As filed with the Securities and Exchange
Commission on November 26, 1996 Registration No.
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM S-8
POST-EFFECTIVE
AMENDMENT NO. 1
REGISTRATION STATEMENT
Under The Securities
Act
of l933 SIMS
COMMUNICATIONS, INC.
(Exact name of issuer as specified in its
charter)
Delaware
65-
0287558
(State or other jurisdiction
(I.R.S.
Employer
of incorporation or organization
Identification
No.)
3333 S. Congress Avenue, Suite 401
Delray Beach, Florida
33445
(Address of Principal Executive
(Zip
Code)
Offices)
Stock Bonus Plan
(Full Title of
Plan)
James J. Caprio
3333 S. Congress
Avenue, Suite 401
Delray Beach, Florida
33445
(Name and address of agent for
service) (407) 265
3601
(Telephone number, including area code, of agent
for service)
Copies of all communications, including all
communications sent to agent for service to:
William T.
Hart, Esq.
Hart & Trinen
l624
Washington
Street
Denver, Colorado
80203 (303)
839
0061
Page one of pages contained in
the
sequential
numbering
system. The Exhibit Index may be
found at page .
CALCULATION OF
REGISTRATION FEE
Propose
d
Proposed Title of
maximum maximum
securities Amount offering
aggregate
Amount
of
to be to be price
offering
registration
registered registered (1) per share (2)
price
fee
Common Stock 1,500,000 $0.94
$1,410,000
$487
Issuable Pursuant Shares
to Stock Bonus Plan
(1) This Registration Statement also covers such additional
number of shares, presently undeterminable, as may
become issuable under the Plan in the event of stock
dividends, stock splits, recapitalizations or other
changes in the Common Stock.
(2) Pursuant to Rule 457(g), the proposed maximum offering
price per share and proposed maximum aggregate
offering price are based upon the average bid and
asked prices of the Registrant's Common Stock on
November 21, 1996.
SIMS COMMUNICATIONS, INC.
Cross Reference Sheet Required Pursuant to
Rule
404 PART I
INFORMATION REQUIRED IN PROSPECTUS
(NOTE: Pursuant to instructions to Form S-8,
the
Prospectus
described
below is not filed with this Registration Statement.)
Item
No. Form S-8 Caption
Caption
in
Prospectus
1. Plan Information
(a) General Plan Information ......... Stock
Option and
Bonus
Plans
(b) Securities to be Offered ......... Stock
Option and
Bonus
Plans
(c) Employees who may Participate in the Plan
......................
Stock
Option
and
Bonus
Plans
(d) Purchase of Securities Pursuant to the Plan
and Payment for
Securities Offered ............... Stock
Option
and
Bonus
Plans
(e) Resale Restrictions .............. Resale
of
Shares byAffiliates
(f) Tax Effects of Plan
Participation .................... Stock
Option
and
Bonus
Plans
(g) Investment of Funds .............. Not
Applicable.
(h) Withdrawal from the Plan;
Assignment of Interest ........... Other
Information
Regarding
the
Plans (i) Forfeitures and Penalties ........
Other
Information
Regarding
the
Plans
(j) Charges and Deductions and
Liens Therefore .................. Other
Information
Regarding
the
Plans
2. Registrant Information and Employee
Plan Annual Information ...............
Available
Information,
Docu-
ments
Incorpor
at ed by
Referenc
e
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 3 - Incorporation of Documents by Reference
The following documents filed by the Company with the
Securities and Exchange Commission are incorporated by
reference in
this Registration Statement: Annual Report on Form 10-KSB
for the year
ending June 30, 1996 and Quarterly Report on Form 10-QSB
for quarter ending September 30, 1996. All reports and
documents subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, prior to the
filing of a posteffective amendment to this
Registration Statement of which this Prospectus
is a part which indicates that all securities
offered hereby have been sold or which
deregisters all securities then remaining
unsold, shall be deemed to be incorporated by
reference in this Prospectus and to be a part
thereof from the date of filing of such reports
or documents. Item 4 - Description of Securities
Not required.
Item 5 - Interests of Named Experts and Counsel
Not Applicable.
Item 6 - Indemnification of Directors and
Officers The Bylaws of
the Company provide in
substance that the
Company shall indemnify any person who was or is
a party or is threatened to be made a party to
any threatened or completed action, suit or
proceeding, whether civil, criminal,
administrative, or investigative by reason of
the fact that such person is or was a director,
officer, employee, fiduciary or agent of the
Company, or is or was serving at the request of
the Company as a director, officer, employee,
fiduciary or agent of
another corporation, partnership, joint venture,
trust or other enterprise, against expenses
(including attorney's fees), judgements, fines
and amounts paid in settlement actually and
reasonably incurred by such person to the full
extent permitted by the laws of the state of
Colorado; and that expenses incurred in
defending any such civil or
criminal action, suit or proceeding may be paid
by the Company in advance of the final
disposition of such action, suit or proceeding
as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by
or on behalf of such director, officer or
employee to repay such amount to the Company
unless it shall ultimately be determined that
such person is entitled to be indemnified by the
Company as authorized in the Bylaws.
Item 7 - Exemption from Registration Claimed
In November 1996, and in accordance
with the Company's Stock Bonus Plan, the Company
issued shares of its Common Stock to the
following persons in consideration of services
rendered to the Company.
Name of Shareholder
Shares
Robert Pittenger
10,000
Henry A. McLarty
50,000
William R. Smith
150,000
Kenneth Zubay
50,000
Robert K. Stevens
50,000
Jeffrey S. Leiner
15,000
Fred Sharp
25,000
300,000
In issuing the shares to the persons listed above the Company
relied upon the exemption provided by Section 4(2) of the
Securities Act of 1933 as such shares were issued in a transaction
not involving any public offering. All of the persons listed
above, at the time of the issuance of the shares, were Company
officers, directors, employees or consultants and were fully
informed as to the Company's business and affairs. The Company did
not pay any commission to any person in connection with the
issuance of these shares.
Item 8 - Exhibits
4 - Instruments Defining Rights of
Security Holders
(a) - Common Stock Incorporated by reference to
Exhibit 4(a) of the
Company's
Registration Statement on
Form
SB2, File No. 33 70546-A
(b) - Stock Bonus Plan (as amended)
5 - Opinion Regarding Legality of
Securities to be Offered
l5 - Letter Regarding Unaudited
Interim Financial Information
None
24 - Consent of Independent Public
Accountants and Attorneys
25 - Power of Attorney Included in the
signature
page
of this Registration
Statement
28 - Information from Reports None
furnished to State Insurance
Regulatory Authorities
99 - Additional Exhibits
(Re-Offer Prospectus)
Item 9 - Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which
offers or sales are being made, a post-
effective amendment to this registration
statement:
(i) to include any prospectus required
by
Section l0(a)(3) of the Securities Act of
l933; (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; and
(iii) to include any material information
with respect to the plan of distribution not
previously disclosed in the registration
statement or any material change in such
information in the registration statement;
Provided, however, that paragraphs
(a)(l)(i) and (a)(l)(ii) will not apply if 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 l3 or Section
l5(d) of the Securities Act of l934
(2) That, for the purpose of determining any
liability under the Securities Act of l933, each such post
effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a
post effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes
that, for purposes of determining any liability under the
Securities Act of l933, each filing of the registrant's
Annual Report pursuant to
Section l3(a) or Section l5(d) of the Securities Exchange
Act of l934 (and, where applicable, each filing of any
employee
benefit plan's annual report pursuant to Section l5(d) of
the Securities Exchange Act of l934) that is incorporated by
reference in the registration statement shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
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.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the
undersigned constitutes and appoints Melvin Leiner and James
Caprio, and each of them, his true and lawful attorneys-in
fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments
(including posteffective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the
Securities and Exchange Commission granting unto said
attorneys-in fact and agents full power and authority to do
and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or
their substitutes or substitute may lawfully do or cause to
be done by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act
of l933, the Registrant certifies that it has reasonable
grounds to believe that it meets all of the requirements for
filing on Form S8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Delray Beach,
State of Florida, on November 21, 1996.
SIMS COMMUNICATIONS,
INC. By: /s/ Melvin
Leiner
Melvin Leiner, President
By: /s/ James Caprio
James Caprio,
Principal
Financial
Officer
Pursuant to the requirements of the Securities Act
of l933, this Registration Statement has been signed by the
following persons in the capacities and on the dates
indicated.
Signature Title
Date
/s/ Melvin Leiner Director
November
21,
1996
Melvin Leiner
/s/ James J. Caprio Director
November
21,
1996
James J. Caprio
/s/ Donald M. Marks Director
November
21,
1996
Donald M. Marks
/s/ Darren Marks Director
November
21,
1996
Darren Marks
2349D
SIMS COMMUNICATIONS,
INC. STOCK BONUS
PLAN
l. Purpose. The purpose of this Plan is to advance the
interests of SIMS Communications, Inc. (the "Company") and
its shareholders, by encouraging and enabling selected
officers, directors, consultants and key employees upon whose
judgment, initiative and effort the Company is largely
dependent for the successful conduct of its business, to
acquire and retain a proprietary interest in the Company by
ownership of its stock, to keep personnel of experience and
ability in the employ of the Company and to compensate them
for their contributions to the growth and profits of the
Company and thereby induce them to continue to make such
contributions in the future.
2. Definitions.
A. "Board" shall mean the board of directors
of the Company.
B. "Committee" means the directors duly
appointed to administer the Plan.
C. "Plan" shall mean this Stock Bonus Plan.
D. "Bonus Share" shall mean the shares of
common stock of the Company reserved pursuant to Section 4
hereof and any such shares issued to a Recipient pursuant to
this Plan.
E. "Recipient" shall mean any individual
rendering services for the Company to whom shares are granted
pursuant to this Plan.
3. Administration of Plan. The Plan shall be
administered by a committee of two or more directors
appointed by the Board (the "Committee"). The Committee shall
report all action taken by it to the Board. The Committee
shall have full
and final authority in its discretion, subject to the
provisions of the Plan, to determine the individuals to whom
and the time or times at which Bonus Shares shall be granted
and the number of Bonus Shares; to construe and interpret the
Plan; and to make all other determinations and take all other
actions deemed necessary or advisable for the proper
administration of the Plan. All such actions and
determinations shall be conclusively binding for all purposes
and upon all persons.
4. Bonus Share Reserve. There shall be
established
a
Bonus Share Reserve to which shall be credited 3,000,000
shares of the Company's common stock. In the event that the
shares of common stock of the Company should, as a result of
a stock split or stock dividend or combination of shares or
any other change, or exchange for other securities by
reclassification, reorganization, merger, consolidation,
recapitalization or otherwise, be increased or decreased or
changed into or exchanged for, a different number or kind of
shares of stock or other securities of the Company or of
another corporation, the number of shares then remaining in
the Bonus Share Reserve shall be appropriately adjusted to
reflect such action. Upon the grant of shares hereunder,
this reserve shall be reduced by the number of shares so
granted. Distributions
of Bonus Shares may, as the Committee shall in its sole
discretion determine, be made from authorized but unissued
shares or from treasury shares. All authorized and unissued
shares issued as Bonus Shares in accordance with the Plan
shall be fully paid and nonassessable and free from
preemptive rights.
5. Eligibility, and Granting and Vesting of Bonus Shares.
Bonus Shares may be granted under the Plan to the Company's
employees, directors and officers, and consultants or
advisors to the Company, provided however that bona fide
services shall be rendered by such consultants or advisors
and such services must not be in connection with the offer or
sale of securities in a capitalraising transaction.
The Committee, in its sole discretion, is
empowered to grant to an eligible Participant a number of
Bonus Shares as it shall determine from time to time. Each
grant of these Bonus Shares shall become vested according to
a schedule to be established by the Committee directors at
the time of the grant. For purposes of this plan, vesting
shall mean the period during which the recipient must remain
an employee or provide services for the Company. At such time
as the employment of the Recipient ceases, any shares not
fully vested shall be forfeited by the Recipient and shall be
returned to the Bonus Share Reserve. The Committee, in its
sole discretion, may also impose restrictions on the future
transferability of the bonus shares, which restrictions shall
be set forth on the notification to the Recipient of the
grant.
The aggregate number of Bonus Shares which may
be granted pursuant to this Plan shall not exceed the amount
available therefore in the Bonus Share Reserve.
6. Form of Grants. Each grant shall specify the
number
of Bonus Shares subject thereto, subject to the provisions of
Section 5 hereof.
At the time of making any grant, the Committee
shall advise the Recipient by delivery of written notice, in
the form of Exhibit A hereto annexed.
7. Recipients' Representations.
A. The Committee may require that, in
acquiring
any Bonus Shares, the Recipient agree with, and represent to,
the Company that the Recipeint is acquiring such Bonus Shares
for the purpose of investment and with no present intention
to transfer, sell or otherwise dispose of shares except such
distribution by a legal representative as shall be required
by will or the laws of any jurisdiction in winding-up the
estate of any Recipient. Such shares shall be transferrable
thereafter only if the proposed transfer shall be permissable
pursuant to the Plan and if, in the opinion of counsel (who
shall be satisfactory to the Committee), such transfer shall
at such time be in compliance with applicable securities
laws.
B. To effectuate Paragraph A above, the
Recipient shall deliver to the Committee, in duplicate, an
agreement in writing, signed by the Recipient, in form and
substance as set forth in Exhibit B hereto annexed, and the
Committee shall forthwith acknowledge its receipt thereof.
8. Restrictions Upon Issuance.
A. Bonus Shares shall forthwith after the
making of any representations required by Section 6 hereof,
or if no representations are required then within thirty (30)
days of the date of grant, be duly issued and transferred and
a certificate or certificates for such shares shall be issued
in the Recipient's name. The Recipient shall thereupon be a
shareholder with respect
to all the shares represented by such certificate or
certificates, shall have all the rights of a shareholder with
respect to all such shares, including the right to vote such
shares and to receive all dividends and other distributions
(subject to the provisions of Section 7(B) hereof) paid with
respect to such shares. Certificates of stock representing
Bonus Shares shall be imprinted with a legend to the effect
that the shares represented thereby are subject to the
provisions of this Agreement, and to the vesting and transfer
limitations established by the Committee, and each transfer
agent for the common stock shall be instructed to like effect
with respect of such shares.
B. In the event that, as the result of a
stock split or stock dividend or combination of shares or any
other change, or exchange for other securities, by
reclassification, reorganization, merger, consolidation,
recapitalization or otherwise, the Recipient shall, as owner
of the Bonus Shares subject to restrictions hereunder, be
entitled to new or additional or different shares of stock or
securities, the certificate or certificates for, or other
evidences of, such new or additional or different shares or
securities, together with a stock power or other instrument
of transfer appropriately endorsed, shall also be imprinted
with a legend as provided in Section 7(A), and all provisions
of the Plan relating to restrictions herein set forth shall
thereupon be applicable to such new or additional or
different shares or securities to the extent applicable to
the shares with respect to which they were distributed.
C. The grant of any Bonus Shares shall be
subject to the condition that if at any time the Company
shall determine in its discretion that the satisfaction of
withholding tax or other withholding liabilities, or that the
listing, registration, or qualification of any Bonus Shares
upon such exercise upon any securities exchange or under any
state or federal law, or that the consent or approval of any
regulatory body, is necessary or desirable as a condition of,
or in connection with, the issuance of any Bonus Shares, then
in any such event, such exercise shall not be effective
unless such withholding, listing, registration,
qualification,
consent, or approval shall have been effected or obtained
free of any conditions not acceptable to the Company.
D. Unless the Bonus Shares covered by the Plan have been
registered with the Securities and Exchange Commission
pursuant to Section 5 of the Securities Act of l933, each
Recipient shall, by accepting a Bonus Share, represent and
agree, for himself and his transferrees by will or the laws
of descent and distribution, that all Bonus Shares were
acquired for investment and not for resale or distribution.
Upon such exercise of any portion of an option, the person
entitled to exercise the same shall, upon request of the
Committee, furnish evidence satisfactory to the Committee
(including a written and signed representation) to the effect
that the shares of stock are being acquired in good faith for
investment and not for resale or distribution. Furthermore,
the Committee may, if it deems appropriate, affix a legend to
certificates representing Bonus Shares indicating that such
Bonus Shares have not been registered with the Securities and
Exchange Commission and may so notify the Company's transfer
agent. Such shares may be disposed of by a Recipient in the
following manner only: (l) pursuant to an effective
registration statement covering such resale or reoffer, (2)
pursuant to an applicable exemption from registration as
indicated in a written opinion of counsel acceptable to the
Company, or (3) in a transaction that meets all the
requirements of Rule l44 of the Securities and Exchange
Commission. If Bonus Shares covered by the Plan have been
registered with the Securities and Exchange Commission, no
such restrictions on resale shall apply, except in the case
of Recipients who are directors, officers, or principal
shareholders of the Company. Such persons may dispose of
shares only by one of the three aforesaid methods.
9. Limitations. Neither the action of the Company in
establishing the Plan, nor any action taken by it nor by the
Committee under the Plan, nor any provision of the Plan,
shall be construed as giving to any person the right to be
retained in the employ of the Company.
Every right of action by or on behalf of the
Company or by any shareholder against any past, present or
future member of the Board, or any officer or employee of the
Company arising out of or in connection with this Plan shall,
irrespective of the place where action may be brought and
irrespective of the place of residence of any such director,
officer or employee cease and be barred by the expiration of
one year from whichever is the later of (a) the date of the
act or omission in respect of which such right of action
arises; or (b) the first date upon which there has been made
generally available to shareholders an annual report of the
Company or any proxy statement for the annual meeting of
shareholders following the issuance of such annual report,
which annual report and proxy statment alone or together set
forth, for the related period, the number of shares issued
pursuant to this Plan; and any and all right of action by any
employee (past, present or future) against the Company
arising out of or in connection with this Plan shall,
irrespective of the place where action may be brought, cease
and be barred by the expiration of one year from the date of
the act or omission in respect of which such right of action
arises.
l0. Amendment, Suspension or Termination of the Plan.
The Board of Directors may alter, suspend, or discontinue the
Plan, but may not, without the approval of a majority of
those holders of the Company's Common Stock voting in person
or by proxy at any meeting of the Company's shareholders,
make any alteration or amendment thereof which operates to
(a) abolish the Committee, change the qualification of its
members, or withdraw the administration of the Plan from its
supervision,
(b) make any material change in the class of eligible
employees as defined in paragraph 5, (c) increase the total
number of shares reserved for purposes of this Plan except as
provided in paragraph 4, (d) extend the term of the Plan or,
(e) materially increase the benefits accruing to persons
participating under this Plan.
Unless the Plan shall theretofore have been
terminated by the Board, the Plan shall terminate ten years
after the effective date of the Plan. No Bonus Share may be
granted during any suspension or after the termination of the
Plan. No amendment, suspension, or termination of the Plan
shall, without a recipient's consent, alter or impair any of
the rights or obligations under any Bonus Share theretofore
granted to such recipient under the Plan.
ll. Governing Law. The Plan shall be governed by
the laws of the State of Delaware.
l2. Expenses of Administration. All costs and
expenses incurred in the operation and adminstration of this
Plan shall be borne by the Company.
SIMS COMMUNICATIONS, INC.
By
2352D/ks
- EXHIBIT A -
SIMS
COMMUNICATIONS,
INC. STOCK
BONUS
PLAN
TO: Recipient:
PLEASE BE ADVISED that SIMS Communications,
Inc. has on the date hereof granted to the Recipient the
number of Bonus Shares as set forth under and pursuant to the
Stock Bonus Plan. Before these shares are to be issued, the
Recipient must deliver to the Committee that administers the
Stock Bonus Plan an agreement in duplicate, in the form as
Exhibit B hereto. The Bonus
Shares are issued subject to the following vesting and
transfer limitations. Vesting:
Number of Shares Date of Vesting
Transfer Limitations:
SIMS COMMUNICATIONS,
INC.
By
Date
- EXHIBIT B
- -
SIMS Communications, Inc.
3333 S. Congress Avenue
Suite 401
Delray Beach, Florida 33445
Gentlemen:
I represent and agree that said Bonus Shares are
being acquired by me for investment and that I have no
present intention to transfer, sell or otherwise dispose
of such
shares, except as permitted pursuant to the Plan and in
compliance with applicable securities laws, and agree further
that said shares are being acquired by me in accordance with
and subject to the terms, provisions and conditions of said
Plan, to all of which I hereby expressly assent. These
agreements shall bind and inure to the benefit of my heirs,
legal representatives, successors and assigns.
My address of record is:
and my social security number: .
Very truly yours,
Receipt of the above is hereby acknowledged.
SIMS COMMUNICATIONS,
INC.
By
Date its
November 22,
1996 SIMS Communications, Inc.
3333 S. Congress Ave.
Suite 40l
Delray Beach, FL 33445
This letter will constitute an opinion upon the
legality of the sale by SIMS Communications, Inc., a Delaware
corporation, of up to 1,500,000 shares of Common Stock, all
as referred to in the Registration Statement on Form S-8
filed by the Company with the Securities and Exchange
Commission. This letter will also constitute an opinion upon
the legality of the sale by certain Selling Shareholders of
the Company of up to 6,080,000 shares of Common Stock, as
referred to in such Registration Statement.
We have examined the Articles of Incorporation, the
Bylaws and the minutes of the Board of Directors of the
Company and the applicable laws of the State of Colorado, and
a copy of the Registration Statement. In our opinion, the
Company has duly authorized the issuance of the shares of
stock mentioned above and such shares when issued will be
legally issued, fully paid, and nonassessable. It is also
our opinion that the Company is author ized to issue the
1,500,000 shares mentioned above and, when issued in
accordance with the terms and conditions set out in the
Registration Statement, such shares of common stock will be
legally issued, fully paid and nonassessable.
Very truly yours,
HART & TRINEN
By /s/ William T. Hart
William T.
Hart
CONSENT OF ATTORNEYS
Reference is made to the Registration Statement of SIMS
Communications, Inc. on Form S-8 whereby the Company
proposes to sell 1,500,000
shares of the Company's Common Stock. Reference is also
made to Exhibit 5 included in the Registration Statement
relating to the validity of the securities pro- posed to be
issued and sold.
We hereby consent to the use of our opinion
concerning the validity of the securities proposed to be
issued and
sold. Very truly yours,
HART & TRINEN
By /s/ William T. Hart
William T.
Hart
Denver, Colorado
November 22, 1996
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this
Registration Statement of SIMS Communications, Inc. on
form S8 of our reports dated September 27, 1996 appearing
in the Annual Report on Form 10KSB of SIMS Communications,
Inc. for the year ended June 30, l996.
Ehrhardt Keefe Steiner & Hottman PC
November l5, l996
Denver, Colorado
SIMS COMMUNICATIONS,
INC. 6,080,000 Shares
Common
Stock
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS". THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus relates to 6,080,000 shares (the
"Shares") of common stock (the "Common Stock") of SIMS
Communications, Inc. (the "Company") which may be issued
pursuant to certain employee incentive plans adopted by the
Company. The employee incentive plans provide for the grant,
to selected employees of the Company and other persons, of
either stock bonuses or options to purchase shares of the
Company's Common Stock. This Prospectus also relates to
80,000 shares of the Company's Common Stock which may be
issued upon the exercise of options granted by the terms of
employment contracts between the Company and certain officers
of the Company. Persons who receive Shares pursuant to the
Plans (or the employment contract options) and who are
offering such
Shares to the public by means of this Prospectus are referred
to as the "Selling Shareholders".
The Company has an Incentive Stock Option Plan, a
Non Qualified Stock Option Plan and a Stock Bonus Plan. In
some cases the plans described above are collectively
referred to as the "Plans". The terms and conditions of any
stock bonus and the terms and conditions of any options,
including the price of the shares of
Common Stock issuable on the exercise of options, are
governed by the provisions of the respective Plans and the
stock bonus or stock option agreements between the Company
and the Plan participants.
The Selling Shareholders may offer the shares from
time to
time in negotiated transactions in the over-the-counter
market, at fixed prices which may be changed from time to
time, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at
negotiated prices. The Selling Shareholders may effect such
transactions by selling the Shares to or through securities
broker/dealers, and such broker/dealers may receive
compensation in the form of discounts, concessions, or
commissions from the Selling Shareholders and/or the
purchasers of the Shares for whom such broker/dealers may act
as agent or to whom they sell as principal, or both (which
compensation as to a particular broker/dealer might be in
excess of customary commissions). See "Selling Shareholders"
and "Plan of Distribution".
The date of this Prospectus is November 25, 1996.
None of the proceeds from the sale of the Shares by
the Selling Shareholders will be received by the Company.
The Company has agreed to bear all expenses (other than
underwriting discounts, selling commissions and fees and
expenses of counsel and other advisers to the Selling
Shareholders). The Company has agreed to indemnify the
Selling Shareholders against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the
"Securities Act").
AVAILABLE INFORMATION
The Company is subject to the information requirements
of the Securities Exchange Act of 1934 (the "Exchange Act")
and in accordance therewith, files reports and other
information with the Securities and Exchange Commission (the
"Commission"). Proxy statements, reports and other
information concerning the Company can be inspected and
copied at Room 1024 of the Commission's office at 450 Fifth
Street, N.W., Washington, D.C. 20549, and the Commission's
Regional Offices in New York (26 Federal Plaza, New York, New
York 10278), and Chicago (Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois
606612511), and copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
This Prospectus does not contain all information set forth in
the Registration Statement of which this Prospectus forms a
part and exhibits thereto which the Company has filed with
the Commission under the Securities Act and to which
reference is hereby made.
DOCUMENTS INCORPORATED BY REFERENCE
The Company will provide, without charge, to each
person to whom a copy of this Prospectus is delivered,
including any beneficial owner, upon the written or oral
request of such person, a copy of any or all of the
documents incorporated by reference herein (other than
exhibits to such documents, unless such exhibits are
specifically incorporated by reference into this
Prospectus). Requests should be directed to:
SIMS Communications,
Inc. 3333 S. Congress
Ave.,
Suite 40l Delray Beach,
FL
33445
(407) 265-3701
Attention: Secretary
The following documents filed with the Commission by
the Company (Commission File No. 0-25474) are hereby
incorporated by reference into this Prospectus:
(1) The Company's Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1996; and
(2) The Company's Quarterly Reports on Form 10-QSB
for the fiscal quarter ended September 30, 1996.
All documents filed with the Commission by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date
of this Prospectus and prior to the termination of the
offering registered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from
the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be
modified or superseded for the purposes of this Prospectus to
the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute
a part of this Prospectus.
TABLE OF CONTENTS
PAGE THE COMPANY
....................................................... 5 RISK
FACTORS ......................................................
8 DILUTION
..........................................................
14 USE OF PROCEEDS
................................................... 14 SELLING
SHAREHOLDERS .............................................. 15
PLAN OF DISTRIBUTION
.............................................. 17 DESCRIPTION
OF COMMON STOCK
.......................................
18
GENERAL ......................................................
.. . .. 18 THE COMPANY
SIMS Communications, Inc. (the "Company") has
designed and markets for its own account and franchisees a
computerized system which provides unattended daily rental of
cellular telephones through a stand alone dispensing station.
The Company's system, known as an Automated Communications
Distribution Center ("ACDC"), was designed to serve the needs
of traveling sales people,
convention and seminar participants, and anyone else who is
temporarily away from normal communications facilities and
needs to maintain contact with an office or home while
traveling.
The Company's first ACDC units became operational in
September l993. Prior to 1996 the Company operated ACDC units
for its own account and also sold franchises which provided
third parties the right to operate ACDC units at various
franchised locations. In August 1995, the Company had 50 ACDC
units in operation and the Company's franchisees (13 in total)
had 28 ACDC's in operation. These ACDC units were located in
30 states and in Puerto Rico.
Since installing its first ACDC unit, the Company
found that certain
locations generate more rentals than others. Accordingly, the
Company and the Company's franchisees moved a number of ACDC
units from their original locations to locations which are
capable of generating greater revenues. At the present time,
ACDC units located at car rental agencies
provide the highest revenues.
During 1995 the Company discontinued the sale of new
franchises. The Company's decision in this regard was based in
part on the Company's desire to retain more ACDC units for its
own use and to decrease the expenses associated with selling
franchises and servicing franchisees.
At September 30, 1996, the Company had 28 ACDC units in
operation and the Company's franchisees (6 in total) had 7
ACDC's in operation. These ACDC units were located in 10
states and Puerto Rico. Most of these ACDC units (27) were
located at car rental agencies.
The Company has introduced four new programs to diversify
and broaden the Company's product and service mix: cellular
telephone activations, sale of pre-paid calling cards, sale of
long distance telephone service and rental of cellular
telephones using overnight courier service.
The cellular telephone activation program is offered to
members of the Florida, Louisiana and Mississippi AAA Clubs.
This program allows a AAA member to receive a free cellular
telephone if the member agrees to a one year service contract
with a cellular telephone carrier. The Company is paid a
commission for each service contract signed by a AAA member.
During the year ending June 30, 1996 the Company activated
over 2,600 cellular phones. This program generated about 40%
of the Company's fourth quarter revenue and operated at a
gross profit of $150,000 for the quarter. The AAA Clubs in
Florida, Louisiana and Mississippi Clubs have approximately
1.2 million members. The Company anticipates broadening this
service to other AAA clubs.
The Company also offers AAA members pre-paid long
distance calling cards and long distance telephone service.
The pre-paid long distance calling
card program is also offered to Alamo Rent-a-Car customers.
Calling cards are sold to rental car customers over the
counter and through an automated calling card dispensing
machine. The Company receives a commission for each pre-paid
calling card sold.
With respect to long distance telephone service, the
Company acts as an agent for a long distance telephone
company. For each AAA member who switches their long distance
service to this telephone company, the Company receives a
commission based upon the member's long distance usage.
The overnight cellular telephone rental program
provides for the delivery of cellular telephones anywhere in
the United States through Federal Express overnight service.
Customers include Florida, Louisiana and Mississippi AAA
members, employees of Nike Corporation and ESPN, and Alamo
RentaCar customers. A person wanting to rent a cellular
telephone through this service calls the Company's toll free
telephone number to arrange for the short-term rental of a
cellular telephone. The Company ships the cellular telephone
via Federal Express to the address designated by the customer,
together with a Federal Express box addressed to the Company.
When the customer no longer needs the cellular telephone, the
customer returns the telephone to the Company by means of
Federal Express. This program, which started in January 1996,
generated approximately $51,000 in revenue during the year
ending June 30, 1996. The Company believes that revenues from
this program will increase as more potential customers become
aware of this service.
The Company has also modified its method of renting
cellular telephones at the Alamo Car Rental locations at the
Orlando, Miami and Ft. Lauderdale airports. Due to the demand
for cellular telephone rentals at these locations, a Company
employee staffs a counter adjacent to the Alamo Rental Car
counters. Rather than dispensing cellular telephones through
a Company ACDC unit, Company employees, who staff the counters
24 hours a day, handle all cellular telephone rentals for
persons wanting to rent cellular telephones at these
locations. Rentals from these three Alamo Rental Car locations
accounted for approximately 14% of the Company's gross
revenues during the three months ending March 31, 1996.
As an alternative to selling additional franchises
the Company plans to enter into joint venture or master
licensing arrangements with third parties. It is expected
that these arrangements will normally involve the
single sale of 10 or more ACDC units for (i) a large location
(such as
an airport), (ii) part or all of a foreign country, or (iii)
a specific region in the United States. As of September 30,
1996 the Company has sold thirty ACDC units to third parties
under a master licensing arrangement.
The Company uses the term "INSTA FONE" to identify its
ACDC machines and services. The Company's "ACDC" trademark
and "INSTA FONE" service mark are registered with the United
States Patent and Trademark Office.
The Company was incorporated in Delaware on August
15, 1991. The Company's executive offices are located at 3333
S. Congress Avenue, Suite 401, Delray Beach, Florida 33445.
The Company's telephone number is (407) 2653601.
In June 1995 the shareholders of the Company
approved a 2 for 1 forward split of the Company's Common
Stock. In February 1996 the shareholders of the Company
approved a 1 for 10 reverse split of the Company's Common
Stock. Accordingly, all historical share data in this
Prospectus has been adjusted
to reflect this stock split.
As of September 30, 1996 the Company had 5,229,907
shares of Common Stock issued and outstanding.
Related Party Transactions
In December 1995 the Company issued 43,778 shares of
its Common Stock to Melvin Leiner, Donald Marks, James Caprio
and Darren Marks (175,112 shares in total) as repayment of
loans, each in the amount of $90,500, made by such persons to
the Company.
In March 1996 the Company issued 25,000 shares of its
Series B Preferred Stock to Melvin Leiner, Donald Marks,
James Caprio and Darren Marks (100,000 shares in total) as
repayment of loans, each in the amount of $25,000, made by
such persons to the Company. Each
share of Series B Preferred Stock is entitled to a dividend
at the rate of $0.15 per share when, as and if declared by
the Board of Directors out of funds legally available for the
payment of dividends. Dividends not declared by the Board of
Directors do not cumulate. Upon any liquidation or
dissolution of the Company, each outstanding share of Series
B Preferred Stock is entitled to distribution of $1.00 per
share prior to any distribution to the holders
of the Company's Common Stock. Each share of Series B
Preferred Stock is entitled to one vote per share and is
convertible into one share of the Company's Common Stock.
Effective May 1, 1996, the Company's Board of
Directors amended the Company's Incentive Stock Option Plan,
Non-Qualified Stock Option Plan and Stock Bonus Plan such
that each Plan now authorizes the issuance of 1,500,000
shares of Common Stock pursuant to options or stock bonuses
granted pursuant to these Plans. In July 1996 the Company's
Board of Directors further amended the Company's Stock Bonus
Plan such that the Stock Bonus Plan now authorizes the
issuance of up to 3,000,000 shares of Common Stock pursuant
to the provisions of the Plan.
In June 1996 the Company issued shares of its Common
Stock to the following officers and directors in repayment of
loans made by such persons to the Company: Melvin Leiner:
103,686 shares in repayment of loan of $51,843; Donald Marks:
114,350 shares in repayment of loan of $57,175; James Caprio:
114,464 shares in repayment of loan of $57,232; and Darren
Marks: 87,440 shares in repayment of loan of $43,720.
In May and November 1996 the Company, in accordance
with the terms of its Stock Bonus Plan, issued 1,800,000
shares of Common Stock to certain Company officers, employees
and consultants. The shares were issued in consideration for
past services rendered to the Company. The following officers
received shares of the Company's Common Stock in this
transaction and such shares are being offered to the public
by means of this Prospectus. See "Selling Shareholders".
Shares Issued as Stock Bonus
Name May 1996 November
1996
Mel Leiner 250,000 --
James J. Caprio 250,000
- --
Darren Marks 250,000
- --
Don Marks 250,000
- --
Bruce Schames 75,000
- --
Other Employees and
Consultants as a
Group 300,000
300,000
In 1996 InstaCall Beheer B.V. and Robert Herbold (the
"Plaintiffs") filed a lawsuit against the Company alleging
that the Company breached its agreement to provide cellular
telephones for use by the Plaintiffs in Europe, and as a
result, the Plaintiffs suffered damages of approximately
$3,800,000. The Company has denied the allegations of the
Plaintiffs.
RISK FACTORS
The securities offered hereby represent a speculative
investment and involve a high degree of risk. Therefore,
prospective investors should read this Prospectus and
carefully consider, among others, the following risk factors
in addition to the other
information set forth in this Prospectus prior to making an
investment.
Offering Proceeds. This Offering is being made by
certain Selling Shareholders. The Company will not receive
any proceeds from the sale of the shares by the Selling
Shareholders.
History of Losses. The Company has had a limited
operating history and has incurred losses since it was formed
in 1991. From the date of its formation through September
30,
1996, the Company incurred net losses of approximately
$(10,940,000). During the three months ended September 30,
1996 the Company had losses of $(417,000). The Company
expects to continue to incur operating losses until such
time, if ever, as it generates substantial revenues directly
or from franchisees and earns net income. There can be no
assurance that the Company will be able to generate
sufficient revenues and become profitable in the future.
The Company is vulnerable to a variety of business risks
generally associated with new companies, any one of which
could have a material adverse effect on its business,
financial condition and results of operations. Potential
investors should be aware of the difficulties encountered by
a new enterprise and the other risk factors set forth in this
section. The Company's future operating results will also
depend on a number of factors, including the demand for its
products, the level of competition, government regulation,
general economic conditions and other factors beyond the
control of the Company. Accordingly, there
can be no assurance that the Company will be able to earn a
profit from its operations.
Need for Additional Capital. The Company's continued
operations will depend upon the availability of additional
funding. Any such delays may have an adverse effect on the
Company, causing the Company to curtail its operations and
planned expansion. There can be no assurance that the
Company will be able to obtain additional funding, if needed,
or if available on terms satisfactory to the Company.
Expansion of Business. The Company has recently
introduced several new programs in an effort to diversify and
broaden the Company's
mix of products and services. However, there can be no
assurance that the Company will be able to continue to expand
its operations successfully and ultimately on a profitable
basis. The successful expansion of the Company's business
depends on, among other things, the continued growth of the
cellular telephone industry, the Company's ability to compete
with much larger
companies, its ability to successfully market its product,
retain qualified sales and other personnel, successfully
manage growth (including monitoring an expanded level of
operations and controlling costs) and the availability of
additional
financing.
The Company's operations have placed, and are expected
to continue to place, significant strain on the Company's
management, staff, working capital, and financial control
systems. The failure to maintain or upgrade financial
control systems, to recruit additional staff or to respond
effectively to difficulties encountered during expansion
could have a material adverse effect on the Company's
business, financial condition and results of operations.
There can be no assurance that the Company's systems and
controls or staff will be adequate.
Competition. The Company competes with numerous
companies involved in the rental of cellular telephones.
Many of these companies have significantly greater financial,
distribution, advertising, marketing, management and
personnel resources than the Company. The Company's future
success will depend to a significant degree upon its ability
to remain competitive in the areas of price, convenience,
equipment quality, and marketing, while operating within the
constraints imposed by its financial resources. No assurance
can be given that other companies with substantially greater
resources will not enter this market.
During the past several years, the number of persons
who either own or lease cellular telephones on a long-term
basis has increased significantly and, in some markets, there
has been a general decline in the cost of using cellular
telephones. For persons owning or leasing a cellular
telephone on a long-term basis, the cost of operating a
cellular telephone includes the cost of the cellular
telephone, batteries, charging units and other accessories
(in the case of direct ownership), monthly lease payments (in
the case of leased equipment), fixed monthly charges, airtime
charges for calls made or received within the area serviced
by the person's cellular carrier, and higher "roaming"
charges for calls made or received outside the area serviced
by the person's cellular carrier. Although the cost of
operating a cellular telephone will vary depending upon
various factors, certain persons who own or lease cellular
telephones on a long-term basis may find that the cost of
using their cellular telephone, when traveling, is less
expensive than renting a cellular telephone from the Company,
and may therefore elect to use their own cellular telephone
instead of renting a cellular telephone from the Company.
Risks Involving Franchisees. The Company may be exposed
to potential significant liability claims resulting from its
franchisees. Other aspects of the franchisor/franchisee
relationship, such as termination and nonrenewal, are not
expected to have a material impact on the Company's
operations. The Company's franchise agreement requires the
franchisee to maintain at least $1,000,000 of general
liability insurance and such other insurance as is reasonably
requested by the Company, with the Company listed as an
additional named insured on each policy, which it believes is
adequate coverage (until the Company is able to expand its
operations at which point the Company will use its best
efforts to obtain coverage for claims that may be made
against it based upon the acts of its franchisees and will
also use its best efforts to obtain an umbrella liability
insurance policy, although there can be no assurance that it
will be able to obtain such additional insurance coverage).
Even if the Company is able to obtain such coverage, there
can be no assurance that the Company will not need to
increase such coverage or that the present or future levels
of coverage will be available at a reasonable cost. A
partially insured or an entirely uninsured claim
against the Company could have a material adverse effect on
the Company.
Patent, Trade and Service Marks. The Company has been
granted a design patent on its ACDC system which will expire
in 2010. Since the design patent covers only the external
design of the ACDC, most of the other features of the ACDC
are not protected by the patent. The Company has also filed
two patent applications relating to other aspects of the
ACDC. In addition, the Company has a trademark and a service
mark for the name ACDC registered with the U.S. Patent and
Trademark Office.
There is no assurance that the Company's pending patent
applications will result in the issuance of any patents.
Furthermore, there is no assurance as to the breadth and
degree of protection any issued patents, trademarks or
service marks might afford the Company. Disputes may arise
between the Company and others as to the scope and validity
of the Company's patent, trademark and service mark or the
patents and trade/service marks held by others. Any defense
of the Company's patents, trademark or service mark could
prove costly and time consuming and there can be no assurance
that the Company will be in a position, or will deem it
advisable, to carry on such a defense. Also, to the extent
the Company relies upon unpatented proprietary technology,
there is no assurance that others may not acquire or
independently develop the same or similar technology.
Dependence on Third Party Suppliers. The Company relies
on software provided by Telemac Cellular for certain features
of its real time billing system. At present, the Company
does not have any alternative sources for the software used
with the ACDC units. Since the Company does not own any
proprietary software, if
the software license between the Company and Telemac was
terminated, the Company, until replacement software could be
obtained, would be unable to provide customers with an
itemized billing at the time the cellular telephone was
returned. Any termination of the agreement between the
Company and Telemac (prior to the Company obtaining an
alternative billing system) may have an adverse effect on the
Company.
Agreements with Credit Card Companies. The Company's
ACDC units are capable of operating on an automatic basis as
the result of a nationwide credit card system. By means of
telephone lines and computers, this system links credit card
companies, issuing banks and credit card processing firms
throughout the United States and allows the Company's
customers to obtain
cellular telephones by merely inserting a credit card into
the appropriate space in the ACDC unit. The Company presently
has agreements with credit card processors which authorize
the use of various major credit cards in the Company's ACDC
units. In order for the Company to continue to have the
services of these credit card processors available, the
Company is required to meet certain conditions as provided in
the agreements between the credit card processors and the
Company. In the event the Company fails to meet these
conditions, the credit card processors may automatically
refuse to accept credit cards inserted into the ACDC units by
the Company's customers, in which case the Company would be
unable to rent cellular telephones through certain of its
ACDC units.
Dependence on Personnel. The success of the Company is
dependent upon the personal efforts of its executive
officers. The loss of the services of any of the Company's
executive officers could have a material adverse effect on
the Company. The Company believes that its future success
will also
depend upon its ability to attract and retain qualified
marketing and programming personnel. There can be no
assurance that the Company will be able to hire and retain
such necessary personnel in the future.
Market for Company's Securities; Volatility of
Securities Prices. Prices for the Company's Common Stock have
been highly volatile and will be influenced by a number of
factors, including the depth and liquidity of the market for
the Company's Common Stock, the Company's financial results,
investor perceptions of the Company, various factors
affecting the cellular telephone industry, and general
economic and other conditions. Additionally, in the last
several years, the stock market has experienced a high level
of price and volume volatility and market prices of many
companies, particularly small and emerging growth companies,
the common stock of which trade in the over-the-counter
market, have experienced wide price fluctuations which have
not necessarily been related to the operating performance of
such companies.
No Assurance of Continued NASDAQ Quotation. Although
the Company's Common Stock and Warrants are listed on the
NASDAQ SmallCap Market, the National Association of
Securities Dealers, Inc. ("NASD") requires, for continued
inclusion on the NASDAQ SmallCap Market, that the Company
must maintain $2,000,000 in assets, $200,000 market value of
the public float, $1,000,000 in net worth and that the bid
price of the Company's Common Stock, must be at least $1.00,
or in the alternative, that the Company have (i) a net worth
of at least $2,000,000 and (ii) that the value of the public
float be at least $1,000,000. As the Company does not have
any control over the market price of its Common Stock, the
Company cannot assure it will be able to comply with the
requirements concerning the market value of the Company's
publicly traded securities. If the Company's securities were
delisted from the NASDAQ SmallCap Market, the Company's
securities would trade in the unorganized interdealer
overthecounter market through the OTC Bulletin Board which
provides significantly less liquidity than the NASDAQ
SmallCap Market. Securities which are not traded on the
NASDAQ SmallCap Market may be more difficult to sell and may
be subject to more price volatility than NASDAQ listed
securities.
If the Company's Common Stock and/or Warrants were
delisted from NASDAQ, trades in such securities may then be
subject to Rule 15g9 under the Securities Exchange Act of
1934, which rule imposes certain requirements on
broker/dealers who sell securities subject to the rule to
persons other than established customers and accredited
investors. For transactions covered by the rule,
brokers/dealers must make a special
suitability determination for purchasers of the securities and
receive the purchaser's written agreement to the transaction
prior to sale. Rule 15g9, if applicable to sales of the
Company's securities, may affect the ability of broker/dealers
to sell the Company's securities and may also affect the
ability of investors in this offering to sell such securities
in the secondary market and otherwise affect the trading
market in the Company's securities.
The Securities and Exchange Commission has rules that
regulate broker/dealer practices in connection with
transactions in "penny stocks". Penny stocks generally are
equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges
or quoted on the NASDAQ system, provided that current price
and volume information with respect to transactions in that
security is provided by the exchange or system). The penny
stock rules, which generally became effective January 1, 1993,
require a broker/dealer, prior to a transaction in a penny
stock not
otherwise exempt from the rules, to deliver a standardized
risk disclosure document prepared by the Commission that
provides information about penny stocks and the nature and
level of risks in the penny stock market. The broker/dealer
also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the
broker/dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each
penny stock held in the customer's account. The bid and offer
quotations, and the broker/dealer and salesperson compensation
information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given
to the customer in writing before or with the customer's
confirmation. These disclosure requirements may have the
effect of reducing the level of trading activity in the
secondary market for a stock that becomes subject to the penny
stock rules.
Control by Principal Shareholders. The Company's
officers and directors own approximately 35% of the
outstanding shares of the Company's Common Stock. As a
result, the Company's officers and directors are in a position
to control the Company through their ability (from a practical
standpoint) to determine the outcome of elections of the
Company's directors, adopt, amend or repeal the Bylaws and
take certain other actions requiring the vote or consent of
the stockholders of the Company.
Transactions with Affiliates. The Company has in the
past entered
into transactions and agreements with the Company's management
and certain of their other affiliates. The Company may in the
future enter into other transactions and agreements incident
to its business with certain of its affiliates. Although the
Company intends that the terms of any such future transactions
and agreements will be no less
favorable than those which could be obtained from unaffiliated
third parties, no assurances can be given that this will be
the case.
Dilution. As of September 30, 1996, the Company had a
net tangible book value of approximately $0.12 per share. Net
tangible book value per share represents the amount of the
Company's tangible net worth (i.e., tangible assets less
liabilities) divided by the total number of shares outstanding
immediately prior to the completion of this offering.
Accordingly, investors in this offering will experience an
immediate dilution in their investment.
Lack of Dividends. There can be no assurance that the
future operations of the Company will be profitable. At
present, the Company intends to use available funds to finance
the Company's operations. Accordingly, while payment of
dividends rests within the discretion of the Board of
Directors, no dividends have been declared or paid by the
Company. The Company
does not presently intend to pay dividends and there can be no
assurance that dividends will ever be paid.
Options. The Company may grant options for the
purchase up to 3,000,000 shares of Common Stock pursuant to
its two stock option plans. For the term of such options, the
holders thereof will have an opportunity to profit from any
increase in the market price of the Company's Common Stock
without assuming the risks of ownership. Holders of such
options may exercise them at a time when the Company could
obtain additional capital on terms more favorable than those
provided by the options which may adversely affect the ability
of the Company to obtain additional capital in the future. The
exercise of the options and the sale of the underlying shares
of Common Stock could adversely affect the market price of the
Company's stock.
Preferred Stock. The Company's Articles of
Incorporation authorize the Company's Board of Directors to
issue up to l,000,000 shares of Preferred Stock. Although no
Preferred Stock has been issued to date, the provisions in the
Company's Articles of Incorporation relating to the Preferred
Stock would allow the Company's directors to issue Preferred
Stock with multiple votes per share and dividends rights which
would have priority over any dividends paid with respect to
the Company's Common Stock. The issuance of Preferred Stock
with such rights may make the removal of management difficult
even if such removal would be considered beneficial to
shareholders generally, and will have the effect of limiting
shareholder participation in certain transactions such as
mergers or tender offers if such transactions are not favored
by incumbent management. Thus, in addition to being able to
control the vote on all matters before
the Shareholders, the Preferred Stock may be deemed to be an
antitakeover device which could be utilized as a method of
discouraging, delaying or preventing a change in control of
the Company.
Shares Available for Resale. As of September 30, 1996
there were
5,229,907 shares of the Company's Common Stock issued and
outstanding. Of this amount, approximately 3,000,000 shares
have not been registered under the Securities Act of 1933, as
amended (the "Act"), and are "restricted securities" as
defined by Rule 144 of the Act.
Rule 144 provides, in essence, that shareholders, after
holding restricted securities for a period of two years may,
every three months, sell in ordinary brokerage transactions an
amount equal to the greater of 1% of the Company's then
outstanding Common Stock or the average weekly trading volume,
if any, of the stock during the four calendar weeks preceding
the sale. Nonaffiliates of the Company who hold restricted
securities for a period of three years may, under certain
prescribed conditions, sell their securities without regard to
any of the requirements of the Rule.
Of the 3,000,000 shares of restricted stock which are
presently outstanding, approximately 1,843,000 shares of
restricted stock have satisfied the two year holding period
required by Rule 144. The remaining shares of restricted stock
will become available for resale pursuant to Rule 144 in
various amounts each month, with
all shares of restricted stock being available for resale by
June 1998.
No prediction can be made as to the effect, if any,
that the sale of Common Stock (or the availability of such
Common Stock for sale) by the holders of the Company's
restricted stock will have on the market price of the
Company's securities. Nevertheless, the possibility of a
substantial number of shares of Common Stock being offered for
sale in the public market may adversely affect prevailing
market prices for the Common Stock and could impair investors'
ability to sell the Company's Common Stock or the Company's
ability to raise capital through the sale of its equity
securities.
FOR ALL OF THE AFORESAID REASONS AND OTHERS SET FORTH
HEREIN, THE PURCHASE OF THE SECURITIES OFFERED HEREBY INVOLVE
A HIGH DEGREE OF RISK. ANY PERSON CONSIDERING AN INVESTMENT IN
THE SECURITIES OFFERED HEREBY SHOULD BE AWARE OF THESE AND
OTHER FACTORS SET FORTH IN THIS PRIVATE OFFERING MEMORANDUM.
THE UNITS SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD
TO ABSORB A TOTAL LOSS OF THEIR INVESTMENT IN THE COMPANY AND
HAVE NO NEED FOR A RETURN ON THEIR INVESTMENT.
DILUTION
As of September 30, 1996, the Company had 5,229,907
shares of its Common Stock outstanding with a net tangible
book value (total assets less total liabilities and
intangible assets) of approximately $0.12 per share.
The net tangible book value of a share of the
Company's Common Stock
is substantially less than the price which investors will
pay for the shares offered by this Prospectus. The
difference between the public offering price and the net
tangible book value of the Company's Common Stock is the
dilution attributable to each share of Common Stock.
"Net tangible book value per share" is the amount
that results from subtracting the total liabilities and
intangible assets of the Company from its total assets and
dividing such amount by the shares of Common Stock then
outstanding.
USE OF PROCEEDS
All of the shares offered by this Prospectus are being
offered by certain owners of the Company's Common Stock (the
Selling Shareholders) and were issued by the Company in
connection with the Company's employee stock bonus or stock
option plans. None of the proceeds from this offering will
be received by the Company. Expenses expected to be incurred
by the Company in connection with this offering are
estimated to be approximately $10,000. The Selling
Shareholders have agreed to pay all commissions and other
compensation to any securities broker/dealers through whom
they sell any of the Shares.
SELLING SHAREHOLDERS
The Company has issued (or may in the future issue)
shares of its common stock to various persons pursuant to
certain employee incentive plans adopted by the Company.
The employee incentive plans provide for the grant, to
selected employees of the Company and other persons, of
either stock bonuses or options to purchase shares of the
Company's Common Stock. The Company may also issue up to
80,000 shares of its common stock upon the exercise of
options granted by the terms of employment contracts between
the Company and certain of its officers. Persons who
received Shares pursuant to the Plans (or upon the exercise
of the employment contract options) and who are offering
such Shares to the public by means of this Prospectus are
referred to as the "Selling Shareholders". The Company has
adopted two Stock Option Plans as well as a Stock Bonus
Plan. In some cases these Plans are collectively referred
to as the "Plans". A summary description of these Plans
follows.
Incentive Stock Option Plan. The Company has an
Incentive Stock
Option Plans which collectively authorize the issuance of up
to 1,500,000 shares of the Company's Common Stock to persons
that exercise options granted pursuant to the Plan. Only
Company employees may be granted options pursuant to the
Incentive Stock Option Plan.
Non-Qualified Stock Option Plan. The Company has a
Non Qualified Stock Option Plan which collectively authorize
the
issuance of up to 1,500,000 shares of the Company's Common
Stock to persons that exercise options granted pursuant to
the Plans. The Company's employees, directors, officers,
consultants and advisors are eligible to be granted options
pursuant to the Plans, provided however that bona fide
services must be rendered by such consultants or advisors
and such services must not be in connection with the offer
or sale of securities in a capitalraising transaction. The
option exercise price is determined by the Committee but
cannot be less than the market price of the Company's Common
Stock on the date the option is granted.
Stock Bonus Plan. The Company has a Stock Bonus
Plan
which allows for the issuance of up to 3,000,000 shares of
Common Stock. Such shares may consist, in whole or in part,
of authorized but unissued shares, or treasury shares.
Under the Stock Bonus Plan, the Company's employees,
directors, officers, consultants and advisors are eligible
to receive a grant of the Company's shares, provided however
that bona fide services must be rendered by consultants or
advisors and such services must not be in connection with
the offer or sale of securities in a capital-raising
transaction.
Summary. The following sets forth certain
information,
as of October 31, 1996, concerning the stock options and
stock bonuses granted by the Company. Each option represents
the right to purchase one share of the Company's Common
Stock.
Total Shares
Remaining
Shares Reserved for Shares
Options/
Reserved Outstanding Issued as
Shares
Name of Plan Under Plan Options Stock Bonus Under
Plan
Incentive Stock Option
Plan 1,500,000 90,000 N/A
1,410,000
Non-Qualified Stock
Option Plan 1,500,000 - N/A
1,500,000
Stock Bonus Plan 3,000,000 N/A 1,800,000
1,250,000
TOTAL:
The following table summarizes the options and stock
bonuses granted to the Company's officers, directors, employees
and consultants pursuant to the Plans:
Shares Subject
to Options Which Shares
Have Been Granted Issued as
Name To Date (1) Stock
Bonus
Melvin Leiner 20,000 250,000
Donald M. Marks 20,000 250,000
James J. Caprio 20,000 250,000
Darren M. Marks 20,000 250,000
Kenneth J.P. Zubay 10,000 150,000
Bruce S. Schames 75,000
Robert Stevens 140,000
Henry A. McLarty 80,000
Robert Thompson 65,000
Jeffrey Leiner 65,000
Anthony Cerniglia 50,000
Robert Pittenger 10,000
William R. Smith 100,000
Fred Sharp 25,000
(1) The options issued to the Company's officers and directors
are exercisable at a price of $3.25 per share and expire on
September 30, 1999.
In addition to the foregoing, and separate and apart
from any of the Company's Stock Option Plans, the Company has
granted options to the following officers upon the terms set
forth below. These options were granted as part of employment
contracts between the Company and these officers. The shares
issuable upon the exercise of these options are also being
offered to the public by means of this Prospectus.
Shares
Expiration
Subject to Exercise Date
of
Option Holder Option Price
Option
Melvin Leiner 20,000 $2.75
9/30/99
Donald M. Marks 20,000 $2.75
9/30/99
James J. Caprio 20,000 $2.75
9/30/99
Darren M. Marks 20,000 $2.75
9/30/99
Shares issuable upon the exercise of options
granted to the Company's officers and directors pursuant to
the Plans, shares issued or issuable pursuant to the Stock
Bonus Plan, as well as the shares issuable upon the exercise
of the employment contract options, are being offered by
means of this Prospectus. The following table provides
certain information concerning the share ownership of the
Selling Shareholders and the shares offered by means of this
Prospectus.
Number of
Shares to
Number of Number of Shares be
Beneficially Name of Shares Being
Offered owned on Com-
Percent
Selling Beneficially Option Bonus pletion
of
the
of
Shareholder Owned Shares(1) Shares(2)
Offering
Class
Melvin Leiner 597,579 40,000 140,231
457,348
8.7%
Donald M. Marks 607,625 40,000 139,613
468,012
8.9%
James J. Caprio 636,506 40,000 168,380
468,126
8.9%
Darren M. Marks 576,934 40,000 134,732
442,202
8.5%
Kenneth J.P. Zubay 161,452 10,000 150,000
11,452
*
Bruce S. Schames 76,500 - 75,000
1,500
*
Robert Stevens 140,000 - 140,000
- -
- -
Henry A. McLarty 80,000 - 80,000
- -
- -
Robert Thompson 65,000 - 65,000
- -
- -
Jeffrey Leiner 66,500 - 65,000
1,500
*
Anthony Cerniglia 50,000 - 50,000
- -
- -
Robert Pittenger 10,000 - 10,000
- -
- -
William R. Smith 100,000 - 100,000
- -
- -
Fred Sharp 25,000 - 25,000
- -
- -
* Less than 1%
(1) Represents shares issuable upon exercise of stock options
granted pursuant to the Plans and the employment contracts
with certain officers.
(2) Represents shares received as a stock bonus.
To allow the Selling Shareholders to sell their Shares
when they deem appropriate, the Company has filed a Form S-8
registration statement under the Securities Act of 1933, of
which this Prospectus forms a part, with respect to the resale
of the Shares from time to time in the overthecounter market or
in privately negotiated transactions.
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the Shares offered
by this Prospec tus from time to time in negotiated
transactions in the over the counter market at fixed prices
which may be changed from time to time, at market prices
prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling
Shareholders
may effect such transactions by selling the Shares to or
through broker/ dealers, and such broker/dealers may receive
compensation in the form of discounts, concessions, or
commissions from the Selling Shareholders and/or the purchasers
of the Shares for which such broker/dealers may act as agent or
to whom they may sell, as principal, or both (which
compensation as to a particular broker/ dealer may be in excess
of customary compensation).
The Selling Shareholders and any broker/dealers who act
in connection with the sale of the Shares hereunder may be
deemed to be "underwriters" within the meaning of 2(11) of the
Securities Acts of 1933, and any commissions received by them
and profit on any resale of the Shares as principal might be
deemed to be underwriting discounts and commissions under the
Securities Act. The Company has agreed to indemnify the Selling
Shareholders and any securities broker/dealers who may be
deemed to be underwriters against certain liabilities,
including liabilities under the Securities Act as underwriters
or otherwise.
The Company has advised the Selling Shareholders that
they and any securities broker/dealers or others who may be
deemed to be statutory underwriters will be subject to the
Prospectus delivery requirements under the Securities Act of
1933. The Company has also advised each Selling Shareholder
that in the event of a "distribution" of the shares owned by
the Selling Shareholder, such Selling
Shareholder, any "affiliated purchasers", and any broker/
dealer or other person who participates in such distribution
may be subject to Rule 10b-6 under the Securities Exchange Act
of 1934 ("1934 Act") until their participation in that
distribution is completed. A "distribution" is defined in Rule
10b6 as an offering of securities "that is distinguished from
ordinary trading transactions by the magnitude of the offering
and the presence of special selling efforts and selling
methods". The Company has also advised the Selling Shareholders
that Rule 10b7 under the 1934 Act prohibits any "stabilizing
bid" or "stabilizing purchase" for the purpose of pegging,
fixing or stabilizing the price of the Common Stock in
connection with this offering.
Rule 10b-6 makes it unlawful for any person who is
participating in a distribution to bid for or purchase stock of
the same class as is the subject of the distribution. If Rule
10b6 applies to the offer and sale of any of the Shares, then
participating broker/dealers will be obligated to cease market
making activities nine business days prior to their
participation in the offer and sale of such Shares and may not
recommence market making activities until their participation
in the
distribution has been completed. If Rule 10b-6 applies to one
or more of the principal marketmakers in the Company's Common
Stock, the market price of such stock could be adversely
affected. See "RISK FACTORS".
DESCRIPTION OF COMMON STOCK
The shares of Common Stock offered by this Prospectus
are fully paid and non-assessable. Holders of the Common
Stock do not have preemptive rights. Each stockholder is
entitled to one vote for each share of Common stock held of
record by such stockholder. There is no right to cumulate
votes for election of directors. Upon liquidation of the
Company, the assets then legally available for distribution to
holders of the Common Stock will be distributed ratably among
such shareholders in proportion to their stock holdings.
Holders of Common Stock are entitled to dividends when, as and
if declared by the Board of Directors out of funds legally
available therefor.
GENERAL
The Company's Bylaws provide that the Company will
indemnify its directors and officers against expense and
liabilities they incur to defend, settle or satisfy any civil
or criminal action brought against them as a result of their
being or having been Company directors or officers unless, in
any such action, they have acted with gross negligence or
willful misconduct. Officers and Directors are not entitled to
be indemnified for claims or
losses resulting from a breach of their duty of loyalty to the
Company, for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law
or a transaction from which the director derived an improper
personal benefit. Insofar as indemnification for liabilities
arising under the Securities Act of l933 may be permitted to
the Company's directors and officers, the Company has been
informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act of l933, and is, therefore,
unenforceable.
No dealer, salesman, or any other person has been
authorized to give any information or to make any
representations other than those contained in this prospectus
in connection with this offering and, if given or made, such
information or representations must not be relied upon as
having been authorized by the Company or the selling
shareholders. This prospectus does not
constitute an offer to sell, or a solicitation of any offer to
buy, the securities offered in any
jurisdiction to any person to whom it is unlawful to make an
offer or solicication. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has not been
any change in the affairs of the Company since the date hereof
or that any information contained herein is correct as to any
time
subsequent to its date.
All dealers effecting transactions in the
registered securities, whether or not participating in
this distribution, may be required to deliver a
prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments
or subscriptions.
