As filed with the Securities and Exchange Commission on June 14, 1996
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------------
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>
<TABLE><CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================================
Proposed
Maximum Proposed Maximum
Amount Offering Aggregate Amount of
Title of Each Class of Securities to be Price Per Offering Price Registration
to be Registered Registered Share(1) Fee
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share 2,211,538(2) $5.125 $11,334,132.25 $3,908.32
- ----------------------------------------------------------------------------------------------------------------------------
Total Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,908.32
============================================================================================================================
</TABLE>
_______________
(1) Represents the average of the bid and asked prices as quoted on NASDAQ
on June 7, 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.
(2) Represents shares of Common Stock which may be sold by selling
security holders. See "Selling Stockholders" in the Prospectus.
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 JUNE 14, 1996
DIVERSIFAX, INC.
2,211,538 SHARES OF COMMON STOCK
________________________
This Prospectus relates to up to 2,211,538 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. 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
$27,000.00 in the aggregate.
The Company's Common Stock is traded on the NASDAQ Small Cap Market
("NASDAQ") under the symbol DFAX. On June 12, 1996, the last reported sale
price of the Common Stock was $5.0625 per share.
________________________
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 for the fiscal year ended
November 30, 1995.
2. Quarterly Report on Form 10-QSB for the quarter ended
February 29, 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) operations in April 1995, upon
the acquisition of the Smart Switch assets of Faxit Corporation. The Smart
Switch is a computerized switching device which 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 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 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.
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>
<TABLE>
THE OFFERING
<S> <C>
Securities Offered: . . . . . . . . . . . 2,211,538 shares of Common Stock.
Shares of Common Stock Outstanding as
of June 3, 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
</TABLE>
_________________
(1)
Does not include (i) an aggregate of 325,000 shares of Common Stock
issuable upon the exercise of outstanding stock options and (ii)
1,335,000 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 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 $365,499 for the three month period ended
February 29, 1996. At February 29, 1996, the Company had an accumulated
deficit of $5,166,413. 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.
WORKING CAPITAL DEFICIT; NEED FOR ADDITIONAL FUNDS. At February 29,
1996, the Company had a working capital deficit of $267,794. 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.
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 into an agreement with AT&T to jointly
market the Company's in-room fax services on an exclusive basis
5
<PAGE>
to AT&T hotel accounts. There can be no assurance that any material sales
or leases will result from this 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. Although there are a
variety of alternatives to pay-per-copy reproduction, these alternatives
generally do not pose significant competition to the Company. Other
alternatives for copying include specialty full-service copy and print
shops, printers, privately owned copiers and personal copiers. Full-
service copy and print shops generally serve a market more interested in
service and high volume sophisticated copying rather than in the
convenience of location and ability to handle relatively few copies.
Additionally, those documents being copied by the users at on site pay-per-
copy copiers, such as government and court documents and library resource
materials, may not be able to be taken off-site. Personal copiers, which
have been on the market for a number of years, do not have a significant
adverse effect on the Company's copier activities. The Company is unable
to predict whether a technology or price breakthrough may increase the
sales and use of personal copiers and reduce the demand for the Company's
copy services.
Computers with printers also provide a certain amount of competition to
the Company, as they allow convenient production of multiple copies.
However, the Company does not believe that computer printing will have a
significant adverse effect on the Company's business since computer based
duplication is available only for documents resident on the computer which
is interfaced with a printer and therefore cannot be used for other
original documents.
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. One competitor, AlphaNet, 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 functionality of the Company's Smart Switch. 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.
6
<PAGE>
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 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.
7
<PAGE>
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.
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 customers amounted to approximately 21.9% and 24.7%,
respectively, of the Company's revenues. In March 1996, the Company was
not successful in its bid for the renewal of its contract with a major
library system in the City of New York, which provided approximately 12.3%
of the Company's sales for the fiscal year ended November 30, 1995. The
Company will continue to collect revenue from this library system over the
next several months until such time when all the Company's copiers are
removed. The loss of significant customers may have a material adverse
effect on the Company.
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.
POTENTIAL DEPRESSIVE EFFECT ON MARKET PRICE DUE TO FUTURE SALES OF
COMMON STOCK. 6,414,639 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 6,414,639 shares are currently eligible for sale
under Rule 144. In addition, the 2,211,538 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 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 Company is unable to predict
the effect that sales made under Rule 144 or otherwise may have on the then
prevailing market price of its Common Stock.
8
<PAGE>
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. Due to its operating deficit the Company may be
unable to continue to meet the NASDAQ requirements for continued listing in
which event the public market for the Company's Common Stock would be
materially adversely affected.
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.
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 June 3, 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 10,000 10,000 0 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(1) 67,000 31,182 *
Debbie & Hyman 30,000(2) 20,000 10,000 *
Ashkenazy**
Kathleen Belz** 75,000(1) 50,000 25,000 *
Henry & Pauline 168,000(3) 110,000 58,000 *
Ferstenberg**
Abraham Fishman** 210,000(4) 110,000 100,000 *
Lou Hammer** 75,000(1) 50,000 25,000 *
Gregg & Pamela 345,000(5) 230,000 115,000 *
Horowitz**
</TABLE>
9
<PAGE>
<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>
Alan Katz** 30,000(2) 20,000 10,000 *
Apostolos & Catherine 15,000(6) 10,000 5,000 *
Lambropoulos**
Thomas Laundrie** 231,250(7) 81,250 150,000 1.07%
Larry & Ruth Linden** 60,000(8) 40,000 20,000 *
Steven J. Miner** 75,000(1) 50,000 25,000 *
Ira & Daryle Openden** 30,000(2) 20,000 10,000 *
Matthew N. Phillips** 60,000(8) 40,000 20,000 *
Stephen A. Powers** 22,500(9) 15,000 7,500 *
William F. Preiss, Jr. 6,240(10) 4,160 2,080 *
& Geraldine Preiss**
Lynn Purcell** 120,000(11) 80,000 40,000 *
Andrew Shaw** 16,000(12) 8,000 8,000 *
Yiannakis Soteriou** 30,000(2) 20,000 10,000 *
John Vacchio** 30,000(2) 20,000 10,000 *
Justin Wernick** 60,000(8) 40,000 20,000 *
Sandra Zucker** 75,000(1) 50,000 25,000 *
Charles Famoso** 22,500(13) 10,000 12,250 *
William Gatta** 22,500(13) 10,000 12,250 *
William & Lois 33,750(14) 15,000 18,750 *
Muller**
Howard & Diane 11,250(15) 5,000 6,250 *
Schwartz**
Steven Finkelstein** 45,000(1) 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
</TABLE>
10
<PAGE>
<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>
Salon, Marrow & 25,000 25,000 0 0
Dyckman, LLP**
Christopher D. 19 19 0 0
Osborne**
George & Linda Geffen 30,000(2) 20,000 10,000 *
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, 9,500 9,500 0 0
Inc.
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 0
Michael Applebaum 4,750 4,750 0 0
Earp, Cohn, Leone & 5,000 5,000 0 0
Pendery
Richard Belz** 156,250(16) 31,250 125,000 *
Ira Openden** 156,250(16) 31,250 125,000 *
</TABLE>
11
<PAGE>
<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>
Gary Purcell** 156,250(16) 31,250 125,000 *
Paul Ruthfield** 30,000 30,000 0 0
Stephen Hayes** 106,250(17) 56,250 50,000 *
Judd Rothman** 313,750(17) 263,750 50,000 *
Wall Street 75,000 75,000 0 0
Associates**
Morris & Selma Cohen 4,750 4,750 0 0
David S. Maglich & 4,500(18) 3,000 1,500 *
Margaret H. Maglich**
Marion Rosenberg & 60,000(8) 40,000 20,000 *
Pauline Ferstenberg**
</TABLE>
___________________________
(1) Includes warrants to purchase an aggregate of 25,000 shares.
(2) Includes warrants to purchase an aggregate of 10,000 shares.
(3) Includes warrants to purchase an aggregate of 70,000 shares.
(4) Includes warrants to purchase an aggregate of 100,000 shares.
(5) Includes warrants to purchase an aggregate of 115,000 shares.
(6) Includes warrants to purchase an aggregate of 5,000 shares.
(7) Includes warrants to purchase an aggregate of 150,000 shares.
(8) Includes warrants to purchase an aggregate of 20,000 shares.
(9) Includes warrants to purchase an aggregate of 7,500 shares.
(10) Includes warrants to purchase an aggregate of 2,080 shares.
(11) Includes warrants to purchase an aggregate of 40,000 shares.
(12) Includes warrants to purchase an aggregate of 4,000 shares.
(13) Includes warrants to purchase an aggregate of 12,500 shares.
(14) Includes warrants to purchase an aggregate of 18,750 shares.
(15) Includes warrants to purchase an aggregate of 6,250 shares.
(16) Includes warrants to purchase an aggregate of 125,000 shares.
(17) Includes warrants to purchase an aggregate of 50,000 shares.
(18) 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.
12
<PAGE>
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.
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.
In addition, 2,211,538 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.
13
<PAGE>
EXPERTS
The financial statements and schedules 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 hereby, 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.
14
<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 DIVERSIFAX, INC.
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.
___________________________
2,211,538 SHARES OF COMMON STOCK
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION . . . . 2 ===================
DOCUMENTS INCORPORATED BY REFERENCE 2 PROSPECTUS
THE COMPANY . . . . . . . . . 3 ===================
THE OFFERING . . . . . . . . 4
RISK FACTORS . . . . . . . . 5
USE OF PROCEEDS . . . . . . . 9
SELLING STOCKHOLDERS . . . . 9
PLAN OF DISTRIBUTION . . . . 13
LEGAL MATTERS . . . . . . . . 13
EXPERTS . . . . . . . . . . . 14
ADDITIONAL INFORMATION . . . 14
___________________________
_________, 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 . . . . . . . . . . . . 1,500.00
Legal Fees and Expenses . . . . . . . . . . . . . . . 13,500.00
Blue Sky Fees and Expenses . . . . . . . . . . . . . 7,500.00
Miscellaneous Expenses . . . . . . . . . . . . . . . 591.68
----------
Total . . . . . . . . . . . . . . . . . . . . $27,000.00
________________________
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>
<TABLE><CAPTION>
ITEM 16. EXHIBITS.
Exhibit Sequentially Numbered
Number Documents Page Where Located
------ --------- ---------------------
<S> <C> <C>
3(a) Certificate of Incorporation* --
3(b) By-Laws* --
5 Opinion of Counsel. 19
23(a) Independent Auditors' Consents. 20
23(b) Consent of Counsel is contained in the Opinion --
of Counsel, filed as part hereof as Exhibit 5.
</TABLE>
_________________
* 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 offers or sales are being made, a post-effective amendment
to this Registration Statement to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; (2) that, for the purpose of determining any
liability under the Securities Act of 1933 (the "Act"), 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; and (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.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or 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.
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 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 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 June 12, 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 June 12, 1996
- ------------------------------------
Dr. Irwin A. Horowitz
/s/ Eugene Bilotti Director June 12, 1996
- ------------------------------------
Eugene Bilotti
/s/ Mario DiNatale Director June 12, 1996
- ------------------------------------
Mario DiNatale
/s/ Kenneth Ross Wolfe Director June 12, 1996
- ------------------------------------
Kenneth Ross Wolfe
II-3
EXHIBIT 5
June 12, 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
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
DiversiFax, Inc. and Subsidiaries on Form S-3 relating to the registration of
2,211,538 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.
/s/ Hoberman, Miller & Co., P.C.
HOBERMAN, MILLER & CO., P.C.
June 12, 1996
