<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 22, 1999
REGISTRATION STATEMENT NO. 333-78907
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SI DIAMOND TECHNOLOGY, INC.
(Exact Name of small business issuer as specified in its charter)
<TABLE>
<S> <C>
STATE OF TEXAS 76-0273345
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
SI DIAMOND TECHNOLOGY, INC. DOUGLAS P. BAKER
3006 LONGHORN BOULEVARD, SUITE 107 VICE PRESIDENT AND CHIEF FINANCIAL
AUSTIN, TEXAS 78758 OFFICER
(512) 339-5020 SI DIAMOND TECHNOLOGY, INC.
(Address, including zip code, and telephone number, 3006 LONGHORN BOULEVARD
including area code, of small business issuer's principal AUSTIN, TEXAS 78758
executive offices) (512) 339-5020
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
</TABLE>
--------------------
Copies To:
DONALD T. LOCKE
KIMBERLY L. HAGER
HASKELL SLAUGHTER & YOUNG, L.L.C.
1200 AMSOUTH/HARBERT PLAZA
1901 SIXTH AVENUE NORTH
BIRMINGHAM, ALABAMA 35203
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement has been declared 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(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
TO BE REGISTERED REGISTERED PER SHARE (2) PRICE (2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value $.001 per share........... 6,564,986
- ---------------------------------------------------------------------------------------------------------------------------------
Common stock underlying warrants.................. 11,304,792
- ---------------------------------------------------------------------------------------------------------------------------------
Common stock issuable upon conversion of Series G
preferred stock................................... 1,849,453
- ---------------------------------------------------------------------------------------------------------------------------------
Total........................................ 19,719,231(1) (1)
=================================================================================================================================
</TABLE>
(1) OF THE NUMBER OF SHARES OF COMMON STOCK BEING REGISTERED IN THIS
REGISTRATION STATEMENT, A TOTAL OF 5,222,925 SHARES OF COMMON STOCK IN
THIS REGISTRATION STATEMENT HAVE PREVIOUSLY BEEN REGISTERED AND THE
REGISTRATION FEES PAID WITH THE COMPANY'S REGISTRATION STATEMENT NOS.
333-24801, 333-38941 AND 333-40711. THE FILING FEE PREVIOUSLY INCLUDED
WITH THIS REGISTRATION STATEMENT IS FOR THE ADDITIONAL 14,496,306
SHARES OF THE COMPANY'S COMMON STOCK REGISTERED HEREIN.
(2) ESTIMATED SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE
PURSUANT TO RULE 457(C), BASED ON THE AVERAGE OF THE HIGH AND LOW
SALES PRICES PER SHARE OF COMMON STOCK AS REPORTED BY THE OTC BULLETIN
BOARD ON MAY 17, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE> 2
EXPLANATORY NOTE
SI Diamond has previously filed Registration Statement Nos. 333-24801,
333-38941 and 333-40711 to register shares of its common stock, as well as
shares of its common stock underlying warrants and the Company's Series G
preferred stock, which is convertible into the Company's common stock, held by
certain selling shareholders. This Registration Statement eliminates those
selling shareholders who have previously sold such shares pursuant to the three
previous registration statements and also eliminates those selling shareholders
to whom the Company no longer has registration obligations. This Registration
Statement registers 14,496,306 shares of common stock or shares of common
stock underlying warrants or the Company's Series G preferred stock which have
not previously been registered.
<PAGE> 3
PROSPECTUS
SI DIAMOND TECHNOLOGY, INC.
6,564,986 SHARES OF COMMON STOCK
(PAR VALUE $.001 PER SHARE)
11,304,792 SHARES OF COMMON STOCK
UNDERLYING WARRANTS
1,849,453 SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF SERIES G PREFERRED STOCK
The shareholders of SI Diamond Technology, Inc. identified on pages
20-22 may offer and sell the shares covered by this Prospectus from time to
time. The shares offered for sale:
- are presently outstanding, or will be issued as a result of
existing agreements,
- underlie certain existing warrants to purchase common stock,
- are issuable upon conversion of outstanding shares of the
Company's Series G preferred stock.
This offering is not being underwritten. The selling shareholders will
pay all underwriting discounts and selling commissions, if any, applicable to
the sale of the shares.
SI Diamond will receive the proceeds from the exercise of the warrants
but, will not receive any proceeds from the sale of the shares of common stock
by the selling shareholders. SI Diamond will pay substantially all of the
expenses of the registration of the sale of the shares. SI Diamond has agreed
to indemnify certain of the selling shareholders against certain civil
liabilities, including liabilities under the Securities Act of 1933. See "Plan
of Distribution and Selling Shareholders."
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN
RISK FACTORS WHICH YOU SHOULD CONSIDER. YOU SHOULD READ THE ENTIRE PROSPECTUS
BEFORE MAKING AN INVESTMENT DECISION.
SI Diamond's common stock is traded and quoted on the OTC Bulletin
Board under the symbol "SIDT". On June 15, 1999, the closing price of the common
stock as reported on the OTC Bulletin Board was $0.85 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is June ___, 1999.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary highlights selected information from this
document and may not contain all the information important to you. You should
read carefully this entire document and the documents to which we have referred
you. Unless the context otherwise requires, the term "SI Diamond" or the
"Company" refers to SI Diamond Technology, Inc. and its subsidiaries.
THE COMPANY
The executive offices of SI Diamond are located at 3006 Longhorn
Boulevard, Suite 107, Austin, Texas 78758, and its telephone number is (512)
339-5020.
THE OFFERING
This prospectus relates to 19,719,231 shares of common stock, par
value $.001 per share, of SI Diamond Technology, Inc., a Texas corporation,
which may be offered for sale by certain shareholders of the Company from time
to time. The shares offered for sale:
- are presently outstanding, or will be issued as a result of
existing agreements,
- underlie certain existing warrants to purchase common stock, or
- are issuable upon conversion of outstanding shares of the
Company's Series G preferred stock.
As of June 15, 1999, the Company had the following securities outstanding
covered by this Prospectus.
<TABLE>
<CAPTION>
SECURITY DESIGNATION AMOUNT OUTSTANDING (1)
-------------------- ----------------------
<S> <C>
Common stock 6,564,986
Common stock underlying 11,304,792
warrants
Series G preferred stock 1,849,453
</TABLE>
- -------------------
(1) This number represents either shares of common stock or the number of
shares of common stock into which the warrants and Series G preferred
stock are convertible as of the date of this Prospectus.
See "Plan of Distribution and Selling Shareholders."
PLAN OF DISTRIBUTION
This offering is not being underwritten. The selling shareholders
directly, through agents designated by them from time to time or through
dealers or underwriters also to be designated, may sell the shares from time to
time, in or through privately negotiated transactions, or in one or more
transactions, including block transactions, on the OTC Bulletin Board or on any
stock exchange on which the shares may be listed in the future pursuant to and
in accordance with the applicable rules of such exchange or otherwise. The
selling price
2
<PAGE> 5
of the shares may be at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. To the extent
required, the specific shares to be sold, the names of the selling
shareholders, the respective purchase prices and public offering prices, the
names of any such agent, dealer or underwriter and any applicable commission or
discounts with respect to a particular offer will be described in an
accompanying prospectus. In addition, any securities covered by this prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this prospectus. See "Plan of Distribution and Selling
Shareholders."
The Company will receive the proceeds from the exercise of the
warrants, but will not receive any proceeds from the sale of the shares by the
selling shareholders. The Company has agreed to pay all of the expenses of the
registration of the shares. The selling shareholders must pay any commissions
and discounts of underwriters, dealers or agents. The Company has agreed to
indemnify certain of the selling shareholders against certain civil liabilities
under the Securities Act. See "Plan of Distribution and Selling Shareholders."
SHARES CONVERTED AT DISCOUNT
Shares of the Company's Series G preferred stock may be convertible
into the Company's common stock at prices which are at a discount to prevailing
market prices at the time of conversion into the Company's common stock. The
Series G preferred stock is convertible into that number of shares of the
Company's common stock determined by dividing the original issue price of the
Series G preferred stock, plus an amount equal to ten percent (10%) of the
issue price per annum, by $1.00. As of the date of this Prospectus, the price
of the Company's common stock was below $1.00. Sales or offers to sell shares
of common stock converted from this series of the Company's preferred stock
could adversely affect the price of and market for SI Diamond's common stock.
See "Description of Capital Stock--Preferred Stock- -Series G preferred stock."
SELLING SHAREHOLDERS AS UNDERWRITERS
The selling shareholders and any broker-dealers, agents or
underwriters that participate with the selling shareholders in the distribution
of any of the shares may be deemed to be "Underwriters" within the meaning of
the Securities Act, and any commissions received by them and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution
and Selling Shareholders."
RISK FACTORS
See "Risk Factors" beginning on page 4 of this prospectus for a
discussion of certain factors related to the Company and the common stock
offered in this prospectus.
3
<PAGE> 6
RISK FACTORS
The common stock being offered hereby involves a high degree of risk.
You should carefully consider the following risk factors in addition to other
information contained in this prospectus in deciding whether to invest in our
shares of common stock.
DFE PRODUCT DEVELOPMENT IS IN ITS EARLY STAGES AND THE OUTCOME IS UNCERTAIN
Our Diamond Field Emission ("DFE") technology, and any products that
use this technology, will require significant additional development,
engineering, testing and investment prior to commercialization. Our leading
potential DFE product is a cathode, or light source, intended for use in a
display. If the cathode is successful, a display using this cathode is also a
possibility. The cathode or display may not be successfully developed. If
either of these products is developed, it may not be possible to produce these
products in significant quantities at a price that is competitive with other
similar products.
THERE ARE NO CURRENT DFE PRODUCT REVENUES
We currently receive no revenue from any products related to our DFE
technology. The only revenues that we have received related to our DFE
technology are revenues for continued research on the technology, and patent
licensing revenues. We may never receive product revenues from the DFE
technology.
OUR SUCCESS IS DEPENDENT ON OUR PRINCIPAL PRODUCTS
Our DFE technology is an emerging technology. Our financial condition
and prospects are dependent upon market acceptance and sales of our DFE
products and our electronic billboard and related electronic display products.
Additional research and development needs to be conducted on the DFE products
before marketing and sales efforts can be commenced. Market acceptance of our
products will be dependent upon the perception within the electronics and
instrumentation industries of the quality, reliability, performance,
efficiency, breadth of application and cost effectiveness of the products.
There can be no assurance that we will be able to gain commercial market
acceptance for our products or develop other products for commercial use.
WE HAVE A HISTORY OF OPERATING LOSSES
We have a history of operating losses and have never had a profitable
year. The first quarter of 1999 was our first profitable quarter. We have
incurred operating losses as shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 NET LOSS
---------------------- --------
<S> <C>
1992 $ (1,630,978)
1993 $ (7,527,677)
1994 $ (7,255,420)
1995 $ (14,389,856)
1996 $ (13,709,006)
1997 $ (6,320,901)
1998 $ (3,557,548)
1999 (through March 31) $ 3,445,984
</TABLE>
We may continue to incur additional operating losses for an extended
period of time as we continue to develop products. we do, however, expect to be
profitable in 1999. we may not be
4
<PAGE> 7
Profitable beyond 1999. Wallace Sanders & Company, Independent Auditors of the
Company, have expressed substantial doubt as to our ability to continue as a
going concern based on these accumulated losses from operations. See
"Independent Auditors' Report." We have funded our operations to date primarily
through the proceeds from the sale of our debt and equity securities. In order
to continue our transition from a contract research and development
organization to an organization with ongoing operations, we anticipate that
substantial product development expenditures will continue to be incurred.
WE HAVE FUTURE CAPITAL NEEDS AND THE SOURCE OF THAT FUNDING IS UNCERTAIN
We expect to continue to incur substantial expenses for research and
development, product testing, production, manufacturing, product marketing, and
administrative overhead. The majority of research and development expenditures
are for the development of our DFE technology and our electronic billboard
product. Some of our proposed products may not be available for commercial sale
or routine use for a period of one to two years. Commercialization of our
existing and proposed products will require additional capital in excess of our
current sources of funding. A shortage of capital may prevent us from achieving
profitability for an extended period of time. Because the timing and receipt of
revenues from the sale of products will be tied to the achievement of certain
product development, testing, manufacturing and marketing objectives, which
cannot be predicted with certainty, there may be substantial fluctuations in
our results of operations. If revenues do not increase as rapidly as
anticipated, or if product development and testing and marketing require more
funding than anticipated, we may be required to curtail our expansion and/or
seek additional financing from other sources. We may seek additional financing
through the offer of debt or equity or any combination of the two at any time.
We have developed a plan to allow us to maintain operations until we
are able to sustain ourselves on our own revenue. At the present time, we have
existing resources to sustain ourselves for a period of approximately 11 months
from the date of this Prospectus at current spending levels. We believe that we
have the ability to continue to raise short term funding, if necessary, to
enable us to continue operations until our plan can be completed. Our plan is
primarily dependent on raising funds through the licensing of our technology
and through strategic partner and debt offerings. We are also concentrating on
raising revenue by seeking customers for our electronic billboard product,
which is currently under development.
Our plan is based on current development plans, current operating
plans, the current regulatory environment, historical experience in the
development of electronic products and general economic conditions. Changes
could occur which would cause certain assumptions on which this plan is based
to be no longer valid. Our plan is primarily dependent on increasing revenues
and raising additional funds through strategic partners and additional debt
offerings. If adequate funds are not available from operations or additional
sources of financing, we may have to eliminate, or reduce substantially,
expenditures for research and development, testing and production of our
products. We may have to obtain funds through arrangements with other entities
that may require us to relinquish rights to certain of our technologies or
products. These actions could materially and adversely affect the Company.
RAPID TECHNOLOGICAL CHANGE COULD RENDER OUR PRODUCTS OBSOLETE AND WE MAY NOT
REMAIN COMPETITIVE
The display industry is highly competitive and is characterized by
rapid technological change. Our existing and proposed products will compete
with other existing products and may compete against other developing
technologies. Development by others of new or improved products, processes or
technologies may reduce the size of potential markets for our products. There
is no assurance that other products, processes or technologies will not render
our proposed products obsolete or less competitive. Most of our competitors
have greater financial, managerial, distribution, and technical resources than
us. We will be required to devote
5
<PAGE> 8
substantial financial resources and effort to further research and development.
There can be no assurance that we will successfully differentiate our products
from our competitors' products, or that we will adapt to evolving markets and
technologies, develop new products, or achieve and maintain technological
advantages.
WE HAVE TECHNOLOGIES SUBJECT TO LICENSES
As a licensee of certain research technologies through various license
and assignment agreements with Microelectronics and Computer Technology
Corporation and DiaGasCrown, Inc., we have acquired rights to develop and
commercialize certain research technologies. In certain cases, agreements
require us to pay royalties on the sale of products developed from the licensed
technologies and fees on revenues from sublicensees. We also have to pay for
the costs of filing and prosecuting patent applications. Each agreement is
subject to termination by either party, upon notice, in the event of certain
defaults by the other party. The payment of such royalties may adversely affect
the future profitability of the Company.
OUR PRODUCTS MAY NOT BE ACCEPTED BY THE MARKET
Since our inception, we have focused our product development and
research and development efforts on technologies that we believe will be a
significant advance over currently available technologies. With any new
technology, there is a risk that the market may not appreciate the benefits or
recognize the potential applications of the technology. Market acceptance of
our products will depend, in part, on our ability to convince potential
customers of the advantages of such products as compared to competitive
products. It will also depend upon our ability to train manufacturers and
others to use our products. We currently have a limited marketing organization
and there is no assurance that we will be able to successfully market our
proposed products even if such products perform as anticipated.
WE HAVE LIMITED MANUFACTURING CAPACITY AND EXPERIENCE
We have no established commercial manufacturing facilities in the
areas in which we are conducting our principal research. The management team
has commercial manufacturing and marketing experience in other industries and
with other products in the display industry; however, we have no experience in
manufacturing our proposed products. At the present time, we have no intention
of establishing a manufacturing facility. We are focusing our efforts on
licensing our technology to others for use in their manufacturing processes. We
intend to contract with a qualified manufacturer for assembly services related
to our electronic billboard product, which is currently under development. To
the extent that any of our other products require manufacturing facilities, we
intend to contract with a strategic partner or other qualified manufacturer.
WE MAY NOT BE ABLE TO MARKET AND SELL OUR PRODUCTS
We intend to establish and develop a sales organization to promote,
market, and sell our products. This may require significant additional
expenditures, management resources, and training time. There can be no
assurance that we will be able to establish a successful sales organization.
WE ARE DEPENDENT ON THE AVAILABILITY OF MATERIALS AND SUPPLIERS
We anticipate that the materials to be used in producing our future
products will be purchased from outside vendors. In certain circumstances, we
may be required to bear the risk of material price fluctuations. We anticipate
that the majority of raw materials used in products to be manufactured by the
Company or its strategic partners will be readily available. However, there is
no assurance that these materials will be
6
<PAGE> 9
available in the future, or if available, will be procurable at prices
favorable to the Company or its strategic partners.
LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS
Our future success will depend on our ability to attract and retain
highly qualified scientific, technical and managerial personnel. Competition
for such personnel is intense. We may not be able to attract and retain all
personnel necessary for the development of our business. In addition, much of
the know-how and processes developed by the Company reside in our key
scientific and technical personnel. This know-how and these processes are not
readily transferable to other scientific and technical personnel. The loss of
the services of key scientific, technical and managerial personnel could have a
material adverse effect on us.
WE MAY NOT BE ABLE TO PROVIDE SYSTEM INTEGRATION
In order to prove that our technologies work and will produce a
complete product, we must ordinarily integrate a number of highly technical and
complicated subsystems into a fully-integrated prototype. There is no assurance
that we will be able to successfully complete the development work on any of
our proposed products or ultimately develop any marketable products.
WE MAY BE UNABLE TO ENFORCE OR DEFEND OUR OWNERSHIP AND USE OF PROPRIETARY
TECHNOLOGY
Our ability to compete effectively with other companies will depend on
our ability to maintain the proprietary nature of our technology. Although we
have been awarded, have filed applications for, or have been licensed
technology under numerous patents, the degree of protection offered by these
patents or the likelihood that pending patents will be issued is uncertain.
Competitors in both the United States and foreign countries, many of which have
substantially greater resources and have made substantial investment in
competing technologies, may already have, or may apply for and obtain patents
that will prevent, limit or interfere with our ability to make and sell our
products. Competitors may also intentionally infringe on our patents. The
defense and prosecution of patent suits is both costly and time-consuming, even
if the outcome is favorable to the Company. In foreign countries, the expenses
associated with such proceedings can be prohibitive. In addition, there is an
inherent unpredictability in obtaining and enforcing patents in foreign
countries. An adverse outcome in the defense of a patent suit could subject us
to significant liabilities to third parties, require disputed rights to be
licensed from third parties or require us to cease selling our products.
Although third parties have not asserted infringement claims against us, there
is no assurance that third parties will not assert such claims in the future.
Claims that our products infringe on the proprietary rights of others are more
likely to be asserted after commencement of commercial sales incorporating our
technology.
We also rely on unpatented proprietary technology, and there is no
assurance that others will not independently develop the same or similar
technology, or otherwise obtain access to our proprietary technology. To protect
our rights in these areas, we require all employees and most consultants,
advisors and collaborators to enter into confidentiality agreements. These
agreements may not provide meaningful protection for the our trade secrets,
know-how, or other proprietary information in the event of any unauthorized use,
misappropriation or disclosure of such trade secrets, know-how, or other
proprietary information. While we have attempted to protect proprietary
technology that we develop or acquire and will continue to attempt to protect
future proprietary technology through patents, copyrights and trade secrets, we
believe that our success will depend upon further innovation and technological
expertise.
7
<PAGE> 10
OUR REVENUES HAVE BEEN DEPENDENT ON GOVERNMENT CONTRACTS IN THE PAST
In previous years, a significant part of our revenues were derived
from contracts with agencies of the United States government. Following is a
summary of those revenues in recent years:
<TABLE>
<CAPTION>
REVENUES FROM PERCENTAGE OF
YEAR ENDED DECEMBER 31 GOVERNMENT CONTRACTS TOTAL REVENUE
---------------------- -------------------- -------------
<S> <C> <C>
1992 $ 930,000 99%
1993 $ 1,147,000 89%
1994 $ 820,000 41%
1995 $ 1,009,000 33%
1996 $ 2,869,000 50%
1997 $ 854,000 24%
1998 $ 0 0%
</TABLE>
We currently have no significant commitment for any future government
funding and do not intend to seek any government funding unless it directly
relates to achievement of our strategic objectives. To the extent that we are
unable to obtain funding from alternate sources, this could adversely affect
our ability to continue to perform research and development on our proposed
products.
Contracts involving the United States government are, or may be,
subject to various risks including, but not limited to, the following:
- Unilateral termination for the convenience of the government
- Reduction or modification in the event of changes in the
government's requirements or budgetary constraints
- Increased or unexpected costs causing losses or reduced
profits under fixed-price contracts or unallowable costs
under cost reimbursement contracts
- Potential disclosure of our confidential information to third
parties
- The failure or inability of the prime contractor to perform
its prime contract in circumstances where we are a
subcontractor
- The failure of the government to exercise options provided
for in the contracts
- The right of the government to obtain a non-exclusive,
royalty free, irrevocable world-wide license to technology
developed under contracts funded by the government if we fail
to continue to develop the technology
YEAR 2000 ISSUES MAY EXPOSE US TO LIABILITY
Some computers, software and other equipment include programming code
in which calendar year data is abbreviated to only two digits. As a result of
this design decision, some of the systems could fail to operate or fail to
produce correct results if "00" is interpreted to mean 1900 rather than 2000.
These problems are widely expected to increase in frequency and severity as the
year 2000 approaches and are commonly referred to as the "Year 2000 Problem."
8
<PAGE> 11
The Year 2000 Problem presents us potential risks including, but not
limited to, the following:
- Products sold to customers - We have had very limited product
sales to customers and believe that all products sold to
customers are Year 2000 complaint. We believe our risk in
this area is extremely limited.
- Internal Infrastructure - We have completed an internal
evaluation and have determined that all of our internal
systems will be Year 2000 compliant well prior to the end of
1999. We believe our risk in this area is extremely limited.
- Suppliers/third party relationships - There is no assurance
that our suppliers or other third parties that we rely on
will resolve any or all Year 2000 problems with their systems
on a timely basis. Since we have no significant suppliers of
product, we believe our risk is limited in this area.
- External Infrastructure - We are dependent on other entities
such as governmental units, utilities, banks, etc., that
maintain an external infrastructure necessary for us to
operate. Although we expect that such entities are addressing
and solving their Year 2000 problems, there no assurance that
these problems will be addressed and solved on a timely
basis.
WE ARE EXPOSED TO MATERIAL LITIGATION
We have been sued by a former customer of Plasmatron, one of our
subsidiaries, for damages that the former customer claims that it incurred as a
result of the alleged failure of the machine provided by Plasmatron to perform
as intended. Various trade creditors have also filed suit to collect unpaid
trade amounts due. We expect these items to be resolved with no material impact
on our financial statements. If we were to become subject to a judgment that
exceeds our ability to pay, that judgment could have a material impact on our
financial condition and could affect our ability to continue in existence.
OFFICERS, DIRECTORS AND PRINCIPAL SHAREHOLDERS OWN OR CONTROL A LARGE NUMBER OF
SHARES
Officers, directors and principal shareholders of SI Diamond own, or
have the power to vote, in the aggregate, approximately 10.2% of the voting
stock of SI Diamond on an "as converted" basis. Due to the relatively large
number of shares owned by these shareholders and certain provisions of SI
Diamond's Amended and Restated Articles of Incorporation (the "Restated
Articles") and Bylaws, it may be difficult for other shareholders to cause a
change in control of SI Diamond or effect other fundamental corporate
transactions if officers, directors and principal shareholders were to act as a
group.
THE MARKET FOR SHARES OF SI DIAMOND COMMON STOCK IS VOLATILE
The market price of the shares of SI Diamond common stock, like that
of the common stock of many emerging technology companies, has fluctuated
significantly in recent years and will likely continue to fluctuate in the
future. The prices of such securities currently rise and are expected to
continue to rise rapidly in response to certain events, such as announcements
concerning product developments, licenses and patents, although the outcome of
such events may not be fully determined. Similarly, prices of such securities
may fall rapidly if unfavorable results are encountered in product development
or market acceptance. In the event that SI Diamond achieves earnings from the
sale of products, securities analysts may begin predicting quarterly earnings.
The failure of our earnings to meet analysts' expectations could result in a
significant rapid decline in the market price of our common stock. In addition,
the stock market has experienced and continues to experience extreme price and
volume fluctuations which have affected the market price of the equity
securities
9
<PAGE> 12
of many technology companies and which have often been unrelated to the
operating performance of those companies. Such broad market fluctuations, as
well as general economic and political conditions, may adversely affect the
market price of the common stock.
SHARES OF OUR SERIES G PREFERRED STOCK MAY BE CONVERTED AT A DISCOUNT INTO
SHARES OF SI DIAMOND COMMON STOCK
Shares of the Company's Series G preferred stock may be convertible
into SI Diamond common stock at prices which are at a discount to prevailing
market prices at the time of conversion into SI Diamond's common stock. The
Series G preferred stock is convertible into that number of shares of the
Company's common stock determined by dividing the original issue price of the
Series G preferred stock, plus an amount equal to ten percent (10%) of the
issue price per annum, by $1.00. As of the date of this Prospectus, the price
of the Company's common stock was below $1.00. Sales or offers to sell shares
of common stock converted from this series of the Company's preferred stock
could adversely affect the price of and market for SI Diamond's common stock.
See "Description of Capital Stock--Preferred Stock--Series G preferred stock."
SHARES OF OUR COMMON STOCK ARE ELIGIBLE FOR FUTURE SALE
As of June 15, 1999, there were 51,015,336 shares of SI Diamond common
stock outstanding, of which 43,628,915 shares of such common stock were freely
tradeable without restriction or further registration under the Securities Act
by persons other than "affiliates" of SI Diamond. As of that date, the
remaining shares of SI Diamond common stock were deemed "restricted
securities," as defined in Rule 144 under the Securities Act, and may not be
resold in the absence of registration under the Securities Act or pursuant to
an exemption from such registration, including exemptions provided by Rule 144
under the Securities Act. Under Rule 144, persons who have held securities for
a period of at least one year may sell a limited amount of such securities
without registration under the Securities Act. Rule 144 also permits, under
certain circumstances, persons who are not affiliates of SI Diamond, to sell
their restricted securities without quantity limitations once they have
completed a two-year holding period.
The Registration Statement, of which this Prospectus is a part,
pertains to 6,564,986 shares of common stock which are currently "restricted
securities"; 11,304,792 shares of common stock which underlie existing
warrants; and 1,849,453 shares of common stock which are issuable upon
conversion of the Series G preferred stock. SI Diamond is obligated to maintain
the effectiveness of the Registration Statement for varying periods of time,
pursuant to separate agreements with certain groups of the selling
shareholders.
In addition to the shares of common stock which are outstanding as of
June 15, 1999, 5,834,391 shares of common stock have been reserved for issuance
pursuant to our stock option plans. Approximately 11,304,792 shares of common
stock have also been reserved for issuance upon the exercise of warrants that
have been issued by SI Diamond (11,304,792 of such shares have been registered
in the Registration Statement) and 1,849,453 shares of common stock have been
reserved for issuance upon conversion of the Company's Series G preferred
stock.
No prediction can be made as to the effect, if any, that future sales,
or the availability of shares of SI Diamond common stock for future sales, will
have on the market price prevailing from time to time. Sales of substantial
amounts of SI Diamond common stock by SI Diamond or by shareholders who hold
"restricted securities," or the perception that such sales may occur, could
adversely affect prevailing market prices for the common stock.
10
<PAGE> 13
PRIOR AND SUPERIOR RIGHTS OF OTHER CLASSES OF CAPITAL STOCK
The rights of holders of the common stock to receive dividends or
other payments with respect thereto are subject to any prior and superior
rights of holders of SI Diamond's preferred stock. As of June 15, 1999, SI
Diamond had issued and outstanding 1,550 shares of its Series G preferred
stock. No current series of SI Diamond's preferred stock has rights that are
prior and superior to the common stock with respect to dividends. Additionally,
the holders of the Series G preferred stock are entitled to a liquidation
preference over the holders of the common stock. The Board of Directors,
however, has the authority to provide for the issuance of additional shares of
preferred stock in one or more additional series and such shares may, in the
Board's discretion, have prior and superior rights to receive dividends or
other payments with respect thereto. In light of its future capital
requirements, SI Diamond could issue shares of preferred stock at any time
having such prior and superior rights. See "Description of Capital Stock".
A POSSIBLE ADVERSE EFFECT ON THE PRICE OF OUR COMMON STOCK COULD RESULT FROM
SALES BY SELLING SHAREHOLDERS IN THE MARKET
Sales of or offers to sell substantial blocks of common stock
currently held by certain shareholders, or the perception by investors,
investment professionals or securities analysts of the possibility that such
sales may occur could adversely affect the price of and market for the common
stock.
Upon registration in accordance with its obligations, the selling
shareholders will be permitted to sell up to 19,719,231 shares of common stock,
of which 11,304,792 are shares of common stock subject to issuance upon the
exercise of certain warrants and 1,849,453 are shares of common stock issuable
upon conversion of the Series G preferred stock. The shares (assuming the
exercise of all warrants and conversion of all the Series G preferred stock are
subject to the Registration Statement) represent approximately 30.73% of the
shares of common stock outstanding on the date hereof. We will not receive any
proceeds from sales of shares held by such selling shareholders. SI Diamond
will receive the proceeds from the exercise of any warrants to purchase shares
of common stock. SI Diamond is unable to predict how much it will receive from
the exercise of the warrants held by the Vision Mark Selling Shareholder since
the price of such warrants shall be established, if at all, upon the
achievement of certain milestones by C&A Services, L.L.C. See "Plan of
Distribution and Selling Shareholder--Vision Mark Selling Shareholder." The
exercise prices of all other warrants range from $0.25 to $7.89 per share of SI
Diamond's common stock. It is unlikely that any warrants will be exercised
until the trading price of the common stock exceeds the exercise price of the
warrants, if at all.
OTHER CLASSES OF CAPITAL STOCK HAVE PRIOR AND SUPERIOR RIGHTS
The rights of holders of the common stock to receive dividends or
other payments with respect thereto are subject to any prior and superior
rights of holders of SI Diamond's preferred stock. As of June 15, 1999, SI
Diamond had issued and outstanding 1,550 shares of its Series G preferred
stock. No current series of SI Diamond's preferred stock has rights that are
prior and superior to the common stock with respect to dividends. Additionally,
the holders of the Series G preferred stock are entitled to a liquidation
preference over the holders of the common stock. The Board of Directors,
however, has the authority to provide for the issuance of additional shares of
preferred stock in one or more additional series and such shares may, in the
Board's discretion, have prior and superior rights to receive dividends or
other payments with respect thereto. In light of its future capital
requirements, SI Diamond could issue shares of preferred stock at any time
having such prior and superior rights. See "Description of Capital Stock".
11
<PAGE> 14
WE HAVE NEVER PAID DIVIDENDS
The Company has never paid cash dividends on its equity securities and
does not intend to pay cash dividends in the foreseeable future. To the extent
the Company has earnings in the future, the Company intends to reinvest such
earnings in the business operations of the Company.
OUR RESTATED ARTICLES OF INCORPORATION AND BYLAWS MAY INHIBIT A TAKEOVER
The Company's Restated Articles and Bylaws contain a number of
provisions which could make the acquisition of the Company, by means of an
unsolicited tender offer, a proxy contest or otherwise, more difficult,
including the following:
- the Board is authorized to issue series of preferred stock
that could, depending on the terms of such series, impede the
completion of a merger, tender offer or other takeover
attempt;
- the Board of Directors is divided into three classes of
directors, with the result that approximately one-third of
the Board of Directors are elected each year;
- except in limited circumstances, no shares of the Company's
preferred stock may be issued or sold to any officer or
director of the Company or any shareholder owning more than
five percent (5%) of the Company's common stock without the
affirmative vote of a majority of the disinterested
shareholders of the Company; and
See "Description of Capital Stock--Certain Provisions of the Articles of
Incorporation, Bylaws and Texas Law."
OUR RESTATED ARTICLES AND BYLAWS LIMIT OUR DIRECTORS' LIABILITY AND PROVIDE FOR
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Articles provide that a director of the Company
will only be liable to the Company for the following:
- breaches of his duty of loyalty to the Company and its
shareholders,
- acts or omissions not in good faith or which constitute a
breach of duty of a director of the Company or involves
intentional misconduct or a knowing violation of law,
- transactions from which a director receives an improper
benefit, whether or not the benefit resulted from an action
taken within the scope of the director's office,
- acts or omissions for which liability is specifically
provided by statute, and
- acts relating to unlawful stock purchases or payments of
dividends.
Thus, the Company may be prevented from recovering damages for certain alleged
errors or omissions by its directors.
The Bylaws also provide that, under certain circumstances, the Company
will indemnify its officers and directors for liabilities incurred in
connection with their good faith acts for the Company. Such an indemnification
payment might deplete the Company's assets. While Texas law permits a
shareholder to bring
12
<PAGE> 15
a derivative action on behalf of a corporation, the law relating to the
remedies available to corporate shareholders is constantly changing.
Shareholders who have questions concerning the fiduciary obligations of the
officers and directors of the Company should consult with independent legal
counsel. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
THERE ARE RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS
This prospectus contains some forward-looking statements.
Forward-looking statements give our current expectations or forecasts of future
events. You can identify these statements by the fact that they do not relate
strictly to historical or current facts. They use words such as "anticipate",
"believe", "expect", "estimate", "project", "intend", "plan", and other words
and terms of similar meaning in connection with any discussion of future
operating or financial performance. In particular, these include statements
relating to future actions, prospective products or product approvals, future
performance or results of current and anticipated products, sales efforts,
expenses, the outcome of contingencies such as legal proceedings, and financial
results. From time to time, we also may provide oral or written forward-looking
statements in other materials we release to the public.
Any or all of our forward-looking statements in this report and in any
other public statements we make may turn out to be wrong. They can be affected
by inaccurate assumptions we might make or by known or unknown risks or
uncertainties. Many factors mentioned in the following discussion - for
example, product development, competition, and the availability of funding -
will be important in determining future results. Consequently, no
forward-looking statement can be guaranteed. Actual future results may vary
materially.
We undertake no obligation to publicly update any forward-looking
statements, whether as the result of new information, future events, or
otherwise. You are advised, however, to consult any further disclosures we make
on related subjects in our 10-Q, 8-K, and 10-K reports to the SEC. Also note
that we provide the following cautionary discussion of risks, uncertainties,
and possibly inaccurate assumptions relevant to our business. These are factors
that we think could cause our actual results to differ materially from expected
and historical results. Other factors besides those listed here could also
adversely affect the Company. This discussion is provided as permitted by the
Private Securities Litigation Reform Act of 1995.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a Registration Statement on Form S-3 that
we filed with the SEC. This prospectus does not contain all of the information
in the Registration Statement. The Registration Statement contains more
information than this prospectus regarding SI Diamond and its common stock,
including exhibits and schedules. You can get a copy of the Registration
Statement from the SEC at the address below or from its internet site.
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy the documents we file
with the SEC at the SEC's public reference room at 450 Fifth Street, N.A.,
Judiciary Plaza, Washington, D.C. 20549 and at the Regional Offices of the
Commission at the Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60606-2511 and Seven World Trade Center, New York, New
York 10048. You should call 1-800-SEC-0330 for more information on the public
reference room. You can request copies of these documents upon payment of a
duplicating fee by writing to the SEC at the public reference section at 450
Fifth Street, N.W., Washington, D.C. 20549.
13
<PAGE> 16
The Commission also maintains a Web site that contains information regarding
registrants at http:\\www.sec.gov.
The common stock is included in the OTC Bulletin Board under the
symbol "SIDT". Reports, proxy and information statements and other information
concerning the Company can be inspected at the National Association of
Securities Dealers, Inc., 1735 K Street, 3rd Floor, Washington, D.C. 20006 or
obtained by calling the Nasdaq Public Reference Room Disclosure Group at
1-800-638-8241.
14
<PAGE> 17
DOCUMENTS INCORPORATED BY REFERENCE
The Commission allows us to "incorporate" into this Prospectus
information we file with the Commission in other documents. This means we can
disclose important information to you by referring to other documents which we
have filed and contain that information. The following documents, which have
been filed by the Company with the Commission pursuant to the Exchange Act
(File No. 1-11602), are incorporated by reference in this prospectus and shall
be deemed to be a part hereof:
(1) The Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1998.
(2) The Company's Quarterly Report on Form 10-QSB for
the quarterly period ended March 31, 1999.
(3) The Company's Current Report on Form 8-K dated as of
February 4, 1999.
(4) The Company's Current Report on Form 8-K dated as of
April 16, 1999.
(5) The description of the Company's common stock which
is contained in the Company's Registration Statement
on Form 8-A filed on November 19, 1992, pursuant to
Section 12 of the Securities Exchange Act of 1934,
including any amendment or report filed for the
purpose of updating such description.
We incorporate by reference all future documents we may file with the
Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 until we terminate the offering of these shares. The information
that we incorporate by reference may include documents filed after the date of
this Prospectus which update and supersede the information you read in this
Prospectus.
You may request a copy of the documents incorporated by reference at
no cost. Requests for copies should be directed in writing or by telephone to:
SI Diamond Technology, Inc.
3006 Longhorn Boulevard, Suite 107
Austin, Texas 78758
Attention: Corporate Secretary
(Telephone: (512) 339-5020)
15
<PAGE> 18
RECENT DEVELOPMENTS
In March 1999, the Company signed a license agreement with a large
manufacturer of information and office products. Under the terms of this
agreement, the Company received $5,000,000 on March 31, 1999 representing gross
royalties of $5,555,556, less related foreign taxes of $555,556. In exchange
for this payment, the Company granted the licensee a paid up worldwide
non-exclusive license to certain of the Company's patents and patent
applications.
During the quarter ended March 31, 1999, the Company converted a total
of $905,000 of short-term notes payable into equity of the Company. This
resulted in the issuance of 3,597,371 shares of the Company's common stock.
USE OF PROCEEDS
The selling shareholders will receive all of the net proceeds from the
sale of the shares of SI Diamond common stock sold. Pursuant to this
prospectus, SI Diamond will not receive any of the proceeds from the sale of
the shares by the selling shareholders. SI Diamond will receive the proceeds
from the exercise of the warrants, which proceeds will be used for working
capital. SI Diamond is unable to predict how much it will receive from its
exercise of the warrants held by the Vision Mark Selling Shareholder since the
price of such warrants shall be established, if at all, upon the achievement of
certain milestones by C&A Services, L.L.C. See "Plan of Distribution and
Selling Shareholder--Vision Mark Selling Shareholder." The exercise prices of
all other warrants range from $0.25 to $7.89 per share of SI Diamond's common
stock. It is unlikely that any warrants will be exercised until the trading
price of the common stock exceeds the exercise price of the warrants, if at
all.
PLAN OF DISTRIBUTION AND SELLING SHAREHOLDERS
GENERAL
The Company is registering the shares on behalf of the Selling
Shareholders. As used herein, "Selling Shareholders" includes donees and
pledgees selling shares received from a named Selling Shareholder after the date
of this Prospectus. The Selling Shareholders hold shares of SI Diamond's common
stock which are (1) currently "restricted securities", (2) issuable upon
exercise of certain outstanding warrants to purchase shares of the Company's
common stock, or (3) issuable upon conversion of outstanding shares of the
Company's Series G preferred stock. All costs, expenses and fees in connection
with the registration of the shares offered hereby will be borne by the Company.
Brokerage commissions and similar selling expenses, if any, attributable to the
sale of shares will be borne by the Selling Shareholders.
Sales of shares may be effected by Selling Shareholders from time to
time in one or more types of transactions (which may include block transactions)
on the OTC Bulletin Board or any stock exchange on which the shares may be
listed in the future pursuant to and in accordance with the applicable rules of
such exchange, in negotiated transactions, through put or call options
transactions relating to the shares, through short sales of shares, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, or at negotiated prices. Such transactions may or may not involve brokers
or dealers or underwriters. The Selling Shareholders have advised the Company
that they have not entered into any agreements, understandings or arrangements
with any underwrites or broker-dealers regarding the sale of their securities,
nor is there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the Selling Shareholders.
16
<PAGE> 19
The Selling Shareholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Shareholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The Selling Stockholders and any broker-dealers that act in connection
with the sale of shares might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. The Company has agreed to indemnify each Selling
Shareholders against certain liabilities, including liabilities arising under
the Securities Act. The Selling Shareholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
shares against certain liabilities, including liabilities arising under the
Securities Act.
Because Selling Shareholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the Selling Shareholders
will be subject to the prospectus delivery requirements of the Securities Act.
Resales and reoffers of the shares by the Selling Shareholders must also be
accompanied by the delivery of a copy of the Prospectus. Copies of the
Prospectus shall be delivered to each Selling Shareholder after the Registration
Statement, of which this Prospectus is a part, is declared effective. To the
extent required by applicable law, the specific shares to be sold, the names of
the Selling Shareholders, the respective purchase prices and public offering
prices, the names of any agent, dealer or underwriter, and any applicable
commissions or discounts with respect to a particular offer will be set forth in
the accompanying Prospectus. Each Selling Shareholder shall also be informed of
the anti-manipulative rules under Regulation M promulgated pursuant to the
Exchange Act.
Selling Shareholders also amy resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such Rule.
They may also pledge shares as collateral for margin accounts, which shares can
be resold pursuant to the terms of such accounts.
There can be no assurance that the Selling Shareholders will sell any
or all of the shares offered by them in this Prospectus. SI Diamond has filed
the Registration Statement, of which this Prospectus forms a part, to comply
with the exercise by certain Selling Shareholders demand registration rights
granted to such Selling Shareholders, and to comply with certain "piggyback"
registration rights granted to other Selling Shareholders.
Upon the Company being notified by a Selling Shareholder that any
material arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
Prospectus will be filed, if required, pursuant to Rule 424(b) under the Act,
disclosing (i) the name of each such Selling Shareholder and of the
participating broker-dealer(s), (ii) the number of shares involved, (iii) the
price at which such shares were sold, (iv) the commissions paid or discounts or
concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this Prospectus and (vi) other facts
material to the transaction. In addition, upon the company being notified by a
Selling Shareholder that a donee or pledgee intends to sell more than 500
shares, a supplement to this Prospectus will be filed.
17
<PAGE> 20
SWARTZ SELLING SHAREHOLDERS
Effective in January 1996, the persons listed in the Selling
Shareholders Table as the Swartz Selling Shareholders received warrants to
purchase shares of the Company's common stock at $7.89 per share. These
warrants expire on January 7, 2002. Swartz allocated their warrants among
certain of its principals and employees. Swartz assisted the Company as
placement agent for its Series E preferred stock, of which there are no shares
currently outstanding.
SERIES G SELLING SHAREHOLDERS
Effective in June 1997, the shareholders listed in the Selling
Shareholders Table as the Series G Selling Shareholders acquired 1,700 shares
of the Company's Series G preferred stock in an exempt transaction pursuant to
Regulation D of the Securities Act. Of these shares, 1,550 are still
outstanding.
Subject to adjustment in certain circumstances, each share of Series G
preferred stock is convertible into that number of shares of common stock
determined by dividing the original issue price of the Series G preferred
stock, plus an amount equal to 10% per annum of their issue price, by $1.00.
In addition to the shares of Series G preferred stock issued in this
offering, the Series G Selling Shareholders also received warrants to purchase
an aggregate of 850,000 shares of the Company's common stock at $1.00 per
share. These warrants expire in August 2002.
The Company agreed at the time of sale of the Series G preferred stock
to register pursuant to the Registration Statement the shares of common stock
issuable upon conversion of the Series G preferred stock as determined at the
time of such registration and to keep such Registration Statement effective for
one (1) year. Additionally, the Company agreed to pay all of the expenses
incident to the preparation and filing of the Registration Statement (other than
commissions and discounts of any underwriters, dealers or agents). The Company
also agreed to indemnify the Series G selling shareholders and any underwriters
they may utilize against certain civil liabilities, including liabilities
arising under the Securities Act. In addition, each Series G selling shareholder
agreed to indemnify the Company against civil liabilities, including liabilities
under the Securities Act, with respect to written information furnished by the
Series G selling shareholders to the Company.
NOTE SELLING SHAREHOLDERS
During 1998, the Company issued a total of $1,005,000 of notes payable
to investors that were convertible into shares of the Company's common stock at
the option of the lender, primarily at a rate of $0.25 per share, which
approximated the market price at the time the loans were made. All of these
notes have been converted into the Company's common stock.
In January and February 1999, the Company borrowed a total of $200,000
from a shareholder for working capital purposes. These short-term loans bore
interest at a rate of 15%, were secured by all assets of the Company, and were
convertible into the common stock of the Company at rates ranging from $0.30 to
$0.40 per share. These conversion rates approximated the market price of the
Company's common stock at the times the loans were arranged. These notes were
converted into shares of Company's common stock in February 1999.
18
<PAGE> 21
OCTOBER 1998 WARRANT SELLING SHAREHOLDER
In 1998, the Company issued $100,000 of 90-day notes which were
payable at a rate of 15% and secured by all assets of the Company. These notes
were accompanied by warrants enabling the holder of these 90-day notes to
purchase a total of 400,000 shares of the Company's common stock at $0.25 per
share, which approximated the market price of the Company's common stock at the
time of the loans.
VISION MARK SELLING SHAREHOLDER
On November 11, 1998, Electronic Billboard Technology, Inc. ("EBT"), a
wholly-owned subsidiary of SI Diamond entered into a Marketing Agent Agreement
with Vision Mark, L.L.C., a Texas limited liability company ("Vision Mark").
Pursuant to the marketing agreement, EBT appointed Vision Mark as a
nonexclusive marketing representative. In connection with the marketing
agreement, SI Diamond entered into a Consulting and Advisory Services
Compensation Agreement with C&A Services, L.L.C. ("C&A"). SI Diamond also
agreed that at such time as EBT shall enter into a letter of intent for the
installation of certain of its operating systems resulting from Vision Mark's
representation of EBT, SI Diamond shall issue C&A 300,000 shares of its common
stock.
SI Diamond also issued warrants to purchase SI Diamond common stock to
C&A, which shall be exercisable upon the achievement of certain goals as
described below:
(1) Once EBT has received revenue from arrangements pursuant to the
marketing agreement in the aggregate of $10,000,000, and for each successive
and cumulative $10,000,000 increment of revenue achieved pursuant to the
marketing agreement, C&A may exercise warrants to purchase up to 250,000 shares
of SI Diamond common stock at a purchase price equal to 50% of the average
closing price of SI Diamond common stock on the five business days next
preceding the date of the achievement of each $10,000,000 increment in revenue
from the marketing agreement.
(2) Within 60 days following each annual anniversary of the
marketing agreement, if the aggregate revenue from the marketing agreement is
at least equal to $10,000,000 for each such annual period, C&A shall have the
additional right thereafter to exercise warrants to purchase shares of SI
Diamond common stock with respect to each such annual determination. If the
amount of revenue received pursuant to the marketing agreement is equal to, but
not less than 25% of, the aggregate revenue of SI Diamond for each such annual
period, C&A may exercise warrants to purchase up to 100,000 shares of SI
Diamond common stock at a purchase price equal to 75% of the average closing
price of SI Diamond common stock on the five business days next preceding the
last business day of each such annual period. For each additional 1% above 25%
that the revenue received pursuant to the marketing agreement contributed to
the aggregate SI Diamond annual revenue for such annual period, C&A may
exercise warrants to purchase up to 100,000 such additional shares of SI
Diamond common stock, in incremental amounts of 4,000 shares of SI Diamond
common stock each for each such additional 1% of revenue that the marketing
agreement contributed to the aggregate revenue of SI Diamond for such annual
period. These warrants may be exercised at a purchase price equal to the
average closing price of SI Diamond common stock on the five business days next
preceding the last business day of such annual period, less a percentage equal
to the sum of 25% plus an additional 1% for each additional 1% over and above
25% (not to exceed, in the aggregate, 50%) that the revenue achieved pursuant
to the marketing agreement contributed to the aggregate SI Diamond revenue for
such annual period.
19
<PAGE> 22
(3) SI Diamond has also issued warrants to C&A to purchase an
additional 2,300,000 shares of SI Diamond's common stock upon the receipt by
EBT of each of $100,000,000 and $200,000,000, respectively, of cumulative
revenue from the marketing agreement (for a maximum of 4,600,000 shares). The
purchase price for the shares subject to these warrants shall be equal to 50%
of the average closing price on the five business days next preceding the date
on the achievement of each of $100,000,000 and $200,000,000 of such cumulative
revenue by EBT.
Notwithstanding anything contained in the Consulting and Advisory
Services Compensation Agreement, the number of shares of SI Diamond common
stock received by C&A shall not exceed 10,000,000 shares, subject to adjustment
in certain circumstances.
OTHER SELLING SHAREHOLDERS
The Company has agreed to give the shareholders listed herein as the
Other Selling Shareholders "piggyback" registration rights regarding shares
underlying certain warrants and shares held by these holders. Pursuant to these
"piggyback" rights, the Company agreed to use its best efforts to have the
common stock and the common stock issuable upon the exercise of these warrants
included in the Registration Statement, of which this prospectus is a part.
SELLING SHAREHOLDERS
This prospectus covers offers of the shares of common stock owned by
the Selling Shareholders. The following table lists the names of the selling
shareholders as well as (1) the number of shares of common stock, (2) the
number of shares of common stock underlying existing warrants, and (3) the
number of shares of common stock issuable upon conversion of the Company's
Series G preferred stock held as of June 15, 1999. Because the Company does not
know how many shares may be sold by the selling shareholders pursuant to this
prospectus, no estimate can be given as to the number of the shares that will
be held by the selling shareholders upon termination of this offering.
20
<PAGE> 23
SELLING SHAREHOLDERS TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
ISSUABLE UPON
NUMBER OF SHARES NUMBER OF SHARES CONVERSION OF
OF COMMON OF COMMON SERIES G
STOCK HELD AND STOCK UNDERLYING PREFERRED STOCK PERCENTAGE OF INTERESTS
OFFERED PURSUANT WARRANTS OFFERED OFFERED PURSUANT PRIOR TO ANY SALES
TO THIS PURSUANT TO THIS TO THIS MADE PURSUANT TO THIS
SHAREHOLDER PROSPECTUS PROSPECTUS PROSPECTUS(1) PROSPECTUS(2)
----------- ----------------- ---------------- ---------------- -----------------------
<S> <C> <C> <C> <C>
SWARTZ SELLING SHAREHOLDERS
Eric S. Swartz........................... 55,702 *
Michael C. Kendrick...................... 55,702 *
P. Bradford Hathorn...................... 5,000 *
Lance T. Bury............................ 5,000 *
Dwight B. Bronnum........................ 1,500 *
Robert L. Hopkins........................ 1,500 *
Charles Krusen........................... 4,867 *
Enigma Investments Limited............... 1,521 *
David K. Peteler......................... 3,000 *
S. Edward Bradford....................... 11,000 *
SERIES G SELLING SHAREHOLDERS
William W. Gow........................... 50,000 119,945 *
John Green Company....................... 50,000 119,890 *
Joseph Shaffer and Cynthia Shaffer....... 25,000 59,877 *
James G. Petroff......................... 25,000 59,863 *
Mark S. Wagner........................... 25,000 59,836 *
Chris S. Lawson.......................... 25,000 59,836 *
Steve Aiello............................. 25,000 59,836 *
Pinnacle Fund, L.P....................... 100,000 239,178 *
Dan Cafolla.............................. 12,500 *
Dan Cafolla Profit Sharing Plan.......... 29,116 12,500 *
J. Brad Carter, M.D...................... 75,000 59,493 *
J. Brad Carter, M.D. IRA Account......... 25,000 59,452 *
Klaich Animal Hospital, Ltd.
Amended Profit Sharing Plan.......... 50,000 119,315 *
Craig Valassis........................... 100,000 238,192 *
Peerless Distributing Company............ 25,000 59,014 *
ARA .................................. 25,000 59,014 *
Nicholas Martin Living Trust............. 100,000 239,178 *
Michael Scott Blechman................... *
Family Trust......................... 100,000 237,534 *
NOTE SELLING SHAREHOLDERS
Pinnacle Fund............................ 1,221,021 2.39%
R.J. Berman.............................. 202,792 *
Bill Clement............................. 202,507 *
Michael Denton, Jr....................... 305,014 *
Michael Scott Blechman Family Trust...... 830,904 1.63%
Barney Cacioppo.......................... 103,534 *
Gilbert Kitt............................. 210,000 *
John E. Green............................ 433,863 *
Nick Martin Co........................... 207,808 *
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
ISSUABLE UPON
NUMBER OF SHARES NUMBER OF SHARES CONVERSION OF
OF COMMON OF COMMON SERIES G
STOCK HELD AND STOCK UNDERLYING PREFERRED STOCK PERCENTAGE OF INTERESTS
OFFERED PURSUANT WARRANTS OFFERED OFFERED PURSUANT PRIOR TO ANY SALES
TO THIS PURSUANT TO THIS TO THIS MADE PURSUANT TO THIS
SHAREHOLDER PROSPECTUS PROSPECTUS PROSPECTUS(1) PROSPECTUS(2)
----------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Nicholas Martin Living Trust............ 207,808
Dan Cafolla............................. 185,140 *
Dan Cafolla Profit Sharing Plan......... 105,301 *
Tom Hickey.............................. 424,795 *
D. Craig Valassis....................... 442,904 *
OCTOBER 1998 WARRANT SELLING
SHAREHOLDERS
First London............................ 100,000 *
Michael Doorey.......................... 100,000 *
Johnathon Drake......................... 100,000 *
Dale Kerney............................. 100,000 *
VISION MARK SELLING
SHAREHOLDER
C&A Services, LLC....................... 300,000 (3) 9,700,000 (4) 16.39%
OTHER SELLING SHAREHOLDERS
Katherine D. Banks...................... 95,000 *
Market Pathways......................... 80,000 *
John E. Palmer.......................... 7,500 *
H. Marcia Smolens....................... 7,500
Barry Kitt.............................. 125,000 *
Gilbert Kitt............................ 125,000 *
Pinnacle Fund, L.P...................... 668,979 1.31%
Larry Bloch............................. 35,000 *
Sam Chawkin............................. 48,500 *
Cynthia Howard.......................... 30,000 *
Edward Kaplan Insurance Trust........... 40,000 *
Clayton Lightman........................ 20,000 *
Dr. Linda Porterfield................... 60,000 *
SFT Consulting.......................... 20,000 *
TOTAL............................... 6,564,986 11,304,792 1,849,453 30.73%
</TABLE>
- --------------------
* Less than 1%
(1) The number of shares included in this prospectus and in the table is
the number of shares into which the Series G preferred stock were
convertible as of June 15, 1999.
(2) This percentage was calculated including shares issuable upon the
exercise of warrants and conversion of the Series G preferred stock
into shares of the Company's common stock.
(3) These 300,000 shares of SI Diamond common stock shall not be issued, if
at all, until the Company enters into a letter of intent for the
installation of certain of its operating systems resulting from Vision
Mark's representation of a subsidiary of SI Diamond.
(4) These warrants shall only be exercisable, if at all, upon the
achievement of certain milestones resulting from the representation of
SI Diamond by Vision Mark.
22
<PAGE> 25
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 120,000,000
shares of common stock, par value $.001 per share, and 2,000,000 shares of
preferred stock, par value $1 per share. The preferred stock may be issued in
series and currently consists of the Series G preferred stock, of which 1,550
shares are issued and outstanding.
After giving effect to the conversion of the Series G preferred stock
into 1,849,453 shares of common stock and the issuance and conversion of all
11,304,792 warrants which are subject to the Prospectus, there would be
64,169,581 shares of common stock issued and outstanding. Additionally,
11,304,792 shares of common stock are reserved for issuance upon exercise of
warrants (including 11,304,792 shares of common stock underlying certain
warrants included in this Prospectus) that have been issued by the Company, and
5,834,391 shares are reserved for issuance under the Company's stock option
plans.
COMMON STOCK
The holders of common stock are entitled to one vote per share, voting
with the holders of any other class of stock entitled to vote, without regard to
class, on all matters to be voted on by the shareholders, including the election
of directors. All issued and outstanding shares of common stock are fully paid
and nonassessable. The common stock is currently listed on the OTC Bulletin
Board.
Subject to any prior and superior rights of the preferred stock, the
holders of common stock are entitled to receive dividends when, and if, declared
by the Board of Directors from funds legally available. Currently, no series of
preferred stock has rights that are prior and superior to the common stock with
respect to dividends.
In the event of any liquidation, dissolution or winding up of the
affairs of the Company, the holders of the common stock are entitled to receive,
pro rata, any assets of the Company remaining after payment has been made in
full to the holders of any series of preferred stock with a liquidation
preference. Currently, only the holders of the Series G preferred stock are
entitled to a liquidation preference.
PREFERRED STOCK
The preferred stock may be issued from time to time in one or more
series as may be established and designated from time to time by the Board of
Directors by resolution. The voting powers, preferences and relative,
participating, optional and other special rights and the qualifications,
limitations or restrictions of any series of preferred stock shall be as is
stated in the resolution or resolutions of the Board of Directors that provides
for the designation of such series. With the exception of shares issued pursuant
to any duly adopted stock option plan of the Company, no shares of preferred
stock may be issued to any officer or director of the Company or any shareholder
who directly or indirectly owns greater than five percent (5%) of the issued and
outstanding voting stock of the Company or any affiliate of such persons,
without the affirmative vote of a majority in interest of the disinterested
shareholders of the Company. Under the Texas Business Corporation Act, each
series of preferred stock is entitled to vote as a class with respect to a
proposed amendment to the Company's Restated Articles of Incorporation in
certain circumstances. As of June 15, 1999, the only preferred stock of SI
Diamond outstanding was the Series G preferred stock.
23
<PAGE> 26
Series G preferred stock
There are 3,000 shares of Series G preferred stock currently authorized
for issuance, of which 1,550 shares are issued and outstanding. Subject to
adjustment in certain circumstances, each share of Series G preferred stock is
convertible into that number of shares of common stock determined by dividing
the original issue price of the Series G preferred stock plus, an amount equal
to ten percent (10%) of the issue price per annum, by $1.00.
Except as provided by law, the holders of Series G preferred stock
shall be entitled to a number of votes equal to the number of shares of common
stock into which their respective shares of Series G preferred stock are then
convertible using the record date for the taking of such vote of shareholders as
the date as of which the Conversion Price is calculated. Holders of Series G
preferred stock shall be entitled to notice of all shareholders meetings or
written consents with respect to which they would be entitled to vote.
In the event of any liquidation, dissolution or winding-up of the
Company, either voluntary or involuntary, the holders of shares of the Series G
preferred stock then issued and outstanding shall be entitled to be paid out of
the assets of the Company available for distribution to its shareholders,
whether from capital, surplus or earnings, before any payment shall be made to
the holders of shares of the common stock, an amount per share equal to the sum
of (i) the stated value and (ii) an amount equal to ten percent (10%) of the
stated value multiplied by the fraction N/365, where N equals the number of days
elapsed since the issue date of the Series G preferred stock. If, upon any
liquidation of the Company, the assets of the Company available for distribution
to its shareholders shall be insufficient to pay the holders of shares of the
Series G preferred stock and the holders of any other series of preferred stock
with a liquidation preference equal to the liquidation preference of the Series
G preferred stock the full amounts to which they shall respectively be entitled,
the holders of shares of the Series G preferred stock and the holders of any
other series of preferred stock with liquidation preference equal to the
liquidation preference of the Series G preferred stock shall receive all of the
assets of the Company available for distribution and each such holder of shares
of the Series G preferred stock and the holders of any other series of preferred
stock with a liquidation preference equal to the liquidation preference of the
Series G preferred stock shall share ratably in any distribution in accordance
with the amounts due such shareholders. After payment shall have been made to
the holders of shares of the Series G preferred stock of the full amount to
which they shall be entitled, as aforesaid, the holders of shares of the Series
G preferred stock shall be entitled to no further distributions thereon and the
holders of shares of the common stock and of shares of any other series of stock
of the Company shall be entitled to share, according to their respective rights
and preferences, in all remaining assets of the Company available for
distribution to its shareholders.
SHARES ELIGIBLE FOR FUTURE SALE
As of June 15, 1999, there were 51,015,336 shares of common stock
outstanding, of which 43,628,915 shares of common stock were freely tradeable
without restriction or further registration under the Securities Act by persons
other than "affiliates" of the Company. As of that date, the remaining shares of
common stock were deemed "restricted securities," as defined in Rule 144 under
the Securities Act, and may not be resold in the absence of registration under
the Securities Act or pursuant to an exemption from such registration, including
exemptions provided by Rule 144 under the Securities Act. Under Rule 144,
persons who have held securities for a period of at least one year may sell a
limited amount of such securities without registration under the Securities Act.
Rule 144 also permits, under certain circumstances, persons who are not
affiliates of the Company, to sell their restricted securities without quantity
limitations once they have completed a two-year holding period.
24
<PAGE> 27
The Registration Statement, of which this prospectus is a part, pertains to
- 6,564,986 shares of common stock which are currently
"restricted securities",
- 11,304,792 shares of common stock which underlie existing
warrants,
- 1,849,453 shares of common stock which are issuable upon
conversion of the Series G preferred stock.
The Company is obligated to maintain the effectiveness of the Registration
Statement for varying periods of time, pursuant to separate agreements with
certain groups of the selling shareholders.
In addition to the shares of common stock which are outstanding as of
June 15, 1999, 5,834,391 shares of common stock have been reserved for issuance
pursuant to the Company's stock option plans. 11,304,792 shares of common stock
have also been reserved for issuance upon exercise of warrants that have been
issued by the Company (11,304,792 of such shares have been registered in the
Registration Statement). Additionally, 1,849,453 shares of common stock have
been reserved for issuance upon conversion of the Series G preferred stock.
No prediction can be made as to the effect, if any, that future sales,
or the availability of shares of common stock for future sales, will have on the
market price prevailing from time to time. Sales of substantial amounts of
common stock by the Company or by shareholders who hold "restricted securities,"
or the perception that such sales may occur, could adversely affect prevailing
market prices for the common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American
Securities Transfer, Incorporated, 938 Quail Street, Suite 101, Lakewood,
Colorado 80215.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND TEXAS LAW
The Company's Restated Articles currently contain provisions which
could be considered to have anti-takeover effects. First, the authorized and
unissued shares of the Company's preferred stock and common stock could be used
by incumbent management to make more difficult and thereby discourage an attempt
to acquire control of the Company, even though some shareholders may deem such
an acquisition desirable. For example, the shares of unissued preferred stock
and unissued common stock could be privately placed with purchasers who might
support the Board of Directors in opposing a hostile takeover bid. The issuance
of the unissued preferred stock with voting rights and/or the unissued common
stock could also be used to dilute the stock ownership and voting power of a
third party seeking to remove directors, replace incumbent directors, accomplish
certain business combinations, or alter, amend, or replace provisions in the
Company's Restated Articles. To the extent that it impedes any such attempt, the
unissued preferred stock and unissued common stock may serve to perpetuate
current management. From time to time, the Company evaluates potential
transactions and acquisitions, which if consummated, may require the issuance of
the unissued preferred stock or unissued common stock.
The Company's Restated Articles require a classified Board of Directors
pursuant to which only one-third (1/3) of the Board of Directors is elected each
year for a term of three years. Therefore, even when a shareholder, or a group
of shareholders, has sufficient voting power to elect all of the directors to be
elected every year, the Company's classified Board could have the effect of
requiring two successive annual meetings
25
<PAGE> 28
to replace a majority of the Board of Directors and three annual meetings to
replace the entire Board of Directors. There is no cumulative voting with
respect to the election of directors.
The Company's Restated Articles also contain a provision which states
that with the sole exception of shares issued pursuant to the duly adopted stock
option plans of the Company, no shares of the Company's preferred stock shall be
issued or sold to any officer or director of the Company, or any shareholder who
directly or indirectly owns more than five percent (5%) of the issued and
outstanding voting stock of the Company, or any affiliate of such a person,
without the affirmative vote of a majority in interest of the disinterested
shareholders of the Company.
The Company shall not be obligated to deliver notices or offer voting
stock for sale pursuant to these provisions in respect of the following
issuances of voting stock: (a) pursuant to employee, director or consultant
stock option, purchase, bonus, exchange or other such plans or upon the exercise
of options or other rights granted thereunder, and (b) in connection with
transactions in which shares of voting stock are issued to security holders of a
company being acquired by the Company or to a company some or all of whose
assets are being acquired by the Company.
The Restated Articles limit the liability of directors of the Company
in their capacity as directors. Specifically, the directors of the Company will
not be liable to the Company or its shareholders for monetary damages for an act
or omission in a director's capacity as a director, except for liability for the
following:
- for any breach of the director's duty of loyalty to the
Company or its shareholders,
- for any act or omission not in good faith which constitutes a
breach of duty of the director to the Company or acts or
omissions which involve intentional misconduct or a knowing
violation of the law,
- for transactions from which a director received an improper
benefit, whether or not the benefit resulted from an action
taken within the scope of the director's office,
- for an act or omission for which the liability of a director
is expressly provided for by an applicable statute, or
- for acts related to an unlawful stock repurchase or payment of
a dividend.
The overall effect of the provisions in the Company's current Restated
Articles described above would be to make more difficult or discourage a merger,
tender, offer or proxy contest, even if such transaction or occurrence generally
is favorable to the interests of the shareholders, or they may delay or
frustrate the assumption of control by a holder of a large block of the
Company's securities and the removal of incumbent management, even if such
removal may be beneficial to the shareholders.
EXPERTS
The consolidated balance sheets as of December 31, 1998 and 1997 and
the consolidated statements of operations, stockholders' equity <deficit> and
cash flows for the years then ended, incorporated by reference in this
prospectus, have been incorporated herein in reliance on the report, which
includes an explanatory paragraph regarding SI Diamond's ability to continue as
a going concern, of Wallace Sanders & Company, independent accountants, given on
the authority of that firm as experts in accounting and auditing.
26
<PAGE> 29
LEGAL OPINIONS
Certain legal matters in connection with the common stock offered
hereby have been passed upon for the Company by Haskell Slaughter & Young,
L.L.C.
27
<PAGE> 30
================================================================================
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO GIVE YOU INFORMATION DIFFERENT FROM THAT CONTAINED IN
THIS PROSPECTUS. THE SELLING SHAREHOLDERS ARE OFFERING TO SELL, AND SEEKING
OFFERS TO BUY, SHARES OF SI DIAMOND COMMON STOCK ONLY IN JURISDICTIONS WHERE
OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE
DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF THE SHARES.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk factors.......................................4
Where you can find more information...............13
Documents incorporated by reference...............15
Recent developments...............................16
Use of proceeds...................................16
Plan of distribution and selling shareholders.....16
Selling Shareholders table........................21
Description of capital stock......................23
Experts...........................................26
Legal Opinions....................................27
</TABLE>
SI DIAMOND
TECHNOLOGY,
INC.
[LOGO APPEARS HERE]
6,564,986 SHARES OF
COMMON STOCK
(PAR VALUE $.001 PER SHARE)
11,304,792 SHARES OF
COMMON STOCK
UNDERLYING WARRANTS
1,849,453 SHARES OF
COMMON STOCK
ISSUABLE UPON
CONVERSION OF SERIES G
PREFERRED STOCK
----------
PROSPECTUS
----------
JUNE ___, 1999
================================================================================
<PAGE> 31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated fees and expenses payable in connection with this
offering, all of which are payable by the Company, are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.................................. $ 3,223.98
Printing and engraving expenses...................................................... 2,000.00
Legal fees and expenses.............................................................. 8,000.00
Accounting fees and expenses......................................................... 4,000.00
Miscellaneous ....................................................................... 1,000.00
Total.......................................................................... 18,223.98
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02A(16) and Article 2.01-1 of the Texas Business Corporation
Act and Article VIII of the Company's Bylaws provide the Company with broad
powers and authority to indemnify its directors and officers and to purchase and
maintain insurance for such purposes. Pursuant to such statutory and Bylaw
provisions, the Company has purchased insurance against certain costs of
indemnification that may be incurred by it and its officers and directors. See
"Item 17. Undertakings" for a description of the Securities and Exchange
Commission's position regarding such indemnification provisions.
Additionally, Article Seven(C) of the Company's Restated Articles,
provides that a director of the Company is not liable to the Company or its
shareholders for monetary damages for any act or omission in the director's
capacity as director, except that Article Seven(C) does not eliminate or limit
the liability of a director for:
- breaches of his duty of loyalty to the Company and its
shareholders;
- acts or omissions not in good faith or which constitute a
breach of duty of a director of the Company or involve
intentional misconduct or a knowing violation of law;
- transactions from which a director receives an improper
benefit, whether or not the benefit resulted from an action
taken within the scope of the director's office;
- acts or omissions for which liability is specifically provided
by statute; and
- acts relating to unlawful stock purchases or payments of
dividends.
Article Seven(C) also provides that any subsequent amendments to Texas
statutes that further limit the liability of directors will inure to the benefit
of the directors, without any further action by shareholders. Any repeal or
modification of Article Seven(C) shall not adversely affect any right of
protection of a director of the Company existing at the time of the repeal or
modification.
II-1
<PAGE> 32
The foregoing discussion is not intended to be exhaustive and is
qualified in its entirety by each of such documents and such statutes.
ITEM 16. EXHIBITS
See Index to Exhibits on page II - 5 for a descriptive response to this
item.
ITEM 17. UNDERTAKINGS
(a) 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:
(i) To include any material information with respect to
the plan of dis tribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
<PAGE> 33
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON BEHALF OF THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED,
IN THE CITY OF AUSTIN, STATE OF TEXAS, ON JUNE 22, 1999.
SI DIAMOND TECHNOLOGY, INC.
By /s/ Marc W. Eller
------------------------------------
Marc W. Eller
Chairman and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Marc W. Eller and Douglas P. Baker, and
each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and any subsequent
registration statements relating to the offering to which this Registration
Statement relates, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or either of them, or their or his
substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Marc W. Eller Chairman of the Board of June 22, 1999
- ------------------------------------------- Directors and
Marc W. Eller Chief Executive Officer
(Principal Executive Officer)
/s/ Dr. Zvi Yaniv President and June 22, 1999
- ------------------------------------------- Chief Operating Officer
Dr. Zvi Yaniv and Director
/s/ Douglas P. Baker Vice President, June 22, 1999
- ------------------------------------------- Chief Financial Officer
Douglas P. Baker (Principal Financial and Accounting Officer)
* Director June 22, 1999
- -------------------------------------------
Ronald J. Berman
</TABLE>
II-3
<PAGE> 34
<TABLE>
<S> <C> <C>
* Director June 22, 1999
- -------------------------------------------
Philip C. Shaffer
* Director June 22, 1999
- -------------------------------------------
David R. Sincox
Director
- -------------------------------------------
Igor Leontiev
*By: /s/ Douglas P. Baker
---------------------------------------
(Douglas P. Baker,
Attorney-in-Fact)
</TABLE>
II-4
<PAGE> 35
INDEX TO EXHIBITS
The exhibits indicated by an asterisk (*) are incorporated by reference
from previous filings with the Commission.
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGES
<S> <C> <C>
4.1* Amended and Restated Articles of Incorporation of the Company as
filed on February 14, 1997, with the Secretary of State of the State of
Texas (Exhibit 3.1 to the Company's Current Report on Form 8-K dated
as of February 14, 1997).
4.2* Statement of Resolutions Establishing and Designating the Series F
Preferred Stock of the Company as filed with the Secretary of State of
the State of Texas on March 10, 1997 (Exhibit 3.1 to the Company's
Current Report on Form 8-K dated as of March 7, 1997).
4.3* Amendment to Amended and Restated Articles of Incorporation of the
Company amending the Company's Series E Preferred Stock, as filed
with the Secretary of State of the State of Texas on May 1, 1997
(Exhibit 3(I).1 to the Company's Current Report on Form 8-K dated as
of August 4, 1997).
4.4* Statement of Resolution Establishing and Designating the Company's
Series G Preferred Stock, as filed with the Secretary of State of the
State of Texas on June 11, 1997 (Exhibit 1(I).2 to the Company's
Current report on Form 8-K dated as of July 25, 1997).
4.5* Amendment to Amended and Restated Articles of Incorporation of the
Company amending the Company's Series F Preferred Stock, as filed
with the Secretary of State of the State of Texas on August 4, 1997
(Exhibit 3(I).2 to the Company's Current Report on Form 8-K dated as
of August 4, 1997.)
4.6* Amendment to Amended and Restated Articles of Incorporation of the
Company amending the Company's Series F Preferred Stock, as filed
with the Secretary of State of the State of Texas on March 25, 1998
(Exhibit 4.38 to the Company's Registration Statement on Form S-3
[No. 333-40711] dated as of June 17, 1998.)
</TABLE>
II-5
<PAGE> 36
<TABLE>
<S> <C>
4.7* Statement of Resolutions of Board of Directors of SI Diamond
Technology, Inc., establishing and designating series of Preferred Stock
as "Series H Junior Participating Preferred Stock" and fixing and
determining the relative rights and preferences thereof, as filed with the
Secretary of State of Texas on June 28, 1998.
4.8* Form of Certificate for shares of the Company's common stock
(Exhibit 4.1 to the Company's Registration Statement on Form
SB-2 (No. 33-51466-FW) dated January 7, 1993).
4.9* Form of warrant Issued to Swartz Investments, Inc. (Exhibit 4.5 to the
Company's Current Report on Form 8-K dated as of January 19, 1996
(File No. 1-11602)).
4.10* Statement of Resolutions Establishing and Designating the Company's
Series G preferred stock, as filed with the Secretary of State of the State
of Texas on June 11, 1997 (Exhibit 3.1 to the Company's Current
Report on Form 8-K, dated as of July 25, 1997 (File No. 1-11602)).
4.11* Form of Regulation D Subscription Agreement by and between the
Company and holders of the Company's Series G preferred stock
(Exhibit 4.2 to the Company's Current Report on Form 8-K dated as of
July 25, 1997)).
4.12* Form of Registration Rights Agreement by and between the Company
and the holders of the Company's Series G preferred stock (Exhibit 4.2
to the Company's Current Report on Form 8-K dated as of July 25,
1997).
4.13* Form of warrant by and between the Company and holders of the
Company's Series G preferred stock (Exhibit 4.3 to the Company's
Current Report on Form 8-K dated as of July 25, 1997).
4.14* Regulation D Subscription Agreement dated as of November 11, 1998,
by and between the Company and C&A Services, L.L.C., for the
issuance of warrants to purchase shares of Common Stock of the
Company (Exhibit 4.1 to the Company's Current Report on Form 8-K
dated as of December 7, 1998).
4.15* Consulting and Advisory Services Agreement by and between the
Company and C&A Services, L.L.C. dated as of November 11, 1998
(Exhibit 10.1 to the Company's Current Report on Form 8-K dated as
of December 7, 1998.)
4.16* Marketing Agent Agreement by and between Electronic Billboard
Technology, Inc. And Vision Mark, L.L.C. dated as of November 11,
1998. (Exhibit 10.2 to the Company's Current Report on Form 8-K
dated as of December 7, 1998.)
</TABLE>
II-6
<PAGE> 37
<TABLE>
<S> <C>
4.17* Form of Rights Agreement dated as of June 18, 1998, between the
Company and American Securities Transfer, Incorporated, as Rights
Agent, which includes as Exhibit A the form of Statement of Resolution
establishing and designating series of preferred stock as "Series H
Junior Participating Preferred Stock" and fixing and determining the
relative rights and preferences thereof, as Exhibit B the form of Rights
Certificate, and as Exhibit C the Summary of Rights to Purchase
Preferred Shares (Exhibit 4.1 to the Company's Current Report on
Form 8-K dated as of June 18, 1998).
4.18* Warrant issued to Dale Kerner to purchase 100,000 shares of the
Company's Common Stock. (Exhibit 4.8 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998)
4.19* Warrant issued to Michael Doorey to purchase 100,000 shares of the
Company's Common Stock. (Exhibit 4.9 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998)
4.20* Warrant issued to John C. Drake to purchase 100,000 shares of the
Company's Common Stock. (Exhibit 4.10 to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1998)
4.21* Warrant issued to First London Securities Corporation to purchase
100,000 shares of the Company's Common Stock. (Exhibit 4.11 to the
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998)
5.1 Opinion of Haskell Slaughter & Young, L.L.C., as to certain legal
aspects of the offering.
23.1 Consent of Haskell Slaughter & Young, L.L.C. (included in Exhibit
5.1).
23.2 Consent of Wallace Sanders & Company.
24 Powers of Attorney (set forth on the signature page of this Registration
Statement).
</TABLE>
II-7
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF HASKELL SLAUGHTER & YOUNG L.L.C. APPEARS HERE]
Board of Directors
SI Diamond Technology, Inc.
3006 Longhorn Boulevard
Austin, Texas 78758
Gentlemen:
We are acting as counsel to SI Diamond Technology, Inc., a Texas
corporation (the "Company"), in connection with the proposed offer and sale by
certain selling shareholders of up to 19,719,231 shares of common stock.
In our capacity as counsel to the Company, we have participated in the
preparation of the Registration Statement on Form S-3 of the Company with
respect to the offer and sale of the common stock which was filed with the
Securities and Exchange Commission under the Securities Act of 1933, and the
General Rules and Regulations thereunder. Capitalized terms used herein shall
have the meanings ascribed to them in the Registration Statement.
In connection with the opinions expressed below, we have examined a
signed copy of the Registration Statement, corporate records of the Company (on
which we have relied with respect to the accuracy of the material factual
matters covered thereby), and such other documents as we have deemed necessary
or appropriate for purposes of the opinions expressed below.
Based on the foregoing and subject to the qualifications and
limitations set forth below, we are of the opinion that (i) the shares of
common stock held by the selling shareholders are validly issued, fully paid
and nonassessable; (ii) the shares of common stock to be issued pursuant to the
warrants are validly authorized and, when such shares have been duly delivered
against payment as provided in the warrants, such shares shall be validly
issued, fully paid and nonassessable; and (iii) the shares of common stock
issuable upon conversion of shares of the Company's Series G preferred stock,
when such shares have been delivered as provided in the applicable provisions
of the Company's Amended and Restated Articles of incorporation, shall be
validly issued, fully paid and nonassessable.
Our opinion is limited in all respects to the substantive law of the
State of Texas and the federal law of the United States, and we assume no
responsibility as to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction. The opinion expressed in this letter is
rendered as of the date hereof, and we undertake no, and hereby disclaim any,
obligation to advise you of any changes in or new developments which might
affect matters or opinions set forth herein.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the statement made regarding me under the caption
"Legal Opinions" in the prospectus included in the Registration Statement.
Very truly yours,
HASKELL SLAUGHTER & YOUNG, L.L.C.
June 22, 1999 By /s/ DONALD T. LOCKE
----------------------------------------
Donald T. Locke
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-3 of our report dated February 15, 1999
(except as to Note 15, which is as of March 15, 1999), which appears on page 18
of the annual report on Form 10-KSB of SI Diamond Technology, Inc. and
subsidiaries for the year ended December 31, 1998, and to the reference to our
Firm under the caption "Experts" in the Prospectus.
WALLACE SANDERS & COMPANY
Dallas, Texas
June 22, 1999
