As filed with the Securities and Exchange Commission on January 26, 1999.
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
Registration Statement
Under
THE SECURITIES ACT OF 1933
Sims Communications, Inc.
(Exact name of registrant as specified in charter)
Delaware
(State or other jurisdiction of incorporation)
18001 Cowan, Suite C & D
Irvine, CA 92614
65-0287558 (949) 261-6665
(IRS Employer I.D. (Address, including zip code, and telephone number
Number) including area of principal executive offices)
Mark Bennett
18001 Cowan, Suite C & D
Irvine, CA 92614
(949) 261-6665
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all communications, including all communications sent to the
agent for service, should be sent to:
William T. Hart, Esq.
Hart & Trinen
1624 Washington Street
Denver, Colorado 80203
(303) 839-0061
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
<PAGE>
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
Class of Maximum Maximum
Securities Securities Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Unit (1) Price Fee
Common Stock (2) 2,810,000 $1.50 $4,215,000 $1,244
Common Stock (3) 825,000 $1.50 1,237,500 365
Common Stock (4) 37,500 $1.50 56,250 17
----------- ----------- --------- -------
Total 3,672,500 $5,508,750 $1,626
========= ========== ======
(1) Offering price computed in accordance with Rule 457(c).
(2) Shares of Common Stock issuable upon conversion of Company's Series C
Preferred Stock. Includes additional shares which may be issued due to
potential adjustments to conversion rate.
(3) Shares of Common Stock issuable upon the exercise of Warrants. Under certain
conditions the Warrants may be issued to the holders of the Company's Series
C Preferred Stock. Includes additional shares which may be issued due to
potential adjustments to Warrant exercise price.
(4) Shares of Common Stock issuable upon the exercise of Sales Agent's Warrants.
Pursuant to Rule 416, this Registration Statement includes such
indeterminate number of additional securities as may be required for issuance
upon the conversion of the Series D Preferred Stock or upon the exercise of the
Warrants as a result of any adjustment in the number of securities issuable by
reason of the anti-dilution provisions of the Series D Preferred Stock, the
Series A Warrants, the Series B Warrants and/or the Sales Agent's Warrants.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of l933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
CEL-SCI CORPORATION
CROSS REFERENCE SHEET
Item in Form S-3 Location in Prospectus
Item 1 Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus ................................ Facing Page;Outside Front
Cover Page
Item 2 Inside Front and Outside Back Cover Inside Front Cover Page;
Pages of Prospectus ....................... Outside Back Cover Page
Item 3 Summary Information, Risk Factors
Ratio of Earnings to Fixed Changes ......... Prospectus Summary; Risk
Factors
Item 4 Use of Proceeds .............................Not Applicable.
Item 5 Determination of Offering Price .............Selling Shareholders
Item 6 Dilution ................................. Comparative Share Data
Item 7 Selling Security Holders ....................Selling Shareholders
Item 8 Plan of Distribution ........................Selling Shareholders
Item 9 Description of Securities to be
Registered ................................. Description of Securities
Item l0 Interest of Named Experts and Counsel .......Experts
Item 11 Material Changes ............................Prospectus Summary
Item 12 Incorporation of Certain Information by
Reference ...................................Documents Incorporated by
Reference
Item l3 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ............................... Indemnification
<PAGE>
PROSPECTUS SIMS COMMUNICATIONS, INC.
Common Stock
This Prospectus relates to:
1. The sale of shares of the Common Stock of Sims Communications, Inc.
(the "Company") by holders of the Company's Series C Preferred Stock (the
"Preferred Stock") if and when the holders of the Series C Preferred Stockelect
to convert the Preferred Stock into shares of the Company's Common Stock.
2. The sale of up to 825,000 shares of common stock issuable upon the
exercise of Warrants which may be issued under certain circumstances to the
holders of the Series C Preferred Stock.
3. The sale of up to 37,500 shares of common stock issuable upon the
exercise of Sales Agent Warrants.
The holders of the Series C Preferred Stock, the Warrants and the Sales
Agent Warrants referred to above, to the extent they convert the Preferred Stock
into shares of Common Stock or exercise the Warrants or Sales Agent Warrants and
receive shares of the Company's Common Stock, are referred to in this Prospectus
as the "Selling Shareholders". For further information concerning the terms of
the Preferred Stock, Warrants and options described above, see "Comparative
Share Data".
The Company will not receive any proceeds from the sale of the shares by
the Selling Shareholders. The Selling Shareholders have advised the Company that
they may from time to time sell the shares covered by this Prospectus in
ordinary brokerage transactions, in negotiated transactions or otherwise, at
prevailing market prices at the time of sale or at negotiated prices. The costs
of registering the shares offered by the Selling Shareholders are being paid by
the Company. The Selling Shareholders will pay all other costs associated with
the sale of their shares. See "Selling Shareholders".
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AND
SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE
INVESTMENT. FOR A DESCRIPTION OF CERTAIN IMPORTANT FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS, SEE "RISK FACTORS" AND "COMPARATIVE SHARE
DATA".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESEN- TATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE>
On January , 1999 the closing price of the Company's Common Stock on the
NASDAQ SmallCap Market was $ .
The Date of this Prospectus is January , 1999
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of l934 and in accordance therewith is required to file reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Copies of any such reports, proxy statements and
other information filed by the Company can be inspected and copied at the public
reference facility maintained by the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. and at the Commission's Regional offices in New York (7
World Trade Center, Suite 1300, New York, New York 10048) and Chicago
(Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511). Copies of such material can be obtained from the Public
Reference Section of the Commission at its office in 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-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), with respect to the shares of common stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to the
Registration Statement.
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, Suite C & D
Irvine, CA 92614
(949) 261-6665
(949) 261-0323 (fax)
The following documents filed with the Commission by the Company
(Commission File No. 0-25474) are hereby incorporated by reference into this
Prospectus:
(1) Annual Report on Form 10-K for the fiscal year ended June 30, 1998. (2)
Quarterly report on Form 10-Q for the quarter ending September 30, 1998.
(3) 8-K report dated December 14, 1998.
(4) 8-K report dated January 20, 1999.
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>
PROSPECTUS SUMMARY
THIS SUMMARY SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS
ENTIRETY BY, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING
ELSEWHERE IN THIS PROSPECTUS.
The Company
Since December 1996 the Company acquired four businesses: Link
International Technologies, Inc. (December, 1996), Movie Vision (January
1998), One Medical Services, Inc. (May 1998) and Med-Card (November 1998).
The products and services offered by theses four companies represent the
core of the Company's business. A summary of the Company's four business
segments is presented below.
Link International
Link has developed a series of state-of-the art pre-paid long distance
telephone card dispensing machines which allow for payment with bank debit
cards, credit cards or cash.
Link has developed and patented certain technologies which provide unique
features for its phone card vending machines. The first and most important
feature is that LINK's machine is the only vending machine in the market which
can individually activate prepaid phone cards (or other "value stored" cards,
including chip-embedded "smart" cards) at the point of sale. All prepaid phone
cards stored in LINK's machines are "dead" (i.e. "inactive") until each one is
individually activated once cash is received or a customer's credit or debit
card has been accepted by the machine and successfully processed. This patented
device, using a proprietary bar code technology, eliminates the risk of fraud or
theft as well as the need for large capital investment which is required by
other machines that dispense only pre-activated (or "live") cards. The machines
can be operated either by direct telephone line or wireless technology, at the
option of the customer. Second, although LINK's machines accept cash and credit
cards, Link's machines are the only vending devices that requires the customer
to use personal identification number when purchasing prepaid phones cards with
a bank debit card. This particular feature serves to eliminate the expense (ie.
"charge backs") to the merchant for mistakenly accepting fraudulent or stolen
credit cards.
Link has also developed a counter top point-of-sale transaction terminal,
("known as the "Debitlink" terminal), primarily for use in the sale of goods and
services. This terminal, which accepts bank debit cards as well as major credit
cards, includes the capability of pre-paid long distance phone card activation,
customer frequency programs, check guarantee and pre-paid cellular time
activation. The Debitlink terminal uses the same technology and host reporting
as Link's phone card dispensing machines. The Company markets its Debitlink to
smaller stores, most of which do not have point-of-sale debit card capability
and to retail pharmacies. The Company began marketing Link's Debitlink terminals
in August 1997.
Link also markets its proprietary scrip terminals which provide the same
benefits as cash dispensing ATM machines without the prohibitive costs to the
merchant. A customer using a bank debit card inserts the card into the terminal
and selects a dollar denomination ($5, $10, $20, etc.). The scrip terminal
dispenses a receipt to the customer which can be used to pay for merchandise
and/or services. The customer receives cash for any difference between the
dollar denomination of the scrip and the amount of the purchase. Once the
transaction is processed, funds are electronically transferred to the merchant's
bank account from the customer's bank account within 48 hours.
Scrip terminals appeal to fast food restaurants, convenience stores, bars,
pharmacies, arcades and other outlets where cash is needed for products or
services. While occupying little store space, scrip terminals increase sales by
giving customers purchasing power, thereby, generating impulse buying and larger
purchases. Similarly, consumers find scrip terminals beneficial due the their
convenience and the fact that they provide a safe alternative to isolated ATM's.
The Company receives a transaction fee (charged to the customer rather than the
retailer) for each transaction processed by the scrip terminal.
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.
One Medical
One Medical provides a financial processing and communications network for
the Home Medical Equipment (HME) industry. Since the Company's DebitLink
terminal has the ability to process information and verify insurance medical
cards, this network can connect 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.
MedCard
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 January 20, 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
terminals and from fees received from every transaction processed by means of
the terminals.
The license was acquired from Dream Technologies, LLC ("Dream") and MedCard
Management Systems, Inc. ("MMS") in consideration for $450,000 in cash, 100,000
shares of the Company's common stock and an option to purchase an additional
350,000 shares of common stock at a price of $1.28 at any time prior to November
10, 2001.
The Company also agreed to pay Dream a royalty, not to exceed $250,000 per
month, equal to 25% of the net revenues derived by the Company from the MedCard
system. Once royalties in any month reach $250,000, the Company is obligated to
pay Dream 10% of the net revenues derived by the Company from the MedCard system
during that particular month. The term net revenues means the gross revenues
received from the use of the MedCard Systems less (a) terminal lease costs of up
to $50 per month,: (b) commissions payable to agents which place terminals with
end users; and (c) network costs which include (i) claim fees payable to data
vendors, (ii) charges for verification of insurance coverage and (iii) similar
telecommunications charges related to obtaining claims processing and/or
benefits verification information.
The Company executive offices are located at 18001 Cowan, Suite C & D,
Irvine California 92614.
THE OFFERING
Shares of Common Stock are offered for public sale by the holders of the
Company's Series C Preferred Stock if and when the holders of the Preferred
Stock elect to convert the Preferred Stock into shares of the Company's Common
Stock. Up to 825,000 additional shares of Common Stock are offered for public
sale upon the exercise of Warrants which may be issued to the holders of the
Series C Preferred Stock under certain circumstances.
Up to 37,500 shares of Common Stock are offered by the holders of Sales
Agent Warrants issued by the Company in connection with the sale of the Series C
Preferred Stock.
The holders of the Preferred Stock Warrants, the Warrants and the Sales
Agent Warrants referred to above, to the extent they convert the Preferred Stock
into Common Stock or exercise the Warrants or Sales Agent Warrants, may resell
the shares they receive upon conversion or exercise from time to time in the
public market. The holders of the Preferred Stock, Warrants or Sales Agent
Warrants are sometimes referred to in this Prospectus as the "Selling
Shareholders". The Company will not receive any proceeds from the sale of the
shares offered by the Selling Shareholders. See "Comparative Share Data" and
"Selling Shareholders".
Common Stock Outstand-
ing Prior To and After
Offering: As of January 20, 1999, the Company had
11,401,629 shares of Common Stock issued and
outstanding. Assuming all shares of the Series C
Preferred Stock are converted to 1,404,600 shares of
the Company's Common Stock (assuming a conversion
price of $1.10 per share) and all Warrants and Sales
Agent Warrants are exercised, there will be
13,668,729 shares of Common Stock issued and
outstanding. The number of outstanding shares before
and after this Offering does not give effect to
shares which may be issued upon the exercise and/or
conversion of options, warrants or other convertible
securities previously issued by the Company. See
"Comparative Share Data", "Selling Shareholders" and
"Description of Securities".
Risk Factors: The purchase of the Securities offered by this
Prospectus involves a high degree of risk. Risk
factors include the Company's history of losses and
need for additional capital.
NASDAQ Symbol: SIMS
Statement of Operations Data:
Three Months
Years Ended June 30, Ending September
1998 1997 30, 1998
------ ---- -------------
Revenues $980,951 $2,923,532 $377,456
Cost of Sales (523,479) (1,608,572) (146,508)
Operating and other
Expenses (7,503,483) (4,657,587) (1,838,686)
(Loss) Income from
Discontinued Operations (63,737) 553,731 -
Net (Loss) $(7,109,748) $(2,788,896) $(1,607,738)
<PAGE>
Balance Sheet Data:
June 30, 1998 September 30, 1998
------------------- ------------------
Current Assets $1,088,022 $1,276,434
Total Assets 5,602,751 5,800,090
Current Liabilities 2,785,015 2,904,720
Total Liabilities 3,372,542 3,513,404
Working Capital (Deficit) (1,697,013) (1,628,286)
Shareholders' Equity 2,230,209 2,286,686
No common stock dividends have been declared by the Company since its inception.
RISK FACTORS
Investors should be aware that ownership of the Common Stock of the
Company involves certain risks, including those described below, which could
adversely affect the value of their holdings of Common Stock. The Company does
not make, nor has it authorized any other person to make, any representation
about the future market value of the Company's Common Stock. In addition to the
other information contained in this Prospectus, the following factors should be
considered carefully in evaluating an investment in the Shares offered by this
Prospectus
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 June 30, 1998, the Company incurred
net losses of approximately $(20,417,000). During the year ended June 30, l998
the Company had a loss of $(7,109,748). During the three months ending September
30, 1998 the Company had a loss of $(1,607,738). The Company expects to continue
to incur losses until such time, if ever, as it 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 on 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.
Competition There can be no assurance that the Company will be able to
compete with the numerous other companies which are engaged in the Company's
lines of business. Many of these competitors have greater financial and
marketing resources than those of the Company.
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.
Dependence on Personnel. The future success of the Company will be highly
dependent upon the personal efforts of its executive officers and 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,
operating 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, 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 and Warrants are 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 tangible net worth and that the bid price of the
Company's Common Stock must be at least $1.00. Although the Company presently
complies with these listing standards, 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. There can be no assurance that the Company's securities will remain
listed on the NASDAQ Small-Cap Market.
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.
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.
Transactions with Affiliates. The Company has in the past entered into
transactions and agreements with the Company's management and certain affiliated
parties and 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.
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 January 20, 1999, there were 11,401,629
shares of the Company's Common Stock issued and outstanding. Approximately
3,800,000 of these shares have been registered for public sale by means of a
separate registration statement which was declared effective by the Securities
and Exchange Commission in October 1998. The remaining amount, approximately
7,602,000 shares, are "restricted securities" as defined by Rule 144 of the
Securities Act of 1933, as amended (the "Act").
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.
Approximately 5,600,000 shares of restricted stock have satisfied the one
year holding period required by Rule 144. The remaining shares of restricted
stock will become available for resale pursuant to Rule 144 beginning in March
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 profits. 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.
COMPARATIVE SHARE DATA
As of January 20, 1999, the present shareholders of the Company owned
11,401,629 shares of Common Stock, which had a net tangible book value of
approximately $0.30 per share. The following table illustrates the comparative
stock ownership of the present shareholders of the Company, as compared to the
investors in this Offering, assuming all shares offered are sold.
Number of Shares Note Reference
Shares outstanding as of January 20,1999(1) 11,401,629
Shares to be issued upon conversion of Series
C Preferred Stock, assuming conversion price
of $1.10 per share 1,404,600 A
Shares issuable upon exercise of Warrants 825,000 B
Shares issuable upon exercise of Sales Agent
Warrants 37,500
Shares outstanding (pro forma basis) (1) 13,668,729
Net tangible book value per share as of
January 20, 1999 $0.30
Equity ownership by present shareholders
after this offering 83%
Equity ownership by investors in this offering 17%
(1) Amount excludes shares which may be issued upon the exercise and/or
conversion of options, warrants and other convertible securities previously
issued by the Company. See table below.
"Net tangible book value" is the amount that results from subtracting the
total liabilities and intangible assets of the Company from its total assets.
Tangible assets exclude goodwill. "Dilution" to investors in this offering will
be the difference between the price at which the Preferred Shares are converted
into Common Stock and the net tangible book value of the Company's Common Stock
at the time of such conversion.
The purchasers of the securities offered by this Prospectus will suffer an
immediate dilution if the price paid for the securities offered is greater than
the net tangible book value of the Company's Common Stock.
Other Shares Which May Be Issued:
The following table lists additional shares of the Company's Common Stock
which may be issued as the result of the exercise of outstanding options,
warrants or the conversion of other securities issued by the Company:
Number of Note
Shares Reference
Shares issuable upon exercise
of warrants issued to sales agents
and financial consultants 238,753 C
Shares issuable upon conversion of notes
and exercise of warrants sold in
private offering 256,937 D
Shares issuable upon exercise of options
previously granted by Company 2,164,000 E
Shares issuable upon conversion of
Series A and Series B Preferred Stock 35,000 F
Additional shares issuable in connection
with the acquisition of One Medical
Services, Inc.: G
Warrant Shares 187,500
Incentive Shares 1,485,000
Share issuable upon conversion of loan 142,900 H
Shares issuable upon the exercise of
Warrants 176,670 I
A. In November and December 1998, the Company sold 1,500 shares of its Series C
Preferred Stock (the "Preferred Stock") to a group of institutional investors
for $1,500,000. 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) $1.31 (or $1.11 in the case of 750 shares sold in December), or
(ii) the average price of the Company's common stock for any two trading days
during the twenty-two trading days preceding the conversion date. The lower of
(i) or (ii) is the "Conversion Price" for the Series C Preferred Stock.
B. For each Series C Preferred Stock held by a preferred stockholder on certain
dates, (the "Warrant Valuation Dates") the Company will issue 50 warrants to the
preferred shareholder.
<PAGE>
The Warrant Valuation Dates are generally the following: (1)
May 30, 1999
June 30, 1999
July 30, 1999
August 30, 1999
September 30,1999
October 30, 1999
November 30, 1999
(1) The Warrant Valuations Dates are determined in reference to the dates the
Series C Preferred Shares were issued. Since the Series C Preferred Shares
were issued on different dates, the actual Warrant Valuation Dates are
within seven days of the dates shown below.
Each Warrant entitles the holder to purchase one additional share of the
Company's common stock for $1.50 per share (or $1.27 per share in the case of
the 750 shares sold in December 1998) at any time during a period ending five
years after the Warrant Valuation Date. If none of the Series C Preferred Shares
are converted into shares of the Company's common stock prior to November 30,
1999 the Company would be required to issue warrants which would allow the
holders of the Series C Preferred Stock to purchase of up to 525,000 shares of
the Company's common stock.
The Company has the right to redeem the Series C Preferred Shares at any
time. Depending upon the date of redemption, the Company is required to pay the
following amount for each Series C Preferred Share redeemed by the Company, plus
all accrued and unpaid dividends up to the Redemption Date.
If Redemption Date is after: (1) Redemption Price per Series C Preferred
Share
November 30, 1998 $1,100
January 30, 1999 $1,150
March 1, 1999 $1,200
April 1, 1999 $1,250 (2)
(1) The dates below are determined in reference to the dates the Series C
Preferred Shares were issued. Since the Series C Preferred Shares were
issued on different dates, the relevant dates after which the Redemption
Price changes are within seven days of the dates shown below.
(2) If the Redemption Date is after April 1, 1999 the Redemption Price is the
greater of (a) $1,250 or (b) the full economic benefit the holder would
derive from converting the Series C Preferred Stock and selling the common
stock on the Redemption Date.
For each share of the Series C Preferred Stock redeemed by the Company the
Company has agreed to issue to the former holder of the redeemed shares warrants
which will entitle the former holder to purchase 200 shares of the Company's
common stock at a price equal to 120% of the closing bid price of the Company's
common stock on the date prior to the Redemption Date. The warrants are
exercisable during a period ending five years from the Redemption Date. If all
1,500 shares of the Series C Preferred Stock are redeemed by the Company the
Company would be required to issue warrants which would allow the former holders
to purchase up to 300,000 shares of the Company's common stock.
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 $2.00 and $7.00 per share and
expire between 2001 and 2003.
D. Between February and December l997 the Company sold $1,017,500 of convertible
notes (the "Notes"), together with warrants for the purchase of 97,562 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, 1998 Notes in the principal amount of
$762,500 (plus accrued interest) have been converted into 534,285 shares of the
Company's common stock. The remaining Notes are collectively convertible into
159,375 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, 2000 at prices
ranging between $5.00 and $10.00 per share.
E. Options were granted in connection with the Company's stock option plans.
F. See "Description of Securities".
G. 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.
H. The Company has borrowed $250,000 from an non-affiliated third party. At the
option of the third party the loan is convertible into shares of the Company's
common stock. The number of shares to be issued upon the conversion of the loan
is determined by dividing the principal and accrued interest to be converted by
the average market price of the Company's common stock during the five day
period prior to conversion. The shares in the table assume the principal amount
of the loan is converted when the market price of the Company's common stock is
$1.50 per share.
I. In January 1999 the Company sold 883,349 shares of common stock and 176,670
warrants for $530,010, less related offering expenses. Each warrant allows the
holder to purchase one additional share of common stock at a price of $1.54.
The shares referred to in Notes C and D, above, together wiht
approximately 3,800,000 additional shares, are being offered for public sale by
means of a separate registration statement which was declared effective by the
Securities and Exchange Commission in October 1998. The shares issuable upon the
exercise of options, and which are referred to in Note E, have been registered
for public sale by means of a registration statement on Form S-8 filed with the
Securities and Exchange Commission
SELLING SHAREHOLDERS
In November and December 1998, the Company sold 1,500 shares of its Series
C Preferred Stock (the "Preferred Stock") to a group of institutional investors
for $1,500,000. 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) $1.31 (or $1.11 in the case of 750 shares sold in December), or
(ii) the average price of the Company's common stock for any two trading days
during the twenty-two trading days preceding the conversion date.
The Company has also agreed, under certain conditions, to issue warrants
to the holders of the Series C Preferred Stock if they do not convert the Series
C Preferred Stock for a certain period of time or if the Series C Preferred
Shares redeemed by the Company. See "Comparative Share Data" for more detailed
information concerning the Warrants .
In connection with the sale of the Series C Preferred Stock, Settondown
Capital International, Ltd., the Sales Agent for such offering, received a cash
commission, 45 shares of the Company's Series C Preferred Stock, warrants to
purchase 18,750 shares of the Company's Common Stock at $1.50 per share and
warrants to purchase 18,750 shares of the Company's common stock at $1.27 per
share. The shares issuable upon the conversion of Series C Preferred Stock
issued to the Sale Agent, as well as the shares issuable upon the exercise of
the Sales Agent's Warrants, are also being offered for public sale by means of
this Prospectus.
The holders of the Preferred Shares, the Warrants and the Sales Agent
Warrants, to the extent they convert their Preferred Shares into shares of
Common Stock or exercise the Warrants or Sales Agent Warrants, are referred to
in this Prospectus as the "Selling Shareholders". The Company will not receive
any proceeds from the sale of the shares by the Selling Shareholders.
The names of the Selling Shareholders are:
Shares
Which
May Be Shares
Acquired Which
Upon Con- May be Share
version of Acquired Shares to Owner-
Series C Upon Ex- be Sold ship
Shares Preferred ercise of in this After
Name Owned Shares (1) Warrants Offering (4) Offering
- ---------------- -------- ---------- -------- ------------ --------
Tonga Partners, LP -- 454,545 275,000 (2) 729,545 --
Manchester Asset
Management Ltd. -- 227,272 137,500 (2) 364,772 --
Gilston Corporation
Ltd. -- 227,272 137,500 (2) 364,772 --
Augustine Fund, LP -- 227,272 137,500 (2) 364,772 --
HSBC James Capel
Canada, Inc. -- 227,272 137,500 (2) 364,772 --
Settondown Capital
International, Ltd. -- 40,909 37,500 (3) 78,409 --
(1)Represents shares issuable upon the conversion of the Series C Preferred
Stock assuming conversion price of $1.10 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. See "Comparative Share Data".
(2) Represents shares issuable upon the exercise of the Warrants.
(3) Represents shares issuable upon the exercise of the Sales Agent's Warrants.
(4) Assumes all shares owned, or which may be acquired, by the Selling
Shareholders, are sold to the public by means of this Prospectus.
Manner of Sale. The shares of Common Stock owned, or which may be
acquired, by the Selling Shareholders may be offered and sold by means of this
Prospectus from time to time as market conditions permit in the over-the-counter
market, or otherwise, at prices and terms then prevailing or at prices related
to the then-current market price, or in negotiated transactions. These shares
may be sold by one or more of the following methods, without limitation: (a) a
block trade in which a broker or dealer so engaged will attempt to sell the
shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and (d) face-to-face transactions between sellers and
purchasers without a broker/dealer. In effecting sales, brokers or dealers
engaged by the Selling Shareholders may arrange for other brokers or dealers to
participate. Such brokers or dealers may receive commissions or discounts from
Selling Shareholders in amounts to be negotiated.
From time to time one or more of the Selling Shareholders may transfer,
pledge, donate or assign the shares received upon the conversion of the Series C
Preferred Stock (the "Conversion Shares") to lenders or others and each of such
persons will be deemed to be a Selling Shareholder for purposes of this
Prospectus. The number of Conversion Shares beneficially owned by those Selling
Shareholders will decrease as and when they transfer, pledge, donate or assign
the Conversion Shares. The plan of distribution for the Conversion Shares sold
by means of this Prospectus will otherwise remain unchanged, except that the
transferees, pledgees, donees or other successors will be Selling Shareholders
for purposes of this Prospectus.
A Selling Shareholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the Company's
common stock in the course of hedging the positions they assume with such
Selling Shareholder, including, without limitation, in connection with the
distribution of the Company's common stock by such broker-dealers. A Selling
Shareholder may also enter into option or other transactions with broker-dealers
<PAGE>
that involve the delivery of the common stock to the broker-dealers, who may
then resell or otherwise transfer such common stock. A Selling Shareholder may
also loan or pledge the common stock to a broker-dealer and the broker-dealer
may sell the common stock so loaned or upon default may sell or otherwise
transfer the pledged common stock.
Broker-dealers, underwriters or agents participating in the distribution
of the Company's common stock as agents may receive compensation in the form of
commissions, discounts or concessions from the Selling Shareholders and/or
purchasers of the common stock for whom 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 less than or in excess of customary
commissions). Selling Shareholders and any broker-dealers who act in connection
with the sale of common stock hereunder may be deemed to be "Underwriters"
within the meaning of the Securities Act, and any commissions they receive may
be deemed to be underwriting discounts and commissions under the Securities Act.
Neither the Company nor any Selling Shareholder can presently estimate the
amount of such compensation. The Company knows of no existing arrangements
between any Selling Shareholder, any other stockholder, broker, dealer,
underwriter or agent relating to the sale or distribution of the Company's
common stock.
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 the Selling Shareholders
that in the event of a "distribution" of the shares owned by the Selling
Shareholder, such Selling Shareholders, 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 102 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 101 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.
DESCRIPTION OF SECURITIES
Common Stock The Company is authorized to issue 40,000,000 shares of Common
Stock, (the "Common Stock"). Holders of Common Stock are each entitled to cast
one vote for each share held of record on all matters presented to shareholders.
<PAGE>
Cumulative voting is not allowed; hence, the holders of a majority of the
outstanding Common Stock can elect all directors.
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of the
Company's assets after payment of liabilities. The board is not obligated to
declare a dividend. It is not anticipated that dividends will be paid in the
foreseeable future.
Holders of Common Stock do not have preemptive rights to subscribe to
additional shares if issued by the Company. There are no conversion, redemption,
sinking fund or similar provisions regarding the Common Stock. All of the
outstanding shares of Common Stock are fully paid and non-assessable and all of
the shares of Common Stock offered as a component of the Units will be, upon
issuance, fully paid and non-assessable.
Preferred Stock
The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock. The Company's Articles of Incorporation provide that the Board of
Directors has the authority to divide the Preferred Stock into series and,
within the limitations provided by Colorado statute, to fix by resolution the
voting power, designations, preferences, and relative participation, special
rights, and the qualifications, limitations or restrictions of the shares of any
series so established. As the Board of Directors has authority to establish the
terms of, and to issue, the Preferred Stock without shareholder approval, the
Preferred Stock could be issued to defend against any attempted takeover of the
Company.
In April 1995, the Company's directors established the Company's Series A
Preferred Stock and authorized the issuance of up to 50,000 shares of Series A
Preferred Stock as part of this series. Each share of Series A Preferred Stock
is entitled to a dividend at the rate of $1.60 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 A Preferred Stock is entitled to distribution of $20 per share
prior to any distribution to the holders of the Company's Common Stock. Each
share of Series A Preferred Stock is entitled to one vote per share and at any
time after July 1, 1999 is convertible into 0.2 of a share of the Company's
Common Stock. Subsequent to the establishment of the Series A Preferred Stock,
the Company issued 25,250 shares of Series A Preferred Stock to eight persons in
consideration for the termination of their franchises with the Company. As of
January 15, 1999, 16,000 shares of the Series A Preferred Stock had been
converted into shares of the Company's common stock.
In March 1996, the Company's directors established the Company's Series B
Preferred Stock and authorized the issuance of up to 100,000 shares of Series B
Preferred Stock as part of this series. 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 0.25 of a share of the Company's Common Stock. In March 1996
<PAGE>
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. As of January 15, 1999 25,000 shares of the Series B Preferred Stock
had been converted into shares of the Company's common stock.
See "Comparative Share Data" for information concerning the Company's
Series C Preferred Stock.Transfer Agent
Corporate Stock Transfer, Inc., of Denver, Colorado, is the transfer agent
for the Company's Common Stock.
EXPERTS
The financial statements as of 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, 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.
INDEMNIFICATION
The Company's Bylaws authorize indemnification of a director, officer,
employee or agent of the Company against expenses incurred by him in connection
with any action, suit, or proceeding to which he is named a party by reason of
his having acted or served in such capacity, except for liabilities arising from
his own misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent of the Company who was found liable for
misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling the Company pursuant to the foregoing provisions, 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 Act and is
therefore unenforceable.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, 450 5th
Street, N.W., Washington, D.C. 20001, a Registration Statement under the
Securities Act of l933, as amended, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
such securities, reference is made to the Registration Statement and to the
Exhibits filed therewith. Statements contained in this Prospectus as to the
contents of any contract or other documents are summaries which are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an Exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. Copies of
each document may be inspected at the Commission's offices at 450 Fifth Street,
<PAGE>
N.W., Washington, D.C., 20549, and at the Northeast Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048 and the Midwest Regional
Office, Suite 1400, 500 West Madison Street, Chicago, Illinois 60681-2511. This
Registration Statement and the related exhibits may also be inspected at the
Internet Web Site maintained by the Securities and Exchange Commission at
www.sec.gov. Copies may be obtained at the Washington, D.C. office upon payment
of the charges prescribed by the Commission.
No dealer, salesman or other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus. Any information or representation not contained in this Prospectus
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, the securities offered hereby in any state or other jurisdiction to any
person to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the date hereof.
TABLE OF CONTENTS
Page
Prospectus Summary ...................................................
Risk Factors ..........................................................
Comparative Share Data ................................................
Selling Shareholders ..................................................
Description of Securities ............................................
Experts ...............................................................
Indemnification ......................................................
Additional Information ................................................
Common Stock
SIMS COMMUNICATIONS, INC.
PROSPECTUS
<PAGE>
PART II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution
SEC Filing Fee 1,626
Blue Sky Fees and Expenses 2,000
Printing and Engraving Expenses 2,000
Legal Fees and Expenses 20,000
Accounting Fees and Expenses 3,000
Miscellaneous Expenses 1,374
------------
TOTAL $ 30,000
============
All expenses other than the S.E.C. filing fees are estimated.
Item 25. Indemnification of Officers and Directors.
The Delaware General Corporation Law and the Company's Bylaws that the
Company may indemnify any and all of its officers, directors, employees or
agents or former officers, directors, employees or agents, against expenses
actually and necessarily incurred by them, in connection with the defense of any
legal proceeding or threatened legal proceeding, except as to matters in which
such persons shall be determined to not have acted in good faith and in the best
interest of the Company.
Item 16. Exhibits
Exhibits Page Number
1 Underwriting Agreement N/A
3.1 Certificate of Incorporation, (1)
as amended
3.1.1 Amendment to Articles of Incorporation (1)
3.2 Bylaws (l)
4.1 Form of 1993 Incentive Stock Option Plan
and 1993 Non-Statutory Stock Option Plan (2)
4.2 Form of Stock Bonus Plan (3)
4.3 Designation of Series C Preferred Stock (as amended) (4)
5 Opinion of Counsel
<PAGE>
10 Series C Preferred Stock Purchase Agreement,
Escrow Agreement, Registration Rights Agreement (4)
and Form of Warrant
23.1 Consent of Hart and Trinen
23.2 Consent of Ehrhardt Keefe Steiner & Hottman
PC
24. Power of Attorney Included as part of the
Signature Page
(1) Incorporated by reference to the same exhibit filed as part of the Company's
Registration Statement on Form SB-2 (Commission File No.
33-70546-A).
(2) Incorporated by reference, and as same exihibit number, from Registration
Statement on Form SB-2 (Commission File Number 33-70546-A).
(3) Incorporated by reference, and as same exhibit number, from
Amendment No. 1 to Registration Statement on Form SB-2 (Commission File
Number 33-70546-A).
(4) Incorporated by reference, and as same exhibit number, from report on 8-K
dated December 14, 1998.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement.
(i) To include any Prospectus required by Section 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;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement, including
(but not limited to) any addition or deletion of a managing underwriter.
(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.
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act of l933 may be permitted to directors, officers and controlling persons of
the Registrant, 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 of 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
The registrant and each person whose signature appears below hereby
authorizes the agent for service named in this Registration Statement, with full
power to act alone, to file one or more amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as such agent for service deems
appropriate, and the Registrant and each such person hereby appoints such agent
for service as attorney-in-fact, with full power to act alone, to execute in the
name and in behalf of the Registrant and any such person, individually and in
each capacity stated below, any such amendments to this Registration Statement.
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
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on the 25th day of
January, 1999.
SIMS COMMUNICATIONS INC.
By: /s/ Mark Bennett
MARK BENNETT, President
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
Mark Bennett Director January 25, 1999
/s/ Michael Malet
Michael Malet Director January 25, 1999
Chet Howard Director January 25, 1999
/s/ George Pursglove
George Pursglove Director January 25, 1999
Cornelia Eldridge Director January 25, 1999
<PAGE>
EXHIBIT 5
<PAGE>
January 25, 1999
Sims Communications, Inc.
18001 Cowan
Suite C & D
Irvine, CA 92614
Gentlemen:
This letter will constitute an opinion upon the legality of the sale by certain
Selling Shareholders of Sims Communications, Inc., a Delaware corporation ("the
Company"), of up to 3,672,500 shares of Common Stock, all as referred to in the
Registration Statement on Form S-3 filed by the Company with the Securities and
Exchange Commission.
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
was authorized to issue the shares of stock mentioned above and such shares
represent fully paid and non-assessable shares of the Company's Common Stock.
Very truly yours,
HART & TRINEN
William T. Hart
<PAGE>
EXHIBIT 23(a)
<PAGE>
CONSENT OF ATTORNEYS
Reference is made to the Registration Statement of Sims Communications, Inc.,
whereby certain Selling Shareholders propose to sell up to 3,672,500 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
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
William T. Hart
Denver, Colorado
January 25, 1999
<PAGE>
EXHIBIT 23(b)
<PAGE>
INDEPENDENT AUDITORS' CONSENTWe consent to the incorporation by reference in
this Registration Statement of Sims Communications, Inc. on Form S-3 of our
report dated September 15, 1998, appearing in the Annual Report on Form 10-KSB
of Sims Communications, Inc. for the year ended June 30, 1998 and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
January 26, 1999
Ehrhardt Keefe Steiner & Hottman PC
