AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 18, 2000
REGISTRATION NO. 333-_______
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)
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<S><C> <C>
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 Telephone Number (Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices) Including Area Code, of Agent For Service)
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Copy to:
MELVIN WEINBERG, ESQ.
PARKER CHAPIN LLP
THE CHRYSLER BUILDING
405 LEXINGTON AVENUE
NEW YORK, NEW YORK 10174
(212) 704-6000
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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.
[X] 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.
[ ] 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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CALCULATION OF REGISTRATION FEE
- --------------------------------- --------------------- ---------------------- ------------------------ ----------------------
Proposed Proposed
Title of each class of Amount to Maximum maximum Amount of
securities be registered Aggregate price Aggregate registration
to be registered Per share offering price fee
- --------------------------------- --------------------- ---------------------- ------------------------ ----------------------
common stock, $.0001 par value
<S> <C> <C> <C> <C>
per share 2,276,500 (2)(3) $4.71875(1) $10,742,234 $2,835.95
- --------------------------------- --------------------- ---------------------- ------------------------ ----------------------
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(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
($4.4375) and asked price ($5.00) on the Nasdaq SmallCap Market
(NASDAQ) on February 14, 2000.
(2) Represents shares of our common stock issuable upon conversion of
26,500 series G preferred shares and upon exercise of warrants issued
in connection therewith. See "Description of Securities."
(3) Because the number of shares of common stock issuable upon conversion of the
series G preferred stock depends on the market price of our common stock, the
actual number of shares into which the series G preferred stock will be
converted and the number to be sold under this registration statement cannot be
determined at this time. In a registration rights agreement among the selling
stockholders and ObjectSoft, dated as of December 30, 1999, we agreed to
register 2,276,500 shares of our common stock. The number of shares registered
is not intended to be a prediction as to the future market price of our common
stock upon conversion of the series G preferred stock. See "Risk Factors -- We
have 3,248,210 shares of our common stock reserved for further issuances which
can substantially dilute the value of your ObjectSoft common stock."
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. WE HAVE
NOT AUTHORIZED ANY DEALER, SALESPERSON OR ANY OTHER PERSON TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. 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 FEBRUARY 18, 2000
OBJECTSOFT CORPORATION
2,276,500 SHARES OF COMMON STOCK
. The stockholders of ObjectSoft Corporation listed on page 15 of this
prospectus are offering for sale up to 2,276,500 shares of our common stock
under this prospectus, issued and issuable upon conversion of our series G
preferred stock and exercise of warrants issued in connection with the
series G preferred stock.
. The selling stockholders may offer their shares through public or private
transactions, at prevailing market prices, or at privately negotiated
prices.
--------------------------------------
NASDAQ SmallCap symbols:
common stock "OSFT"
Redeemable Class A Warrants "OSFTW"
--------------------------------------
. On February 16, 2000 the closing sale price of our common stock on the
Nasdaq SmallCap Market was $4.90625 and the closing sale price of our
Redeemable Class A Warrants was $0.65625.
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 __________ __, 2000
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TABLE OF CONTENTS
PAGE
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RISK FACTORS..........................................................4
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS.....................11
WHERE YOU CAN FIND MORE INFORMATION ABOUT US.........................11
USE OF PROCEEDS......................................................12
DIVIDEND POLICY......................................................12
DILUTION.............................................................12
SELLING STOCKHOLDERS.................................................14
DESCRIPTION OF PRIVATE PLACEMENT TRANSACTION.........................16
DESCRIPTION OF SECURITIES............................................17
PLAN OF DISTRIBUTION.................................................20
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES.......................21
LEGAL MATTERS........................................................22
EXPERTS..............................................................22
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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.
UNLESS OTHERWISE INDICATED, ALL SUBSEQUENT REFERENCES IN THIS
PROSPECTUS TO OUR COMMON STOCK GIVES EFFECT TO THE ONE-FOR-SIX REVERSE STOCK
SPLIT EFFECTED ON OCTOBER 13, 1999.
WE HAVE 3,248,210 SHARES OF OUR COMMON STOCK RESERVED FOR FURTHER ISSUANCES
WHICH CAN SUBSTANTIALLY DILUTE THE VALUE OF YOUR OBJECTSOFT COMMON STOCK
The issuance of reserved shares would dilute the equity interest of
existing stockholders and could have a significant adverse effect on the market
price of our common stock. As of February 14, 2000, we had 3,248,210 shares of
common stock reserved for possible future issuances upon conversion of the
Series G preferred stock, options and warrants.
The conversion terms of our outstanding series G preferred stock may
cause substantial dilution in the book value per share of our common stock.
Because of the conversion features in the series G preferred stock, the
preferred stockholders will receive a greater number of shares of common stock
if our common stock price decreases.
We have also issued certain options and warrants, including warrants
owned by the selling stockholders, which 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.
If the selling stockholders convert their preferred stock or exercise
their warrants and then sell our common stock, the common stock price may
decrease due to the additional shares in the market. This could allow the
selling stockholders to convert remaining preferred stock into greater amounts
of common stock, the sales of which would further depress the stock price.
The significant downward pressure on the price of the common stock
could encourage short sales and consequently place further downward pressure on
the price of our common stock. (See "Dilution".)
WE HAVE A HISTORY AND EXPECTATION OF FUTURE LOSSES AND AN ACCUMULATED DEFICIT
AND IF WE DO NOT ACHIEVE PROFITABILITY WE MAY NOT BE ABLE TO CONTINUE OUR
BUSINESS IN THE FUTURE
Although we have generated revenues from operations, we have
experienced substantial operating losses. We have incurred, and will continue to
incur, significant costs developing our interactive public access terminals and
Internet operations. We anticipate incurring additional losses until we can
successfully market and distribute our products and develop new technologies and
commercially viable future products. If we are unable to do so, we will continue
to have losses and might not be able to continue our 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
Nine months ended:
. September 30, 1999............... $2,658,740
As of September 30, 1999, we accumulated losses of $9,811,381.
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WE COULD BE REQUIRED TO CUT BACK OR STOP OPERATIONS IF WE ARE UNABLE TO RAISE OR
OBTAIN NEEDED FUNDING
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.
Our ability to continue operations will depend on our positive cash
flow from future operations and on our ability to raise additional funds through
equity or debt financing. We do not know if we will be able to raise additional
funding or if additional funding will be available on favorable terms. Also, 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. We could be
required to cut back or stop operations if we are unable to raise or obtain
needed funding.
WE DON'T KNOW IF OUR NEW PRODUCT "FASTAKE(R)" WILL BE PROFITABLE
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.
Revenue from FastTake(R) depend on placement of kiosks, usage and
especially advertiser support. We cannot assure you that customers will continue
to use the Fastake(R) kiosks as additional kiosks are added. Although we have
entered in advertising arrangements, we cannot assure you that sponsorship by
advertisers will continue at present levels to attain the level needed to cover
our costs and to be profitable.
IF WE CANNOT MEET THE NASDAQ SMALLCAP MARKET MAINTENANCE REQUIREMENTS, NASDAQ
MAY DELIST THE COMMON STOCK WHICH COULD NEGATIVELY AFFECT THE PRICE OF THE
COMMON STOCK AND YOUR ABILITY TO SELL THE COMMON STOCK
In the future, we may not be able to meet the listing maintenance
requirements of the Nasdaq SmallCap Market and Nasdaq rules, which require,
among other things, minimum net tangible assets of $2 million, a minimum bid
price for our common stock of $1.00, and stockholder approval prior to the
issuance of securities in connection with a transaction involving the sale or
issuance of common stock equal to 20 percent or more of a company's outstanding
common stock before the issuance for less than the greater of book or market
value of the stock.
Although we currently comply with Nasdaq's listing maintenance
requirements, it is possible we may not meet the requirements in the future as
in the past we have not always been in compliance. For example, the dilution
resulting from the issuance of the convertible preferred stock discussed above
and subsequent conversion and sale of common stock could have a substantial
depressive effect on the common stock bid price causing it to decrease below
$1.00. If we were no longer in compliance with Nasdaq rules and were unable to
receive a waiver or achieve compliance, and if our common stock were to be
delisted from the SmallCap market, an investor in our company may find it more
difficult to sell our common stock. This lack of liquidity also may make it more
difficult for us to raise capital in the future.
IF NASDAQ DELISTS OUR COMMON STOCK BROKERS WOULD NEED TO COMPLY WITH THE PENNY
STOCK REGULATIONS WHICH COULD MAKE IT MORE DIFFICULT TO SELL YOUR COMMON STOCK
In the event that our securities are not listed on the Nasdaq SmallCap
Market, trading of the common stock would be conducted in the "pink sheets" or
through the NASD's Electronic Bulletin Board and covered by Rule 15g-9 under the
Securities Exchange Act of 1934. Under this rule, broker/dealers who recommend
these securities to
5
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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.
Although the Securities and Exchange Commission adopted regulations
that generally define a penny stock as any equity security that has a market
price of less than $5.00 per share, our common stock, albeit currently less than
$5.00 per share, does not constitute penny stock because our common stock is
quoted on Nasdaq and our net tangible assets currently exceed $2.0 million. If
in the future our common stock falls within the definition of penny stock, these
regulations would require the delivery, prior to any transaction involving our
common stock, of a disclosure schedule explaining the penny stock market and the
risks associated with it. Furthermore, the ability of broker/dealers to sell the
common stock and the ability of purchasers in this offering to sell their
securities in the secondary market would be limited. As a result, the market
liquidity for the common stock would be severely and adversely affected. These
or other regulations in the future could negatively affect the market for these
securities.
SINCE WE DEPEND ON CERTAIN LICENSES, AND INSTALLATION AND MAINTENANCE SERVICES,
OUR PRODUCT MAY BE AFFECTED IF THE SERVICES ARE CANCELED
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 effect on our sales as well as on the quality of service which
we could provide to our customers.
"BUGS" IN OUR HARDWARE AND SOFTWARE AND THAT OF THIRD PARTIES, "VIRUSES", AND
OTHER DISRUPTIONS COULD BE COSTLY AND RETARD OUR COMPETITIVE EDGE
The hardware and software that we use us in our public access terminals
commonly experience errors, or "bugs," both during development and subsequent to
commercial introduction. We don't know if all the potential problems will be
identified, and that any bugs that are located can be corrected on a timely
basis. 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 affect our competitive edge with respect to
existing and new technologies and products offered by our competitors.
Despite the 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, employees or others. Eliminating computer
viruses 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.
WE COULD BE LIABLE FOR THE UNAUTHORIZED USE OF OUR INFORMATION AND INJURIES TO
KIOSK USERS AND COULD LOSE BUSINESS WHILE TRYING TO REMEDY THE PROBLEMS
Unauthorized use could 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, such measures have been circumvented in the
past, and we cannot assure you that measures we implement will not be
circumvented in the future. 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.
Although we believe it is unlikely, users of our kiosks may seek to hold us
liable for injuries allegedly incurred in connection with using them.
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IF OUR EXISTING TECHNICAL AND OPERATIONAL SYSTEMS FAIL, WE COULD EXPERIENCE
INTERRUPTIONS OR DELAYS IN OUR SERVICE OR DATA LOSS WHICH COULD NEGATIVELY
AFFECT OUR BUSINESS
Our systems and operations are vulnerable to damage or interruption
from telecommunications failure, power loss, break-ins, vandalism, fire, flood,
earthquakes 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 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.
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.
THE MARKETS ARE CONTINUOUSLY AND RAPIDLY CHANGING AND IF WE DON'T KEEP UP, IT
WOULD ADVERSELY AFFECT OUR BUSINESS
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 markets. 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. Also, our products and services must keep pace with technological
developments, and 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. We
might experience difficulties that could delay or prevent the successful
development, introduction and marketing of new products and services. If this
happens, it would materially and negatively affect our financial condition and
results of operations.
WE HAVE MANY COMPETITORS WHICH HAVE SIGNIFICANTLY GREATER FINANCIAL, TECHNICAL
SALES AND MARKETING RESOURCES THAN WE DO AND THESE COMPETITORS MAY NEGATIVELY
AFFECT OUR BUSINESS
We experience significant competition from different sources for our
different services. For example, our Internet public access terminal business
competes with numerous companies, including IBM, North Communications, Golden
Screens and ATCOM/INFO. 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. Many of such competitors have resources far greater than ours.
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.
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WE MAY HAVE DIFFICULTY COMPLYING WITH GOVERNMENT CONTRACT REQUIREMENTS AND
GOVERNMENT REGULATION
We initially marketed our SmartSign(TM) 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 SmartSign(TM) public
access terminals accessible to blind persons. Other jurisdictions may impose
similar requirements. We are currently attempting to develop a program to make
our SmartSign(TM) public accesS terminals accessible to blind persons, with the
aid and cooperation of various organizations for the blind, and until we succeed
in making our terminals accessible to blind persons, we have been required to
remove our terminals in San Fransisco.
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, which is generally a long process.
WE RELY ON OUR RELATIONSHIP WITH MICROSOFT IN MARKETING OUR PRODUCT AND
TERMINATION OF THIS RELATIONSHIP COULD RESULT IN REDUCED REVENUES
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 SmartSign(TM) 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 SmartSign(TM) public access terminals in New York City. If
Microsoft terminates this relationship with us, we may lose many customers which
could result in a loss of revenue.
WE DEPEND UPON MICROSOFT'S WINDOWS OPERATING SYSTEM AND ANY NEGATIVE EFFECT ON
MICROSOFT'S OPERATING SYSTEM COULD AFFECT US
We have invested in software built on certain of Microsoft's operating
systems. Any factor negatively affecting the demand for, or use of, Microsoft's
windows operating system could have an impact on the demand for our products or
services which in turn 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.
SINCE WE DEPEND UPON COMMON CARRIERS AND INTERNET ACCESS PROVIDERS, OUR
PROFITABILITY MAY BE NEGATIVELY AFFECTED IF THEY FAIL TO PROVIDE THE REQUIRED
SERVICE
We depend 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
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affected if such carriers or providers cannot timely respond to our requirements
for service, fail to provide reliable service or increase their rates
substantially.
PROBLEMS WITH THE INTERNET MAY ADVERSELY AFFECT OUR INTERNET-RELATED PRODUCT
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.
THE TERMINATION OF OUR RELATIONSHIP WITH A CUSTOMER THAT ACCOUNTS FOR A
SIGNIFICANT PORTION OF OUR REVENUES COULD NEGATIVELY AFFECT OUR BUSINESS
During 1999, one customer accounted for approximately 75% of our
revenues. During 1998, one customer accounted for approximately 73% of our
revenues. During 1997, one customer accounted for approximately 84% 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. Since we have derived only limited revenue
from FastTake(R), which we began shipping in March 1999, if ouR relationship
with a customer that accounts for a significant portion of revenues terminates,
it could affect our business.
OUR FAILURE TO RETAIN SUBCONTRACTORS WOULD RESULT IN COSTS AND DELAYS AND WOULD
ADVERSELY AFFECT OUR BUSINESS
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, 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
them, because we need to assure the timelines and quality of the manufacture of
our public access terminals.
OUR STOCK PRICE MAY BE ADVERSELY AFFECTED BY FLUCTUATING 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 placement
of kiosks, customer use of the kiosks, entering into advertising contracts,
revenue produced from advertising, which depends in part on customer usage, and
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.
Other factors which contribute to our varying operating results include:
. the pricing and mix of services and products which we sell;
. terminations of our service;
. 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.
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SINCE OUR SUCCESS DEPENDS UPON THE EFFORTS OF KEY MEMBERS OF OUR MANAGEMENT AND
OUR EMPLOYEES, OUR FAILURE TO RETAIN MANAGEMENT MEMBERS OR EMPLOYEES WILL
NEGATIVELY AFFECT OUR BUSINESS
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.
Also, success will depend in large part upon our ability to attract,
develop, motivate and retain highly skilled technical employees. Competition for
qualified personnel is intense and we may not be able to hire or retain
qualified personnel. The loss of some or all of our project managers and other
senior personnel could have a materially adverse impact on us. 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.
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 negative effect on our business, operating results
and financial condition.
IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY ADEQUATELY, WE COULD LOSE
OUR COMPETITIVE ADVANTAGE
Our success and ability to compete is dependent on our proprietary
technology. We regard our technology as proprietary and we rely primarily on
U.S. patent, trademark, copyright, trade secret laws, third-party non-disclosure
agreements and other methods to protect our proprietary rights.
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 steps taken by us to protect our
other proprietary rights may not be adequate and third parties may infringe or
misappropriate our copyrights, trade marks, and similar proprietary rights.
Additionally, effective trademark, patent, copyright and trade secret protection
may not be available in every country in which our products and media will be
distributed or made available through the Internet.
Litigation may be necessary in the future to enforce our proprietary
rights, 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.
WE FACE POTENTIAL 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
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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.
WE DO NOT EXPECT TO PAY DIVIDENDS AND INVESTORS SHOULD NOT BUY OUR COMMON STOCK
EXPECTING TO RECEIVE 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. Consequently, you will only realize an economic gain on
your investment in our common stock if the price appreciates. You should not
purchase our common stock with the expectation of receiving cash dividends.
ANTI-TAKEOVER MEASURES IN OUR CERTIFICATE OF INCORPORATION COULD ADVERSELY
AFFECT THE VOTING POWER OF THE HOLDERS OF THE COMMON STOCK.
Our certificate of incorporation authorizes anti-takeover measures like
the authority to issue "blank check" preferred stock and the staggered terms of
the members of our board of directors. Those measures could have the effect of
delaying, deterring or preventing a change in control without any action by the
stockholders. In addition, issuance of preferred stock, without stockholder
approval, on those terms as the board of directors may determine, could
adversely affect the voting power of the holders of the common stock, including
the loss of voting control to others. See "Description of Securities."
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
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 the previous section and other factors
noted in this prospectus could cause our actual results to differ materially
from those contained in any forward-looking statements.
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, although we believe that the information contained in this
prospectus is materially complete, as permitted by the SEC's rules, this
prospectus 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
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<PAGE>
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.
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 Form 10-QSB for the quarters ended March
31, 1999, June 30, 1999 and September 30, 1999;
3. Proxy Statements for the 1999 Annual Meeting of Stockholders
which occurred on June 3 1999 and for the Special Meeting of
Stockholders which occurred on October 12, 1999;
4. Current Reports on Form 8-K dated (date of earliest event
reported) December 31, 1998 (as filed on January 15, 1999),
March 17, 1999 (as filed on March 23, 1999) and December 30,
1999 (as filed on January 4, 2000); 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.
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.
DILUTION
As of February 14, 2000, we had issued and outstanding 4,289,281 shares
of common stock. At that date, there were an additional 3,248,210 shares of
common stock reserved for possible future issuances as follows:
. options granted under our stock option plan to purchase
205,661 shares at exercise prices between $1.50 and $31.50 per
share. We have registered the shares issuable upon exercise of
the options under the Securities Act;
. options and warrants to purchase 1,078,549 shares at prices
between $2.92 and $48.00 per share. We have registered a total
of 573,982 shares and will be registering an additional
504,567 shares issuable upon exercise of these options and
warrants. The balance of 36,234 shares will be deemed to be
"restricted securities" when issued, unless we register these
shares.
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<PAGE>
. 1,964,000 shares issuable upon conversion of 26,500 shares of
series G preferred stock. These shares are registered in the
registration statement of which this prospectus is a part and
upon effectiveness of the registration statement will be
freely tradable without restriction (subject to prospectus
delivery requirements).
The existence of the options and the warrants may adversely affect the
terms on which we may obtain additional equity financing. Moreover, the holders
are likely to exercise their rights to acquire 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.
The shares which will be deemed "restricted securities" may be sold
under Rule 144. Rule 144 permits sales of "restricted securities" by any person,
whether or not an affiliate of the issuer, after one year. At that time, sales
can be made subject to the Rule's volume and other limitations and after two
years by non-affiliates without adhering to Rule 144's volume or other
limitations. 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 issuing entity.
Dilution effects of the conversion of outstanding preferred stock
- -----------------------------------------------------------------
Series G preferred stock is convertible into common stock over time at
the discretion of the holders. If the holders of this preferred stock were able
to fully convert their shares into common stock on February 14, 2000 and elected
to do so, approximately 980,500 additional shares of common stock would be
issued.
The following table describes the number of shares of our common stock
into which the outstanding series G convertible preferred stock would have been
convertible if the holders of these securities could have fully converted all of
the series G preferred stock on February 14, 2000 pursuant to the following
market prices. This table also describes the percentages of our total
outstanding common stock represented by the shares of common stock into which
all of the outstanding series G preferred stock would have been convertible on
February 14, 2000. For purposes of this table, we assume that the average of the
two lowest closing market prices for a share of our common stock during the
immediately preceding 20 day trading period before conversion was the same as
the price per share in each of the respective rows of column one of the table
and we also assume that the registration statement had been declared effective
by February 14, 2000.
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<PAGE>
<TABLE>
<CAPTION>
- ------------------------------ ------------------ ----------------------------- ---------------------------------
Percentage of market Conversion price Number of shares of common Percentage of our outstanding
price per share of our for stock issuable upon common stock represented by the
common stock series G conversion of the shares of common stock issuable
outstanding series G upon conversion of the
preferred stock outstanding series G preferred
stock following conversion of
the series G preferred stock
and exercise of the warrants
- ------------------------------ ------------------ ----------------------------- ---------------------------------
<S> <C> <C> <C>
At $6.84375 per share (150%
of the market price at $2.6875 980,500 23.16%
February 14, 2000)
- ------------------------------ ------------------ ----------------------------- ---------------------------------
At $4.5625 per share (100%
of the market price at $2.6875 980,500 23.16%
February 14, 2000)
- ------------------------------ ------------------ ----------------------------- ---------------------------------
At $2.28125 per share (50%
of the market price at $2.28125 1,161,644 25.58%
February 14, 2000)
- ------------------------------ ------------------ ----------------------------- ---------------------------------
</TABLE>
SELLING STOCKHOLDERS
This prospectus covers the resale by the selling stockholders of:
. 980,500 shares of our common stock issuable upon the
conversion of the outstanding series G preferred shares issued
to the selling stockholders during a private placement
conducted in December 1999; and
. 312,500 shares of our common stock to be issued upon the
exercise of warrants issued to the selling stockholders during
the December 1999 private placement.
The following table lists certain information regarding the selling
stockholders' ownership of shares of our common stock as of February 14, 2000,
and as adjusted to reflect the sale of the shares. Information concerning the
selling stockholders, their pledgees, donees and other non-sale transferees who
may become selling stockholders, may change from time to time. When the selling
stockholders advise us of changes, we will report those changes in a prospectus
supplement as the SEC requires.
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 exercise of the warrants by
their holders, which are based solely on the assumptions referenced in footnotes
(1) and (2) to the table.
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<PAGE>
<TABLE>
<CAPTION>
Shares of common
stock owned prior Shares of comon
to stock Shares of common stock owned
Name of selling stockholder offering to be sold(1) after offering (2)
---------------------------- --------- ---------- ----------------
Number Percent
<S> <C> <C> <C> <C>
Acqua Wellington SmallCap Value Fund, Ltd.
(3) 235,000 (12) 235,000 (12) 0 0%
Cedar Trees Investments, Ltd. (4) 354,424 (13) 117,500 (14) 236,924 5.52
Danby International Ltd. (5) 105,750 (15) 105,750 (15) 0 0
Garros Ltd. (6) 105,750 (16) 105,750 (16) 0 0
Hudson Venture Associates LLC (7) 476,577 (17) 235,000 (18) 241,577 5.62
Roseworth Group Limited(8) 141,000 (19) 141,000 (19) 0 0
Triton Private Equities Fund L.P. (9) 238,294 (20) 117,500 (21) 120,794 2.81
Fairfield Homes Ltd.(10) 117,500 (22) 117,500 (22) 0 0
Intercoastal Financial Services Corp.(11) 118,000 (23) 118,000 (23) 0 0
============= ============== ======= ======
Total 1,892,294 1,293,000 599,295 13.95%
</TABLE>
- -------------------------
* Less than 1%.
(1) Assumes that each selling stockholder will convert all of its
preferred stock and will exercise all of its warrants into
common stock.
(2) Assumes that all of the shares of common stock offered in this
prospectus are sold and no other shares of common stock are
sold during the offering period.
(3) Anthony L.M. Inder Rieden is a director of Acqua Wellington
SmallCap Value Fund, Ltd. and has investment control of Acqua.
(4) C.B. Williams is a director of Cedar Trees Investments Ltd.
and has investment control of Cedar Trees.
(5) Deidre M. McCoy is a director of Danby International Ltd.. and
has investment control of Danby.
(6) Giora Lavie is the attorney-in-fact of Garros Ltd. and has
investment control of Garros.
(7) Jay N. Goldberg and Lawrence A. Howard are members of Hudson
Venture Associates LLC and have investment control of Hudson.
(8) Hans Gassner is a director of Roseworth Group Limited and has
investment control of Roseworth.
(9) John C. Tausche is the managing member of Triton Management,
LLC which is a partner of Triton Private Equities Fund L.P.
and Mr. Tausche has investment control of Triton Private
Equities Fund L.P.
(10) John Gainsford is a director of Fairfield Homes Ltd. and has
investment control of Fairfield.
(11) Intercoastal Financial Services Corp. is a registered
broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Marilyn R. O'Leary is the Financial
and Operations Principal of
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<PAGE>
Intercoastal and has investment control of Intercoastal.
(12) Includes 185,000 shares of common stock issued upon conversion
of the series G preferred stock and 50,000 shares of common
stock issuable upon the exercise of warrants.
(13) Includes 231,091 shares of common stock issued upon conversion
of the series F preferred stock and 92,500 shares of common
stock issuable upon conversion of the series G preferred stock
and 30,833 shares of common stock issuable upon exercise of
warrants.
(14) Includes 92,500 shares of common stock issued upon conversion
of the series G preferred stock and 25,000 shares of common
stock issuable upon the exercise of warrants.
(15) Includes 83,250 shares of common stock issued upon conversion
of the series G preferred stock and 22,500 shares of common
stock issuable upon the exercise of warrants.
(16) Includes 83,250 shares of common stock issuable upon
conversion of the series G preferred stock and 22,500 shares
of common stock issuable upon the exercise of warrants.
(17) Includes 233,244 shares of common stock issued upon conversion
of the series F and 185,000 shares of common stock issuable
upon conversion of the series G preferred stock and 58,333
shares of common stock issuable upon the exercise of warrants.
(18) Includes 185,000 shares of common stock issuable upon
conversion of the series G preferred stock and 50,000 shares
of common stock issuable upon the exercise of warrants.
(19) Includes 111,000 shares of common stock issuable upon
conversion of the series G preferred stock and 30,000 shares
of common stock issuable upon the exercise of warrants.
(20) Includes 116,628 shares of common stock issued upon conversion
of the series F preferred stock and 92,500 shares of common
stock issuable upon conversion of the series G preferred stock
and 29,166 shares of common stock issuable upon exercise of
warrants.
(21) Includes 92,500 shares of common stock issuable upon
conversion of the series G preferred stock and 25,000 shares
of common stock issuable upon the exercise of warrants.
(22) Includes 92,500 shares of common stock issuable upon
conversion of the series G preferred stock and 25,000 shares
of common stock issuable upon the exercise of warrants.
(23) Includes 55,500 shares of common stock issuable upon
conversion of the series G preferred stock and 62,500 shares
of common stock issuable upon the exercise of warrants.
Cedar Trees, Hudson and Triton purchased shares of series F preferred
stock and warrants in August 1999. Except as noted, the selling stockholders
have not had any material relationship with us within the past three years.
DESCRIPTION OF PRIVATE PLACEMENT TRANSACTION
THE SERIES G PRIVATE PLACEMENT TRANSACTION
The holders of the series G preferred stock, the selling stockholders,
acquired their shares in a private placement transaction entered into on
December 30, 1999. The series G preferred stock have the material rights and
obligations discussed below. We have previously filed the agreements relating to
these rights and obligations with the SEC. We urge you to read them in their
entirety.
STOCK SUBSCRIPTION AGREEMENT
- ----------------------------
Under the terms of the stock subscription agreement, dated as of
December 30, 1999, among us and the investors referred to therein, we agreed to
sell up to 25,000 shares of our series G preferred stock and warrants to
purchase up to 250,000 shares of our common stock for an aggregate purchase
price of $2,500,000 in two separate tranches. The warrants have a term of five
years and are exercisable at $2.95625. All of the warrants have
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<PAGE>
adjustment provisions for standard dilution events including stock splits, stock
dividends and similar transactions.
REGISTRATION RIGHTS AGREEMENT
- -----------------------------
In connection with our sale of series G preferred stock, we agreed to
file an initial registration statement covering the resale of 2,276,500 shares
of our common stock issuable upon conversion of the series G preferred stock and
exercise of the warrants.
PLACEMENT AGENT FEES
- --------------------
On December 30, 1999, at the closing of the first tranche of the sale
of the series G preferred stock we issued 1,200 shares of series G preferred
stock and warrants to purchase 50,000 shares of common stock at $2.95625 per
share to Intercoastal Financial Services Corp. as placement agent fees. We also
gave Intercoastal $10,000 in cash for reimbursement of legal fees.
On February 1, 2000, at the closing of the second tranche, when an
additional investor purchased 5,000 series G preferred stock and warrants to
purchase 50,000 shares of common stock, we issued 300 series G preferred shares
and warrants to purchase 12,500 shares of commons stock at $2.95625 per share to
Intercoastal as placement agent fees.
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. We effected a one-for-six reverse stock split of our
outstanding common stock effective as of October 13, 1999. Unless otherwise
indicated, all subsequent references to our shares of common stock gives effect
to the stock split. As of February 14, 2000 we had 4,289,281 shares of our
common stock issued and outstanding.
COMMON STOCK
Voting
The holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Our
certificate of incorporation and by-laws do not provide for cumulative voting
rights in the election of directors. Accordingly, holders of a majority of the
shares of common stock entitled to vote in any election of directors may elect
all of the directors standing for election.
Dividends
Subject to the senior rights of our preferred stock, holders of common
stock are entitled to receive ratably those dividends as may be declared by our
board of directors out of funds legally available for that purpose.
Rights on liquidation
In the event of our liquidation, dissolution or winding up, holders of
our common stock are entitled to share ratably in the assets remaining after
payment of liabilities and payment to the holders of our preferred stock.
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<PAGE>
Pre-emptive or redemption rights
Holders of common stock have no preemptive, conversion or redemption rights. All
of the outstanding shares of common stock are fully-paid and nonassessable.
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 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.
As of the date of this prospectus, our board has designated series A-G
preferred stock. Only the series G preferred stock has not been fully converted.
SERIES G PREFERRED STOCK
Our Board of Directors has authorized the issuance of a series of
preferred stock, designated as series G preferred stock, and consisting of
30,000 shares. Each share of series G preferred stock has a stated value of
$100. A certificate of designation filed with the secretary of state of Delaware
governs the terms and conditions of the series G preferred stock. The following
is a brief description of key terms of the series G preferred stock.
Dividends.
. The holders of the shares of our series G preferred stock are
entitled to receive, when and as declared by our Board,
dividends at the yearly rate of six percent of the purchase
price, payable, at the discretion of our Board, in common
stock or cash.
. Dividends will accrue on each share of the series G 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 G preferred
stock into our common stock.
Preferences on liquidation.
. In the event of our voluntary or involuntary liquidation,
dissolution or winding up, the holders of shares of our series
G 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 G 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 G preferred
stock the full Liquidation Preference, the holders of the
series G 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 G preferred
stock.
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<PAGE>
Conversion rights.
. The holders of the shares of our series G preferred stock may
convert each share of preferred stock into shares of our
common stock at a conversion rate determined by dividing $100,
by the lesser of:
(a) 2.6875; or
(b) the average of the two lowest closing bid prices of
our common stock for the lookback period (i.e. the 20
trading days preceding the date on which the holder
of the series G preferred stock has sent us a notice
of conversion, increased by two trading days on the
last trading day of each month, beginning at the end
of April 2000, up to a maximum of 30 trading days).
. The shares of preferred stock may not be converted until the
earlier of (i) the ninetieth day after the first closing of
the issuance of the preferred stock and (ii) the effective
date of the registration statement of which this prospectus is
a part, and thereafter only one-third of a holder's acquired
shares of preferred stock may be converted, on a cumulative
basis, during each 30 day period.
. The certificate of designation of the series G preferred stock
provides that on each conversion date of the series G
preferred stock, the number of shares of common stock to be
issued to each holder, when added to other shares owned by the
holder, will not exceed 4.99% of the shares of our common
stock outstanding on that conversion date (more than 9.99%
with respect to each holder which owned more than 4.99% of the
company's outstanding common stock on December 29, 1999).
. No fractional shares of our common stock shall be issued upon
conversion of the series G preferred stock. In lieu of any
fractional shares to which the holder would otherwise be
entitled, we shall pay cash.
Forced conversion.
. On December 29, 2001, all outstanding shares of the series G
preferred stock shall be automatically converted into shares
of common stock.
. We may force a conversion of the series G preferred stock if
we sell our common stock in a pubic offering.
Redemption.
. We may redeem any or all of the outstanding shares of our
series G preferred stock on any date set for such redemption
by our board.
. The redemption price for each share of series G preferred
stock, to be paid in cash on the date of redemption, is set
forth in the certificate of designation for the series G
preferred stock.
. We will give written notice to the holder of series G
preferred stock at least 5 days prior to the date specified
for 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 lose our rights to serve a notice of
redemption in the future.
No voting rights.
Unless required by law, the holders of the series G preferred stock
will not be entitled to vote upon any matter relating to our business or affairs
or for any other purpose.
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<PAGE>
So long as any shares of series G preferred stock are outstanding, we
will not
(a) alter or change any of the powers preferences,
privileges, or rights of the series G preferred
stock; or
(b) amend the provisions of the certificate of
designation changing the seniority, liquidation,
conversion or other rights of the series G preferred
stock,
without first obtaining the approval of the holders of at least a majority of
the outstanding shares of series G 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
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.
Our certificate of incorporation that vacancies on the board of
directors may be filled only with the approval of a majority of the board then
in office.
Our certificate of incorporation and bylaws provide that any action
required or permitted to be taken by our stockholders may be taken only at an
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 the board or upon
written request by the holders of at least 50% of the voting power of all the
shares entitled to vote or the chairman or the president.
These provisions, which may be amended only by a 75% vote of the
stockholders, could make it more difficult for a third party to change the board
. Also, these provisions could make it more difficult for a third party to
acquire, or could discourage a third party from attempting to acquire an
interest in the company which is less than a majority of the stock of the
company and may make more difficult or discourage a takeover of the company.
PLAN OF DISTRIBUTION
The selling stockholders and their pledgees, donees, transferees and
other subsequent owners, 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 privately negotiated transactions;
. in connection with short sales; o 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 also sell the shares under Rule 144
instead of under this prospectus, if Rule 144 is available for those sales.
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<PAGE>
The transactions in the shares covered by this prospectus may be
effected by one or more of the following methods:
. ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
. purchases by a broker or dealer as principal, and the resale
by that broker or dealer for its account under this
prospectus, including resale to another broker or dealer;
. block trades in which the broker or dealer will attempt to
sell the shares as agent but may position and resell a portion
of the block as principal in order to facilitate the
transaction; or
. negotiated transactions between selling stockholders and
purchasers without a broker or dealer.
The selling stockholders 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. 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 under this
prospectus.
We have advised the selling stockholders that during the time each is
engaged in distributing shares covered by this prospectus, each must comply with
the requirements of the Securities Act and Rule 10b-5 and Regulation M under the
Exchange Act.
Under those rules and regulations, they:
. may not engage in any stabilization activity in connection
with our securities;
. must furnish each broker which offers common stock covered by
this prospectus with the number of copies of this prospectus
which are required by each broker; and
. may not bid for or purchase any of our securities or attempt
to induce any person to purchase any of our securities other
than as permitted under the Exchange Act.
In the registration rights agreement we executed in connection with the
series G transaction with the selling stockholders we agreed to indemnify and
hold harmless each selling stockholder against liabilities under the Securities
Act, which may be based upon, among other things, any untrue statement or
alleged untrue statement of a material fact or any omission or alleged omission
of a material fact, unless made or omitted in reliance upon written information
provided to us by that selling stockholder. We have agreed to bear the expenses
incident to the registration of the shares, other than selling discounts and
commissions.
We agreed in the registration rights agreement to use our best efforts
to keep the registration statement of which this prospectus is a part effective
until the earliest of
. the date that all of the registrable securities have
been sold pursuant to the registration statement;
. the date the selling stockholders may sell all the
shares under the provisions of Rule 144 without
limitations; or
. June 30, 2005.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law allows companies to
indemnify their directors and officers against expenses, judgments, fines and
amounts paid in settlement under the conditions and limitations described in the
law. Our certificate of incorporation authorizes us to indemnify our officers,
directors and other agent to the fullest extent permitted under Delaware law.
21
<PAGE>
Our certificate of incorporation provides that a director is not
personally liable for monetary damages to us or our stockholders for breach of
his or her fiduciary duties as a director. A director will be held liable for a
breach of his or her duty of loyalty to us or our stockholders, his or her
intentional misconduct or willful violation of law, actions or in actions not in
good faith, an unlawful stock purchase or payment of a dividend under Delaware
law, or transactions from which the director derives an improper personal
benefit. This limitation of liability does not affect the availability of
equitable remedies against the director including injunctive relief or
rescission.
We have purchased a directors and officers liability and reimbursement
policy that covers liabilities of our directors and officers arising out of
claims based upon acts or omissions in their capacities as directors and
officers.
We maintain a directors and officers liability policy with National
Union Fire Insurance that contains a combined limit of liability of $5,000,000
per policy year.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers and controlling persons pursuant
to the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
LEGAL MATTERS
Parker Chapin LLP, New York, New York reviewed and confirmed for us the
validity of the securities being registered in this prospectus. Melvin Weinberg,
Esq., a member of Parker Chapin LLP, may be deemed the beneficial owner of
50,000 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 report given on the authority of Richard A Eisner &
Company, LLP, as experts in accounting and auditing.
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------- ------------------------------------------------------
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 FEBRUARY 14, 2000. 2,276,500 SHARES OF COMMON STOCK
TABLE OF CONTENTS
PAGE
----
RISK FACTORS........................................4
INFORMATION REGARDING FORWARD-LOOKING
STATEMENTS......................................11
WHERE YOU CAN FIND MORE INFORMATION
ABOUT US........................................11
USE OF PROCEEDS....................................12
DIVIDEND POLICY....................................12
DILUTION...........................................12
SELLING STOCKHOLDERS...............................14 PROSPECTUS
DESCRIPTION OF PRIVATE PLACEMENT
TRANSACTION.....................................16
DESCRIPTION OF SECURITIES..........................17
PLAN OF DISTRIBUTION...............................20
INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES.....................................21
LEGAL MATTERS......................................22 _____________ __, 2000
EXPERTS............................................22
- --------------------------------------------------------- ------------------------------------------------------
</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..............$ 2,835.95
Legal fees and expenses............................$ 15,000
Miscellaneous expenses.............................$ 500
=========
Total..........................................$18,335.95
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware
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.
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.
II-1
<PAGE>
ITEM 16. EXHIBITS.
Number Description of Exhibit
- ------ ----------------------
4.1 (1) 6% series G Convertible preferred stock Subscription
Agreement, dated as of December 30, 1999
4.2 (1) Certificate of Designation of series G preferred
stock
4.3 (1) Form of Warrant issued pursuant to the December 30,
1999 Subscription Agreement
4.4 (1) Registration Rights Agreement dated as of December
30, 1999
5.1 (2) Opinion of Parker Chapin LLP
23.1 (2) Consent of Richard A. Eisner & Company, LLP
23.2 (2) Consent of Parker Chapin LLP (included in Exhibit
5.1 hereto)
24.1 (2) Power of Attorney
- -------------------
(1) Filed with current report on Form 8-K filed with the Securities and
Exchange Commission on January 4, 2000, and incorporated herein by
reference.
(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;
(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 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 Securities 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
II-2
<PAGE>
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 February 18, 2000.
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>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C> <C>
/s/ David E.Y. Sarna Chairman of the Board, Co-Chief February 18, 2000
- ---------------------------------
David E.Y. Sarna Executive Officer, Secretary and
Director
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
/s/ George J. Febish President, Co-Chief Executive February 18, 2000
- ---------------------------------
George J. Febish Officer, Treasurer and Director
(Principal Executive Officer)
/s/ Michael A. Burak Director February 18, 2000
- ----------------------------------
Michael A. Burak
/s/ Daniel E. Ryan Director February 18, 2000
- --------------------------------
Daniel E. Ryan
</TABLE>
<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 G Convertible preferred stock Subscription
Agreement, dated as of December 30, 1999
4.2 (1) Certificate of Designation of series G preferred stock
4.3 (1) Form of Warrant issued pursuant to the December 30, 1999
Subscription Agreement
4.4 (1) Registration Rights Agreement dated December 30, 1999
5.1 (2) Opinion of Parker Chapin LLP
23.1 (2) Consent of Richard A. Eisner & Company, LLP
23.2 (2) Consent of Parker Chapin LLP (included in Exhibit 5.1
hereto)
24.1 (2) Power of Attorney
- -------------------
(1) Filed with current report on Form 8-K filed with the Securities and
Exchange Commission on January 4, 2000, and incorporated herein by
reference.
(2) Filed herewith.
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this 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
February 18, 2000
PARKER CHAPIN LLP
The Chrysler Building
405 Lexington Avenue, New York, NY 10174
(212) 704-6000 Fax (212) 704-6288
February 18, 2000
ObjectSoft Corporation
Continental Plaza III
433 Hackensack Avenue
Hackensack, NJ 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, as amended,
relating to an offering of an aggregate of 2,276,500 shares of common stock, par
value $.0001 per share (the "Common Stock") of the Company.
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.
Based upon and subject to the foregoing, we are of the opinion that:
<PAGE>
ObjectSoft Corporation
February 18, 2000
Page 2
(a) the shares of Common Stock issuable upon the conversion of
the Series G Preferred Stock, upon issuance in accordance with the terms of the
Company's Certificate of Designation of the Series G Preferred Stock, will be
legally issued, fully paid and non-assessable; and
(b) the shares of Common Stock issuable upon the exercise of
the warrants (the "Warrants") issued to the investors and the placement agent,
pursuant to the Stock Subscription Agreement, dated as of December 30, 1999
among the Company and the investors referred to therein (the "Subscription
Agreement), upon issuance and payment in accordance with the terms of the
Subscription Agreement and the terms of the 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 LLP
---------------------
PARKER CHAPIN LLP
