As filed with the Securities and Exchange Commission on
November 25,
1996
Registration
No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
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
Proposed
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
by
Affili-
ates
(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
Incorporated by
Reference
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
50,000
Kenneth Zubay
50,000
Robert K. Stevens
50,000
Jeffrey S. Leiner
15,000
Fred Sharp
25,000
250,000
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
Exhib
it
4(a)
of
the
Compa
ny's
Regis
trati
on
State
ment
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 S-
8 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 capital-
raising 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 S-8
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 60661-2511), 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 Rent-aCar 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 1,745,000 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 425,000
245,000
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
over-thecounter 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 anti-takeover 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 1,750,000
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 50,000
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 50,000 - 50,000 -
- -
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 10b-7 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 10b-6
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.
