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As filed with the Securities and Exchange Commission on April 28, 2000
Registration No. 333-94743
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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AMENDMENT NO.3 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ELCOM INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
04-3175156
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(I.R.S. Employer Identification No.)
10 Oceana Way, Norwood, Massachusetts 02026, telephone (781) 440-3333
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(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Copy to:
Robert J. Crowell Douglas A. Neary
Elcom International, Inc. Calfee, Halter & Griswold LLP
10 Oceana Way 1400 McDonald Investment Center
Norwood, Massachusetts 02026 800 Superior Avenue
(781) 440-3333 Cleveland, Ohio 44114
(216) 622-8200
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of the Registration Statement and after
compliance with applicable state and federal laws.
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 he same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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SUBJECT TO COMPLETION, DATED APRIL 28, 2000
PROSPECTUS
ELCOM INTERNATIONAL, INC.
2,853,418 Shares of Common Stock
This prospectus relates to the offer and sale of common stock of Elcom
International, Inc. Of the 2,853,418 shares offered, we are selling up to
2,500,000 and Wit Capital Corporation, the selling stockholder, is selling up to
353,418 shares issuable upon the exercise of outstanding warrants.
We are selling shares pursuant to the terms of an agreement between us
and Cripple Creek Securities, LLC. Cripple Creek is an underwriter in connection
with the sale of the shares offered by this prospectus. Under the terms of the
agreement:
- - We can sell only a maximum of $50 million of common stock over the 18
month period of the agreement; and
- - We will sell the common stock at a price equal to the average purchase
price of the five trading days preceding the sale, but in no event
lower than $4.00 per share.
For further information regarding the terms governing the issuance of
shares under the agreement, see "Underwriting" on page 14.
Wit Capital, the selling stockholder, may sell the common stock offered
by this prospectus from time to time. We will not receive any proceeds from the
sale of the common stock by Wit Capital, but we will receive proceeds upon the
sale of the shares, if any, under the agreement and upon a cash exercise, if
any, of the warrants by Wit Capital.
Our common stock is quoted on the Nasdaq National Market under the
symbol "ELCO." On April 27, 2000, the last reported sale price for the common
stock was $6.9375 per share.
The underwriter has an option in the form of a call right, exercisable
during any monthly period for which we elect to sell common stock, to purchase
an amount of common stock up to the amount sold by us in the same monthly
period, but not less than $1 million.
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INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 3.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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CRIPPLE CREEK SECURITIES, LLC
The date of this prospectus is , 2000
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TABLE OF CONTENTS
Page
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RISK FACTORS..................................................................3
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS..............................10
ABOUT ELCOM..................................................................11
USE OF PROCEEDS..............................................................12
SELLING STOCKHOLDER..........................................................13
UNDERWRITING.................................................................14
PLAN OF DISTRIBUTION BY SELLING STOCKHOLDER..................................16
LEGAL MATTERS................................................................18
EXPERTS......................................................................18
WHERE YOU CAN FIND MORE INFORMATION..........................................18
INFORMATION INCORPORATED BY REFERENCE........................................18
You should rely only on the information contained in this prospectus.
We have not authorized anyone to provide you with information different from
that contained in this prospectus. The information contained in this prospectus
is accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the common stock.
We have not taken any action to permit a public offering of the shares
of common stock outside the United States or to permit the possession or
distribution of this prospectus outside the United States. Persons outside the
United States who come into possession of this prospectus must inform themselves
about and observe any restrictions relating to the offering of the shares of
common stock and the distribution of this prospectus outside of the United
States.
In this prospectus, "Elcom," "we," "us" and "our" refer to Elcom
International, Inc. "Cripple Creek" or "the underwriter" refer to Cripple Creek
Securities, LLC. "Wit Capital" or "the selling stockholder" refer to Wit Capital
Corporation.
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks before
buying shares of our common stock. The risks described are not the only ones
facing our company. Additional risks may impair our business operations. If any
of the following risks occur, our business, results of operations or financial
condition could be adversely affected. In that case, the trading price of our
common stock could decline, and you may lose all or part of your investment. You
should also refer to the other information contained in this prospectus or
incorporated herein by reference, including our consolidated financial
statements and the notes to those statements.
WE HAVE INCURRED SIGNIFICANT NET LOSSES IN EACH OF OUR LAST FOUR FISCAL
QUARTERS.
We have incurred significant net losses in each of our last four fiscal
quarters, including a net loss of approximately $42.5 million for the year ended
December 31, 1999. As of December 31, 1999, we had an accumulated deficit of
approximately $58.7 million. We cannot assure you that we will be able to
achieve profitability on an annual or quarterly basis in the short term, or, if
we achieve profitability, that it will be sustainable. The extent of our future
losses will depend, in part, on the rate of growth, if any, of sales of our
business-to-business automated procurement software applications, as well as
sales of business products, including PCs and other related products and office
supplies, and on the level of our expenses. We anticipate significant increased
expenditures relating to the marketing and branding of our business-to-business
automated procurement applications and Internet storefront. If we are unable to
generate significant additional revenue and gross profits in the short term, our
commercial viability could be called into question and we will need additional
financing.
OUR STOCK PRICE COULD BE ADVERSELY AFFECTED BY THE RISK OF OWNERSHIP DILUTION
CAUSED BY THE ISSUANCE OF SHARES UNDER THE EQUITY LINE OR BY ADDITIONAL SHARES
OF OUR COMMON STOCK BECOMING AVAILABLE FOR SALE IN THE FUTURE.
Under the equity line, we may sell up to $10 million of common stock
and the underwriter may exercise its option to purchase up to an additional $10
million of common stock during each monthly investment period (up to an
aggregate of $50 million during the term of the equity line) at a price equal to
100% of the lowest volume-weighted average sale price during the five days
immediately preceding the notice of purchase delivered by us to the underwriter.
Because the price of the shares that may be sold under the equity line is based
on the market value of the common stock at the time of the sale, the number of
shares sold will be greater if the price of the common stock declines, which
would cause greater ownership dilution. The equity line agreement limits the
price at which common stock may be sold to $4.00 per share, although we have no
present intention of selling shares at that price. Therefore, while this
prospectus relates to the offering of up to 2,500,000 shares under the equity
line, if we sold shares of common stock at the $4.00 per share minimum floor
price allowable under the equity line agreement, we would, subject to filing a
subsequent registration statement, issue 12,500,000 shares of common stock.
The perceived risk resulting from the sale of shares (down to $4.00 per
share) could cause some of our stockholders to sell their stock, thus causing
the price of our stock to further decline. In addition, the downward pressure on
our stock price could cause some of our stockholders to engage in short sales of
our common stock, which may cause the price of our stock to decline even
further.
The total number of shares that may be issued under the equity line
depends on the market price of our common stock at the time that the shares are
sold and whether we choose to sell shares, and the number of shares we choose to
sell from time to time, to the underwriter. The following table illustrates the
effect of variations in the market price in our common stock, and resulting
variations in sales prices to the underwriter, on the number of shares issued --
assuming that we choose to sell all possible shares under the equity line. The
equity line permits us to choose to sell no shares, or as many shares as we
wish, subject to limitations contained in the equity line agreement.
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Price Per Share Number of Shares Issued
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$6.9375 7,207,207
$6.00 8,333,333
$4.00 12,500,000
The numbers of shares issued shown above represent, respectively, 20.0%, 22.4%
and 30.2% of the total number of shares outstanding, when added to the number of
shares outstanding as of December 31, 1999. This table illustrates how the
ownership dilution resulting from the sale of shares under the equity line
agreement increases as the market value of the common stock declines.
Our decision to choose to sell all possible shares under the equity
line as reflected above would be influenced by, among other things, whether it
is in the best interests of the stockholders to sell at lower market prices,
limitations in the equity line agreement on the total number of shares that the
underwriter may purchase, and other factors. In that connection, we have only
registered 2,500,000 shares for sale with the Securities and Exchange
Commission, which represents 8.0% of our stock outstanding as of December 31,
1999. Although we are required to register additional shares if we choose to
sell such shares, we have not decided at this point to sell such shares, and may
elect not to do so under the equity line.
This prospectus also relates to the resale of up to 353,418 shares of
common stock issuable upon exercise of outstanding warrants, having an exercise
price of $28.71 per share, held by Wit Capital. In addition, the equity line
agreement requires us to issue to Cripple Creek warrants to purchase up to an
aggregate of 750,000 shares of common stock at a price equal to 120% of the
price at which the common stock is sold under the equity line.
In addition, as of December 31, 1999, we had an aggregate of 28,870,846
shares of common stock outstanding, of which 24,915,918 shares were held by
non-affiliates and are freely tradeable in the public market without
restriction. The remaining 3,954,928 shares are held by affiliates of Elcom and
are considered "restricted securities" subject to the resale limitations of Rule
144. Sales of a substantial number of shares of common stock in the public
market after this offering could depress the market price of the common stock
and could impair our ability to raise capital through the sale of additional
equity securities.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL ON TERMS UNFAVORABLE TO INVESTORS IN
THIS OFFERING IF WE DO NOT GENERATE ENOUGH REVENUE.
We require substantial working capital to fund our business and may
need more in the future. We currently have a secured line of credit with
Deutsche Financial Services Corporation, under which borrowings are limited to
defined percentages of eligible inventory and accounts receiveable, up to a
maximum amount of $80 million. We depend upon the Deutsche Financial line to
finance our eligible accounts receivable arising from sales of computer products
as well as United States inventory purchases. At December 31, 1999, our
borrowings from Deutsche Financial were $29.9 million, which approximated the
maximum amount available to us, based upon eligible inventory and accounts
receivable at that time. We cannot assure you that the Deutsche Financial line
will continue to be available to us or that it would be increased to support our
requirements with respect to eligible inventory and accounts receivable.
The net proceeds from the sale of common stock under the equity line,
together with our available funds, should be sufficient to meet our needs for
working capital and capital expenditure needs for the next twelve months. If,
however, we need to raise additional funds through the issuance of equity,
equity-related or debt securities, your rights may be subordinate to other
investors and your stock ownership percentage may be diluted. We cannot be
certain that additional financing will be available to us. If we cannot raise
funds on acceptable terms, if and when needed, we may not be able to develop or
enhance
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our products and services, continue our marketing and branding campaign,
take advantage of future opportunities, grow our business or respond to
competitive pressures or unanticipated requirements, which could seriously harm
our business.
OUR REVENUES AND OPERATING RESULTS HAVE VARIED IN THE PAST AND ARE LIKELY TO
CONTINUE TO DO SO IN THE FUTURE.
Our quarterly and annual revenues and operating results have varied
significantly in the past and are likely to continue to vary in the future.
Revenues and operating results may fluctuate as a result of the demand for our
products and services, the introduction of new hardware or software technologies
offering improved features, the introduction of new services by us and our
competitors, changes in the level of operating expenses, the timing of major
customer projects, inventory adjustments, competitive conditions and economic
conditions generally. In particular, our operating results are highly sensitive
to changes in the mix of our product and professional services revenues, product
margins and interest rates. Further, the purchase of our products and services
in large quantities generally involves a significant commitment of capital, with
the attendant delays frequently associated with large capital expenditures and
authorization procedures within our customers' organizations. For these and
other reasons, our operating results are subject to a number of significant
risks over which we have little or no control, including customers' technology
life cycle needs, budgetary constraints and internal authorization reviews. In
addition, in the event that the growth in our business does not meet our
expectations, we may be unable to adjust our spending levels rapidly enough to
avoid an adverse effect upon operating results. Accordingly, we believe that
period-to-period comparisons of our operating results should not be relied upon
as an indication of future performance. In addition, the results of any
quarterly period are not necessarily indicative of results to be expected for a
full fiscal year. It is possible that in certain future periods, our operating
results may be below the expectations of public market analysts and investors.
In such event, the price of our common stock would likely decline.
WE HAVE RECENTLY INCREASED THE FOCUS OF OUR BUSINESS ON DEVELOPING AND PROVIDING
OUR PECOS (PERSONAL ELECTRONIC CATALOG ORDERING SYSTEM) AUTOMATED PROCUREMENT
SOFTWARE APPLICATIONS. IF WE ARE UNABLE TO SUCCESSFULLY EXECUTE OUR STRATEGY TO
MARKET OUR PECOS APPLICATIONS, OUR BUSINESS PROSPECTS COULD BE SERIOUSLY HARMED.
Historically, we have derived substantially all of our net sales from
our computer remarketing business. We have recently increased the focus of our
business on developing and providing PECOS.pm, our intranet and Internet-based
business-to-business automated procurement software applications. We are placing
particular emphasis on the Internet version of our software, which we host as a
service provider for our licensees. We expect to derive an increasingly larger
portion of our net sales from the licensing and/or hosting of our PECOS
applications.
The market for Internet-based automated procurement applications and
hosting services is at an early stage of development. Our success depends on a
significant number of customer/client organizations implementing PECOS and
linking with their suppliers over the Internet through our applications. Our
ability to attract additional customers for our PECOS applications will depend
on using our existing customers as reference accounts, as well as the
effectiveness of our marketing and branding campaign. As of December 31, 1999,
only 5 customers had licensed our current PECOS intranet and Internet-based
applications, for renewable periods of no less than six-months, generally with
90-day acceptance periods. Accordingly, these procurement applications have not
yet achieved, and may not achieve, significant market acceptance. In addition to
our PECOS applications, we are relying on the growth of our Starbuyer.com
Internet storefront, where we market and sell business products, including
computers and related products and office supplies, to provide significant
revenue growth. As Internet commerce continues to evolve, and competition for
on-line commerce applications and hosting thereof intensifies, we must continue
to invest in branding our applications and Internet storefront in order to gain
market share. Unless a critical mass of buying organizations and their suppliers
utilize our PECOS applications, our applications may not achieve widespread
market acceptance and our business prospects would be seriously harmed.
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WE DEPEND ON ENHANCING THE FUNCTIONALITY OF OUR PECOS PRODUCTS AND SERVICES TO
KEEP PACE WITH THE RAPID TECHNOLOGICAL CHANGE ASSOCIATED WITH OUR BUSINESS.
If we are unable to develop new products or services or enhancements to
our existing products and services on a timely and cost-effective basis, or if
our new products or services or enhancements do not achieve market acceptance,
our business prospects would be seriously harmed. The life cycles of our
products and services are difficult to predict because the market for our
products and services is relatively new and emerging, and is characterized by
rapid technological change, changing customer needs and evolving industry
standards. The introduction of products and services employing new technologies
and emerging industry standards could render our existing products or services
obsolete and unmarketable in a very short time frame.
To be successful, our products and services must keep pace with
technological developments and emerging industry standards, address the
ever-changing and increasingly sophisticated needs of our customers and achieve
market acceptance.
In developing new enhancements and/or products and services, we may:
- Fail to develop and market products that respond to
technological changes or evolving industry standards in a
timely or cost-effective manner;
- Encounter products, capabilities or technologies developed by
others that rapidly render our products and services obsolete
or noncompetitive or that shorten the life cycles of our
existing products and services;
- Experience difficulties that could delay or prevent the
successful development, introduction and marketing of these
enhancements and/or new products and services;
- Fail to develop new products and services that adequately meet
the requirements of the marketplace or achieve market
acceptance; or
- Fail to adequately protect our proprietary rights in new
technology that we develop.
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Any one or a combination of these failures could seriously harm our
business prospects.
THE MARKETS THAT WE COMPETE IN ARE VERY COMPETITIVE AND WE FACE INTENSE
COMPETITION FROM MANY PARTICIPANTS IN THIS INDUSTRY. IF WE ARE UNABLE TO COMPETE
SUCCESSFULLY, OUR BUSINESS PROSPECTS WILL BE SERIOUSLY HARMED.
The markets that we compete in are intensely competitive, evolving and
subject to rapid technological change. We expect the intensity of competition to
increase in the future. Increased competition is likely to result in price
reductions, reduced gross profits and loss of market share, any one of which
could seriously harm our business prospects. Competitors vary in size and in the
scope and breadth of the products and services offered. With respect to our
business and computer products remarketing business, we compete with direct
manufacturers of such products, other major remarketers, computer mail order
companies, systems integrators, computer superstores and electronics superstores
and local computer stores, among others. With respect to our PECOS procurement
software applications, we compete with vendors of prepackaged electronic
commerce software, vendors of software tools for developing electronic commerce
applications and system integrators. Potential customers also may elect to
develop their own interactive commerce solutions. In addition, we expect
additional competition from other established and emerging companies, as the
market for electronic commerce applications continues to develop and expand. Our
principal competitors for the sale of business products, including computers and
related supplies and office products, offered through our Starbuyer.com web site
include companies such as Value America, Insight Enterprises, Inc., Cyberian
Outpost, Inc. and other traditional resellers of computers and related products.
We also experience competition from companies such as eBay, Inc. and uBid Inc.
with respect to the Internet auction activity conducted through our
Starbuyer.com web site. Our principal competitors for the licensing of our PECOS
procurement applications include companies such as Ariba, Inc., Commerce One,
Inc., Clarus Corporation, PurchasePro.com, Inc. and others.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources than us, significantly greater name recognition and a larger installed
base of customers. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products to address customer
needs. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. We also
expect that competition will increase as a result of industry consolidations. We
may not be able to compete effectively with current and future competitors. As a
result, current and future competitive pressures may have a material adverse
effect on our business, results of operations and financial condition.
WE MAY BE UNABLE TO MAINTAIN FAVORABLE RELATIONSHIPS WITH OUR KEY VENDORS.
Substantially all of our revenue is derived from the remarketing of
business products, including computers and related supplies and office products
and associated hardware, peripherals and software (including products of various
major vendors). Our agreements with those vendors from which we purchase
products directly or for whom we are authorized to resell their products
generally contain provisions for periodic renewals and for termination by the
vendor without cause, generally upon relatively short notice. Although we
believe our vendor relationships are good, there can be no assurance that our
relationships will continue as presently in effect. The loss of a major vendor,
the deterioration of our relationship with a major vendor or the failure to
establish good relationships with major new vendors could seriously harm our
business. As is typical in our industry, we receive funds from most of our
vendors for market development, which are used to offset a portion of our sales
and marketing expense. Availability of such funds has been substantially reduced
in recent years and any further reductions in the availability of these credits
could harm our operating results. We are also dependent, in part, upon vendor
financing for working capital requirements. In these instances, the vendors pay
Deutsche Financial to provide us with interest free financing for specified
periods of time. We cannot assure you that vendor financing will continue to be
available to us on satisfactory terms and conditions, if at all. If we are
unable to obtain vendor financing on satisfactory terms and conditions, our
business, our financial condition and results of operations could be harmed.
HOLDING INVENTORY POSES INVENTORY OBSOLESCENCE RISKS.
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The computer industry is characterized by rapid product improvement and
technological change resulting in relatively short product life cycles and rapid
product obsolescence, which can place inventory at considerable valuation risk.
We have recently reduced the level of inventory we stock, but continue to stock
inventory. Although it is industry practice for our suppliers to provide
selected aspects of price protection that are intended to reduce the risk of
inventory devaluation, such policies have been substantially curtailed in recent
years. We also may have the option of returning, subject to limitations, a
percentage of our current product inventories each quarter to certain
manufacturers as we assess each product's current and forecasted demand. The
amount of inventory that can be returned to suppliers varies under our
agreements and these return policies, if available, provide only limited
protection against excess inventory. Some of our suppliers do not accept any
inventory returns. We cannot assure you that suppliers will continue supporting
return policies, that unforeseen new product developments will not materially
adversely affect our business prospects or that we can successfully manage our
existing and future inventories.
WE MAY BE UNABLE TO HIRE, RETAIN AND INTEGRATE KEY MANAGEMENT AND TECHNICAL
PERSONNEL.
Our success depends to a large extent on our ability to attract and
retain senior management and technical personnel. Loss of members of our senior
management team or other key technical employees would hurt our business.
Competition for technical personnel is intense. We may be unable to retain our
present senior management team or other key technical employees or to attract,
assimilate or retain additional qualified employees in the future. In addition,
we may experience difficulty in hiring and retaining skilled employees with
appropriate qualifications. Our business prospects will be harmed if we fail to
attract and retain key employees.
WE FACE UNCERTAINTY REGARDING YEAR 2000 COMPLIANCE.
Elcom and third parties with which we do business rely on numerous
computer programs for day-to-day operations. Many currently installed computer
systems and software products are not capable of distinguishing 21st century
dates from 20th century dates. As a result, many computer systems and software
products could produce erroneous results or fail unless they have been modified
or upgraded to process date information correctly. We have completed the process
of evaluating our computer systems and software and believe our systems and
software are Year 2000 compliant. We have not experienced any significant
problems internally or with customers, clients or electronic trading partners in
connection with Year 2000 compliance. Nevertheless, we cannot assure you that
Year 2000 problems will not arise in the future, which could potentially cause
computer system failures if we or our customers, clients and electronic trading
partners are not Year 2000 compliant. Failure of our internal computer systems
or software, or of systems maintained by our customers, clients and electronic
trading partners, to operate properly with regard to the Year 2000 and
thereafter could require us to incur significant expenses to remedy any such
problems, could result in a loss of revenues, and otherwise adversely affect our
business.
WE DEPEND ON CUSTOMERS' INCREASING USE OF THE INTERNET AND ON THE GROWTH OF
ELECTRONIC COMMERCE. IF THE USE OF THE INTERNET AND ELECTRONIC COMMERCE DOES NOT
GROW AS ANTICIPATED, OUR BUSINESS WILL BE SERIOUSLY HARMED.
Our Internet PECOS software applications and Starbuyer.com Internet
storefront depend on the increased acceptance and use of the Internet as a
medium of commerce. Rapid growth in the use of the Internet is a recent
phenomenon. As a result, acceptance and use may not continue to develop and
expand at recent growth rates and a sufficiently broad base of business
customers may not adopt or continue to use the Internet as a medium of commerce.
Demand and market acceptance for recently introduced services and products over
the Internet are subject to a high level of uncertainty, and there exist few
proven services and products.
Our business prospects would be seriously harmed if:
- Use of the Internet and other on-line services does not
continue to increase or increases more slowly than expected;
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- The technology underlying the Internet and other on-line
services does not effectively support any expansion that may
occur; or
- The Internet and other on-line services do not create a viable
commercial marketplace, inhibiting the development of
electronic commerce and reducing the need for our products and
services.
SECURITY RISKS AND CONCERNS MAY DETER THE USE OF THE INTERNET FOR CONDUCTING
ELECTRONIC COMMERCE.
A significant barrier to electronic commerce and communications is the
secure transmission of confidential information over public networks. Advances
in computer capabilities, new discoveries in the field of encryptography or
other events or developments could result in compromises or breaches of the
software security systems we license or those of other web sites to protect
proprietary information. If any well-publicized compromises of security were to
occur, it could have the effect of substantially reducing the use of the
Internet for commerce and communications. Anyone who circumvents our software
security systems could misappropriate proprietary information or cause
interruptions in our services or operations. The Internet is a public network,
and data is sent over this network from many sources. In the past, computer
viruses, software programs that disable or impair computers, have been
distributed and have rapidly spread over the Internet. Computer viruses could be
introduced into our systems or those of our customers or suppliers, which could
disrupt our Starbuyer.com network or make our PECOS applications inaccessible to
customers or suppliers. We may be required to expend significant capital and
other resources to protect against the threat of security breaches or to
alleviate problems caused by breaches. To the extent that our activities may
involve the storage and transmission of proprietary information, such as credit
card numbers, security breaches could expose us to a risk of loss or litigation
and possible liability. Our security systems may be inadequate to prevent
security breaches, and our business would be harmed if we do not prevent them.
RECENTLY, OUR STOCK PRICE HAS BEEN EXTREMELY VOLATILE AND COULD CONTINUE TO BE
HIGHLY VOLATILE, AS IS TYPICAL OF TECHNOLOGY AND INTERNET-RELATED COMPANIES.
The stock market has experienced significant price and volume
fluctuations, and the market prices of securities of technology companies,
particularly Internet-related companies, have been highly volatile. Many of the
factors that might cause volatility in the market price of our common stock are
beyond our control. Some of these factors include:
- actual or anticipated variations in our quarterly operating
results;
- announcements of technological innovations or new products or
services by us or our competitors;
- changes in financial estimates by securities analysts;
- conditions or trends in electronic commerce;
- changes in the economic performance or market valuations of
other Internet, electronic commerce or business-to-business
companies;
- announcements by us or our competitors of significant
acquisitions, strategic partnerships, joint ventures or
capital commitments;
- additions or departures of key personnel;
- release of lock-up or other transfer restrictions on our
outstanding shares of common stock or sales of additional
shares of common stock; and
- potential litigation.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such a company. The institution of such litigation
9
<PAGE> 11
against us could result in substantial costs to us and a diversion of our
management's attention and resources.
YOU ARE UNLIKELY TO RECEIVE DIVIDENDS FOR THE FORESEEABLE FUTURE.
We have never declared or paid cash dividends on our common stock. We
currently intend to retain all available funds and future earnings, if any, for
use in the operation and expansion of our business and do not anticipate paying
any cash dividends in the foreseeable future.
OUR MANAGEMENT'S BROAD DISCRETION IN THE USE OF PROCEEDS FROM THE EQUITY LINE
MAY ADVERSELY AFFECT YOUR INVESTMENT.
We have no current specific plans for the use of the net proceeds from
the equity line. Although we generally intend to use the net proceeds for
marketing and branding expenditures in support of our PECOS procurement system
and Starbuyer.com, for general corporate purposes, including working capital,
and for expenses incurred in connection with the equity line agreement, we have
not yet determined the actual expected expenditures and thus, cannot estimate
the amounts to be used for each specified purpose. The actual amounts and timing
of these expenditures will vary significantly depending upon a number of
factors, including, but not limited to, the amount of cash generated by our
operations and the market response to our services. Depending on future
developments and circumstances, we may use some of the proceeds for uses other
than those described above. Our management will therefore have significant
flexibility in applying the net proceeds from the equity line. Our success and
growth depends on the effective use of the net proceeds.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements that involve risks and uncertainties. These forward-looking
statements have been made pursuant to the provisions of the Private Securities
Litigation Reform Act of 1995. These statements are not historical facts, but
rather refer to our future plans and current objectives, expectations and
intentions. Words such as "believes," "may," "will," "expects," "anticipates,"
"intends," "plans," and similar expressions are intended to identify
forward-looking statements. These statements are not guarantees of future
performance and are subject to risks, uncertainties and other factors, some of
which are beyond our control, are difficult to predict and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. Factors that could contribute to these differences
include, but are not limited to, those discussed in "Risk Factors" and elsewhere
in this prospectus. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus. We are not
obligated to update these statements or publicly release the result of any
revision to them to reflect events or circumstances after the date of this
prospectus or to reflect the occurrence of unanticipated events.
ABOUT ELCOM
We develop and license automated procurement software applications that
facilitate business-to-business electronic commerce and, through our computer
remarketing subsidiaries, which are the source of substantially all of our net
sales since inception, use versions of our technology as well as Internet-based
technologies and other traditional reselling methods to sell and market computer
products. Through elcom.com, inc., our eBusiness technology subsidiary, we
developed our PECOS(R) (Personal Electronic Catalog and Ordering System)
technologies, which enable companies to communicate, market, sell and buy
various goods and services electronically. We license our PECOS technology
product line to companies in a broad range of industries.
ELCOM.COM, INC.
Our eBusiness technology subsidiary, elcom.com, is a provider of
intranet- and Internet-based applications that automate the procurement
processes for businesses. Through elcom.com, we also operate our Starbuyer.com
Internet on-line business-to-business store and auction site, where we market
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<PAGE> 12
and sell over 150,000 business products, including computer products, office
supplies, and other commodity-type products. Our procurement software
applications and Internet storefront, which were commercially introduced in
1999, are designed to enable buying organizations to control expenditures for
non-production goods and services commonly referred to as "operating resources,"
which include office products, computers and other products necessary for the
day-to-day operation of most business enterprises. We intend to be a leading
provider of remotely-hosted automated procurement applications and a premier
business-to-business Internet storefront supplier of operating resources to
companies.
PECOS Procurement Manager, or PECOS.PM, is our software application
that enables our customers to be able to automate substantially all of their
operating resources procurement process. PECOS.PM is designed to reduce internal
product acquisition costs by eliminating the inefficiencies associated with
traditional paper-based purchasing processes. PECOS.PM helps to automate the
internal processes required to identify and select products, check pricing,
solicit approvals, place orders electronically and track orders through the
fulfillment process. PECOS.PM can be deployed either within a company's intranet
(internal computer networks that are based on Internet protocol) through
PECOS.EPM, or can be remotely-hosted through elcom.com by use of our PECOS
Internet Procurement Manager, or PECOS.ipm. Due to the substantial benefits of
remote-hosting, both to the client and to us, we expect to focus a substantial
majority of our marketing efforts on PECOS.ipm.
We launched elcom.com's Internet storefront, Starbuyer.com, on March 2,
1999. Starbuyer is targeted to business customers that desire to purchase
operating resources on-line from a single source and do not need high levels of
overall procurement automation. We offer more than 150,000 business, office and
computer products through our Internet storefront at Starbuyer.com. Our
elcom.com Internet storefront reported net sales of $2.0 million in the first
quarter of 1999, $14.5 million in the second quarter of 1999, $12.2 million in
the third quarter of 1999 and $28.3 million in the fourth quarter of 1999.
ELCOM SERVICES GROUP, INC.
Through our subsidiary, Elcom Services Group, Inc.(R), we use our PECOS
technology, as well as traditional methods, to market and sell computer-related
products to business customers, which has generated substantially all of our net
sales to date. We believe that the use of our PECOS applications differentiates
us from other computer remarketers. We commenced operations in December 1993,
and experienced rapid growth through the end of 1997. We achieved our growth by
offering our PECOS technology to our customers and by various marketing efforts,
including the expansion of our direct sales force nationwide and by the
acquisition of six computer remarketers. Our computer remarketer acquisition
strategy included utilizing an acquired company's sales force to offer PECOS to
prospective customers in those new markets and, over time, to transition the
acquired company's customers to the PECOS system, thereby generating increasing
revenues through the PECOS system. A portion of our revenues are generated by
several companies we acquired that have not converted their customers' orders to
a PECOS system and these entities continue to use traditional methods of selling
and order taking.
Through Elcom Services Group, we offer over 23,000 products
manufactured by leading companies such as Compaq, IBM, Toshiba, Hewlett-Packard
and Apple through PECOS.cm, our "sell-side" application, and 62,000 products
through PECOS.web, our Internet-based sell-side application. We are currently
finalizing development of a version of PECOS. web for use by our United Kingdom
subsidiary. Several product manufacturers have paid marketing fees to Elcom
Services Group to advertise their products in PECOS.cm and PECOS. web. Orders
placed through PECOS.cm and PECOS. web for products that are in stock generally
are fulfilled from our inventory or the inventory of one of our distribution
fulfillment partners, which include Ingram Micro, Inc., and Tech Data
Corporation, two of the largest computer product distributors in the world. We
also offer a wide range of professional services to our customers, and have
recently increased our focus on attempting to grow this business segment. We
operate seven field sales and support offices in the U.S. and two in the U.K.,
and maintain configuration and distribution facilities in Canton, MA; Irvine,
CA; and Hounslow, Middlesex, U.K. We also utilize an outsourced facility in
Hartford, CT.
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<PAGE> 13
USE OF PROCEEDS
We could receive, before expenses, up to $50 million in proceeds under
the equity line. In addition, Cripple Creek, the underwriter, will receive
warrants to purchase up to 750,000 shares of common stock. The amount of gross
proceeds, if any, received upon exercise of the warrants issuable to Cripple
Creek will depend on the exercise price of the warrants, which is specified in
the equity line as 120% of the weighted average purchase price of the common
stock purchased during the commitment period. Wit Capital has received warrants
to purchase 353,418 shares of common stock having an exercise price of $28.71
per share. Cripple Creek and, with our consent, Wit Capital may effect a
"cashless" exercise of the warrants by requesting that shares with a value equal
to the exercise price of the warrants be withheld to pay the exercise price, in
which case we will not receive any proceeds from such exercise of the warrants.
The actual amount of proceeds from the equity line and the warrants, if
any, will depend upon
- the market price of the common stock;
- whether Wit Capital or Cripple Creek elect to exercise the
warrants and, if so, whether they elect and, in the case of
Wit Capital, are permitted, to effect a "cashless" exercise of
their warrants;
- whether we elect to sell common stock under the terms of the
equity line; and
- whether Cripple Creek exercises its option to purchase common
stock as permitted under the terms of the equity line.
However, there can be no assurance that we will issue any shares or receive any
proceeds from the equity line or the exercise of warrants and, under the terms
of the equity line, it is possible that no shares will be issued.
We expect that any net proceeds from the equity line and the warrants
will be used for:
- marketing and branding expenditures in support of our PECOS
procurement system and Starbuyer.com;
- general corporate purposes, including working capital; and
- expenses incurred in connection with the equity line
agreement, including the payment of the placement fee to Wit
Capital, as described below in "Selling Stockholder."
SELLING STOCKHOLDER
Wit Capital has not had a material relationship with Elcom within the
past three years, other than in its capacity as financial advisor for Elcom
pursuant to a letter agreement dated July 8, 1999. In that capacity, Wit Capital
introduced Elcom to Cripple Creek and, in addition to the 353,418 warrants it
received, will be paid a cash placement fee equal to 7% of the amount of
proceeds received by Elcom from sales of the shares of common stock under the
equity line, but in no event will Wit Capital receive less than $700,000 as its
cash placement fee. As of the date of this prospectus, Wit Capital does not own
or have an interest in any shares of our common stock, other than the 353,418
shares being offered by this prospectus upon exercise of warrants, which, as of
December 31, 1999, represented approximately 1% of the outstanding shares of our
common stock on a fully diluted basis.
The following table shows the number of shares owned by the selling
stockholder prior to this offering and the number of shares of common stock
being registered hereby. Because any or all of the shares of common stock listed
below may be offered for sale by the selling stockholder from time to time, no
estimate can be given as to the number and percentage of common stock that will
be held by the selling stockholder upon termination of sales pursuant to this
prospectus.
12
<PAGE> 14
<TABLE>
<CAPTION>
Shares Owned Number of
Prior Shares
Name to Offering to be Registered
---- ----------- ----------------
<S> <C> <C>
Wit Capital Corporation ................ 353,418 (1) 353,418 (1)
</TABLE>
- -------------
(1) Represents shares of common stock issuable upon the exercise of outstanding
warrants held by Wit Capital. Eighty percent of the warrants became exercisable
upon issuance and the remaining 20% became exercisable upon the date of this
prospectus. The warrants expire on December 20, 2002.
UNDERWRITING
We entered into an Amended and Restated Structured Equity Line Flexible
Financing Agreement and a related registration rights agreement with Cripple
Creek, the underwriter.
Under the equity line agreement, we may require Cripple Creek to
purchase shares of our common stock over a period of 18 months beginning on the
eleventh day following the date of this prospectus. The equity line provides for
monthly investment periods commencing on that date. During any monthly
investment period, we may, in our sole discretion, require Cripple Creek to
purchase between $1 million and $10 million of common stock by delivering a "put
notice" to Cripple Creek on or before the third trading day before the beginning
of the investment period. During any investment period for which we have issued
a put notice, Cripple Creek may deliver a "call notice" at any time prior to the
twentieth day of such investment period. Cripple Creek's call notice would
require us to sell to Cripple Creek an additional amount of common stock up to
the amount set forth in our put notice during such investment period, but in no
event less than $1 million. The maximum amount of common stock that may be
purchased under the equity line may not exceed $50 million, excluding warrants.
The purchase price per share for the common stock sold to Cripple Creek
under the equity line will be equal to the lowest daily volume-weighted average
stock price of the five trading days preceding the put notice or the call
notice, as the case may be. We may set a minimum purchase price per share by
delivering notice thereof on or before three trading days before the beginning
of any investment period. However, under the equity line agreement, we may not
sell common stock for less than $4.00 per share. In calculating the purchase
price, if the volume-weighted average stock price for a given trading day in the
five-day period before delivery of the put notice or call notice, as the case
may be, is below the minimum price that we set for that investment period, then,
upon notice from Cripple Creek, the stock price for that trading day will be
deemed to be the minimum purchase price. If no notice is given by Cripple Creek,
the stock price for such trading day will be excluded from the determination of
the purchase price.
Cripple Creek's obligation to purchase shares of common stock during
any investment period is subject to the satisfaction of various conditions,
including:
- our registration statement must remain effective under the
Securities Act of 1933;
- our common stock must continue to trade on the Nasdaq National
Market; and
- Cripple Creek may not become the beneficial owner, at any
time, of more than 9.9% of the outstanding shares of our
common stock.
The equity line agreement also provides limitations on the amount of
common stock that may be sold, which may be less than the amount indicated in
the put notice and call notice. Specifically, the amount of common stock sold
during each monthly investment period will be equal to the lesser of:
- the amount indicated in the put notice and call notice, if
any,
- an amount equal to 8% of the average daily value of open
market trading during the investment period immediately
preceding the current investment period times the number of
days during such investment period that the volume-weighted
average of the common stock is above the minimum price for
such investment period, or
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<PAGE> 15
- - an amount equal to 8% of the average daily value of open market
trading during the current investment period times the number of
days during such investment period that the volume-weighted
average of the common stock is above the minimum price for the
current investment period.
In addition, the equity line also provides for a pro rata reduction in
the amount of common stock that may be sold if there are any trading days during
the period in which the volume-weighted average price of the common stock is
below the minimum price that we set for the period.
We also have agreed to issue to Cripple Creek warrants to purchase
15,000 shares for every $1 million in gross proceeds from the sale of common
stock under the equity line agreement. We are obligated to issue warrants to
purchase a minimum of 150,000 shares of common stock, regardless of the amount
of common stock sold under the equity line. However, up until the time of the
effectiveness of this prospectus, under limited circumstances involving our
termination of the equity line agreement, the minimum amount of warrants that we
would have been required to issue to Cripple Creek would have been reduced from
150,000 to 100,000. In those limited circumstances, Wit Capital would have been
entitled to exercise only 80% of its warrant.
The warrants to Cripple Creek will be issued after the end of 18-month
period or upon early termination, if any. The warrants are exercisable for 5
years from the date they are issued at an exercise price equal to 120% of the
weighted average price at which shares of common stock were sold under the
equity line or, if the warrants are issued to satisfy the minimum amount, the
exercise price will equal 120% of the volume-weighted price of the common stock
for the five trading days before the termination of the agreement. The
registration rights agreement requires us to register the shares issuable upon
exercise of the warrants that are issued to Cripple Creek.
We may terminate the equity line at any time without further obligation
(beyond the minimum warrants) to Cripple Creek. Cripple Creek may terminate the
equity line without further obligation to us only if Cripple Creek determines,
in its reasonable discretion, that the adoption of, or change in, or any change
in the interpretation or application of, any law, regulation, rule, guideline or
treaty makes it illegal or materially impractical for Cripple Creek to fulfill
its obligations under the equity line agreement.
Cripple Creek has advised us that it may sell the common stock offered
by this prospectus from time to time primarily in transactions on the Nasdaq
National Market or in other types of transactions, including those described in
"Plan of Distribution of Selling Stockholder."
The equity line agreement provides that we must indemnify the
underwriter in certain circumstances against certain liabilities, including
liabilities under the Securities Act, and contribute to payments that the
underwriters may be required to make in respect of those liabilities. The
underwriter is required by the equity line agreement to indemnify us in certain
circumstances against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments that we may be required to make in
respect of those liabilities.
The underwriter may create a short position in the common stock for its
own account by selling more shares of common stock than we have actually sold to
it under the equity line. The potential size of the short position at any time
is not expected to be greater than the amount remaining to be purchased under
any put notice or call notice. The underwriter may elect to cover any short
position by delivering shares of common stock purchased in the open market or
shares of common stock purchased pursuant to a particular put notice or call
notice. Cripple Creek will deliver a prospectus to all purchasers of shares in
short sales which Cripple Creek covers with purchases under the equity line.
Purchasers of shares sold pursuant to such short sales may be entitled to the
same remedies under the federal securities laws as any other purchaser of shares
covered by the registration statement. Under the equity line agreement, the
underwriter is prohibited from making any sales with the intention of reducing
the price of our common stock to the underwriter's benefit. Cripple Creek has
advised us that it is a registered broker-dealer under the Securities Exchange
Act of 1934.
14
<PAGE> 16
The following table indicates the expenses payable by us in the
offering. All amounts are estimates, other than the SEC Registration Fee and the
Nasdaq Additional Listing Fee.
<TABLE>
<S> <C>
SEC Registration Fee....................................................... $ 19,321
Accounting Fees (for the Company, underwriter and selling stockholder)..... $ 140,000
Fees and Expenses of Counsel (for the Company, underwriter
and selling stockholder).................................................. $ 200,000
Nasdaq Additional Listing Fee.............................................. $ 17,500
Placement Fee ............................................................. $3,500,000
Miscellaneous.............................................................. $ 23,179
Total............................................................. $3,900,000
</TABLE>
As indicated in the above table, we are required to pay a placement fee
to Wit Capital, the selling stockholder and our financial advisor, in an amount
equal to the greater of $700,000 or 7% of the gross proceeds received by the us
in connection with the equity line agreement. In its capacity as financial
advisor, Wit Capital introduced Elcom to Cripple Creek, the underwriter. See
"Selling Stockholder." The estimated placement fee set forth above of $3.5
million assumes the sale of $50 million of common stock, the maximum amount that
may be sold under the equity line agreement. Wit Capital also received warrants
to purchase 353,418 shares of common stock, 80% of which became exercisable upon
issuance in December 1999 and the remaining 20% of which became exercisable upon
the date of this prospectus.
PLAN OF DISTRIBUTION BY SELLING STOCKHOLDER
The selling stockholder may, from time to time, sell all or a portion
of the 353,418 shares of common stock issuable upon exercise of outstanding
warrants:
- on the Nasdaq National Market, or such other exchange on which
the common stock may from time to time be trading;
- in privately negotiated transactions or otherwise;
- at fixed prices that may be changed;
- at market prices prevailing at the time of sale; or
- at prices related to such market prices or at negotiated
prices.
The warrants are exercisable at a price of $28.71 per share. The
selling stockholder is not restricted as to the price at which it may sell the
shares of common stock offered by this prospectus. The shares may be sold by the
selling stockholder by one or more of the following methods, without limitation:
- 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 to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this
prospectus;
- an exchange distribution in accordance with the rules of such
exchange;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- privately negotiated transactions;
- short sales; and
- a combination of any of the above methods of sale.
15
<PAGE> 17
In effecting sales, brokers and dealers engaged by the selling
stockholder may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the selling stockholder, or,
if any broker-dealer acts as agent for the purchaser of the shares, from the
purchaser, in amounts to be negotiated that are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with
the selling stockholder to sell a specified number of shares at a stipulated
price per share. To the extent a broker-dealer is unable to sell a specified
number of shares acting as agent for the selling stockholder, it will purchase
as principal any unsold shares at the price required to fulfill the
broker-dealer commitment to the selling stockholder. Broker-dealers who acquire
shares as principal may resell the shares from time to time in transactions that
may involve block transactions of the nature described above, in the
over-the-counter market or otherwise at prices and on terms then prevailing at
the time of sale, at prices related to the then-current market price or in
negotiated transactions. In connection with resales, broker-dealers may pay to
or receive from the purchasers of the shares commissions as described above. The
selling stockholder also may sell the shares in accordance with Rule 144 under
the Securities Act, rather than under this prospectus.
From time to time the selling stockholder may engage in short sales,
short sales against the box, puts and calls and other transactions in our common
stock, and may sell and deliver the shares in connection with these transactions
or to settle securities loans. If the selling stockholder engages in such
transactions, the price of our common stock may be affected. From time to time
the selling stockholder may pledge its shares pursuant to the margin provisions
of its agreements with its brokers. Upon a default by the selling stockholder,
the broker may offer and sell the pledged shares from time to time.
The selling stockholder and any other persons participating in the sale
or distribution of the shares will be subject to the Securities Exchange Act of
1934 and the related rules and regulations, including Regulation M, to the
extent it applies. The Securities Exchange Act and related rules may limit the
timing of purchases and sales of any of the shares by the selling stockholder or
any other such person that may affect the marketability of the shares. The
selling stockholder also must comply with the applicable prospectus delivery
requirements under the Securities Act in connection with the sale or
distribution of the shares.
We are required to pay certain fees and expenses incident to the
registration of the shares.
We have agreed to indemnify the selling stockholder in certain
circumstances against certain liabilities, including liabilities under the
Securities Act.
We have agreed to use our best efforts to keep the registration
statement, of which this prospectus is a part, effective until the shares may be
or have been sold under Rule 144(k) of the Securities Act.
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<PAGE> 18
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be
passed upon for Elcom International, Inc. by Calfee, Halter & Griswold LLP,
Cleveland, Ohio.
EXPERTS
The consolidated financial statements and schedules of Elcom
International, Inc. and subsidiaries as of and for the year ended December 31,
1999 incorporated by reference in this prospectus have been audited by KPMG LLP,
independent certified public accountants, as set forth in their reports. The
consolidated financial statements and schedules of Elcom International, Inc. and
subsidiaries as of and for the years ended December 31, 1998 and 1997
incorporated by reference in this prospectus for the years ended December 31,
1998 and 1997 have been audited by Arthur Andersen LLP, independent certified
public accountants. The consolidated financial statements and supporting
schedules referred to above have been incorporated by reference in reliance upon
the reports of those firms and upon the authority of those firms as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting company and file annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission. You may read and copy these reports, proxy statements and other
information at the Commission's public reference room located at 450 Fifth
Street, N.W., Washington, D.C 20549. Please call the Commission at
1-800-SEC-0330 for more information about the operation of the public reference
room. You can request copies of these documents by writing to the Commission and
paying a fee for the copying cost. Our filings with the Commission are also
available at the Commission's Web site at "http://www.sec.gov." We also maintain
a Web Site at "www.elcominternational.com", which provides additional
information about our company. THE INFORMATION SET FORTH ON OUR WEB SITE IS NOT
A PART OF THIS PROSPECTUS.
We have filed a registration statement on Form S-3 with the Commission
under the Securities Act of 1933, as amended, relating to the common stock
offered by this prospectus. This prospectus does not contain all of the
information set forth in the registration statement. Some information has been
omitted in accordance with the rules and regulations of the Commission. For
further information, please refer to the registration statement and the exhibits
and schedules filed with it.
INFORMATION INCORPORATED BY REFERENCE
The Commission allows us to "incorporate by reference" into this
prospectus the information in documents that we file with the Commission. This
means that we can disclose important information to you by referring you to
other documents that we have filed separately with the Commission. The
information incorporated by reference is an important part of this prospectus,
and the information that we file with the Commission after the date hereof will
automatically update and may supersede this information. Until the termination
of the offering of the common stock by this prospectus, we incorporate by
reference the documents listed below and any future filings that we make with
the Commission under section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, except for portions of those documents that
are not deemed to be filed with the Commission or are not required to be filed
with the Commission by statute, designation or otherwise.
(a) Our Annual Report on Form 10-K for the year ended December 31,
1999; and
(b) The description of our common stock set forth in our
Registration Statement on Form 8-A, filed with the Commission
on December 12, 1995.
We will provide to you at no cost a copy of any and all of the
information incorporated be reference into the registration statement of which
this prospectus is a part. You may make a request for copies of this information
in writing or by telephone. Requests for copies should be directed to:
Elcom International, Inc.
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<PAGE> 19
Attention: Chief Financial Officer
10 Oceana Way
Norwood, Massachusetts 02062
Telephone: (781) 440-3333
18
<PAGE> 20
===============================================================================
ELCOM INTERNATIONAL, INC.
2,853,418 Shares
Common Stock
----------
PROSPECTUS
-----------
CRIPPLE CREEK SECURITIES, LLC
, 2000
===============================================================================
<PAGE> 21
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS.
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses payable by the
Company in connection with the sale and distribution of the Common Stock
registered hereby:
<TABLE>
<S> <C>
SEC Registration Fee......................................................... $ 19,321
Accounting Fees (for the Company, underwriter and selling stockholder)....... $ 140,000
Fees and Expenses of Counsel (for the Company, underwriter
and selling stockholder).................................................... $ 200,000
Nasdaq Additional Listing Fee................................................ $ 17,500
Placement Fee ............................................................... $ 3,500,000*
Miscellaneous................................................................ $ 23,179
Total........................................................................ $ 3,900,000
</TABLE>
- ----------------
*The Company is required to pay a placement fee to its financial advisor in an
amount equal to the greater of $700,000 or 7% of the gross proceeds received by
the Company in connection with the equity line agreement. See "Selling
Stockholder." The estimate set forth assumes the sale of $50 million of Common
Stock, the maximum amount that may be sold under the equity line agreement.
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporate Law (the "Delaware GCL")
sets forth the conditions and limitations governing the indemnification of
officers, directors and other persons. Section 145 provides that a corporation
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or contemplated action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation or was serving at the request of the corporation in a similar
capacity with another corporation or other entity, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement incurred in
connection therewith if the person acted in good faith and in a manner that the
person reasonably believed to be in the best interests of the corporation. With
respect to a suit by or in the right of the corporation, indemnity may be
provided to the foregoing persons under Section 145 on a basis similar to that
set forth above, except that no indemnity may be provided in respect of any
claim, issue or matter as to which such person has been adjudged to be liable to
the corporation unless and to the extent that the Delaware Court of Chancery or
the court in which such action, suit or proceeding was brought determines that
despite the adjudication of liability, but in view of all the circumstances of
the case, such person is entitled to indemnity for such expenses as the court
deems proper. Moreover, Section 145 provides for mandatory indemnification of a
director, officer, employee or agent of the corporation to the extent that such
person has been successful in defense of any such action, suit or proceeding and
provides that a corporation may pay the expenses of an officer or director in
defending an action, suit or proceeding upon receipt of an undertaking to repay
such amounts if it is ultimately determined that such person is not entitled to
be indemnified. Section 145 establishes provisions for determining that a given
person is entitled to indemnification, and also provides that the
indemnification provided by or granted under Section 145 is not exclusive of any
rights to indemnity or advancement of expenses to which such person may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 102 (b) of the Delaware GCL permits corporations to eliminate
or limit the personal liability of a Director to the corporation or its
stockholders for monetary damages for breach of the Director's duty of care.
Accordingly, the Article SEVENTH of the Company's Second Restated Certificate of
Incorporation (the "Certificate") provides that a Director of the Company shall
not 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 corporation or its stockholders,
(ii) for acts or omissions not in good faith that involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware GCL or
(iv) for any transaction from which the Director derived an improper personal
benefit.
<PAGE> 22
Article EIGHTH of the Certificate provides in part that the Company
shall indemnify any Director or officer who was or is a party or is threatened
to be made a party to, or is involved in, any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, be reason of the fact that he or she is or was a director or
officer of the Company, or is or was serving at the request of the Company, as a
director or officer or certain other entities, against all expense, liability
and loss (including attorneys' fees, judgments, fines, excise taxes or penalties
and amounts paid or to be paid in settlement) actually or reasonably incurred or
suffered by such person in connection with such action, suit or proceeding.
The Company has also entered into indemnity agreements (the "Indemnity
Agreements") with its directors and executive officers that expand the
protection provided to the Company's directors and officers and are based upon
sections of the Delaware GCL and Article EIGHTH of the Certificate that
recognize the validity of additional indemnity rights granted by agreement. The
substantive content of the Indemnity Agreements and Article EIGHTH of the
Certificate is substantially the same, except that, pursuant to the Indemnity
Agreements, indemnity is expressly provided for settlements in derivative
actions and partial indemnification is permitted in the event that the director
or executive officer is not entitled to full indemnification.
Both the Delaware GCL and Article EIGHTH of the Certificate provide
that the Company may maintain insurance to cover losses incurred pursuant to
liability of Directors and officers of the Company. The Company has purchased a
Directors and Officers Liability Insurance Policy, which insures the directors
and officers against certain liabilities that might arise in connection with
their respective positions with the Company.
Item 16. EXHIBITS.
See the Exhibit Index at page E-1 of this Registration Statement.
Item 17. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during the 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 event
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 end 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;
PROVIDED, HOWEVER, that paragraphs (a)(i) and (a)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(b) 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.
<PAGE> 23
(c) 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.
(2) The undersigned Registrant hereby undertakes that for the purpose
of determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or 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.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted for Directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 3 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Norwood and the State of
Massachusetts, as of the 28th day of April, 2000.
ELCOM INTERNATIONAL, INC.
By: /s/ Robert J. Crowell
Robert J. Crowell
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities indicated on April 28, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Robert J. Crowell Chairman of the Board of Directors
- -------------------------------------------- and Chief Executive Officer
Robert J. Crowell (Principal Executive Officer)
/s/ Peter A. Rendall Chief Financial Officer
- -------------------------------------------- (Principal Financial and Accounting Officer)
Peter A. Rendall
* Director
- --------------------------------------------
Richard J. Harries, Jr.
* Director
- --------------------------------------------
John W. Oritz
* Director
- --------------------------------------------
William W. Smith
</TABLE>
*The undersigned, by signing his name hereto, does sign and execute this
Amendment No. 3 to the Registration Statement pursuant to the Powers of Attorney
executed by the above-named directors of the Company and which have been filed
with the Securities and Exchange Commission on behalf of such directors.
/s/ Robert J. Crowell
- ---------------------------------------
Robert J. Crowell, Attorney-in-Fact
<PAGE> 25
EXHIBITS
Exhibit No. Description
- -------------------------------------------------------------------------------
4.4 Specimen certificate of Registrant's Common Stock. (1)
- -------------------------------------------------------------------------------
5.1 Opinion of Calfee, Halter & Griswold LLP as to the validity
of the shares of Common Stock. (x)
- -------------------------------------------------------------------------------
10.7 Amended and Restated Structured Equity Line Flexible Financing
Agreement, dated April 7, 2000, between the Registrant and
Cripple Creek Securities, LLC. (x)
10.8 Amended and Restated Registration Rights Agreement, dated
April 7, 2000, between the Registrant and Cripple Creek
Securities, LLC. (x)
10.9 Form of Warrant and Minimum Commitment Warrant of the
Registrant issuable to Cripple Creek Securities, LLC. (x)
10.10 Warrant Agreement, dated as of December 30, 1999, between the
Company and Wit Capital Corporation. (x)
10.11 Amendment No. 1 to Amended and Restated Structured Equity Line
Flexible Financing Agreement, dated April 27, 2000.
10.42 Wit Capital Corporation Engagement Letter, dated July 8, 1999.
(2)
23.1 Consent of Calfee, Halter & Griswold LLP (included in Exhibit
5.1 of this Registration Statement).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of KPMG LLP.
24.1 Powers of attorney. (x)
- ------------------
(1) Previously filed as an exhibit to Registration Statement No. 33-98866
on Form S-1 and incorporated herein by reference.
(2) Previously filed as an exhibit to the Registrant's quarterly report on
Form 10-Q for the quarterly period ended September 30, 1999 and
incorporated herein by reference.
(x) Previously filed.
<PAGE> 1
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED STRUCTURED EQUITY LINE FLEXIBLE
FINANCING(SM) AGREEMENT
THIS AMENDMENT NO. 1 to the AMENDED AND RESTATED STRUCTURED EQUITY LINE
FLEXIBLE FINANCING(SM) AGREEMENT ("Amendment") is dated as of April 27, 2000
between Cripple Creek Securities, LLC, a limited liability company organized and
existing under the laws of the state of New York (the "Investor"), and Elcom
International, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Company"). Capitalized terms not defined herein shall
have the meanings assigned to them in that certain Amended and Restated
Structured Equity Line Flexible Financing(SM) Agreement dated as of April 7,
2000 (the "Agreement").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and the Investor entered into the Agreement,
pursuant to which the Company may issue to the Investor, and the Investor shall
purchase from the Company, from time to time as provided therein, shares of the
Company's common stock, par value $.01 per share, for a maximum aggregate
Purchase Price of $50,000,000; and
WHEREAS, the Company and the Investor desire to amend the Agreement to
reduce the minimum Floor Price from $8.00 per share to $4.00 per share.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
AGREEMENT
Section 1.1 The definition of the "Floor Price" contained in Section 1.1 of the
Agreement is hereby amended and restated in its entirety as follows:
""FLOOR PRICE" shall be $4.00, or the higher or lower dollar
amount designated after the date hereof by the Company in a Floor Price
Notice; PROVIDED THAT the Company shall not designate the Floor Price
at a dollar amount less than $4.00. In the event a Floor Price Notice
is not received with respect to a certain Investment Period, the Floor
Price set for the preceding Investment Period will continue to be the
Floor Price."
<PAGE> 2
ARTICLE II
MISCELLANEOUS
Section 2.1 NO THIRD PARTY BENEFICIARIES. This Amendment is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 2.2 GOVERNING LAW. This Amendment shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware without regard to such state's principles of conflict of laws.
Section 2.3 EXECUTION. This Amendment may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
Section 2.4 AGREEMENT Otherwise Unchanged. Except as amended hereby,
the Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to the Amended and Restated Structured Equity Line Flexible Financing(SM)
Agreement to be duly executed by their respective authorized officers as of the
date hereof.
CRIPPLE CREEK SECURITIES, LLC ELCOM INTERNATIONAL, INC.
By: /s/ Robert L. Chender By: /s/ Peter A. Rendall
--------------------------------- --------------------
Name: Robert L. Chender Name: Peter A. Rendall
Title: Principal Title: Chief Financial Officer
[Signature Page to Amendment No. 1 to the Amended and Restated
Structured Equity Line Flexible Financing Agreement]
<PAGE> 1
Exhibit 23.2
[ARTHUR ANDERSEN LOGO]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Elcom International, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated March 23, 1999
included in Elcom International, Inc.'s Form 10-K for the year ended December
31, 1999 and to all references to our Firm included in this registration
statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
April 27, 2000
<PAGE> 1
Exhibit 23.3
Consent of Independent Public Accountants
The Board of Directors
Elcom International, Inc.:
We consent to the use of our reports dated February 9, 2000 included in Elcom
International, Inc.'s December 31, 1999 Annual Report on Form 10-K which is
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the prospectus.
KPMG LLP
Boston, Massachusetts
April 27, 2000
