As filed with the Securities and Exchange Commission on August __, 1999.
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.)
18001 Cowan, Suites C&D
Irvine, California 92614
(Address of Principal Executive Offices) (Zip Code)
Incentive Stock Option Plan
Non-Qualified Stock Option Plan
Stock Bonus Plans
(Full Title of Plan)
Mark Bennett
18001 Cowan, Suites C&D
Irvine, California 92614
(Name and address of agent for service)
(949) 261-6665
(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>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of maximum maximum
Securities Amount offering aggregate Amount of
to be to be price per offering registration
registered registered (1) share (2) price fee
- -------------------------------------------------------------------------------
Common Stock 500,000 $1.30 $650,000 195.00
Issuable Pursuant Shares
to 1999 Stock
Bonus Plans
-------- -------
$650,000 $195.00
======== =======
(1) This Registration Statement also covers such additional number of shares,
presently undeterminable, as may become issuable under the Plans in the
event of stock dividends, stock splits, recapitalizations or other changes
in the Common Stock. The shares subject to this Registration Statement
reflect the shares issuable pursuant to the Stock Bonus Plan all of which
may be reoffered in accordance with the provisions of Form S-8.
(2) Varied, but not less than the fair market value on the date that the options
were or are granted. 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 July
26, 1999.
<PAGE>
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, 1998. 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 post-effective 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 Delaware General Corporation Law provides 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; 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.
Item 7 - Exemption from Registration Claimed
None.
<PAGE>
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 SB-2, File No. 33-70546-A.
(b) - 1999 Stock Bonus Plan _________________________________
5 - Opinion Regarding Legality of
Securities to be Offered _________________________________
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;
<PAGE>
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.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned constitutes
and appoints Mark Bennett and Michael Malet, 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 post-effective 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 Irvine, California, on July 27, 1999.
SIMS COMMUNICATIONS, INC.
By: /s/ Mark Bennett
Mark Bennett, President and
Chief Executive Officer
By: /s/ Ian Hart
Ian Hart, Principal Financial officer
and Chief Accounting 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/ Mark Bennett Director July 27, 1999
____________________________
Mark Bennett
/s/ Michael Malet Director July 27, 1999
____________________________
Michael Malet
/s/ David Breslow Director July 27, 1999
____________________________
David Breslow
_____________________________ Director
Julio Curra
SIMS COMMUNICATIONS, INC. 1999 STOCK BONUS PLAN
l. Purpose. The purpose of this Stock Bonus 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 500,000 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.
<PAGE>
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 Recipient 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.
<PAGE>
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 ef-
fected 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. The person entitled to receive Bonus Shares
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, exceptin
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 any person receiving shares of common
stock pursuant to this Plan 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 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 at any time.
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.
July 27, 1999
SIMS Communications, Inc.
18001 Cowan, Suites C&D
Irvine, California 92614
This letter will constitute an opinion upon the
legality of the sale by SIMS Communications, Inc. a Delaware corporation, of up
to 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 shares of common stock
issuable upon the exercise of options or shares issued as stock bonuses pursuant
to the stock option and stock bonus plans 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 Delaware, an 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 authorized to issue
the 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 non-assessable.
Very truly yours,
HART & TRINEN, L.L.P.
/s/ 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 up to 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 proposed 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, L.L.P.
/s/ William T. Hart
Denver, Colorado
July 27, 1999
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 of our report dated September 15, 1998 for the year ended June 30,
1998, included in the Form 10-KSB of Sims Communications, Inc. for the year
ended June 30, 1998.
Ehrhardt Keefe Steiner & Hottman PC
August 2, 1999
Denver, Colorado
SIMS COMMUNICATIONS, INC.
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 shares (the "Shares") of this 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. Persons who receive Shares pursuant to the Plans
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, two Non-Qualified Stock
Option Plans and two Stock Bonus Plans. 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 _____________, 1999.
<PAGE>
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. Certain information concerning the
Company is also available at the Internet Web Site maintained by the Securities
and Exchange Commission at www.sec.gov. The Company has filed with the
Commission a Registration Statement on Form S-8 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Act"), with respect to the securities offered hereby.
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.
18001 Cowan, Suites C&D
Irvine, CA 92614(949) 261-6665Attention: Secretary
The following documents filed with the Commission by the Company
(Commission File No. 0-25474) are hereby incorporated by reference into this
Prospectus:
<PAGE>
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1998. 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.
<PAGE>
TABLE OF CONTENTS
PAGE
THE COMPANY .................................................. 5
RISK FACTORS ................................................. 7
DILUTION .....................................................11
USE OF PROCEEDS ..............................................13
SELLING SHAREHOLDERS .........................................14
PLAN OF DISTRIBUTION .........................................16
DESCRIPTION OF COMMON STOCK ..................................17
EXPERTS.......................................................18
GENERAL ......................................................18
<PAGE>
THE COMPANY
SIMS Communications, Inc. (the "Company") was incorporated in Delaware on
August 15, 1991 to design and market a computerized system which provides
unattended 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.
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.
The Company's first ACDC units became operational in September l993. 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. As of July 31, 1999 the
Company was not operating any ACDC units and the Company's only remaining
franchisee had five ACDC units in operation.
The Company presently generates revenue through the following divisions:
One Medical
The Company's One Medical Division provides a financial processing and
communications network for the Home Medical Equipment (HME) industry. In
addition to processing information and verifying insurance medical cards, this
network connects HME buyers with a network of HME vendors. This proprietary
network has been designated for the medical and managed healthcare market, but
the Company's primary focus at the present time is the retail pharmacy industry.
The One Medical network allows any pharmacy to be more competitive in the
HME marketplace by being able to offer over 23,000 products through an automated
catalogue process and a direct connection to local providers of oxygen,
appliance repair, nursing care, and other such services. Pharmacies in the
network are able to provide their customers with medical supplies and equipment
along with product information without sending the customer to another location
and thus losing control of the customer. As a result, the network provides
pharmacies with the opportunity to capture a greater percentage of the managed
healthcare market, generate additional revenues, and simultaneously provide
greater service and convenience to their customers.
JustMed.com
The JustMed.com division involves three components:
- The Medcard health insurance verification and billing system
- The JustMed.com website
- The Med Store
<PAGE>
MedCard System
In November 1998 the Company acquired an exclusive world wide license to
software programs and related technology known as the MedCard system. The
MedCard system is an electronic processing system which consolidates insurance
eligibility verification and processes medical claims and approvals of credit
card and debit card payments in under 30 seconds through a single, small
terminal.
As of July 31, 1999 the MedCard system was able to retrieve on-line
eligibility and authorization information from 77 medical insurance companies
and electronically process and submit billings for its healthcare providers to
over 1650 companies. These insurance providers include CIGNA, Prudential, Oxford
Health Plan, United Health Plans, Blue Cross, Medicaid, Aetna, Blue Cross/Blue
Sheild and Metrahealth. Using the MedCard system, patients are relieved from the
problems associated with eligibility confirmation and billings, healthcare
providers' reimbursements are accelerated and account receivables are reduced.
The time it takes to collect payments from insurance providers decreases from
months to days. The Company obtains revenues from the sale or lease of its
processing terminals and from fees received from every transaction processed by
means of the terminals.
Website
The JustMed.com website is an internet site which began functioning on July
1, 1999. The website advertises healthcare products and services which are
available to the general public and provides medical information to the general
public. Persons in need of healthcare products and services can access the
website and order products or transfer to the more detailed websites maintained
by the companies which provide the products and services. The Company expects to
generate revenues from this website by charging providers of healthcare products
and services fees for advertising on the website. Sims will also receive fees
when a person transfers from the Company's website to the websites maintained by
a provider of healthcare products or services. The Company expects that
advertisers on its website will include distributors of healthcare equipment and
products, hospitals, physician practice groups, and clinics.
Med Store
The Med Store is a feature of the Company's website which allows consumers
to use their computers to purchase a variety of healthcare products and
services. Items available for purchase include canes, crutches, walkers, bath
chairs, blood pressure units, cold therapies, exercise equipment and hot and
cold packs.
Movie Vision
Movie Vision rents video cassettes, primarily containing motion pictures,
through automated dispensing units in hotels. Movie Vision currently has video
cassette dispensing machines in approximately 140 hotels in the United States.
<PAGE>
The Company's executive offices are located at 18001 Cowan, Suite C & D,
Irvine California 92614. The Company's telephone number is (949) 261-6665.
All historical share data in this Prospectus has been adjusted to
reflect the following stock splits relating to the Company's common stock:
June 1995: 2-for-1 forward split, February 1996: 1-for-10 reverse split,
February l998: 1-for-4 reverse split.
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk and should be purchased only by persons who can afford to lose their entire
investment. Therefore, prospective investors should read this entire 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.
History of Losses. The Company has incurred losses since it was formed in
1991. From the date of its formation through March 31, 1999, the Company
incurred net losses of approximately $(24,982,000). During the nine months ended
March 31, 1999 the Company had a loss of $(4,532,730). The Company expects to
continue to incur losses until such time, if ever, as it generates substantial
revenues and earns net income. There can be no assurance that the Company will
be able to generate sufficient revenues and become profitable.
The Company is vulnerable to a variety of business risks generally
associated with small 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 small companies and
the other risk factors set forth in this section. The Company's future operating
results will depend on a number of factors, including the demand for its
products and services, government regulation, the Company's ability to compete
with much larger companies, its ability to successfully market its products and
services, 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. There can be no assurance that the Company will be able to earn a
profit from its operations.
Need for Capital. This offering is being made in behalf of certain Selling
Shareholders. The Company will not receive any proceeds from the sale of the
shares offered by the Selling Shareholders. The Company's continued operations
will depend upon the availability of additional funding. 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.
<PAGE>
Agreements with Credit Card Companies. The Company's point-of-sale
terminals and video dispensing machines 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 products
and services to be purchased through credit cards. The Company presently has
agreements with credit card processors which authorize the use of various major
credit cards in the Company's machines. 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, in which case the Company's machines would be unable to process
transactions.
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, 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 Listing. Although the Company's Common
Stock is currently listed on the NASDAQ Small-Cap Market, the National
Association of Securities Dealers, Inc. ("NASD") requires, for continued
inclusion on the NASDAQ Small-Cap Market, that the Company must maintain
$2,000,000 in net worth and that the bid price of the Company's Common Stock
must be at least $1.00.
There can be no assurance however that the Company's securities will
remain listed on the NASDAQ Small-Cap Market. If the Company's securities were
delisted from the NASDAQ Small-Cap Market, the Company's securities would trade
in the unorganized interdealer over-the-counter market through the OTC Bulletin
Board which provides significantly less liquidity than the NASDAQ Small-Cap
Market. Securities which are not traded on the NASDAQ Small-Cap 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 was delisted from NASDAQ, trades in such
securities may then be subject to Rule 15g-9 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
15g-9, 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.
<PAGE>
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 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.
Options, Warrants and Convertible Securities. The Company has issued
options, warrants and other convertible securities ("Derivative Securities")
which allow the holders to acquire additional shares of the Company's Common
Stock. In some cases the Company has agreed that, at its expense, it will make
appropriate filings with the Securities and Exchange Commission so that the
securities underlying certain Derivative Securities will be available for public
sale. Such filings could result in substantial expense to the Company and could
hinder future financings by the Company.
For the terms of these Derivative Securities, 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
Derivative Securities may exercise and/or convert them at a time when the
Company could obtain additional capital on terms more favorable than those
provided by the Derivative Securities. The exercise or conversion of the
Derivative Securities will dilute the voting interest of the owners of presently
outstanding shares of the Company's Common Stock and may adversely affect the
ability of the Company to obtain additional capital in the future. The sale of
the shares of Common Stock issuable upon the exercise or conversion of the
Derivative Securities could adversely affect the market price of the Company's
stock. See "Dilution and Comparative Share Data".
Shares Available for Resale. As of July 31, 1999, there were 17,299,052
shares of the Company's Common Stock issued and outstanding. Of this amount,
approximately 9,215,000 shares are "restricted securities" as defined by Rule
144 of the Securities Act of 1933.
Rule 144 provides, in essence, that shareholders, after holding restricted
securities for a period of one year may, every three months, sell in ordinary
brokerage transactions an amount equal to the greater of l% 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. Non-affiliates of
the Company who hold restricted securities for a period of two years may, under
certain prescribed conditions, sell their securities without regard to any of
the requirements of the Rule.
<PAGE>
Approximately 3,500,000 shares of restricted stock have satisfied the
one-year holding period required by Rule 144. Approximately 5,078,000 additional
shares of restricted stock are being offered for public sale by means of a
registration statement which has been filed with the Securities and Exchange
Commission. The remaining shares of restricted stock will become available for
resale pursuant to Rule 144 beginning in August 1999.
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.
Lack of Dividends. There can be no assurance that the operations of the
Company will result in any revenues or will be profitable. At the present time,
the Company intends to use available funds to finance any possible growth of the
Company's business. Accordingly, while payment of dividends rests within the
discretion of the Board of Directors, no common stock 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.
Preferred Stock. The Company's Articles of Incorporation authorize the
Company's Board of Directors to issue up to 1,000,000 shares of Preferred Stock.
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.
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 PROSPECTUS. THE SECURITIES 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.
<PAGE>
DILUTION AND COMPARATIVE SHARE DATA
As of July 31, 1999, the Company had 17,299,052 shares of common stock
issued and outstanding with a net tangible book value (total assets less total
liabilities and intangible assets) of approximately $0.15 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 price paid by investors
in this offering 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.
The following table reflects the shares of Common Stock which may be
issued by the Company as the result of the sale of additional securities by the
Company, the exercise of options and warrants issued, or to be issued, by the
Company and the conversion of convertible securities issued by the Company.
Number of Note
Shares Reference
Shares Outstanding 17,299,052
Shares issuable upon conversion of Series C 2,125,000 A
Preferred Stock.
Shares issuable in payment of dividends to 93,750 B
holders of Series C Preferred shares.
Shares issuable upon exercise of warrants 113,333 B
held by Series C Preferred shareholders.
Shares held by, or which may be acquired 111,519 B
by sales agent.
Shares issuable upon exercise of warrants 1,888,206 C
issued to sales agents and financial consultants
Shares issuable upon conversion of notes and 137,565 D
exercise of warrants sold in private offerings
Shares issuable upon exercise of options 4,825,500 E
previously granted by Company
<PAGE>
Additional shares issuable in connection with
the acquisition of One Medical Services, Inc.: F
Warrant Shares 187,500
Incentive Shares 1,485,000
Shares issuable upon exercise of warrants sold 1,804,953 G
to private investors
A. Between November 1998 and January 1999, the Company sold 1,700 shares of its
Series C Preferred Stock (the "Preferred Stock") to a group of institutional
investors for $1,700,000. Each Preferred Share is convertible into shares of the
Company's common stock equal in number to the amount determined by dividing
$1,000 by the lower of (i) $1.50 (or $1.28 in the case of 750 shares sold in
December 1998), or (ii) 80% of the average price of the Company's common stock
for any two trading days during the ten trading days preceding the conversion
date. The lower of (i) or (ii) is the "Conversion Price" for the Series C
Preferred Stock. The shares in the table assume a conversion price of $0.80 per
share. The actual number of shares to be issued upon the conversion of the
Series C Preferred Shares will depend upon the price of the Company's common
stock at the time of conversion.
B. In connection with the issuance of the Series C Preferred Stock the Company
also:
(i) Agreed to pay annual dividends to the Series C Preferred
shareholders at the rate of $60 per share. At the Company's
option these dividends may be paid in cash or in shares of the
Company's common stock. For dividends paid in shares of stock,
the number of shares to be issued is determined by dividing the
dollar amount of the dividends by 80% of the average price of the
Company's common stock for any two trading days during the ten
trading days preceding the date the dividends are payable. As of
July 31, 1999 the Company owed approximately $75,000 in dividends
to the Series C Preferred shareholders. The Company has elected
to pay these dividends with shares of common stock. The number
of shares in the table was determined by dividing $75,000 by
$0.80.
(ii) Issued to the holders of the Series C Preferred Stock, on a pro rata
basis, warrants which collectively allow for the purchase of up to
116,333 shares of the Company's common stock. The warrants are
exercisable at a price of $1.00 per share at any time prior to July
31, 2004.
(iii) Issued to the sales agent for the offering 45 shares of Series C
Preferred Stock, warrants for the purchase of 37,500 shares of the
Company's common stock and 14,769 shares of common stock. The Series
C Preferred Shares issued to the sales agent are convertible on the
same basis as the Series C Preferred Shares sold to the
institutional investors (with maximum conversion prices ranging
between $1.27 and $1.50 per share). The warrants issued to the sales
agent are exercisable at a price of $1.24 and $1.50 per share at any
time prior to December 31, 2003.
C. In connection with prior private offerings of the Company's common stock, the
Company paid Commissions to the sales agents for such offerings in the form of
cash and warrants. The Company has also entered into a number of agreements with
various financial consultants. Pursuant to the terms of these agreements, the
Company has issued to the financial consultants shares of common stock, plus
warrants to purchase additional shares of common stock. The warrants referred to
above are exercisable at prices ranging between $0.59 and $5.00 per share and
expire between November 2001 and April 2004.
<PAGE>
D. Between February and December l997 the Company sold $1,017,500 of convertible
notes (the "Notes"), together with warrants for the purchase of 75,065 shares of
the Company's common stock. The Notes bear interest at 8% per annum and are
presently due and payable. As of July 31, 1999 Notes in the principal amount of
$917,500 (plus accrued interest) have been converted into 571,851 shares of the
Company's common stock. The remaining Notes are collectively convertible into
62,500 shares of the Company's Common Stock at a conversion price of $1.60 per
share. The Warrants are exercisable at any time prior to May 31, 2002 at prices
ranging between $4.00 and $10.00 per share.
E. See "Selling Shareholders - Summary".
F. Effective May 30, 1998 the Company acquired One Medical Services, Inc. in
consideration for 142,349 shares of common stock and 187,500 warrants
exercisable at $2.00 per share at any time prior to May 30, 2003. The Company
has also agreed to issue to the former owners of One Medical up to 1,485,000
additional shares of common stock depending on the future operating of One
Medical. The number of shares to be issued will be determined by dividing the
quarterly net income of One Medical (for each fiscal quarterly beginning June
30, 1998 and ending June 30, 2001), by the average closing price of the
Company's common stock for the five day trading period prior to the end of each
quarter.
G. In connection with certain private offerings, the Company sold shares of
common stock and warrants. The warrants sold in these private offerings are
exercisable at prices ranging between $0.44 and $1.54 per share and expire
between March 2000 and April 2004.
Shares issuable upon the exercise of options granted, or which may be
granted pursuant to the Company's Incentive Stock Option and Non-Qualified Stock
Option Plans, as well as shares issued or issuable pursuant to the Stock Bonus
Plans are also being offered by means of this Prospectus. See "Selling
Shareholders". The shares which are referred to in Notes A, B, C and G (limited
to 360,000 shares in the case of Note C and 889,269 shares in the case of Note
G), as well as approximately 5,000,000 additional shares, are being registered
for public sale by means of a separate registration statement on Form S-3 which
has been filed with the Securities and Exchange Commission.
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 the sale of the shares offered by this
Prospectus 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.
<PAGE>
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. Officers and directors who
received options or shares of common stock pursuant to the Plans, and who are
offering shares of common stock to the public by means of this Prospectus, are
referred to as the "Selling Shareholders". Shares issuable upon the exercise of
options granted, or which may be granted pursuant to the Company's Incentive
Stock Option and Non-Qualified Stock Option Plans, as well as shares issued or
issuable pursuant to the Stock Bonus Plans are also being offered by means of
this Prospectus.
The Company has an Incentive Stock Option Plan, Non-Qualified Stock Option
Plans and Stock Bonus Plans. 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 that authorizes 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 Plans. The Company has two Non-Qualified Stock
Option Plans which collectively authorize the issuance of up to 3,000,000 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 capital-raising 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 Plans. The Company has Stock Bonus Plans which collectively
allow for the issuance of up to 2,000,000 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 July 31,
1999, 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.
<PAGE>
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 1,500,000 691,000 N/A 809,000
Non-Qualified Stock Option
Plans 3,000,000 607,000 N/A 2,393,000
Stock Bonus Plans 2,000,000 N/A 1,497,625 502,375
The following table summarizes the options and stock bonuses granted to
the Company's officers, directors, employees and consultants pursuant to the
Plans:Incentive Stock Options
Shares Subject Exercise Expiration
Option Holder To Option Price Date of Option
Mark Bennett -- -- --
Michael Malet -- -- --
Ian Hart 50,000 $1.00 4/16/04
Marvin Berger 15,000 $1.00 4/16/04
Other Company employees
and other third parties 26,000 $1.00 4/16/04
Non-Qualified Stock Options
- ---------------------------
No officer or director holds any options which were granted pursuant to
the Company's Non-Qualified Stock Option Plan.
Stock Bonus Plans
Name Shares issued as Stock Bonus
Mark Bennett 18,750 (1)
Michael Malet 21,250 (1)
Ian Hart 15,000
Other Employees and
Consultants as a group 1,442,625
(1) Shares were issued between May 1997 and June 1999. All of these shares
have since been sold.
Other Options
The Company has also issued options to purchase shares of the Company's
common stock to the following officers and/or directors. These options were not
granted pursuant to any of the
<PAGE>
Company's stock option plans and the shares issuable upon the exercise of the
options are not being offered by means of this prospectus.
Shares Subject Exercise Expiration
Name to Option Price Date of Option
Mark Bennett 560,500 $1.50 5/29/03
Mark Bennett 1,015,000 $0.8125 4/18/04
Michael Malet 457,000 $1.50 5/29/03
Michael Malet 925,000 $0.8125 4/18/04
Ian Hart 460,000 $0.8125 4/18/04
Ian Hart 100,000 $2.00 10/01/01
Marvin Berger 10,000 $2.50 9/01/01
Selling Shareholders
The following table provides certain information concerning the share
ownership of the Selling Shareholders and the shares offered by the Selling
Shareholders by means of this Prospectus.
Number of
Shares to
Number of Number of Shares be Beneficially
Shares Being Offered owned on Com- Percent
Name of Selling Beneficially Option Bonus pletion of the of
Shareholder Owned Shares(1) Shares(2) Offering Class
- -------------------------------------------------------------------------------
Mark Bennett 224,900 -- -- 224,900 1%
Michael Malet 157,802 -- -- 157,802 1%
Ian Hart 50,000 50,000 15,000 35,000 *
Marvin Berger 65,000 15,000 -- 65,000 *
* Less than 1%
(1) Represents shares issuable upon exercise of stock options granted
pursuant to the Plans.
(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 over-the-counter market or in
privately negotiated transactions.
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the Shares offered by this Prospectus
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
<PAGE>
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 ss.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 102 under the Securities Exchange Act of 1934 ("1934 Act") until
their participation in that distribution is completed. A "distribution" is
defined in Rule 102 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 101 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 102 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 102 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 102
applies to one or more of the principal market makers 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.
<PAGE>
EXPERTS
The financial statements as of June 30, 1998 and for each of the two years
in the period ended June 30, 1998 incorporated by reference in this prospectus
from the Company's annual report on Form 10-K have been audited by Ehrhardt
Keefe Steiner & Hottman PC independent auditors, as stated in their report which
is incorporated herein by reference, and have been so incorporated in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
GENERAL
The Delaware General Corporation Law provides that the Company may
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
solicitation. 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.
