As filed with the Securities and Exchange Commission on September 10, 1999
Registration No. 333-____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
REGISTRATION STATEMENT
ON FORM S-3
UNDER
THE SECURITIES ACT OF 1933
--------------------------------
OBJECTSOFT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 22-3091075
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation Identification No.)
or Organization)
David E. Y. Sarna, Chairman
ObjectSoft Corporation
Continental Plaza III Continental Plaza III
433 Hackensack Avenue 433 Hackensack Avenue
Hackensack, New Jersey 07601 Hackensack, New Jersey 07601
(201) 343-9100 (201) 343-9100
(Address, Including Zip Code, and (Name, Address, Including Zip Code,
Telephone Number Including Area Code, and telephone number
of Registrant's Principal Executive Offices) Including Area Code, of Agent For
Service)
----------------------------
Copy to:
Melvin Weinberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
(212) 704-6000
-----------------------------
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective, as determined
by market conditions.
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, please
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
---------------------
If this Form is a post-effective amendment filed pursuant to rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
---------------------
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
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<TABLE>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
================================ ====================== ======================= ========================= =======================
Proposed Proposed
Maximum maximum Amount of
Title of each class of securities Amount to Aggregate price Aggregate registration
to be registered be registered Per share offering price fee
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Common Stock, $.0001 par
value per share 5,515,840(2)(3) $.4925(1) $2,716,551.20 $755.20
================================ ====================== ======================= ========================= =======================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (g); based on the average of the bid
($.343) and asked price ($.641) on the Nasdaq SmallCap Market (NASDAQ)
on September 3, 1999.
(2) Represents 5,500,000 shares of our Common Stock issuable upon
conversion of $2,350,000 stated value of 6% Series F Convertible
Preferred Stock ("Series F Preferred Stock") and upon exercise of
warrants issued in connection therewith, and 15,840 shares of our
common stock issuable upon the exercise of warrants issued in
accordance with a finance lease commitment. See "Description of
Securities."
(3) The number of shares of Common Stock issuable upon conversion of the
Series F Preferred Stock is dependent upon the market price of our
Common Stock, and accordingly the actual number of shares of Common
Stock which shall be issued upon such conversion and, consequently,
offered for sale under this Registration Statement, cannot be
determined at this time. This number is arbitrary and was arrived at
through agreement of the parties to the Series F Subscription
Agreement. This number is not intended to constitute a prediction as to
the future market price of our Common Stock upon conversion of the
Series F Preferred Stock. See "Risk Factors -- the Conversion of the
Series F Preferred Shares and the Exercise of the Warrants Will Dilute
the Value of Your Shares".
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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The information in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed
with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these
securities and is not seeking an offer to buy
these securities in any state where the offer or
sale is not permitted.
---------------------------
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION,
DATED SEPTEMBER 10, 1999
5,515,840 Shares of Common Stock
(par value $.0001 per share)
OBJECTSOFT CORPORATION
-----------------------
The stockholders of ObjectSoft Corporation listed on page 16 of this
Prospectus are offering for sale up to 5,515,840 shares of Common Stock of the
Company under this Prospectus, of which up to 5,500,000 are issuable upon
conversion of Series F of the Company's Preferred Stock and exercise of warrants
issued in connection with the Series F Preferred Stock, and 15,840 are issuable
upon the exercise of additional warrants to purchase Common Stock. Those to whom
such Selling Stockholders may pledge, donate or transfer their shares and other
successors, may also use this prospectus. The Selling Stockholders may offer
their shares through public or private transactions, at prevailing market
prices, or at privately negotiated prices.
The Selling Stockholders will receive all of the net proceeds from the
resale of the shares. Accordingly, we will not receive any proceeds from the
resale of the shares. We may receive proceeds from the exercise of the warrants.
We will use such net proceeds for general corporate purposes. We have agreed to
bear the expenses relating to the registration of the shares, other than
brokerage commissions and expenses, if any, which will be paid by the Selling
Stockholders.
------------------------------------
NASDAQ SmallCap symbols:
Common Stock "OSFTC"
Redeemable Class A Warrants "OSFTWC"
------------------------------------
On September 8, 1999 the closing sale price of our Common Stock on the
Nasdaq SmallCap Market was $.50 and the closing sale price of our Redeemable
Class A Warrants was $.125.
Our executive offices are located at Continental Plaza III, 433 Hackensack
Avenue, Hackensack, New Jersey 07601, our telephone number is (201) 343-9100 and
our website is at www.objectsoftcorp.com.
This investment involves a high degree of risk. You should carefully consider
the factors described under the caption "Risk Factors" beginning on page 4 of
this Prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved 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 September , 1999
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WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
over the Internet at the SEC's Website at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-3 to
register the Shares being offered. This Prospectus is part of that registration
statement and, as permitted by the SEC's rules, does not contain all the
information included in the registration statement. For further information with
respect to us and our Common Stock, you should refer to the registration
statement and to the exhibits and schedules filed as part of that registration
statement, as well as the documents we have incorporated by reference which are
discussed below. You can review and copy the registration statement, its
exhibits and schedules, as well as the documents we have incorporated by
reference, at the public reference facilities maintained by the SEC as described
above. The registration statement, including its exhibits and schedules, are
also available on the SEC's web site.
This Prospectus may contain summaries of contracts or other documents.
Because they are summaries, they will not contain all of the information that
may be important to you. If you would like complete information about a contract
or other document, you should read the copy filed as an exhibit to the
registration statement.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be a part of this Prospectus, and information that we file later
with the SEC will automatically update or supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
1. Annual Report on Form 10-KSB for the year ended December 31, 1998;
2. Quarterly Reports on Forms 10-QSB for the quarters ended March 31,
1999 and June 30, 1999;
3. The Company's Proxy Statement for the 1999 Annual Meeting of
Stockholders;
4. Current Reports on Form 8-K dated (date of earliest event reported)
December 31, 1998 (as filed on January 15, 1999) and March 17, 1999
(as filed on March 23, 1999); and
5. The description of our Class A Common Stock contained in the
Registration Statement on Form 8-A filed on October 16, 1996.
You may request a copy of these filings, at no cost, by writing or
telephoning us at Continental Plaza III, 433 Hackensack Avenue Hackensack, New
Jersey 07601 (201) 343-9100. Attention: Dina Pecoraro.
-----------------------
This Prospectus contains certain forward-looking statements which
involve substantial risks and uncertainties. These forward-looking statements
can generally be identified because the context of the statement includes words
such as "may," "will," "expect," "anticipate," "intend," "estimate," "continue,"
"believe," or other similar words. Similarly, statements that describe our
future plans, objectives and goals are also forward-looking statements. Our
factual results, performance or achievements could differ materially from those
expressed or implied in these forward-looking statements as a result of certain
factors, including those listed in "Risk Factors" and elsewhere in this
Prospectus.
We have not authorized any dealer, salesperson or any other person to
give any information or to represent anything not contained in this Prospectus.
You must not rely on any unauthorized information. This Prospectus does not
offer to sell or buy any shares in any jurisdiction where it is unlawful. The
information in this Prospectus is current as of September , 1999.
-------------------------
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TABLE OF CONTENTS
Where You Can Find More Information About Us................................2
Risk Factors................................................................4
Use of Proceeds............................................................15
Dividend Policy............................................................15
Selling Stockholders ......................................................15
Description of Securities..................................................18
Plan of Distribution ......................................................22
Indemnification for Securities Act Liabilities.............................23
Legal Matters..............................................................24
Experts ...................................................................24
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RISK FACTORS
Before you buy shares of our Common Stock, you should be aware that
there are various risks associated with such purchase, including those described
below. You should consider carefully these risk factors, together with all of
the other information in this Prospectus, and the documents we have incorporated
by reference in the section "Where You Can Find More Information About Us"
before you decide to purchase shares of our Common Stock.
Some of the information in this Prospectus and in the documents we have
incorporated by reference may contain forward-looking statements. Such
statements can be generally identified by the use of forward- looking words such
as "may," "will," "expect," "anticipate," "intend," "estimate," "continue,"
"believe," or other similar words. These statements discuss future expectations,
or state other "forward-looking" information. When considering such statements,
you should keep in mind the risk factors and other cautionary statements in this
Prospectus. The risk factors noted in this section and other factors noted in
this Prospectus could cause our actual results to differ materially from those
contained in any forward-looking statements.
THE CONVERSION OF THE SERIES E AND SERIES F PREFERRED STOCK AND THE EXERCISE OF
THE WARRANTS ISSUED IN THE MARCH 1999 AND AUGUST 1999 PRIVATE PLACEMENTS, AS
WELL AS THE EXERCISE OF OTHER WARRANTS AND OPTIONS, WILL DILUTE THE VALUE OF
YOUR SHARES
The value of your Shares will be diluted upon the conversion of the
Series E and Series F Preferred Stock and upon exercise of the warrants issuable
in connection therewith and upon exercise of the warrants we issued in
connection with a finance lease commitment. Specifically, our Series E Preferred
Stock is and our Series F Preferred Stock may be convertible into Common Stock
at rates which represent a discount from future market prices of our Common
Stock. This conversion may result in substantial dilution to existing holders of
Common Stock. The sale of such Common Stock could have a negative impact on the
trading price of the Common Stock and could increase the volatility in the
trading price of the Common Stock. Moreover, if the trading price of the Common
Stock were to decrease significantly, the issuance of the shares upon conversion
of the Series E and Series F Preferred Stock could conceivably effect a change
of control of the Company.
In addition, certain warrants which we have issued, including warrants
owned by the Selling Stockholders, entitle their holders to acquire our Common
Stock at prices which may represent discounts from its future market prices.
Such discounts could result in substantial dilution to existing holders of our
Common Stock. The sale of such Common Stock acquired at a discount could have a
negative impact on the trading price of our Common Stock and could increase the
volatility in its trading price.
At the date of this Prospectus, we have reserved an aggregate of
approximately 5,000,000 shares of Common Stock for issuance upon exercise of
options and warrants to purchase shares of our Common Stock at an exercise price
between $0.50 and $8.00 per share. The number of shares issuable upon exercise
of certain of the warrants may be adjusted pursuant to the terms of these
warrants. During the terms of the options and warrants, we must give their
holders the opportunity to profit from a rise in the market price of our Common
Stock. The existence of the warrants may adversely affect the terms on which we
may obtain additional funds in return for the issuance of our equity. Moreover,
the holders of these securities are likely to exercise their rights to acquire
our Common Stock at a time when we would otherwise be able to obtain capital
with more favorable terms than we could obtain through the exercise of such
securities.
WE HAVE A LIMITED OPERATING HISTORY; WE HAVE A HISTORY AND EXPECTATION OF
FUTURE LOSSES AND AN ACCUMULATED DEFICIT
We were incorporated in 1990 and have a limited operating history. In
addition, we recently changed our business focus from consulting and training
services to focus on products from which we derive operating income and
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leasing fees, and on Internet services. As a result, any analysis of our
operations in the past has only minimal relevance to an evaluation of our net
worth, our current products and services and our prospects.
Although we have generated revenues from operations, we have
experienced substantial operating losses. We have incurred, and will continue to
incur, significant costs in connection with the development of our interactive
public access terminals and Internet operations, which may result in operating
losses. We cannot assure you as to if and when we may begin generating
significant revenues or achieve profitable operations.
We have incurred the following losses since 1996:
Fiscal year ended:
. December 31, 1996 ............... $1,240,695
. December 31, 1997 ............... $2,519,872
. December 31, 1998 ............... $2,514,670
Six months ended:
. June 30, 1999 ........................ $1,550,228
As of June 30, 1999, the Company had an accumulated deficit of
$8,736,720.
OUR NEED FOR ADDITIONAL FINANCING; THE UNCERTAINTY OF ADDITIONAL FINANCING
Our current policy is generally to own and operate our public access
terminals, which may require substantial capital investment. We intend to enter
into one or more lease financing arrangements for these terminals.
We may need to raise additional funds through public or private debt or
sale of debt or equity in order to respond to unanticipated competitive
pressures or take advantage of unanticipated opportunities, including
acquisitions of complementary businesses or technologies, and the development of
new products, and to finance the purchase of kiosks. In addition, if we
experience rapid growth, we may require additional funds to expand our
operations or enlarge our organization. In any such event, our continued
operation may be dependent on our ability to procure additional financing
through sales of additional equity or debt. If we were to issue any additional
equity securities or debt securities which are convertible into equity, such
issuance could substantially dilute the interests of our security holders
existing at the time of such issuance. Such equity securities may also have
rights, preferences or privileges senior to those of the holders of our Common
Stock.
We cannot assure you that additional financing will be available on
terms favorable to us, or that additional financing will be available at all. If
adequate funds are not available or are not available on acceptable terms, we
may not be able to take advantage of unanticipated opportunities, develop new
products or otherwise respond to unanticipated competitive pressures. Such
inability could have a materially negative effect on our business, financial
condition and results of operations and could require us to materially reduce,
suspend or cease operations.
WE CANNOT ASSURE YOU OF CONTINUED NASDAQ LISTING; WE MAY BE SUBJECT TO PENNY
STOCK REGULATIONS
The Board of Governors of the National Association of Securities
Dealers, Inc. has established certain standards for the continued listing of a
security on The Nasdaq SmallCap Market(TM). Among other things, as such
requirements pertain to us, we are required to maintain net tangible assets of
at least $2,000,000 (at June 30, 1999, our net tangible assets (as defined by
Nasdaq as total assets, excluding goodwill, minus total liabilities) were
approximately $2,521,000 and, on a pro forma basis giving effect to the August
1999 Financing, were approximately $4,715,900) and our Common Stock must have a
minimum bid price of at least $1.00 per share.
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Under Nasdaq's listing maintenance standards, if the closing bid price
of our Common Stock is under $1.00 per share for thirty consecutive business
days and does not thereafter regain compliance for a minimum of ten consecutive
business days during the ninety calendar days following notification by Nasdaq,
Nasdaq may delist our Common Stock from trading on The Nasdaq SmallCap
Market(TM). The bid price of our Common Stock closed below $1.00 per share from
August 3, 1999 to the date of this prospectus. On September 1, 1999, we received
a letter from Nasdaq that it would continue to list our stock on The Nasdaq
SmallCap Market(TM) pursuant to a temporary exception, which requires that we
meet certain conditions relating to maintenance of the closing bid price of at
least $1.00 per share. We must begin to meet the terms of the exception by
October 15, 1999. If we are unable to demonstrate compliance with the exception,
the Common Stock will be delisted. The Company understands that it is Nasdaq's
position that an ability to demonstrate sustained compliance with all
requirements for continued listing also is required to achieve compliance with
such exception. The closing bid price of our Common Stock as of September 8,
1999 was $.50.
Our Board of Directors has adopted resolutions recommending that our
stockholders, at a special meeting of stockholders scheduled to be held on
October 12, 1999, authorize an amendment to our Certificate of Incorporation,
which authorization will give our Board of Directors the discretion to effect a
reverse split of our Common Stock in an exchange ratio to be approved by our
Board. The principal purpose of the reverse split is to increase the market
price of our Common Stock above the Nasdaq minimum bid requirement (which does
not adjust for the reverse split), in the event that market forces are
insufficient.
If our securities were to be excluded from Nasdaq, it may negatively
affect the prices of our securities and the ability of holders to sell them.
Additionally, if our securities were to be excluded from Nasdaq, it may be more
difficult to use our Common Stock in acquisitions and financing transactions in
which we may engage. In the event that our securities are not listed on Nasdaq,
trading would be conducted in the "pink sheets" or through the National
Association of Securities Dealers, Inc. Electronic Bulletin Board. In the
absence of our Common Stock being quoted on Nasdaq, trading in our Common Stock
would be covered by Rule 15g-9 promulgated under the Securities Exchange Act of
1934 for non-Nasdaq and non-exchange listed securities. Under such rule,
broker/dealers who recommend such securities to persons other than established
customers and accredited investors must make a special written suitability
determination for the purchaser and receive the purchaser's written agreement to
a transaction prior to sale. Securities are exempt from this rule if the market
price is at least $5.00 per share.
The Commission adopted regulations that generally define a penny stock
to be any equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. Unless an exception is available, the regulations
require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith. If our Common Stock were subject to the regulations on penny stocks,
the market liquidity for our Common Stock would be severely affected by limiting
the ability of broker/dealers to sell our Common Stock and the ability of
purchasers to sell their securities in the secondary market. We cannot assure
you that trading in our securities will not be subject to these or other
regulations in the future which would adversely affect the market for such
securities.
WE CHANGED OUR OPERATING FOCUS
Beginning in mid-1994, we changed our business focus from consulting
and training services to focus on products from which we derive operating income
and leasing fees and on Internet based services. Operating income is derived
from either advertising fees or fees for transactions performed on our
interactive public access terminals. Our first public access terminals
(SmartStreet(TM)) were introduced in July 1996. Our newest product is FastTake
(R), which we introduced in October 1998 at the East Coast Video Show and which
we began shipping in March, 1999. FastTake(R) is designed for the video
industry. It permits users to search a data base for a favorite actor, director,
or by a portion of the movie name. The user can then access a plot summary, the
names of the major actors and directors, still pictures from the movie
(photographs) and a preview of the video (known as a trailer). By the end of
1999, we expect to release FastTake (R) with an added electronic commerce
feature. The operations to which we are now devoting our resources are in the
early stages of development. We cannot assure you that we will be successful in
attracting new customers or retaining current customers for our new business
divisions or in generating significant revenues or profits
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from such business divisions. Although we anticipate that we will begin to
recognize greater revenues from the SmartSign(TM) and FastTake(R) public access
terminals during 1999, we cannot predict the actual timing or amount of such
revenues. You should consider our prospects in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets. To
address these risks, we must, among other things, respond to competitive
developments, attract, retain and motivate qualified product development and
marketing personnel, continue to upgrade our existing technologies, develop new
technologies and commercialize products and services incorporating such
technologies. We cannot assure you that we will be successful in addressing such
risks. In order to have the financial and technical resources to respond to
changing market demands on a timely basis, we may also need to enter into
strategic alliances and cooperate with others in an effort to develop our
products and services. We cannot assure you that entities with the necessary
technical or financial resources will be willing to enter into such alliances
with us on acceptable terms or at all.
MUNICIPAL KIOSKS DE-EMPHASIZED
In early 1996, as part of its Public Access Terminal Demonstration
Project, the City of New York entered into an agreement with us to develop
public terminals to be located in city offices and other public locations in an
effort to expedite transactions with the City of New York . Under this
agreement, the City of New York agreed to lease the first five public access
terminals, and we have the option to deploy additional terminals throughout the
New York City area at our own risk and expense, subject to the approval of
terminal locations by the City of New York . We deployed the first five public
access terminals in New York City in July 1996, we installed a sixth terminal in
August 1997 (which was discontinued in January 1999) and we installed a seventh
in March 1998. The agreement was extended through the end of 1999. The public
access terminals are configured to permit us to offer additional services
provided either by us or by third parties and to sell advertising on such
terminals. The current extended agreement requires us to pay to the City of New
York 50% of advertising and third party service revenues from the first five
installed terminals. We have been seeking to provide SmartStreet(TM) services to
other municipalities, states and government agencies and to organizations in the
private sector that provide a large volume of information, records and documents
to the public. We entered into the first such additional agreement on March 11,
1998 with the City of San Francisco. The first public access terminal under this
agreement was installed in June 1998. It was removed in March 1999 as we decided
not to make the investment needed to make the kiosk fully accessible to blind
persons, a condition imposed by the City of San Francisco, since we determined
that such cost was uneconomic. We may also seek to enter into agreements with
the City of New York and other customers to provide information and services
over the Internet, in order to expand the accessibility of such information and
services. We also supplied eight terminals to King County, Washington. In August
1999, we decided not to expand our line of municipal kiosks and we do not expect
these kiosks to be a major source of revenue in the year 2000 and beyond.
In October 1998 we first demonstrated a new product based on our
SmartStreet(TM) technology called FastTake(R), which is designed for the video
industry. Deliveries of this product (in many cases on a trial basis) began in
March 1999. As of September 1, 1999, 100 kiosks were manufactured. We have
agreements for placement of all FastTake(R) kiosks currently manufactured in
pilot or long-term programs in certain locations. 87 kiosks with 331,762 page
views have been installed as of September 10, 1999. As of the date of this
filing, seven studios had committed to advertise FastTake(R), with expected
revenue from this source of about $200 per kiosk per month.
We cannot assure you that additional agreements will be signed. Neither
can we assure you that FastTake(R) will prove to be effective and continue to be
in demand. If the FastTake(R) kiosks are not successful in their initial
locations we cannot assure you that we will be able to find other locations on
the same terms or at all. We cannot assure you that the present usage patterns
will continue as additional kiosks are added or that sponsorship by advertisers
will continue at present levels or will increase to the levels needed to cover
our costs. Revenue from FastTake(R) is dependent on placement of kiosks, usage
and advertiser support. By the end of 1999, we are expecting to add an
electronic commerce feature to FastTake(R). We cannot predict what revenues will
be achieved through electronic commerce once this feature becomes available.
WE DEPEND ON CERTAIN LICENSES, INSTALLATION AND MAINTENANCE SERVICES
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FastTake(R) uses databases compiled by and licensed from Video
Pipeline, Inc. and film trailers licensed from Screenplay, Inc. If these
licenses were canceled for any reason, it may be difficult or expensive to
license similar data bases from other providers. We also rely on installation
and maintenance services for our FastTake(R) public access terminals which we
receive from International Business Machines (IBM). These contracts could be
canceled on short notice. If such contracts were canceled by IBM, this could
have a negative affect on our sales as well as on the quality of service which
we could provide to our customers.
WE CANNOT BE CERTAIN ABOUT OUR PRODUCT DEVELOPMENT
Hardware and software as complex and sophisticated as that employed by
us in our public access terminals commonly experience errors, or "bugs," both
during development and subsequent to commercial introduction. As such terminals
are installed in the City of New York and elsewhere, we may identify such
problems, either in the software platforms developed by others or in our own
proprietary software. We cannot assure you that all the potential problems will
be identified, that any bugs that are located can be corrected on a timely basis
or at all, or that additional errors will not be located in existing or future
products at a later time or when usage increases. Any such errors could delay
the commercial introduction or use of existing or new products and require
modifications in systems that have already been installed. Remedying such errors
could be costly and time consuming. Furthermore, bugs involving the proprietary
software of third parties could require the redesign of our proprietary
software. Delays in debugging or modifying our products could materially and
adversely affect our competitive position with respect to existing and new
technologies and products offered by our competitors. In particular, delays in
remedying existing or newly identified errors in our public access terminals
could materially and adversely affect our ability to achieve significant market
penetration with them.
WE ARE VULNERABLE TO TECHNOLOGICAL CHANGES; WE NEED TO BE CONTINUOUSLY
ACCEPTED IN RAPIDLY CHANGING MARKETS
The markets we serve experience rapid technological change, changing
customer requirements, frequent new product introductions and evolving industry
standards that may render existing products and services obsolete. As a result,
more advanced products produced by our competitors could erode our position in
our existing markets or other markets that we may enter. It is difficult to
estimate the life cycles of our products and services. Our future success will
depend, in part, upon our ability to enhance existing products and services and
to develop new products and services on a timely basis. In addition, our
products and services must keep pace with technological developments, conform to
evolving industry standards, particularly client/server and Internet
communication and security protocols and publishing formats. We also must
address increasingly sophisticated customer needs. In particular, the success of
our public access terminals will depend in large measure on their being
user-friendly to the public and capable of operating reliably. We might
experience difficulties that could delay or prevent the successful development,
introduction and marketing of new products and services. New products and
services and enhancements might not meet the requirements of the marketplace and
achieve market acceptance. If these things happen, they would materially and
negatively affect our financial condition and results of operations.
WE HAVE SIGNIFICANT COMPETITION
We are subject to significant competition from different sources for
our different services. Our Internet public access terminal business competes
with numerous companies, including IBM, North Communications, Golden Screens and
ATCOM/INFO. The City of New York has also awarded contracts, comparable to the
contract awarded to us, to North Communications and DSSI (which awarded a
subcontract to Golden Screens), both of which have sold similar public access
terminals to other municipalities. After fulfillment of the initial contracts,
if the City of New York chooses to install additional public access terminals
throughout New York City, it may award to others, and not to us, the contract to
install such additional terminals. Further, other municipalities or other
entities might not seek to acquire these terminals from us. In addition, if this
business is successful, additional companies in the software, hardware and
communications areas, among others, may seek to enter the market. Many of such
competitors may have resources far
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greater than ours. A total of 19 companies competed for the contracts with the
City of New York, many of which can be expected to compete aggressively in other
competitive situations.
Our FastTake(R) business competes with a number of companies,
principally Muze, Inc., Entertainment Decisions, Inc. (Clair-V) and Advanced
Communication Design Inc., which have been in the video field for far longer
than us. Although we believe that FastTake(R) is a competitive product, we
cannot assure you that these or other companies with far greater resources than
ours might enter the field and negatively affect our FastTake(R) business
prospects in this market.
WE MAY HAVE DIFFICULTY COMPLYING WITH GOVERNMENT CONTRACT REQUIREMENTS
AND GOVERNMENT REGULATION
We are initially marketing our public access terminals to entities
including municipalities, states and other government agencies, among others.
Governmental agencies and authorities are subject to public contract
requirements and regulations which vary from one jurisdiction to another. Some
of the issues which these requirements and regulations relate to are listed
below:
. bidding procedures;
. audits;
. guarantees;
. insurance coverage;
. non-discrimination in hiring practices;
. access to the disabled;
. record-keeping.
In San Francisco, we were requested to make the public access terminals
accessible to blind persons. Other jurisdictions may impose similar
requirements. We are currently attempting to develop a program to make our
public access terminals accessible to blind persons, with the aid and
cooperation of various organizations for the blind.
Some public contract requirements may be onerous or even impossible for
us to satisfy, such as requirements for large guarantees, and we may not be able
to make sales in these jurisdictions. In addition, public contracts frequently
require a formal competitive bidding process. The process to date has been and
may continue to be long. Even following contract award, significant delays in
contract implementation are possible.
WE RELY ON MICROSOFT IN MARKETING
We have established a strategic relationship with Microsoft that we
believe is important to our sales, marketing and support activities as well as
to our product development efforts, relating to our public access terminals.
Microsoft supports us in marketing our public assets and services and has agreed
to exhibit our public access terminals in Microsoft displays at various trade
shows. It has also issued public statements that included favorable references
relating to our products. Additionally, Microsoft currently advertises on public
access terminals in New York City. It is possible that Microsoft would not
continue to support our products, continue our participation in the Developer
Days program, continue to advertise on our public access terminals or enter into
such agreements with us in the future. Such an eventuality would materially
negatively affect us.
WE DEPEND UPON MICROSOFT'S WINDOWS OPERATING SYSTEM
We have invested in software built on Microsoft's Internet Explorer,
Windows Internet Information Server, Windows NT and BackOffice and Office
platforms. This software uses programming languages designed for these operating
systems. If these platforms do not remain competitive, we might have to spend
significant time and resources to make our software compatible to other
platforms. Any factor negatively affecting the demand for, or use of,
Microsoft's Windows operating system could have an impact on demand for our
products or services which in turn
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would have a material negative effect on our business, results of operations and
financial condition. Additionally, any changes to the Windows operating system
that require us to make changes to our products would negatively affect us if we
were unable to develop or implement such changes in a timely fashion.
WE DEPEND UPON COMMON CARRIERS AND INTERNET ACCESS PROVIDERS
We are also dependent on various regulated common carriers and
unregulated Internet access providers, such as AT&T, Bell Atlantic, Global
Crossing and PSI. Our service or profitability could be materially and
negatively effected if such carriers or providers cannot timely respond to our
requirements for service, fail to provide reliable service or increase their
rates substantially.
WE DEPEND ON THE INTERNET
Sales of our Internet-related products and services will depend in
large part upon the growth of the Internet industry. We depend on a robust
Internet industry and infrastructure for providing commercial Internet access
and carrying Internet traffic, and we depend on increased commercial use of the
Internet.
WE HAVE A LIMITED CUSTOMER BASE
Historically, we have derived a significant portion of our revenues
from a relatively limited number of customers. During 1998, one customer
accounted for approximately 73% of our revenues. During 1997, one customer
accounted for approximately 84% of our revenues, and during 1996, two customers
accounted for approximately 71% of our revenues. The services provided to such
customers were consulting and related services and, more recently, services
related to the development of Intranet and public access terminal technology. We
cannot assure you that such customers or others will retain us to install public
access terminals or to provide such services to them in the future. So far, we
have derived only limited revenue from FastTake(R), which we began shipping in
March 1999.
THERE IS RISK INVOLVED IN OUR MANUFACTURING ACTIVITIES
We are responsible for the design of our public access terminals.
Subcontractors are responsible for the engineering and manufacturing of their
hardware and graphical components. Only a limited number of public access
terminals have been built to date, so it is difficult for us to predict if our
current subcontractors will be able to engineer and produce such terminals on a
satisfactory basis. While we believe that we could arrange to have public access
terminals built by other subcontractors on comparable terms, we would experience
costs and delays if we needed to do so. Our future success will depend in part
on our ability to retain subcontractors and maintain good relationships with
subcontractors, because we need to assure the timelines and quality of the
manufacture of our public access terminals.
THERE IS POTENTIAL FLUCTUATION IN OUR QUARTERLY OPERATING RESULTS
Our quarterly operating results have in the past and may in the future
vary significantly. These variations depend upon factors such as the timing of
significant orders, which in the past have been, and may be in the future,
delayed from time to time due to delays in the contracting process. The
potential customers for our public access terminals are expected to include
municipalities, government agencies and large organizations; that is, entities
that typically engage in extended competitive bidding, approval and negotiation
procedures with respect to contracts, with no assurance that the contract will
ultimately be awarded to us. Our FastTake(R) public access terminals are
dependent on agreements with distributors, video stores and studios (to provide
advertising support). To date, only [one] distributor agreement has been signed
(with Plaza Entertainment) and agreements have been signed with [four] studios
and [eight] video outlets representing [30] initial locations. Additional
factors contributing to variability of operating results include the following:
. the pricing and mix of services and products which we sell;
. terminations of our service;
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. new products which we or our competitors introduce;
. market acceptance of new and enhanced versions of our products and
services;
. changes in pricing or marketing policies by our competitors and our
responses thereto;
. our ability to obtain sufficient vendors;
. our ability to obtain supplies of sole or limited source components;
. our ability to make changes in our network infrastructure costs, as a
result of demand variation or otherwise;
. and the lengthening of our sales cycle due to expansion and the timing
of the expansion of our network infrastructure.
Variations in the timing and amounts of revenues and costs could have a
materially negative effect on our quarterly operating results.
WE DEPEND UPON KEY MEMBERS OF OUR MANAGEMENT
Our business is greatly dependent on the efforts of our executive
officers and key employees, and on our ability to attract key personnel. In
particular, our future success is dependent upon the personal efforts of our
founders, David E. Y. Sarna, our Chairman, Co-Chief Executive Officer, Secretary
and Director and George J. Febish, our President, Co- Chief Executive Officer,
Treasurer and Director. We have entered into employment agreements with each of
Messrs. Sarna and Febish, which terminate on December 31, 2001. We have in place
key person life insurance policies, of which we are the beneficiary, on the
lives of Messrs. Sarna and Febish in the amount of $1,000,000 each. However, the
loss of the services of our executive officers or other key employees could
delay our ability to fully implement our operating strategy, which could have a
materially negative effect on our business, operating results and financial
condition.
OUR SUCCESS DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN EMPLOYEES AND
CONTRACT PROVIDERS
Our success will depend in large part upon our ability to attract,
develop, motivate and retain highly skilled technical employees. In particular
we must be able to attract software developers, project managers and other
senior personnel, as well as independent providers of creative content for our
public access terminals and websites. Qualified project managers and skilled
developers with Intranet, Internet and ActiveX(TM) skills are in particularly
great demand and are likely to remain a limited resource for the foreseeable
future. Although we expect to continue to be able to attract and retain
sufficient numbers of highly skilled technical employees, developers, project
managers and independent content providers for the foreseeable future, there can
be no assurance that we will be able to do so. The loss of some or all of our
project managers and other senior personnel could have a materially adverse
impact on us, particularly on our ability to secure and complete engagements.
Other than Messrs. Sarna and Febish, no other senior personnel have entered into
employment agreements obligating them to remain employed by us for any specific
term; however, substantially all our key employees are parties to
nonsolicitation, confidentiality and noncompetition agreements with us.
OUR SUCCESS DEPENDS UPON OUR PROPRIETARY TECHNOLOGY
Our success and ability to compete is dependent in part upon our
proprietary technology. While we rely on trade secret, contract, trademark,
patent and copyright law to protect our technology, we believe that other
factors are more essential to establishing and maintaining a technology
leadership position. Theses factors include: the technological and creative
skills of our personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance. We presently
have several patents or patent applications pending. There can be no assurance
that such patent applications will be allowed or even if such applications are
allowed that others will not develop technologies that are similar or superior
to our technology. The source code for our proprietary software is protected as
a trade secret. In addition, we do not sell or license our technology to third
parties, but rather deliver services through our public access terminals. Our
proprietary software is not disclosed to third parties. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain aspects of our
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products or to obtain and use information that we regard as proprietary or to
develop similar technology independently. Policing unauthorized use of our
products is difficult. In addition, effective trade secret and copyright
protection may be unavailable or limited in certain foreign countries. We cannot
assure you that the steps we have taken will prevent misappropriation of our
technology. In addition, litigation may be necessary in the future to enforce
our intellectual property rights, to protect trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Such litigation could result in
substantial costs and diversion of resources and could have a material negative
effect on our business, operating results or financial condition.
Certain technology used in our products or services is licensed or
leased from third parties, generally on a nonexclusive basis. While the licenses
involved are primarily "shrink wrap licenses"; that is, licenses available to
anyone who purchases publicly available software programs, in the event any of
these licenses or leases is terminated or in the event the underlying programs
are discontinued our operations may be materially negatively affected.
Replacement of certain technologies which we license or lease could be costly
and could result in product delays which would materially and negatively affect
our operating results. While it may be necessary or desirable in the future to
obtain other licenses or leases relating to one or more of our products or
services or relating to current or future technologies, we cannot assure you
that we will be able to do so on commercially reasonable terms or at all.
WE ARE EXPOSED TO RISK OF SYSTEM FAILURE, RISKS ASSOCIATED WITH THE SECURITY OF
OUR SYSTEMS AND LIABILITY RISKS
Our operations are dependent upon our ability, and the ability of our
suppliers, such as AT&T, Bell Atlantic and PSI to protect our network
infrastructure against damage from fire, earthquakes, power loss,
telecommunications failures and similar events. Despite the precautions we take,
the occurrence of a natural disaster or other unanticipated problems at our
network operations center or public access terminals in the future could cause
interruptions in the services we provide. In addition, there could be
interruptions in the services we provide if our telecommunications providers
fail to provide the data communications capacity we require as a result of a
natural disaster, operational disruption or for any other reason. Any damage or
failure that causes interruptions in our operations could have a material
negative effect on our business, financial condition and results of operations.
Our public access terminals are designed to operate with reduced functionality
even without connection to telecommunication lines. However, a substantial
failure could negatively affect our business.
Despite the implementation of security measures, the core of the
infrastructure of our network is vulnerable to computer virus attacks and other
disruptive problems. In the past, we and our Internet access providers have
experienced, and may in the future experience, interruptions in service as a
result of the accidental or intentional actions of Internet users, current and
former employees or others. Unauthorized use could also potentially jeopardize
the security of confidential information stored in our computer systems and in
the computer systems of our customers, which may result in us being liable to
our customers and also may deter potential users. Although we intend to continue
to implement industry-standard security measures, including the use of firewalls
and virus detection and prevention software, such measures have been
circumvented in the past, and we cannot assure you that measures we implement
will not be circumvented in the future. Eliminating computer viruses and
alleviating other security problems may require interruptions, delays or
cessation of service to our customers which could have a material negative
effect on our financial condition and results of operations.
Our success will depend upon the capacity, reliability and security of
our network infrastructure, including processing capability, and the facilities
and capacity leased from access providers and telecommunications vendors. We
must continue to expand and adapt our network infrastructure as the number of
users and the amount of information they wish to transfer increases, and to meet
changing customer requirements. The expansion and adaptation of our network
infrastructure will require substantial financial, operational and management
resources. We cannot assure you that we will be able to expand or adapt our
network infrastructure to meet additional demand or our customers' changing
requirements on a timely basis, at a commercially reasonable cost, or at all. If
we fail to expand our network infrastructure on a timely basis or adapt it
either to changing customer requirements or to evolving industry standards, our
business, financial condition and results of operations could be materially
negatively affected.
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The public access terminals that were installed in various locations in
New York City since July 1996, in Kings County, Seattle, Washington since June
1997 and the FastTake(R) Kiosks installed since March 1999 have have only been
operating for a short time. Accordingly, we have only limited experience with
actual consumer interaction with the public access terminals. While we have
designed the public access terminals to be resistant to vandalism, there can be
no assurance that vandals will not succeed in damaging or disabling these
terminals. In addition, although we believe it is unlikely, users of the public
access terminals may seek to hold us liable for injuries allegedly incurred in
connection with using them.
While we maintain insurance covering, among other things , losses
resulting from business interruptions caused by system failures, damages to
public access terminals or claims by users of the public access terminals, with
an annual limit of $2,000,000, and a $5,000,000 umbrella policy, we cannot
assure you that such insurance will provide sufficient coverage or that if there
are multiple claims, such insurance will not be terminated or will be available
for terms affordable to us.
WE HAVE RISK OF LIABILITY DUE TO FUTURE REGULATION OF THE INTERNET ACCESS
INDUSTRY
We are currently not subject to direct regulation by the Federal
Communications Commission or any other agency, other than regulations applicable
to businesses generally and businesses doing business with governmental agencies
(see "Risk Factors -- We May Have Difficulties Complying with Government
Contract Requirements and Government Regulation").
Changes in the regulatory environment relating to the Internet access
industry could have a negative effect on our business. Due to the increase in
Internet use and publicity, it is possible that laws and regulations may be
adopted with respect to the Internet, including with respect to privacy, pricing
and characteristics of products or services. We cannot predict the impact, if
any, that future laws and regulations or legal or regulatory changes may have on
our business.
The law relating to the liability of on-line services companies and
Internet access providers for information carried on or disseminated through
their systems is currently unsettled. Parties have instituted several private
lawsuits seeking to impose such liability upon on-line services companies and
Internet access providers. In addition, there is proposed legislation which
would impose liability for or prohibit the transmission on the Internet of
certain types of information and content. We may be exposed to such potential
liability in the event we were to make services such as the one offered through
our public access terminals available over the Internet. Although we carry
insurance, it may not be adequate to compensate us in the event we become liable
for information carried on or disseminated through our systems.
OUR CURRENT MANAGEMENT HAS CONTINUING CONTROL OF THE COMPANY
As of the date of this Prospectus, David E. Y. Sarna, our Chairman and
Co-Chief Executive Officer, and George J. Febish, our President and Co-Chief
Executive Officer, each of whom is also a director and a principal stockholder
of ours, together with The David E. Y. Sarna Family Trust and The George J.
Febish Family Trust, beneficially own, in the aggregate, approximately 17% of
our issued and outstanding shares of our Common Stock. As a result, assuming no
exercise of any of the warrants and options or convertible securities which we
have issued, and subject to the effect of additional voting shares which we may
issue in the future, these stockholders could exercise a significant influence
over the control of the Company and on the outcome of matters submitted to our
stockholders for approval, which influence might not be consistent with the
interests of other stockholders. In addition, if they were to act together, they
could under certain circumstances be able to elect a majority of our directors,
deter or cause a change in control of the Company and otherwise generally
control our affairs. On the other hand, the conversion rights which may be
exercised pursuant to the March 1999 and August 1999 Subscription Agreements
could conceivably effect a change of control of the Company if the trading price
of our Common Stock were to decrease significantly.
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WE DO NOT ANTICIPATE THE PAYMENT OF DIVIDENDS
Other than distributions made prior to 1993, when we were a
closely-held "S corporation," we have not paid any dividends on our Common Stock
in the past, and do not anticipate that we will declare or pay any dividends in
the foreseeable future.
SHARES THAT ARE ELIGIBLE FOR SALE IN THE FUTURE MAY AFFECT THE MARKET PRICE OF
OUR COMMON STOCK
A significant number of the outstanding shares of our Common Stock are
"restricted securities" as that term is defined in Rule 144 promulgated under
the Securities Act. The restricted shares may be sold pursuant to an effective
registration statement under the Securities Act, in compliance with the
exemption provisions of Rule 144 or pursuant to another exemption under the
Securities Act. In the absence of any agreement to the contrary, the outstanding
restricted Common Stock could be sold in accordance with one or more other
exemptions under the Securities Act (including Rule 144). Rule 144, as amended,
permits sales of restricted securities by any person (whether or not an
affiliate) after one year, at which time sales can be made subject to the Rule's
existing volume and other limitations and by non-affiliates without adhering to
Rule 144's existing volume or other limitations after two years. In general, an
"affiliate" is a person with the power to manage and direct our policies. The
SEC has stated that, generally, executive officers and directors of an entity
are deemed affiliates of the entity. Future sales of substantial amounts of
shares in the public market, or the perception that such sales could occur,
could negatively affect the price of the shares in any market that may develop
for the trading of such shares.
RISK RELATED TO THE YEAR 2000 ISSUE
Many currently installed computer systems and software products accept
only two digit codes to define a specific year. Computer equipment and software
with embedded technology which are time-sensitive may recognize the two digit
date code "00" as the year 1900 rather than the year 2000, resulting in system
failure or miscalculations. This problem is generally referred to as the "Year
2000 issue". We use software and related technologies that will be affected by
the "Year 2000 issue." We began the process of identifying the changes required
to our computer programs and hardware during 1996. We believe that all of our
major programs and hardware are Year 2000 compliant. We believe that we will not
incur any significant costs between now and January 1, 2000 to resolve Year 2000
issues. However, we cannot assure you that other companies' computer systems and
applications on which our operations rely will be timely converted, or that any
such failure to convert by another company would not have a material negative
effect on our systems and operations. Furthermore, there can be no assurance
that the software that we use which has been designed to be Year 2000 compliant,
contains all necessary date code changes.
THE POSSIBLE NEGATIVE EFFECT OF ANTI-TAKEOVER PROVISIONS, A STAGGERED BOARD
AND PROVISIONS RELATING TO STOCKHOLDER ACTIONS
There are certain provisions of Delaware law and certain provisions in
our Certificate of Incorporation, as amended, and in our Amended and Restated
Bylaws, which could make it more difficult for a third party to acquire control
of the Company and could discourage a third party from attempting to do so.
Certain of these provisions allow us to issue Preferred Stock with rights senior
to those of our Common Stock without any further vote or action by the
stockholders, eliminate the right of stockholders to act by written consent and
impose various procedural and other requirements which could make it more
difficult for stockholders to effect certain corporate actions. In addition, our
Board of Directors is divided into classes which serve in staggered terms,
meaning that the Board members may only be replaced a few at a time. This fact
could have the effect of delaying a change in control of the Company. In
addition, we have 5,000,000 shares of authorized Preferred Stock, which we could
issue in the future without further stockholder approval and upon such terms and
conditions, and with such rights, privileges and preferences, as the Board of
Directors may determine. The rights of the holders of our Common Stock will be
subject to, and may be negatively affected by, the rights of the holders of
Preferred Stock that may be issued in the future. In addition to the Series E
Preferred Stock which we have issued under the terms of the March 1999
Subscription Agreement, and the Series F Preferred Stock
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which we have issued under the terms of the August 1999 Subscription Agreement
we may issue additional Preferred Stock in connection with future financings.
See "Description of Securities - Delaware Takeover Statute and Certain Charter
Provisions."
THERE ARE LIMITATIONS ON THE LIABILITY OF OUR DIRECTORS AND OFFICERS
Our Certificate of Incorporation, as amended, and our Amended and
Restated Bylaws contain provisions limiting the liability of our directors for
monetary damages to the fullest extent permissible under Delaware law. This is
intended to eliminate the personal liability of a director for monetary damages
on an action brought by or in the right of the Company for breach of a
director's duties to us or to our stockholders except in certain limited
circumstances. In addition, our Certificate of Incorporation, as amended, and
our Amended and Restated Bylaws contain provisions requiring us to indemnify our
directors, officers, employees and agents serving at our request, against
expenses, judgments (including derivative actions), fines and amounts paid in
settlement. This indemnification is limited to actions taken in good faith in
the reasonable belief that the conduct was lawful and in or not opposed to the
best interests of the Company. The Certificate of Incorporation, as amended, and
the Amended and Restated Bylaws provide for the indemnification of directors and
officers in connection with civil, criminal, administrative or investigative
proceedings when acting in their capacities as agents for the Company. These
provisions may reduce the likelihood of derivative litigation against directors
and executive officers and may discourage or deter stockholders or management
from suing directors or executive officers for breaches of their duties to the
Company, even though such an action, if successful, might otherwise benefit the
Company and its stockholders.
USE OF PROCEEDS
The Selling Stockholders are selling all of the Shares covered by this
Prospectus for their own account. Accordingly, we will not receive any of the
proceeds from the resale of the Shares. We may receive proceeds from the
exercise of the warrants. We will use such net proceeds for general corporate
purposes. We have agreed to bear the expenses relating to the registration of
the shares, other than brokerage commissions and expenses, if any, which will be
paid by the Selling Stockholders.
DIVIDEND POLICY
We have never declared or paid cash dividends on our Common Stock. We
currently anticipate that we will retain all available funds for use in the
operation of our business. As such, we do not anticipate paying any cash
dividends on our Common Stock in the foreseeable future.
SELLING STOCKHOLDERS
We issued securities convertible into or exercisable for a substantial
number of the shares covered by this Prospectus to the Selling Stockholders in
connection with the August 1999 private placement under the terms of a
Subscription Agreement between certain of the Selling Stockholders and
ourselves, dated as of August 13, 1999 as amended (the "August 1999 Financing").
Under the terms of this Subscription Agreement, we issued 23,500 shares of
Series F Preferred Stock and warrants to purchase 235,000 shares of our Common
Stock (for more details regarding the August 1999 Financing see "Description of
Securities-- the Private Placement" and "Description of Securities -- Preferred
Stock"). Additionally, certain of the Selling Stockholders are offering for
resale 15,840 shares of our Common Stock which may be acquired upon the exercise
of warrants issued pursuant to a finance lease commitment.
The following table lists certain information regarding the Selling
Stockholders' ownership of shares of our Common Stock as of September 3, 1999,
and as adjusted to reflect the sale of the shares. Information concerning the
Selling Stockholders may change from time to time.
The information in the table concerning the Selling Stockholders who
may offer Shares hereunder from time to time is based on information provided to
us by such stockholders, except for the assumed conversion of the Series F
Preferred Stock into Common Stock, and the assumed exercise of the warrants by
their holders, which are based solely on the assumptions referenced in footnotes
(1), (2), and (3) to the table.
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<TABLE>
<S> <C> <C> <C>
Shares of
Common
Stock Shares of Common Stock Owned
Name of Selling Stockholder Owned Prior Shares of after Offering (3)
to Common Stock -------------------------------------------
Offering(1) to be Sold (2) Number Percent
-------------- ---------------- ------------------ ------------------
Amro International, S. A. (4) 530,000 530,000 0 0
Austost Anstalt Schaan (5) 587,142 530,000 57,142 *
Balmore Funds S.A. (6) 587,142 530,000 57,142 *
Yeoman Ventures Limited (7) 441,667 441,667 0 0
Hudson Venture Associates LLC (8) 883,333 883,333 0 0
Talbiya Investments Ltd. (9) 176,667 176,667 0 0
Cedar Trees Investments Ltd. (10) 618,333 618,333 0 0
Triton Private Equities Fund L.P. (11) 441,667 441,667 0 0
Barry Cooper (12) 5,940 5,940 0 0
Mark Cooper (12) 5,940 5,940 0 0
Gene Verba (12) 3,960 3,960 0 0
Total
============== ================ ================== ==================
4,281,791 4,167,507 114,284
</TABLE>
- -----------------
* Less Than 1 Percent.
(1) Because the number of shares of Common Stock issuable upon conversion
of the Series F Preferred Stock is dependent upon the market price of
our Common Stock, the actual number of shares of Common Stock
beneficially owned and which shall be issued upon such conversion and,
consequently, offered for sale under this Registration Statement,
cannot be determined at this time. The number of shares attributed to
the investors (the "Investors") who purchased our Series F Preferred
Stock includes the number of shares of our Common Stock as would be
issuable upon conversion in full of the Series F Preferred Stock and
exercise in full of the warrants issued in connection therewith, based
on a hypothetical five trading day average closing bid price of our
Common Stock on the Nasdaq SmallCap Market (NASDAQ) of $.75 (without
regard to any contractual or other restriction on the number of
securities a Selling Stockholder may own at any point in time).
However, in order to provide a cushion for fluctuation in the market
price of our Common Stock, we have agreed to include herein 5,500,000
shares of our Common Stock as may be issuable upon conversion in full
of the Series F Preferred Stock and exercise in full of the warrants
issued in connection therewith. The Investors have agreed to vote the
shares beneficially held by them in favor of nominees to our board of
directors who are nominated by our then current board of directors.
(2) Assumes that each Selling Stockholder will exercise all of its warrants
into Common Stock; also assumes full conversion of the Series F
Preferred Stock.
(3) Assumes that all of the shares of Common Stock offered hereby are sold
and no other shares of Common Stock are sold during the offering
period.
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(4) Includes 500,000 shares of Common Stock issuable upon conversion of the
Series F Preferred Stock and 30,000 shares of Common Stock issuable
upon the exercise of warrants.
(5) Includes 57,142 shares of Common Stock issuable upon conversion of the
Series E Preferred Stock, 500,000 shares of Common Stock issuable upon
conversion of the Series F Preferred Stock, and 30,000 shares of Common
Stock issuable upon the exercise of warrants.
(6) Includes 57,142 shares of Common Stock issuable upon conversion of the
Series E Preferred Stock, and 500,000 shares of Common Stock issuable
upon conversion of the Series F Preferred Stock, and 30,000 shares of
Common Stock issuable upon the exercise of warrants.
(7) Includes 416,667 shares of Common Stock issuable upon conversion of the
Series F Preferred Stock and 25,000 shares of Common Stock issuable
upon the exercise of warrants.
(8) Includes 833,333 shares of Common Stock issuable upon conversion of the
Series F Preferred Stock and 50,000 shares of Common Stock issuable
upon the exercise of warrants.
(9) Includes 166,667 shares of Common Stock issuable upon conversion of the
Series F Preferred Stock, and 10,000 shares of Common Stock issuable
upon the exercise of warrants.
(10) Includes 583,333 shares of Common Stock issuable upon conversion of the
Series F Preferred Stock and 35,000 shares of Common Stock issuable
upon the exercise of warrants.
(11) Includes 416,667 shares of Common Stock issuable upon conversion of the
Series F Preferred Stock and 25,000 shares of Common Stock issuable
upon the exercise of warrants.
(12) Includes shares underlying warrants issued to this holder upon
assignment of a portion of warrants we originally issued to R.C.C.
Finance Group Ltd. ("RCC"), in accordance with a lease financing
commitment. We originally issued warrants to RCC to purchase 12,320 and
3,520 shares of our common stock, respectively, at exercise prices of
$2.25 and $.969, respectively. Of the 3,960 shares of common stock
underlying Mr. Verba's warrants, 3,080 are exercisable at $2.25 per
share and 880 are exercisable at $.969 per share. Of the 5,940 shares
of common stock underlying each of Barry Cooper and Mark Cooper's
warrants, 4,620 are exercisable at $2.25 per share and 1,310 are
exercisable at $.969 per share.
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The Certificate of Designation of the Series F Preferred Stock provides
that on each conversion date of the Series F Preferred Stock, the number of
shares of Common Stock to be issued to each holder, when added to other shares
of Common Stock owned by the holder, will not exceed 4.99% of the shares of our
Common Stock outstanding on such conversion date.
The following Selling Stockholders purchased shares of Series E
Preferred Stock and warrants in March 1999: Austost Anstalt Schaan and Balmore
Funds S.A. Except as noted, the Selling Stockholders have not had any material
relationship with us within the past three years.
DESCRIPTION OF SECURITIES
General
We are authorized to issue up to 50,000,000 shares of Common Stock, par
value $.0001 per share and up to 5,000,000 shares of Preferred Stock, par value
$.0001 per share. As of September 3, 1999 we had 9,260,639 shares of Common
Stock issued and outstanding.
The Private Placement
Pursuant to the terms of the 6% Series F Convertible Preferred Stock
Subscription Agreement, dated as of August 13, 1999, as amended, certain
investors (the "Investors") purchased $2,350,000 of our 6% Series F Convertible
Preferred Stock. The Investors were also granted warrants to purchase an
aggregate amount of 235,000 shares of Common Stock.
Warrants
--------
The Investors may exercise the warrants granted to them in connection
with the August 1999 Financing, subject to the terms and subject to the
conditions set forth in the warrants, for a five- year period. Upon exercising
the warrants, the Investors will be entitled to subscribe for and purchase
shares of our Common Stock at an exercise price of $1.07 per share. The exercise
price and the number of shares for which the warrants are exercisable is subject
to adjustment as provided in the warrant, including, but not limited to,
anti-dilution provisions pertaining to the declaration of stock dividends, a
merger or our consolidation or liquidation. One-half of each Investor's warrants
are callable at a nominal price if the Common Stock trades at a price equal to
or in excess of 150% of the exercise price for 20 consecutive days.
Compensation to the Placement Agent
-----------------------------------
At the closing of the August 1999 Financing on August 13, 1999, we
issued to the placement agent, Warwick Corporation, Ltd. (the "Placement
Agent"), 1,260 shares of our Series F Preferred Stock (six percent of the number
of shares of Preferred Stock issued to the Investors on the Closing Date on the
same terms as Investors). On or about August 27, 1999, we used $126,000 of the
proceeds from an additional investor (which purchased $250,000 of Series F
Preferred Stock) to redeem the 1,260 shares of Series F Preferred Stock
previously issued to the Placement Agent. In addition, we paid the Placement
Agent a finder's fee of $15,000 (6% of the additional investor amount).
Common Stock
Holders of shares of our Common Stock are entitled to one vote per
share on all matters that are submitted to the stockholders for their approval
and have no cumulative voting rights. Subject to the senior rights of our
Preferred Stock, the holders of our Common Stock are entitled to receive
dividends, if any, as may be declared by the Board of Directors from funds
legally available from time to time for this purpose. Upon liquidation or
dissolution of the Company, the remainder of our assets will be distributed
ratably among the holders of our Common Stock, after the payment of all
liabilities and payment to the holders of any Preferred Stock. Our Common Stock
has no preemptive or other subscription rights and there are no conversion or
sinking fund provisions with respect to such shares. All of our outstanding
shares of Common Stock are fully paid and nonassessable. The Investors have
agreed to vote all shares of
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Common Stock which may be beneficially held by them in favor of all nominees to
our Board of Directors who are nominated by the then current Board of Directors.
Preferred Stock
Our Preferred Stock may be issued from time to time by our Board of
Directors without the approval of our stockholders. Our Board of Directors is
authorized to issue these shares in different classes and series and, with
respect to each class or series, to determine the dividend rights, the
redemption provisions, conversion provisions, liquidation preferences and other
rights and preferences not in conflict with our Certificate of Incorporation or
with Delaware law. Our Board of Directors, without stockholder approval, could
issue Preferred Stock which would negatively affect the voting and other rights
of the holders of our Common Stock.
Series F Preferred Stock
Our Board of Directors has authorized the issuance of a series of
Preferred Stock, designated as Series F Preferred Stock, and consisting of
25,000 shares. Each such share of Series F Preferred Stock has a stated value of
$100 pursuant to a Certificate of Designation. We are registering a total of
approximately 5,265,000 shares of our Common Stock underlying the Series F
Preferred Stock as part of this Prospectus.
Dividends. Subject to the rights of the holders of our Series E
---------
Preferred Stock, the holders of the shares of our Series F Preferred Stock are
entitled to receive, when and as declared by our Board of Directors, dividends
at the yearly rate of six percent of the Purchase Price, payable, at the
discretion of our Board of Directors, in Common Stock or cash. Dividends shall
accrue on each share of the Series F Preferred Stock from the date of initial
issuance and be cumulative, whether or not we have profits, surplus or other
funds legally available for the payment of dividends. All accrued dividends
shall be immediately due and payable on the date of conversion of such shares of
Series F Preferred Stock into our Common Stock.
Preferences on Liquidation. Subject to the senior rights of the holders
--------------------------
of our Series E Preferred Stock, in the event of our voluntary or involuntary
liquidation, dissolution or winding up, the holders of shares of our Series F
Preferred Stock then outstanding shall be entitled to be paid, out of our assets
available for distribution to our stockholders, an amount per share of Series F
Preferred Stock as would have been payable had each such share been converted
into Common Stock immediately prior to such event of liquidation, dissolution or
winding up plus all accrued dividends and liquidated damages, if any
("Liquidation Preference"). If upon our liquidation, dissolution, or winding up,
our assets available for distribution to our stockholders shall be insufficient
to pay the holders of the Series F Preferred Stock the full Liquidation
Preference, the holders of the Series F Preferred Stock shall all share in any
distribution of assets, each getting a relative share of the distribution based
on their relative holdings of the Series F Preferred Stock.
Conversion Rights. The shares of Series F Preferred Stock may be
------------------
converted into shares of Common Stock at a conversion rate determined by
dividing $100, the purchase price per share of Series F Preferred Stock, by the
Conversion Price, which is the lesser of (a) 0.80 times the average Closing Bid
Price, as defined in the Certificate of Designation of Series F Convertible
Preferred Stock, of the Common Stock for the five trading days ending on the day
prior to conversion, or (b) $1.21 (subject to appropriate adjustments in the
event of a stock split, reverse stock split or similar event). The Series F
Preferred Stock may not be converted until the earlier of (i) the ninetieth day
after the closing date of the August 1999 Financing and (ii) the effective date
of this registration statement, and thereafter only one-third of a holder's
acquired shares of Series F Preferred Stock may be converted, on a cumulative
basis, during each 30-day period. The shares of Series F Preferred Stock will
automatically convert into Common Stock on the second anniversary of the closing
date. The Certificate of Designation of the Series F Preferred Stock provides
that on each conversion date of the Series F Preferred Stock, the number of
shares of Common Stock to be issued to each holder, when added to other shares
of Common Stock owned by the holder, will not exceed 4.99% of the shares of our
Common Stock outstanding on such conversion date. Additionally, we will not be
able, under the August 1999 Subscription Agreement, to issue an amount of shares
of Common Stock exceeding 19.99% or more of our Common Stock outstanding at the
time of the August 13, 1999 closing unless our stockholders' approve such an
issuance or unless a waiver is obtained from Nasdaq. In the event that neither
approval from our stockholders nor a waiver from Nasdaq is obtained, we are only
obligated under the August 1999 Subscription Agreement to convert the shares of
Series F Preferred Stock into Common Stock in the applicable pro rata amounts so
that no more than 19.99% of our Common
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Stock outstanding at the time of the August 13, 1999 closing will be issued
under the August 1999 Subscription Agreement.
No fractional shares of our Common Stock shall be issued upon
conversion of the Series F Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled, we shall pay cash equal to such
fraction multiplied by the conversion price of one share of Common Stock (which
shall be calculated as described above). We shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon conversion
unless either the certificates evidencing such shares of Series F Preferred
Stock are delivered to us or our transfer agent as provided above, or the holder
notifies us or our transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to us to indemnify us for
any loss we incur in connection with such certificates.
Upon conversion of all of the then outstanding Series F Preferred
Stock, shares of Series F Preferred Stock shall not be deemed outstanding for
any purpose whatsoever and all such shares shall be retired and canceled and
shall not be reissued.
Forced Conversion. Within two years after the date of issuance of the
------------------
Series F Preferred Stock, all outstanding shares of the Series F Preferred Stock
shall be automatically converted into shares of Common Stock. In addition, we
may force a conversion of the Series F Preferred Stock in the event we close on
a public offering of our shares of Common Stock under certain conditions.
So long as any shares of our Series F Preferred Stock shall be
outstanding we shall at all times, reserve and keep available out of our
authorized but unissued stock, such number of shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all the outstanding
shares of Series F Preferred Stock.
Redemption. We may redeem any or all of the outstanding shares of our
----------
Series F Preferred Stock on any date set for such redemption by our Board of
Directors. The redemption price for each share of Series F Preferred Stock, to
be paid in cash on the date of redemption, shall be an amount equal to:
- $108, plus an amount equal to all accrued but unpaid
dividends on such share, if the redemption occurs on or
before October 22, 1999;
- $113, plus an amount equal to all accrued but unpaid
dividends on such share, if the redemption occurs between
October 23, 1999 and December 26, 1999;
- $118, plus an amount equal to all accrued but unpaid
dividends on such share, if the redemption occurs between
December 27, 1999 and February 9, 2000;
- the higher of (i) $118, plus an amount equal to all accrued
but unpaid dividends on such share, or (ii) an amount equal
to the number of shares issuable upon the conversion of such
share of Series F Preferred Stock on the date of redemption
multiplied by the average closing bid price of the Common
Stock for the last 5 trading days before the date of
redemption, if the redemption occurs after February 9, 2000.
We shall give written notice to the holder of Series F Preferred Stock
to be redeemed, by telecopy and by first class mail, postage prepaid, at least 5
days prior to the date specified for redemption. Such notice shall state that a
redemption is being effected, note the date of redemption and call upon such
holders to surrender to us such holders' redeemed stock. The notice shall
further state that any shares of Series F Preferred Stock not converted into
shares of Common Stock prior to the date of redemption, shall be redeemed by us
on the date of redemption. If we fail to pay the redemption price on the date of
redemption, the redemption notice shall be null and void and we will relinquish
our redemption rights.
From and after the date of redemption (unless we default on duly paying
the redemption price, in which case all the rights of the holders of such shares
shall continue), the holders of the shares of the Series F Preferred Stock
called for redemption shall not have any rights as holders of our tendered
shares, except the right to receive, without interest, the redemption price upon
surrender of the certificates of their shares of Series F Preferred Stock.
Following the date of
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<PAGE>
redemption, the shares of the Series F Preferred Stock called for redemption
shall not be transferred (except with our consent) on our books and shall not be
deemed outstanding for any purpose whatsoever.
There shall be no redemption of any shares of our Series F Preferred
Stock where such action would be in violation of applicable law.
Capital Reorganization or Reclassification. If the Common Stock
---------------------------------------------
issuable upon the conversion of the Series F Preferred Stock shall be changed
into the same or different number of shares of any class or classes of our
stock, whether by capital reorganization, reclassification, stock split, stock
dividend, or similar event, then and in each such event, the holder of each
share of Series F Preferred Stock shall have the right to convert such share
into the kind and amount of shares of stock and other securities and property
receivable upon such capital reorganization, reclassification or other change
which such holder would have received had its shares of Series F Preferred Stock
been converted immediately prior to such capital reorganization,
reclassification or other change.
Capital Reorganization Merger or Sale of Assets. If at any time there
-------------------------------------------------
shall be a capital reorganization of our Common Stock (other than a subdivision,
combination, reclassification or exchange of shares described above), or a
merger or consolidation of the Company with or into another corporation, or the
sale of all or substantially all of our properties and/or assets to any other
person or entity (any of which events is herein referred to as a
"Reorganization"), then as a part of such Reorganization, provision shall be
made so that the holders of the Series F Preferred Stock shall be entitled to
receive upon conversion of the Series F Preferred Stock, the number of our
shares of stock or our other securities or property, or the securities and
shares of the successor corporation resulting from such Reorganization, to which
such holder would have been entitled if such holder had converted its shares of
Series F Preferred Stock immediately prior to such Reorganization.
Voting Rights. Except as otherwise required by law, the holders of the
-------------
Series F Preferred Stock shall not be entitled to vote upon any matter relating
to our business or affairs or for any other purpose.
So long as any shares of Series F Preferred Stock are outstanding, we
shall not (i) alter or change any of the powers preferences, privileges, or
rights of the Series F Preferred Stock; or (ii) amend the provisions of the
Certificate of Designation changing the seniority, liquidation, conversion or
other rights of the Series F Preferred Stock, without first obtaining the
approval by vote or written consent, in the manner provided by law, of the
holders of at least a majority of the outstanding shares of Series F Preferred
Stock.
Transfer Agent and Warrant Agent
Continental Stock Transfer & Trust Company, New York, New York is the
transfer agent for our Common Stock and Warrant Agent for our Class A Warrants.
Delaware Takeover Statute and Certain Charter Provisions
We are subject to Section 203 of the Delaware General Corporation Law
("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the Board of
Directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to such date, the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
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Our Certificate of Incorporation, as amended, provides that vacancies
on the Board of Directors may be filled only with the approval of a majority of
the Board of Directors then in office. Furthermore, any director elected by the
stockholders, or by the Board of Directors to fill a vacancy, may be removed
only for cause and by a vote of 75% of the combined voting power of the shares
of Common Stock entitled to vote for the election of directors, voting as a
single class.
Our Certificate of Incorporation and Amended and Restated Bylaws
provide that any action required or permitted to be taken by our stockholders
may be taken only at a duly called annual or special meeting of the
stockholders. These provisions, could have the effect of delaying until the next
stockholders meeting stockholder actions which are favored by the holders of a
majority of our outstanding voting securities, since special meetings of
stockholders may be called only by (x) the Board of Directors pursuant to a
resolution adopted by a majority of the entire Board of Directors, either upon
motion of a director or upon written request by the holders of at least 50% of
the voting power of all the shares of capital stock of the Corporation then
entitled to vote generally in the election of directors, voting together as a
single class, or (y) the chairman or the president of the Corporation.
The foregoing provisions, which may be amended only by a 75% vote of
the stockholders, could have the effect of making it more difficult for a third
party to effect a change in the control of the Board of Directors. In addition,
these provisions could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from attempting to acquire,
an interest in the Company which constitutes less than a majority of the
outstanding voting stock of the Company and may make more difficult or
discourage a takeover of the Company.
PLAN OF DISTRIBUTION
The Selling Stockholders may offer their shares of our Common Stock at
various times in one or more of the following transactions:
. on any U.S. securities exchange on which our Common Stock
may be listed at the time of such sale;
. in the over-the-counter market;
. in transactions other than on such exchanges or in the
over-the-counter market;
. in connection with short sales;
. in a combination of any of the above transactions.
The Selling Stockholders may offer their shares of Common Stock at
prevailing market prices at the time of sale, at prices related to such
prevailing market prices, at negotiated prices or at fixed prices.
The Selling Stockholders may use broker-dealers to sell their shares of
Common Stock. If this happens, broker-dealers will either receive discounts or
commission from the Selling Stockholder, or they will receive commissions from
purchasers of shares of Common Stock for whom they acted as agents. Such brokers
may act as dealers by purchasing any and all of the Shares covered by this
Prospectus either as agents for others or as principals for their own accounts
and reselling such securities pursuant to this Prospectus.
The Selling Stockholder and any broker-dealers or other persons acting
on the behalf of parties that participate in the distribution of the shares may
be deemed to be underwriters. As such, any commissions or profits they receive
on the resale of the shares may be deemed to be underwriting discounts and
commissions under the Securities Act.
As of the date of this Prospectus, we are not aware of any agreement,
arrangement or understanding between any broker or dealer and any of the Selling
Stockholders with respect to the offer or sale of the Shares pursuant to this
Prospectus.
To the extent required under the Securities Act, we will file a
supplemental prospectus to disclose (a) the name of any such broker-dealers, (b)
the number of Shares involved, (c) the price at which such Shares are to be
sold, (d) the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable, (e) that such broker-dealers did not conduct
any investigation to verify the information set out in this Prospectus, as
supplemented, and (f) other facts material to the transaction.
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The Selling Stockholders are selling all of the shares covered by this
Prospectus for their own account. Accordingly, we will not receive any proceeds
from the resale of these shares. We may receive proceeds from the exercise of
the warrants. We will use such net proceeds for general corporate purposes.
Pursuant to the Registration Rights Agreement signed in connection with
the August 1999 Financing, several of the Selling Stockholders and us have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act. We shall bear customary expenses incident
to the registration of the shares for the benefit of such Selling Stockholders
in accordance with our agreements with such Selling Stockholders, other than
underwriting discounts commissions and attorneys' fees directly attributable to
the sale of such securities by or on behalf of the Selling Stockholders.
Pursuant to the terms of the Registration Rights Agreement we have
agreed to use our best efforts to keep the Registration Statement of which this
Prospectus is a part effective until the earliest of (i) the date that all of
the Registrable Securities have been sold pursuant to the Registration Statement
of which this Prospectus is a part (ii) the date the Selling Stockholders may
sell all the Shares under the provisions of Rule 144 without limitations or
(iii) February 12, 2005.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law provides, in
general, that a corporation incorporated under the laws of the State of
Delaware, such as our company, may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (other than a derivative action by or in the right of the
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful. In the case of a derivative action, a Delaware corporation may
indemnify any such person against expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnity for such expenses.
Our Certificate of Incorporation provides that directors shall not be
personally liable for monetary damages to us or our stockholders for breach of
fiduciary duty as a director, except for liability resulting from a breach of
the director's duty of loyalty to our stockholders, intentional misconduct or
wilful violation of law, actions or inactions not in good faith, an unlawful
stock purchase or payment of a dividend under Delaware law, or transactions from
which the director derives improper personal benefit. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission. Our Certificate of Incorporation also
authorizes us to indemnify our officers, directors and other agents, by Bylaws,
agreements or otherwise, to the fullest extent permitted under Delaware law. We
have entered into an Indemnification Agreement (the "Indemnification Agreement")
with each of our directors and officers which may, in some cases, be broader
than the specific indemnification provisions contained in our Certificate of
Incorporation or as otherwise permitted under Delaware law. Each Indemnification
Agreement may require us, among other things, to indemnify such officers and
directors against certain liabilities that may arise by reason of their status
or service as a director or officer, against liabilities arising from willful
misconduct of a culpable nature, and to obtain directors' and officers'
liability insurance if available on reasonable terms.
We maintain a directors and officers liability policy with Lloyds and
Agriculture Insurance Companies that contains a combined limit of liability of
$5,000,000 per policy year.
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Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
LEGAL MATTERS
The validity of the securities being offered hereby was reviewed and
confirmed for us by Parker Chapin Flattau & Klimpl, LLP, New York, New York.
Melvin Weinberg, Esq., a partner of Parker Chapin Flattau & Klimpl, LLP, may be
deemed the beneficial owner of 300,000 shares of our Common Stock as a result of
his being a trustee of each of the two family trusts formed by the Co-Chief
Executive Officers of the Company.
EXPERTS
Our financial statements incorporated in this Prospectus by reference
to the our Annual Report on Form 10- KSB as of December 31, 1998 and for each of
the years in the two-year period ended December 31, 1998 have been audited by
Richard A. Eisner & Company, LLP, independent auditors, as set forth in their
report dated February 20, 1999 (with respect to Note A[1] March 19, 1999)
accompanying such financial statements, and are incorporated herein by reference
in reliance upon the said report given on the authority of said firm as experts
in accounting and auditing.
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<TABLE>
<S> <C>
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We have not authorized any dealer, salesperson or any other person to
give any information or to represent anything not contained in this Prospectus.
You must not rely on any unauthorized information. This Prospectus does not
offer to sell or buy any shares in any jurisdiction where it is unlawful. The 5,515,840 SHARES OF COMMON STOCK
information in this Prospectus is current as of September __, 1999.
TABLE OF CONTENTS
Page
Where You Can Find More Information About Us............................2
Risk Factors............................................................4
Use of Proceeds........................................................15
Dividend Policy........................................................15
Selling Stockholders ..................................................15
Description of Securities..............................................18
Plan of Distribution ..................................................22 PROSPECTUS
Indemnification for Securities Act Liabilities.........................23
Legal Matters..........................................................24
Experts ...............................................................24
September __, 1999
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</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses payable in
connection with the issuance and distribution of the securities being registered
under this Registration Statement which will be paid by the Company. The Selling
Stockholders will not incur any of the expenses set forth below. All amounts
shown are estimates.
Filing fee for registration statement................... $ 755.17
Legal fees and expenses................................. $ 10,000.00
Miscellaneous expenses.................................. $ 500.00
---------------
Total.............................. $ 10,255.17
================
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 ("Section 145") of the General Corporation Law of the State
of Delaware ("DGCL") provides, in general, that a corporation incorporated under
the laws of the State of Delaware, such as our Company, may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than a derivative action
by or in the right of the corporation) by reason of the fact that such person is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful. In the case of a derivative action, a Delaware corporation
may indemnify any such person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or any other court in which such
action was brought determines such person is fairly and reasonably entitled to
indemnity for such expenses.
The Ninth Article of the Company's Certificate of Incorporation, as
amended provides that the Company shall indemnify all persons whom the Company
shall have the power to indemnify under Section 145 to the fullest extent
permitted by such Section 145. In addition, Article Eighth of the Company's
Certificate of Incorporation provides, in general, that no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL (which provides that, under certain circumstances, directors may be
jointly and severally liable for willful or negligent violations of the DGCL's
provisions regarding the payment of dividends or stock repurchases or
redemptions), or (iv) for any transaction from which the director derived an
improper personal benefit.
II - 1
<PAGE>
Section 11.2 of the Subscription Agreement (Exhibit 4.1) provides for
indemnification by the Investors of the directors, officers and controlling
person of the Company for certain liabilities, including certain liabilities
under the Securities Act of 1933, under certain circumstances.
The Company maintains primary and excess directors and officers
liability policies in an aggregate amount of $5,000,000 per policy year.
ITEM 16. EXHIBITS.
Number Description of Exhibit
- ----- ----------------------
4.1(1) 6% Series F Convertible Preferred Stock Subscription Agreement,
dated as of August 13, 1999, as amended
4.2(2) Amendment Agreement, dated as of August 19, 1999
4.3(1) Certificate of Designation of Series F Preferred Stock
4.4(1) Form of Warrant issued pursuant to the August 13, 1999 Subscription
Agreement
4.5(1) Registration Rights Agreement dated as of August 13, 1999
5.1(2) Opinion of Parker Chapin Flattau & Klimpl, LLP
23.1(2) Consent of Richard A. Eisner & Company, LLP
23.2 Consent of Parker Chapin Flattau & Klimpl, LLP (included in Exhibit
5.1 hereto)
24.1(2) Power of Attorney (included on Signature Page hereto)
- ----------------
(1) Filed with the Company's Quarterly Report on Form 10-QSB for the
quarter ended June 30, 1999.
(2) Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
II - 2
<PAGE>
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
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 small business issuer 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 and will be governed by
the final adjudication of the issue.
The undersigned small business issuer 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.
II - 3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Hackensack, State of New Jersey on September 10,
1999.
OBJECTSOFT CORPORATION
By: /s/ David E. Y. Sarna
-----------------------------------
David E.Y. Sarna
Chairman of the Board, Co-Chief
Executive Officer, Secretary and
Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of David E.Y. Sarna and George J.
Febish and each of them with power of substitution, as his attorney-in-fact, in
all capacities, to sign any amendments to this registration statement (including
post-effective amendments) and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-facts or their
substitutes may 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 date indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ David E.Y. Sarna Chairman of the Board, Co-Cheif September 10, 1999
- ------------------- Executive Officer, Secretary and
David E.Y. Sarna Director
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
/s/ George J. Febish President, Co-Chief Executive September 10, 1999
- -------------------- Officer, Treasurer and Director
George J. Febish (Principal Executive Officer)
/s/ Michael A. Burak Director September 10, 1999
- --------------------
Michael A. Burak
/s/ Daniel E. Ryan Director September 8, 1999
- ------------------
Daniel E. Ryan
</TABLE>
II - 4
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
EXHIBITS TO FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
OBJECTSOFT CORPORATION
(EXACT NAME OF ISSUER AS SPECIFIED
IN ITS CHARTER)
<PAGE>
EXHIBIT INDEX
Number Description of Exhibit
- ------ ----------------------
4.1(1) 6% Series F Convertible Preferred Stock Subscription Agreement, dated
as of August 13, 1999, as amended
4.2(2) Amendment Agreement, dated as of August 19, 1999
4.3(1) Certificate of Designation of Series F Preferred Stock
4.4(1) Form of Warrant issued pursuant to the August 13, 1999 Subscription
Agreement
4.5(1) Registration Rights Agreement dated as of August 13, 1999
5.1(2) Opinion of Parker Chapin Flattau & Klimpl, LLP
23.1(2) Consent of Richard A. Eisner & Company, LLP
23.2 Consent of Parker Chapin Flattau & Klimpl, LLP (included in Exhibit
5.1 hereto)
24.1(2) Power of Attorney (included on Signature Page hereto)
- --------------
(1) Filed with the Company's Quarterly Report on Form 10-QSB for the
quarter ended June 30, 1999.
(2) Filed herewith.
<PAGE>
EXHBIT 4.2
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT, made as of the 19th day of August, 1999 by and
among OBJECTSOFT CORPORATION, with its principal office at Continental Plaza
III, 433 Hackensack Avenue, Hackensack, New Jersey 07601 (hereinafter the
"Company"), the purchasers specified on Schedule A attached hereto, with their
respective principal offices at the addresses set forth in Schedule A (the
"Prior Purchasers"), WARWICK CORPORATION, LTD. (the "Placement Agent" and
together with the Prior Purchasers referred to herein as the "Prior Investors")
located at Charlotte House, Charlotte Street, P.O. Box N. 9204, Nassau, Bahamas,
TRITON PRIVATE EQUITIES FUND L.P., located at c/o Triton Capital Management,
L.L.C., 225 North Market Street, Suite 220, Wichita, Kansas 67202 (the "New
Investor") and PARKER CHAPIN FLATTAU & KLIMPL, LLP, having an address at 1211
Avenue of the Americas, New York, New York 10036 (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Prior Purchasers have purchased 21,000 shares of
Preferred Stock and 210,000 Warrants from the Company on August 13, 1999 (the
"Closing Date"), for an aggregate purchase price of $2,100,000, in accordance
with the terms of that certain 6% Series F Convertible Preferred Stock
Subscription Agreement (the "Agreement") dated as of the Closing Date by and
among the Company and the Prior Investors; and
WHEREAS, the parties desire to amend the Agreement and the
agreements contemplated thereby to provide for the issuance and sale by the
Company of additional shares of Preferred Stock and additional Warrants to the
New Investor for a purchase price equal to $250,000.
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein and other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties agree as follows:
1. Amendment of Agreements. The parties hereby amend the Agreement and
each of the other agreements and documents executed and delivered in
connection therewith, including without limitation, that certain (i)
Registration Rights Agreement dated as of the Closing Date by and among
the Company and the Prior Investors and (ii) Escrow Agreement dated as
of the Closing Date by and among the Company, the Prior Investors and
the Escrow Agent (the Agreement and such other agreements and
documents, collectively, the "Transaction Agreements"), to the extent
necessary and/or applicable, so as to provide as follows:
a. The Commitment Amount shall be increased from $2,100,000 to
$2,350,000, the number of Warrants shall be increased from
210,000 to 235,000, and all references in the Agreement and
the other Transaction Agreements to the Commitment Amount and
Warrants, as applicable, shall be deemed to be modified
accordingly.
<PAGE>
b. The New Investor shall be a party to the Agreement, as amended
hereby, and each of the other Transaction Agreements, as
applicable. By the New Investor's signature below, the New
Investor hereby agrees to be bound by all of the
representations, warranties, covenants, agreements, and other
terms and conditions contained in the Agreement and the other
Transaction Agreements. By the Company's execution of this
Amendment Agreement, the Company agrees (i) to be bound by all
of the representations, warranties, covenants, agreements and
other terms and conditions contained in the Agreement and the
other Transaction Agreements with respect to the New Investor,
and (ii) that the New Investor shall have all of the rights
conferred upon the Prior Investors by the Agreement and the
other Transaction Agreements, in each case as if the New
Investor had executed each and all of the Transaction
Agreements contemporaneously with the Prior Investors. By the
Escrow Agent's execution of this Amendment Agreement, the
Escrow Agent agrees (i) to be bound by all of the
representations, warranties, covenants, agreements and other
terms and conditions contained in the Escrow Agreement (as
defined in the Agreement) and the other Transaction
Agreements, as the same may be applicable to the Escrow Agent,
with respect to the New Investor, and (ii) that the New
Investor shall have all of the rights conferred upon the Prior
Investors by the Escrow Agreement and the other Transaction
Agreements as the same may be applicable to the Escrow Agent,
in each case as if the New Investor had executed each and all
of the Transaction Agreements contemporaneously with the Prior
Investors.
c. The New Investor shall purchase from the Company, and the
Company shall issue to the New Investor, for and in
consideration of the sum of $250,000 (the "New Investor
Proceeds"), an aggregate of (i) 2,500 shares of Preferred
Stock and (ii) Warrants to purchase 25,000 shares of Common
Stock. The Company shall pay the Placement Agent $15,000 in
cash and the Placement Agent shall not be entitled to any
additional payment of Preferred Stock pursuant to Section 12.7
of the Agreement.
d. Consummation of all of the issuances of Preferred Stock and
Warrants to the New Investor, as set forth in paragraph (c) of
this Section 1, shall be deemed to have occurred as of the
Closing Date (i.e., August 13, 1999) for all purposes of the
Agreement, the other Transaction Agreements and the
Certificate of Designation.
e. Promptly upon receipt by the Company of the New Investor
Proceeds, the Company shall use an aggregate amount of
$126,000 of the New Investor Proceeds to purchase the 1,260
shares of Preferred Stock previously issued to the Placement
Agent pursuant to the Agreement, at a purchase price of $100
per share of Preferred Stock.
2. Stock Split and Reverse Stock Split. The Prior Investors and the New
Investor expressly acknowledge and agree that, in the event that the
Common Stock shall be changed into a different number of shares of
Common Stock, whether by way of stock split, stock dividend,
subdivision, combination, reverse stock split or similar event, then
the Conversion Rights and
-2-
<PAGE>
Conversion Rate formula set forth in the Certificate of Designation
shall apply to the resulting shares of Common Stock, the Closing Bid
Prices shall be calculated on the resulting shares of Common Stock, and
the Maximum Price (as such term is defined in Section 5(b)(iii) of the
Certificate of Designation) shall, for all purposes of the Certificate
of Designation, be adjusted appropriately and proportionately. (For
example, assume that the Company effects a one-for- three reverse stock
split whereby every three shares of Common Stock become one share of
Common Stock and as a result the market price of the Common Stock
increases, then the Conversion Rights and Conversion Rate will
thereafter be measured in terms of the resulting higher market price
shares of Common Stock and the Maximum Price will automatically be
tripled.) The Prior Investors and the New Investor agree to approve,
vote in favor of and consent to any amendments to the Certificate of
Designation that the Company and/or its counsel deem necessary or
appropriate to reflect or implement the provisions of this Section 2.
3. Terms of Agreement and Transaction Agreements. Except as otherwise
amended or modified herein, all terms and conditions contained in the
Agreement and any of the Transaction Agreements shall continue
unchanged and remain in full force and effect.
4. Capitalized Terms. All capitalized terms used herein that are not
otherwise defined herein shall have the respective meanings ascribed to
such terms in the Agreement.
5. Governing Law. This Amendment Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without
giving effect to principles of conflicts or choice of laws thereof.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
OBJECTSOFT CORPORATION
By: /s/ David E. Y. Sarna
-------------------------------------
Name: David E. Y. Sarna
Title: Chairman
WARWICK CORPORATION, LTD.
By: /s/ Anthony L.M. Inder Rieden
-------------------------------------
Name: Anthony L.M. Inder Rieden
Title: Director
TRITON PRIVATE EQUITIES FUND L.P.
By: /s/ John C. Taysche
-------------------------------------
Name: John C. Taysche
Title: Managing Member of Triton
Capital Management, L.L.C.
-4-
<PAGE>
AMRO INTERNATIONAL, S.A.
By: /s/ M. Klee
----------------------------------
Name: M. Klee
Title: Director
AUSTOST ANSTALT SCHAAN
By: /s/ Thomas Hackl
----------------------------------
Name: Thomas Hackl
Title: Representative
BALMORE FUNDS, S.A.
By: /s/ Francis Maraux
-----------------------------------
Name: Francis Maraux
Title: Director
YEOMAN VENTURES LIMITED
By: /s/ Gina Lavie
-----------------------------------
Name: Gina Lavie
Title: Attorney-in-fact
HUDSON VENTURE ASSOCIATES LLC
By: /s/ Jay N. Goldberg
------------------------------------
Name: Jay N. Goldberg
Title:
TALBIYA LTD
By: [illegible]
-----------------------------------
Name:
Title:
-5-
<PAGE>
CEDAR TREES INVESTMENTS LTD
By: /s/ J. Bouhras
---------------------------------
Name: Turks & Caicos First
Secretarial Ltd
Title: Secretary
PARKER CHAPIN FLATTAU & KLIMPL, LLP
By: /s/ Melvin Weinberg
--------------------------------
Name: Melvin Weinberg
Title: Authorized Signatory
-6-
<PAGE>
SCHEDULE A
INVESTORS:
1. AMRO INTERNATIONAL, S.A.
c/o Ultra Finance
Grossmuenster Platz
#6
Zurich, Switzerland CH822
Tel.: (212) 376-8750
Fax: (212) 214-0440
Attn:
2. AUSTOST ANSTALT SCHAAN
Landstrasse 163
Schaan
Fuerstentum Liechtenstein
Tel.: (212) 586-8224
Fax: (212) 586-8244
Attn: Ari Rabinowitz
3. BALMORE FUNDS, S.A.
Trident Chambers
P.O. Box 146
Roadstown, Tortola, BVI
Tel.: (212) 586-8224
Fax: (212) 586-8244
Attn: Ari Rabinowitz
4. YEOMAN VENTURES LIMITED
Charlotte House
Charlotte Street
Nassau, Bahamas
Tel.: (242) 325-7915
Attn: Anthony L.M. Inder Rieden
<PAGE>
5. HUDSON VENTURE ASSOCIATES LLC
660 Madison Avenue
New York, NY 10021
Tel.: (212) 644-7430
Fax: (212) 644-9797
Attn: Jay N. Goldberg
6. TALBIYA INVESTMENTS LTD.
c/o LH Financial Services Corp.
160 Central Park South
Suite 3212
New York, New York 10019
Tel.: (212) 586-8224
Fax: (212) 586-8244
Attn: Chris Rossman
7. CEDAR TREES INVESTMENTS LTD.
c/o Turks & Caicos First Secretarial Ltd.
Gretton House
Duke Street
Grand Turk
Turks and Caicos, British West Indies
Tel.: (649) 946-2133
Fax: (649) 946-2933
Attn: C.B. Williams
<PAGE>
PARKER CHAPIN FLATTAU & KLIMPL, LLP
1211 Avenue of the Americas
New York, NY 10036
(212) 704-6000
Exhibit 5.1
September 9, 1999
ObjectSoft Corporation
Continental Plaza III
433 Hackensack Avenue
Hackensack, New Jersey 07601
Dear Sir:
We have acted as counsel to ObjectSoft Corporation, a Delaware
corporation (the "Company"), in connection with its filing of a registration
statement on Form S-3 (the "Registration Statement") being filed with the
Securities and Exchange Commission under the Securities Act of 1933, relating to
an offering of an aggregate of 5,515,840 shares of common stock, par value
$.0001 per share.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Registration Statement.
In our capacity as counsel to the Company, we have examined originals
or copies, satisfactory to us, of the Company's (i) Certificate of
Incorporation, as amended, (ii) Amended and Restated By-laws and (iii)
resolutions of the Company's board of directors. We have also reviewed such
other matters of law and examined and relied upon all such corporate records,
agreements, certificates and other documents as we have deemed relevant and
necessary as a basis for the opinion hereinafter expressed. In such examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity with the original
documents of all documents submitted to us as copies or facsimiles. As to any
facts material to such opinion, we have, to the extent that relevant facts were
not independently established by us, relied on certificates of public officials
and certificates of officers or other representatives of the Company.
-1-
<PAGE>
ObjectSoft Corporation
September 9, 1999
Page 2
Based upon and subject to the foregoing, we are of the opinion that:
(a) the shares of Common Stock issuable upon the conversion of
the Series F Preferred Stock, upon issuance in accordance with the terms of the
Certificate of Designation of the Series F Preferred Stock, will be legally
issued, fully paid and non-assessable;
(b) the shares of Common Stock issuable upon the exercise of
the warrants issued to the Investors, pursuant to the Subscription Agreement,
upon issuance and payment in accordance with the terms of the Subscription
Agreement and the terms of the warrants issued to the Investors, will be legally
issued, fully paid and non-assessable; and
(c) the shares of Common Stock issuable upon exercise of
warrants issued to each of Gene Verba, Barry Cooper and Mark Cooper, assignees
of R.C.C. Finance Group Ltd. (collectively, the "Assignees' Warrants"), upon
issuance and payment in accordance with the terms of the Assignees' Warrants
will be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference made to us under the caption "Legal
Matters" in the prospectus constituting part of the Registration Statement.
Very truly yours,
/s/ Parker Chapin Flattau & Klimpl, LLP
PARKER CHAPIN FLATTAU & KLIMPL, LLP
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Form S-3
Registration Statement of our report dated February 20, 1999 (with respect to
Note A[1] March 19, 1999), with respect to our audit of the financial statements
included in ObjectSoft Corporation's Annual Report (Form 10-KSB) for the year
ended December 31, 1998. We also consent to the reference to our firm under the
caption "Experts".
/s/ Richard A. Eisner & Company, LLP
- ------------------------------------
Richard A. Eisner & Company, LLP
Florham Park, New Jersey
September 10, 1999
