
obtaining equipment or parts and supplies and does not anticipate that there
will be any problems obtaining any equipment, parts or supplies in the future.
7
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FAX MACHINES. The Company assembles the Smart Switch by programming the
Company's proprietary software into off-the-shelf computers and then leases
the programmed computer together with off-the-shelf fax machines, telephones,
dialers and components all of which are manufactured by other vendors. The
Company purchases certain custom components and complete fax machines from
single suppliers in order to obtain lower prices. In the past, the Company
has had satisfactory relationships with its suppliers and has not experienced
delays in the delivery of components or public-fax machines. The Company
generally does not maintain supply contracts with its suppliers and purchases
components pursuant to purchase orders in the ordinary course of business.
The Company believes that there are a number of other suppliers for the
components that it uses. The Company has not experienced any difficulties in
obtaining equipment or parts and supplies and, although there can be no
assurance thereof, does not anticipate that there will be any problems
obtaining any equipment, parts or supplies in the future.
DEPENDENCE ON CERTAIN CUSTOMERS; RECENT LOSS OF LARGE CUSTOMER. During the
fiscal years ended November 30, 1994 and 1995, revenue derived from two of the
Company's copier customers, a major library system in the City of New York and a
large university located in the southeastern United States, amounted to
approximately 21.9% and 24.7%, respectively, of the Company's revenues. The
Company's contract with the large southeastern university, which is not
terminable at will, is for a term of one year (ending April 23, 1997) and is
renewable at the parties' option for four additional one year terms. In
general, customer accounts are maintained pursuant to contractual agreements
that have terms ranging from three to five years. Currently, there are varying
terms remaining on all of the Company's customer contracts, except for that with
the major library system in the City of New York. In March 1996, the Company
was not successful in its bid for the renewal of its contract with this library
system, which provided approximately 12.3% of the Company's sales for the fiscal
year ended November 30, 1995.
SEASONALITY. The Company's copier activities are subject to seasonal
fluctuations. Revenues from copiers tend to be lower during the summer months
of June through September and in the last weeks of December and the first week
of January due to school and employee vacation patterns. Although the Company
has a working capital deficit and cash flow tends to be tight in these periods
of low revenue, the Company has not experienced severe cash flow difficulties.
Seasonally slow periods are immediately preceded by periods of high volume of
use, which generate increased cash flows. In addition, because the copier
business is conducted primarily in cash, there is no lead time between sales and
collections. Also fluctuations are regular and predictable, thereby allowing
the Company to plan for such low revenue months. Historically, the President of
the Company has advanced funds to the Company when needed so that it could meet
its day to day cash obligations, although there can be no assurance he will
continue to do so in the future. Finally, many creditors have typically allowed
the Company to forbear during these slow months, although there can be no
assurance they will continue to do so in the future.
POTENTIAL DEPRESSIVE EFFECT ON MARKET PRICE DUE TO FUTURE SALES OF COMMON
STOCK. 7,715,304 shares of the Company's outstanding Common Stock are
"restricted securities" as that term is defined in Rule 144 promulgated under
the Securities Act (excluding, for this purpose, the shares registered hereby).
Ordinarily, under Rule 144, a person holding restricted securities for a period
of two years may, every three months, sell in ordinary brokerage transactions or
in transactions directly with a market maker an amount equal to the greater of
one percent of the Company's then outstanding Common Stock or the average weekly
trading volume during the four calendar weeks prior to such sale. Rule 144 also
permits the sale of shares without any quantity limitation by a person who is
not an affiliate of the Company and who has satisfied a three year holding
period. At least 6,334,445 of such 7,715,304 shares are currently eligible for
sale under Rule 144. In addition, the 2,216,538 shares of Common Stock
registered hereby may now be sold into the open market, subject to an agreement
of holders of an aggregate of 1,961,841 shares to sell no more than
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25% of their shares within six months of the date of this Prospectus, no more
than an additional 25% within the following three months and no more than an
additional 25% during the next three months. Furthermore, there is an aggregate
of 1,660,000 shares of Common Stock underlying warrants and stock options issued
by the Company, which shares may ultimately be sold into the open market. The
sale of a large number of shares in the open market is likely to have a
depressive effect on the market price of the Common Stock.
POSSIBILITY OF DELISTING FROM NASDAQ. The Company's Common Stock is listed
on the NASDAQ System. To remain listed with NASDAQ, companies are required to
have not less than $2,000,000 in total assets and $1,000,000 in capital and
surplus. As of May 31, 1996, the Company had total assets of $5,413,195 and
$3,857,402 in stockholder equity. In the event the Company is unable to
continue to meet the NASDAQ requirements for continued listing, trading, if any,
in the Common Stock would thereafter be conducted in the over-the-counter market
in the so-called "pink sheets" or the NASD's "Electronic Bulletin Board," and it
would be more difficult to dispose of the Common Stock or to obtain as favorable
a price for the Common Stock. Thus, the liquidity of the Common Stock could be
impaired, not only in the number of shares of Common Stock that could be bought
and sold at a given price, but also through delays in the timing of
transactions.
PENNY STOCK REGULATION
Broker-dealer practices in connection with transactions in "penny stocks"
are regulated by certain penny stock rules adopted by the Commission. Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the NASDAQ system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If the Common Stock becomes subject to the penny stock
rules, investors may find it more difficult to sell the Common Stock.
CONTROL OF THE COMPANY. Dr. Irwin Horowitz, President of the Company,
presently owns 6,310,000 shares of Common Stock, representing 44.7% of the
outstanding Common Stock of the Company and effectively controls the Company.
Due to this control, Dr. Horowitz will be able to control or influence such
actions as election of directors and the authorization of certain transactions
that require shareholder approval and be able to otherwise control the Company's
policies without concurrence of the Company's other shareholders.
COMPANY PARTY TO LAWSUITS. The Company is involved in the following legal
proceedings: (1) The Company has instituted an action to enforce a restrictive
covenant against a former employee. The employee's current employer has
counterclaimed for $1,750,000 based upon an alleged unfair or trade practice in
seeking to prevent it from employing the employee; and (2) The Company is a
party to a suit for
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$228,670, brought by former creditors to the Company, which amount the Company
believes is payable in Common Stock but the plaintiff is seeking cash in lieu of
Common Stock.
DIVIDENDS ON COMMON STOCK NOT LIKELY. The Company has never paid any cash
dividends on its Common Stock. For the foreseeable future it is anticipated
that earnings, if any, which may be generated from the Company's operations will
be used to finance the growth of the Company and that cash dividends will not be
paid to holders of shares of Common Stock.
USE OF PROCEEDS
The Company will not realize any proceeds from the sale of the Common Stock
which may be sold under this Prospectus.
SELLING STOCKHOLDERS
The following table sets forth the beneficial ownership of the Common Stock
owned by each of the selling stockholders (the "Selling Stockholders") as of
August 9, 1996.
<TABLE>
<CAPTION>
Securities Percentage of
Name of Selling Securities Owned Securities to be to be Owned Securities Owned
Stockholders Prior to Offering Sold in Offering After Offering After Offering
- -------------- ----------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Eugene Bilotti 50,000(1) 10,000 40,000 0
Jean A. Bilotti 14,000 14,000 0 0
Louis Sussan 6,818 5,000 1,818 *
Terrance Eller 6,818 5,000 1,818 *
Richard Vitello** 98,182(2) 67,000 31,182 *
Debbie & Hyman Ashkenazy** 30,000(3) 20,000 10,000 *
Kathleen Belz** 75,000(2) 50,000 25,000 *
Henry & Pauline Ferstenberg** 168,000(4) 110,000 58,000 *
Abraham Fishman** 210,000(5) 110,000 100,000 *
Lou Hammer** 75,000(2) 50,000 25,000 *
Gregg & Pamela Horowitz** 345,000(6) 230,000 115,000 *
Alan Katz** 30,000(3) 20,000 10,000 *
Apostolos & Catherine
Lambropoulos** 15,000(7) 10,000 5,000 *
Thomas Laundrie** 231,250(8) 81,250 150,000 1.07%
Larry & Ruth Linden** 60,000(9) 40,000 20,000 *
10
<PAGE>
Securities Percentage of
Name of Selling Securities Owned Securities to be to be Owned Securities Owned
Stockholders Prior to Offering Sold in Offering After Offering After Offering
- -------------- ----------------- ---------------- -------------- ----------------
Steven J. Miner** 75,000(2) 50,000 25,000 *
Ira & Daryle Openden** 30,000(3) 20,000 10,000 *
Matthew N. Phillips** 60,000(9) 40,000 20,000 *
Stephen A. Powers** 22,500(10) 15,000 7,500 *
William F. Preiss, Jr. 6,240(11) 4,160 2,080 *
& Geraldine Preiss**
Lynn Purcell** 120,000(12) 80,000 40,000 *
Andrew Shaw** 16,000(13) 8,000 8,000 *
Yiannakis Soteriou** 30,000(3) 20,000 10,000 *
John Vacchio** 30,000(3) 20,000 10,000 *
Justin Wernick** 60,000(9) 40,000 20,000 *
Sandra Zucker** 75,000(2) 50,000 25,000 *
Charles Famoso** 22,500(14) 10,000 12,250 *
William Gatta** 22,500(14) 10,000 12,250 *
William & Lois Muller** 33,750(15) 15,000 18,750 *
Howard & Diane Schwartz** 11,250(16) 5,000 6,250 *
Steven Finkelstein** 45,000(2) 20,000 25,000 *
Robert Andrews** 2,228 2,228 0 0
Carole Catani** 32 32 0 0
Mario DiNatale** 37,902 37,902 0 0
Dan Purjes*** 9,968 9,968 0 0
Hon-Jane Chiu** 57,000 57,000 0 0
Faxit Corporation** 55,000 55,000 0 0
Bernard Spak** 5,000 5,000 0 0
BDO Seidman** 15,000 15,000 0 0
Salon, Marrow & Dyckman, LLP**** 30,000 30,000 0 0
Christopher D. Osborne** 19 19 0 0
George & Linda Geffen 30,000(3) 20,000 10,000 *
11
<PAGE>
Securities Percentage of
Name of Selling Securities Owned Securities to be to be Owned Securities Owned
Stockholders Prior to Offering Sold in Offering After Offering After Offering
- -------------- ----------------- ---------------- -------------- ----------------
Roland Aristone 12,284 12,284 0 0
Ronald Biglin 15,069 15,069 0 0
Jacqueline DiNatale 26 26 0 0
Rudy Dubay 1,392 1,392 0 0
Tina Elgart 1,392 1,392 0 0
Keith Fenton 58 58 0 0
Joseph Pane 97 97 0 0
Josephthal Lyon & Ross 50,000 50,000 0 0
Incorporated
Gary Schlosser 12,841 12,841 0 0
Tom Shelby 64 64 0 0
James Simon, Jr. 6 6 0 0
F&T Planning Center, Inc. 9,500 9,500 0 0
Key Investments APS 9,500 9,500 0 0
Omotsu Holdings Ltd. 9,500 9,500 0 0
Susan Goldberg 9,500 9,500 0 0
Donald Drakeman 9,500 9,500 0 0
& Lisa Drakeman
Miriam B. Meshel 9,500 9,500 0 0
Kazuko Tatsumura 4,750 4,750 0 0
Herman Elber 9,500 9,500 0 0
Myles F. Wittenstein 4,750 4,750 0 0
Dorigol S.A. 9,500 9,500 0
Michael Applebaum 4,750 4,750 0
Earp, Cohn, Leone & Pendery 5,000 5,000 0
Richard Belz** 156,250(17) 31,250 125,000 *
Ira Openden** 156,250(17) 31,250 125,000 *
Gary Purcell** 156,250(17) 31,250 125,000 *
Paul Ruthfield** 30,000 30,000 0 0
Stephen Hayes** 106,250(18) 56,250 50,000 *
Judd Rothman** 313,750(18) 263,750 50,000 *
<PAGE>
Securities Percentage of
Name of Selling Securities Owned Securities to be to be Owned Securities Owned
Stockholders Prior to Offering Sold in Offering After Offering After Offering
- -------------- ----------------- ---------------- -------------- ----------------
Wall Street Associates** 75,000 75,000 0 0
Morris & Selma Cohen 4,750 4,750 0 0
David S. Maglich & 4,500(19) 3,000 1,500 *
Margaret H. Maglich**
Marion Rosenberg & 60,000(9) 40,000 20,000 *
Pauline Ferstenberg**
</TABLE>
_________________________
(1) Includes options to purchase an aggregate of 40,000 shares.
(2) Includes warrants to purchase an aggregate of 25,000 shares.
(3) Includes warrants to purchase an aggregate of 10,000 shares.
(4) Includes warrants to purchase an aggregate of 70,000 shares.
(5) Includes warrants to purchase an aggregate of 100,000 shares.
(6) Includes warrants to purchase an aggregate of 115,000 shares.
(7) Includes warrants to purchase an aggregate of 5,000 shares.
(8) Includes warrants to purchase an aggregate of 150,000 shares.
(9) Includes warrants to purchase an aggregate of 20,000 shares.
(10) Includes warrants to purchase an aggregate of 7,500 shares.
(11) Includes warrants to purchase an aggregate of 2,080 shares.
(12) Includes warrants to purchase an aggregate of 40,000 shares.
(13) Includes warrants to purchase an aggregate of 4,000 shares.
(14) Includes warrants to purchase an aggregate of 12,500 shares.
(15) Includes warrants to purchase an aggregate of 18,750 shares.
(16) Includes warrants to purchase an aggregate of 6,250 shares.
(17) Includes warrants to purchase an aggregate of 125,000 shares.
(18) Includes warrants to purchase an aggregate of 50,000 shares.
(19) Includes warrants to purchase an aggregate of 1,500 shares.
* Less than 1%
** Has entered into a Lock-up Agreement, as described in "Plan of
Distribution."
*** Has entered into a Lock-up Agreement as to 7,500 shares.
**** Includes 5,000 shares received on October 7, 1996. Has entered into a
Lock-Up Agreement as to 25,000 shares.
Selling Stockholders will be entitled to receive all of the proceeds from
the future sale of their shares of Common Stock. The Company will not receive
any proceeds from the future sale of any of the aforementioned shares by the
respective Selling Stockholders.
The Company will bear all the expenses (other than stock transfer taxes,
brokerage commissions and other selling expenses) of any offering by the Selling
Stockholders.
13
<PAGE>
None of the Selling Stockholders has had, within the past three years, any
position, office or material relationship with the Company except that (i) Mr.
Eugene Bilotti is currently a director of the Company; (ii) Ms. Jean A. Bilotti
is the wife of Eugene Bilotti; (iii) Mr. Greg Horowitz is the son of Dr. Irwin
A. Horowitz, the Chairman, Chief Executive Officer and President of the Company,
and is the Florida counsel to the Company; (iv) Mr. Yiannakis Soteriou is
currently a consultant to the Company; (v) Mr. Mario DiNatale is a director of
the Company and President of DiversiFax Information Service, Inc., a subsidiary
of the Company; (vi) Salon, Marrow & Dyckman, LLP are the former attorneys of
the Company; (vii) Mr. Keith Fenton is currently a consultant to the Company;
(vii) Mr. Judd Rothman was a director of the Company from 1992 to 1993; and
(viii) Wall Street Associates is currently the public relations firm of the
Company.
PLAN OF DISTRIBUTION
The Selling Stockholders may offer and sell shares of Common Stock from
time to time as market conditions permit 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 negotiated transactions. The shares may be sold by
one or more of the following methods, without limitation: (a) a block trade in
which a broker or dealer so engaged will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchases;
and (d) face-to-face transactions between sellers and purchaser without a broker
or dealer. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from Selling
Stockholders in amounts to be negotiated. Such brokers, dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with such sales. The Company will
advise all Selling Stockholders that the State of New Jersey requires that all
sales of Common Stock sold in New Jersey must be made through brokers or dealers
registered with New Jersey, or pursuant to an exemption from such requirement.
In addition, 2,216,538 shares of Common Stock registered hereby may now be
sold into the open market, subject to a "lock-up" agreement with holders of an
aggregate of 1,961,841 shares to sell no more than 25% of their shares within
six months of the date of this Prospectus, no more than an additional 25% within
the following three months and no more than an additional 25% during the next
three months.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Breslow & Walker, 875 Third Avenue, New York, New York 10022.
14
<PAGE>
EXPERTS
The financial statements of the Company, as of November 30, 1995, and for
the years ended November 30, 1994 and November 30, 1995, incorporated by
reference herein and elsewhere in the Registration Statement, have been
incorporated by reference herein and in the Registration Statement in reliance
upon the reports of Hoberman, Miller & Co., P.C., independent certified public
accountants, given upon authority of said firm as experts in accounting and
auditing and incorporated by reference herein.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C., a Registration Statement on Form S-3 under
the Securities Act of 1933, as amended, for the registration of the securities
offered hereby. This Prospectus, which is part of the Registration Statement,
does not contain all of the information contained in the Registration Statement.
For further information with respect to the Company and the securities offered
7hereby, reference is made to the Registration Statement, including the exhibits
thereto, which may be inspected, without charge, at the Office of the Securities
and Exchange Commission, or copies of which may be obtained from the Commission
in Washington, D.C., upon payment of the requisite fees. Statements contained
in this Prospectus as to the content of any contract or other document referred
to are not necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
15
<PAGE>
______________________________________________________________________________
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION
WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION IN ANY JURISDICTION TO ANYONE 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 CIRCUMSTANCES OR THE FACTS HEREIN SET FORTH
SINCE THE DATE HEREOF.
___________________________
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION........................................ 2
DOCUMENTS INCORPORATED BY REFERENCE.......................... 2
THE COMPANY.................................................. 3
THE OFFERING................................................. 4
RISK FACTORS................................................. 5
USE OF PROCEEDS.............................................. 10
SELLING STOCKHOLDERS......................................... 10
PLAN OF DISTRIBUTION......................................... 14
LEGAL MATTERS................................................ 14
EXPERTS...................................................... 15
ADDITIONAL INFORMATION....................................... 15
___________________________
________________________________________________________________________________
DIVERSIFAX, INC.
2,216,538 SHARES OF COMMON STOCK
______________________
PROSPECTUS
_____________________
_________, 1996
________________________________________________________________________________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the Registrant in connection with the issuance
and distribution of the securities being registered hereby are as follows:
Registration Fee....................................... $ 3,908.32
Accounting Fees and Expenses........................... 4,000.00
Legal Fees and Expenses................................ 24,500.00
Blue Sky Fees and Expenses............................. 7,750.00
Miscellaneous Expenses................................. 841.68
----------
Total.......................................... $41,000.00
________________________
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law the registrant
may or shall, subject to various exceptions and limitations, indemnify its
directors or officers and may purchase and maintain insurance therefor.
The Company has included in its Certificate of Incorporation pursuant to
Section 102(b)(7) of the Delaware General Corporation Law a provision
eliminating the personal liability of directors to the Company or its
stockholders for damages for breach of fiduciary duty. The principal effect of
this provision in the Company's Certificate of Incorporation is to eliminate
potential monetary damage actions against any director for breach of his duties
as a director except (a) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) under
section 174 of the General Corporation Law, which relates to a willful or
negligent violation of section 160 (regarding the illegal purchase or redemption
of stock by a corporation) or 173 (regarding a corporations illegal declaration
or payment of dividends) of the General Corporation Law, or (d) for any
transaction from which the director for acts or omissions occurring prior to the
date of adoption of this provision. In addition, section 145 of the Delaware
General Corporation Law empowers a corporation (a) to grant indemnification to
any officer or director where it is determined that he acted in good faith and
in a manner he reasonably 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 reasonable cause to believe his conduct was unlawful and (b) to advance to an
officer or director the expenses of defending claims upon receipt of his
undertaking to repay any amount to which it is later determined he is not
entitled. The Company's By-laws provide that the Company will indemnify and
advance expenses of defense to its officers and directors substantially to the
full extent authorized by the Delaware General Corporation Law.
The foregoing statement is subject to the detailed provisions of Sections
102 and 145 of the Delaware General Corporation Law.
II-1
<PAGE>
ITEM 16. EXHIBITS.
Exhibit Sequentially Numbered
Number Documents Page Where Located
------- --------- ------------------
3(a) Certificate of Incorporation* _ _
3(b) By-Laws* _ _
5 Opinion of Counsel. 21
23(a) Independent Auditors' Consent. 22
23(b) Consent of Counsel is contained in the Opinion
of Counsel, filed as part hereof as Exhibit 5. _ _
_________________
* Previously filed with the Company's Registration Statement on Form S-1 (No.
33-46580) declared effective by the commission on November 18, 1992.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to include any
additional or changed material information on the plan of distribution.
(2) For determining any liability under the Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
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 final adjudication of such issue.
II-2
<PAGE>
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 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 Valley Stream, State of New York, on October 8, 1996.
DIVERSIFAX, INC.
By: /s/ Irwin A. Horowitz
--------------------------------
Dr. Irwin A. Horowitz
President and Chief Executive Officer
(Principal Executive, Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Irwin A. Horowitz Director October 8, 1996
- ------------------------------------
Dr. Irwin A. Horowitz
/s/ Eugene Bilotti Director October 8, 1996
- ------------------------------------
Eugene Bilotti
/s/ Mario Dinatale Director October 8, 1996
- ------------------------------------
Mario DiNatale
/s/ Kenneth Ross Wolfe Director October 8, 1996
- ------------------------------------
Kenneth Ross Wolfe
II-3
<PAGE>
Exhibit 5
October 8, 1996
Board of Directors
Diversifax, Inc.
39 Stringham Avenue
Valley Stream, New York 11580
Gentlemen:
It is our opinion that the securities being registered with the Securities
and Exchange Commission pursuant to the Registration Statement of Diversifax,
Inc. on Form S-3 will, when sold, be legally issued, fully paid and
nonassessable.
We consent to the filing of this opinion as an exhibit to the aforesaid
Registration Statement and further consent to the reference made to us under the
caption "Legal Matters" in the Prospectus constituting part of such Registration
Statement.
Very truly yours,
/s/ Breslow & Walker
Breslow & Walker
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 2 to the
Registration Statement of DiversiFax, Inc. and Subsidiaries on Form S-3 relating
to the registration of 2,216,538 shares of common stock, of our report dated
March 7, 1996, appearing in the Annual Report on Form 10-KSB of DiversiFax, Inc.
and Subsidiaries for the year ended November 30, 1995, and the use of our name,
and the statements with respect to us, under the heading "Experts" in the
Prospectus.
HOBERMAN, MILLER & CO., P.C.
October 9, 1996
