<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1996.
REGISTRATION NO. 33 -_______
- -------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
TIMELINE, INC.
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
STATE OF WASHINGTON 91-1590734
STATE OR JURISDICTION OF I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION IDENTIFICATION NUMBER
CHARLES R. OSENBAUGH, EXECUTIVE
3055 - 112TH AVENUE N.E., SUITE 106 VICE-PRESIDENT
BELLEVUE, WASHINGTON 98004 TIMELINE, INC.
(206) 822-3140 3055 - 112TH AVENUE N.E., SUITE 106
ADDRESS AND TELEPHONE NUMBER OF BELLEVUE, WASHINGTON 98004
PRINCIPAL EXECUTIVE OFFICES (206) 822-3140
-- AND -- NAME, ADDRESS AND TELEPHONE NUMBER OF
ADDRESS OF PRINCIPAL PLACE OF AGENT FOR SERVICE
BUSINESS
------------------------
COPIES OF ALL COMMUNICATIONS TO THE FOREGOING TO BE SENT TO:
SCOTT T. BELL & WILLIAM A. CARLETON III
CAIRNCROSS & HEMPELMANN, P.S.
701 FIFTH AVENUE, SUITE 7000
SEATTLE, WASHINGTON 98104-7014
(206) 587-0700
------------------------
Approximate date of commencement of proposed sale to the public:
FROM TIME TO TIME 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,
check the following box: . . . . . . . . . . . . . . . . . . . . . . . . [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans,
check the following box: . . . . . . . . . . . . . . . . . . . . . . . . [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration statement
number of the earlier effective registration statement for
the same offering: . . . . . . . . . . . . . . . . . . . . . . . . . . . [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: . . . . . . . . [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box: . . . . . . . . . . . . . . . . . . . . . . . . [ ]
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT
REGISTERED OFFERING AGGREGATE OF
TITLE OF SECURITIES TO BE REGISTERED PRICE PER SHARE OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMON STOCK, PAR VALUE $.01 PER SHARE 557,530 $6.38(1) $3,557,041(1) $1,227
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee;
based on the closing bid price of the Common Stock on the Nasdaq SmallCap
Market on July 15, 1996, pursuant to Rule 457(c).
- ------------------------------------------------------------------------------
This filing consists of three (3) documents. Exhibits Index appears on page 21
of Document 1.
<PAGE>
PROSPECTUS
557,530 SHARES
[LOGO]
COMMON STOCK
This Prospectus relates to a shelf registration of an aggregate of 557,530
shares of Common Stock of Timeline, Inc. ("Timeline," or the "Company"), 521,530
shares of which are being offered for sale by certain of the Company's
shareholders (the "Selling Shareholders"), and 36,000 shares of which may be
issued by the Company upon exercise of an outstanding transferable warrant at an
exercise price of $5.88 per share (the "Warrant"). The Company will not receive
any of the proceeds from the sale of shares offered by the Selling Shareholders.
No assurances can be given that the Warrant or any portion thereof will be
exercised. See "Selling Shareholders and Plan of Distribution."
The Company's Common Stock is traded on the Nasdaq SmallCap Market under
the symbol "TMLN" and is listed on the Boston Stock Exchange under the same
symbol. On July 11, 1996, the last sale price of the Common Stock, as reported
on the Nasdaq SmallCap Market, was $6.75 per share.
____________
THE COMMON STOCK OFFERED HEREBY INVOLVES 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 SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The shares of Common Stock offered by the Selling Shareholders generally
may be offered for sale from time to time in the over-the-counter market or on
the Boston Stock Exchange in ordinary brokerage transactions at market prices
prevailing at the time of sale or in negotiated transactions at prices related
to prevailing market prices. Brokers or dealers will receive commissions or
discounts from Selling Shareholders in amounts to be negotiated prior to sale.
Any brokers or dealers participating in the offering of any such shares may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and the compensation received by them may be
deemed to be underwriting commissions or discounts. See "Selling Shareholders
and Plan of Distribution."
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied, at prescribed
rates, at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically. The address of that site is http://www.sec.gov. The Company's
Common Stock is traded on the Nasdaq SmallCap Market and the Boston Stock
Exchange, and such reports and other information can also be inspected at the
office of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006 and at
the office of the Boston Stock Exchange, One Boston Place, Boston, MA 02108.
The Company has filed with the Commission a registration statement under
the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all the information set forth in the registration
statement and the exhibits thereto, to which reference is hereby made.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the registration
statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement is qualified in its entirety by
such reference. Any interested parties may inspect the registration statement,
without charge, at the public reference facilities of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, and any interested parties may obtain
copies of all or any part of the registration statement from the Commission at
prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the Company with
the Commission are incorporated by reference into this Prospectus:
1. The Company's Annual Report on Form 10-KSB for the year ended March
31, 1996.
2. The description of the Company's Common Stock contained in its
Registration Statement pursuant to Section 12 of the Exchange Act, as
amended from time to time.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference into this Prospectus and made a part hereof from the date of filing of
such documents.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request, a copy of any and
all documents incorporated by reference in this Prospectus, other than exhibits
to such documents, unless such exhibits are specifically incorporated by
reference in such documents. Requests should be directed to Ms. Paula McGee,
Investor Relations, at Timeline, Inc., 3055 - 112th Avenue NE, Suite 106,
Bellevue, WA 98004, or by telephone at (206) 822-3140.
2
<PAGE>
THE COMPANY
The Company develops, markets and supports enterprise-wide financial
management and reporting software. Timeline's software products automatically
access and distribute business information with full accounting control.
Although the Company has products which permit the processing of transactions,
Timeline's marketing and development strategy is focused on products which
report accounting data in meaningful and flexible formats. The Company believes
that these reporting products allow end users to gather and disseminate business
information throughout the enterprise while the enterprise maintains maximum
flexibility in determining the types of transaction processing systems it will
use.
In May 1994, following 17 years of marketing products designed solely for
use in the Digital Equipment Corporation ("Digital") mainframe and minicomputer
environment, the Company introduced its first client/server product, OPEN
GENERAL LEDGER-TM- ("OGL-TM-"). OGL-TM- incorporates technology designed to
gather data from multiple operating systems and hardware platforms, old and new,
for translation into a Microsoft Corporation ("Microsoft") client/server
environment, and to process transactions within the Microsoft operating system.
Refinements to this technology have resulted in the Company's new METAVIEW
product line, which emphasizes financial reporting and management functions,
rather than transaction processing.
Timeline's primary product family, METAVIEW, consists of client/server
software applications based on Microsoft Windows/Windows NT-TM- and Microsoft
Office operating systems and products from Microsoft Corporation. Timeline's
METAVIEW products allow end users to effect enterprise-wide reporting in the
user-friendly Microsoft desktop environment, which is currently utilized by many
enterprises. The relational accounting architecture embodied in METAVIEW adapts
to existing accounting systems and other enterprise data that may or may not
reside in a Microsoft environment.
In addition to client/server products, the Company develops, markets and
supports a fully integrated line of host-based accounting applications that
operate on VAX-Registered Trademark- and AXP-Registered Trademark- computer
systems from Digital Equipment Corporation. This product line represents a
continuation of Timeline's historical core business and provides ongoing
maintenance, license and consulting revenue. Products in this market include
General Ledger, Accounts Payable, Accounts Receivable, Digibase, Digicalc II-
Registered Trademark-, Fixed Assets, Inventory, Purchase Order and Association
Management.
The Company's principal executive offices are located at 3055 - 112th
Avenue NE, Suite 106, Bellevue, Washington 98004, and its telephone number is
(206) 822-3140.
3
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN AND INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER
THE FOLLOWING RISK FACTORS IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED
HEREBY.
ACCUMULATED DEFICIT; RECENT OPERATING RESULTS
The Company has demonstrated an historical inability to operate profitably.
As of March 31, 1996, the Company had an accumulated deficit of approximately
$5,089,153. During the fiscal year then ended, the Company experienced a net
loss of $1,422,830. In order to achieve stable profitability, the Company must
increase sales of its existing client/server products, develop new products, and
control its expenses. There can be no assurance the Company will meet any of
these objectives or ever achieve sustained profitability.
LIMITED PRODUCT LINE; UNCERTAINTY OF MARKET ACCEPTANCE
Until recently, the Company derived substantially all of its net
revenues from sales of host-based accounting applications operating on
Digital systems. In May 1994 and April 1995, respectively, the Company
introduced its first two client/server products for general market release.
In June 1996, in connection with an agreement between the Company and
Microsoft Corporation, the Company released MICROSOFT-Registered Trademark-
SMALL BUSINESS FINANCIAL MANAGER, a financial reporting system for use in the
"small-office, home-office" (or "SOHO") market. Although the Company intends
to continue to support customers on Digital systems, the Company's future
will depend upon the successful development, marketing and sales of METAVIEW,
OPEN GENERAL LEDGER-TM-, METAVIEW ANALYST-TM-, METAVIEW ANALYST SERVER-TM-,
MICROSOFT-Registered Trademark- SMALL BUSINESS FINANCIAL MANAGER, and other
new products that operate on a client/server platform.
There can be no assurance the Company will achieve or sustain significant
sales growth for its actual, scheduled or anticipated client/server products,
that enhancements to such products and other applications for the client/server
environment can be successfully developed, that demand for client/server
products will continue to grow or be sustained, or that the Company's
client/server products will successfully compete with the products of others. To
the extent demand for the Company's client/server products does not develop due
to competition, product performance, customer assessment of the Company's
financial resources and expertise, technological change or other factors, the
Company's operations will be adversely affected.
RELIANCE ON MICROSOFT
In furtherance of its long-term client/server product strategy, the Company
has developed all of its client/server products to function in the Microsoft
Windows and/or Windows NT environments, and anticipates future products will
also be designed for use in these Microsoft environments. In light of this
product strategy, and because the Company expects that its client/server product
line and related enhancements will account for substantially all new license
revenues for the foreseeable future, sales of the Company's new products would
be materially and adversely affected by market developments adverse to Microsoft
Windows and/or Windows NT. The success of the Company's strategy of developing
products using the Microsoft Windows and/or Windows NT environments is
substantially dependent on its ability to gain timely access to, and to develop
expertise in, current and future developments by Microsoft, of which there can
be no assurance. Moreover, the abandonment by
4
<PAGE>
Microsoft of its current operating system product line or strategy would
materially and adversely affect the Company.
FLUCTUATIONS IN PERFORMANCE
The Company's results of operations have historically varied substantially
from period to period (quarterly or otherwise), and the Company expects they
will continue to do so. The timing and amount of the Company's net revenues are
dependent upon a number of factors, such as the size and timing of customer
orders or license agreements, the timing of the introduction and customer
acceptance of new products or product enhancements by the Company or its
competitors, changes in pricing policies by the Company or its competitors, and
changes in general economic conditions.
Recently, the Company's operating and other expenses have increased
significantly. Since its initial public offering in January 1995, the Company
has made significant expenditures to enhance its sales and marketing and
research and development activities, and general and administrative expenses
have increased. The Company may be unable to reduce these expenses quickly if
revenues are less than expected. As a result, variations in timing of revenues
can cause significant variations in periodic results of operations. The Company
does not take any measures specifically designed to limit fluctuations in the
Company's periodic results of operations. There can be no assurance the Company
will be profitable on a quarter-to-quarter or any other basis in the future.
FUTURE CAPITAL NEEDS
The Company's net working capital at March 31, 1996 was approximately
$544,000, a reduction of approximately $1,704,000 from March 31, 1995. For the
year ended March 31, 1996, operating activities generated a cash flow deficiency
of approximately $1,553,000, while investing and financing activities generated
positive cash flow of approximately $1,454,000. The Company will realize no
proceeds from the sale of Common Stock to be sold by the Selling Shareholders.
Moreover, there can be no assurance that the Warrant will be exercised and that
the Company will realize any proceeds from such exercise. The Company's capital
needs in the future will depend upon factors such as the market acceptance of
its existing client/server products and any other new products developed by the
Company, the cost of increasing the Company's sales and marketing activities and
the progress of the Company's research and development activities, none of which
can be predicted with certainty. There can be no assurance the Company will not
require substantial additional financing in the future. The Company has no
commitments or arrangements for such financing, and there can be no assurance
any additional financing, if required, will be available to the Company on
acceptable terms, if at all. The inability to obtain required financing could
have a material adverse effect on the Company's results of operations, and could
cause the Company to significantly reduce or suspend its operations, seek a
merger partner or sell additional securities on terms which are highly dilutive
to existing investors.
TECHNOLOGICAL CHANGE AND UNCERTAINTY
The market for the Company's products is characterized by rapidly changing
technology, evolving industry standards, changes in customer needs and frequent
new product introductions. The Company's future success will depend on its
ability to enhance its current products and develop new products on a timely and
cost-effective basis, to meet changing customer needs and to respond to emerging
industry standards and other technological changes. In particular, the Company's
products must maintain compatibility with existing and future Microsoft Windows
and Windows NT operating environments, local area network operating systems, and
other industry-standard database systems, and
5
<PAGE>
accepted personal computer, peripheral, communications interface and other
hardware standards. Any failure by the Company to anticipate or to respond
promptly and adequately to changes in technology and customer preferences, or
any significant delays in product development or introduction, would have a
material adverse effect on the Company's results of operations. There can be
no assurance the Company will be successful in developing new products or
enhancing its existing products on a timely basis, or that such new products
or product enhancements will achieve market acceptance.
Software products as complex as those offered by the Company may contain
undetected errors or failures when first introduced or as new versions are
released. There can be no assurance that, despite significant testing by the
Company and by current and potential customers, errors will not be found in new
products after commencement of commercial shipments, resulting in loss of or
delay in market acceptance. Furthermore, from time to time the Company and
others may announce new products, capabilities or technologies which have the
potential to replace or shorten life cycles of the Company's existing products.
There can be no assurance that announcements of currently planned or other new
products will not cause customers to defer purchasing existing Company products.
Delays or difficulties associated with new product introductions or product
enhancements could have a material adverse effect on the Company's results of
operations.
COMPETITION
The business information software market is highly competitive. Management
believes the primary products in competition with OPEN GENERAL LEDGER-TM- are
products provided by IMRS, Inc. and Comshare, Inc., and the primary products in
competition with various products of the METAVIEW family are client/server
products from FRX and financial reporting modules from various accounting
software vendors such as Platinum Software Corporation, Computron Technologies
Corp., and various IBM- or UNIX-based vendors. The Company also expects to face
competition with respect to those products it is developing and has scheduled
for release. In addition, because OPEN GENERAL LEDGER-TM- is a complete general
ledger product, it competes in large, complex general ledger environments with
products provided by PeopleSoft Inc., SAP America Inc., Dun & Bradstreet
Software, Inc., and Oracle Corporation, among others, and in the mid-range
client/server general ledger market with products provided by Platinum,
Computron, and various IBM- or UNIX-based vendors. In the host-based financial
and managerial accounting markets, the Company's various products designed for
use on Digital operating systems compete with Digital-based products from Ross
Systems Inc., Dun & Bradstreet Software, Inc., and Oracle Corporation, among
others. Competition for the Company's products that operate on host-based
systems also includes a number of vendors with products that run on UNIX or IBM,
rather than Digital, operating systems.
Most of the Company's competitors have significantly greater financial,
technical, sales, marketing and other resources, as well as greater name
recognition and larger installed bases, than the Company. Because there are
minimal barriers to entry into the software market, the Company believes sources
of competition will continue to proliferate. The market for the Company's
products is characterized by significant price competition, and the Company
expects it will face increasing pricing pressures. There can be no assurance the
Company will be able to maintain its historic pricing structure, and an
inability to do so would adversely affect the Company's results of operations.
RELIANCE ON DISTRIBUTORS
Although the Company intends to continue to expand its internal direct
sales and marketing staff, the Company expects to rely increasingly on
distributors for sales of its products. The Company's
6
<PAGE>
agreements with its distributors are not exclusive, may be terminated by
either party without cause, and generally do not impose minimum purchase
requirements. Some of the Company's distributors carry competing product lines.
The effectiveness of distributors depends in part on their continued viability
and financial stability, which, in turn, depends in part on the economic
health of the software industry. There can be no assurance distributors will
be able to market the Company's products effectively, or that any existing
distributor will continue to represent the Company's products. The inability
to recruit, or the loss of, important distributors could adversely affect the
Company's results of operations.
The Company also expects to rely increasingly on distributors to support
its products. There can be no assurance, however, that the Company will be able
to attract distributors qualified to provide timely and cost-effective customer
support or service. Any deficiencies in the service or support provided by such
entities could have a material adverse effect on the Company's results of
operations.
DEPENDENCE ON KEY PERSONNEL; MANAGEMENT OF GROWTH
The Company's success depends to a significant extent on the continued
contributions of several management personnel, in particular John Calahan, the
Company's Chief Executive Officer, and Charles Osenbaugh, the Company's
Executive Vice President and Chief Financial Officer. The loss of the services
of these key persons would have a material adverse effect on the Company. The
Company currently maintains $1 million of key man insurance on the life of Mr.
Calahan. The Company has also entered into an employment agreement with Mr.
Calahan.
The Company's success also depends in part on its ability to attract and
retain qualified professional, technical, managerial and marketing personnel.
Competition for such personnel in the software industry is intense, and there
can be no assurance the Company will be successful in attracting and retaining
the personnel it requires to conduct its operations successfully. The Company's
results of operations could be adversely affected if the Company were unable to
attract, hire, train and manage these personnel, or if revenues failed to
increase at a rate sufficient to absorb the resulting increase in expenses.
The Company anticipates that planned growth could place a significant
strain on the Company's management and other resources. The ability of the
Company to manage and sustain growth will depend in part on the ability of its
officers and key personnel to manage growth successfully through the
implementation of appropriate management, operational and financial systems and
controls.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company relies on a combination of copyright, trademark and trade
secret laws, patents, confidentiality procedures and contractual provisions to
protect its proprietary rights. The Company seeks to protect its software,
documentation and other written materials under trade secret and copyright laws,
which afford only limited protection. The Company has received Notice of
Issuance by the U.S. Patent Office of one patent, and one other patent
application is pending. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information the Company regards as proprietary.
Policing unauthorized use of the Company's products is difficult, and although
the Company is unable to determine the extent, if any, to which piracy of its
software products currently exists, it can be expected to occur in the future.
In addition, the laws of some foreign countries do not protect proprietary
rights to the same extent as do the laws of the U.S. There can be no assurance
proprietary protections will be adequate or that the
7
<PAGE>
Company's competitors will not independently develop similar technology. The
Company has not obtained an opinion of counsel as to the validity of its
proprietary rights.
No claims have been made against the Company for infringement of
proprietary rights of third parties. There can be no assurance, however, that
third parties will not assert infringement claims against the Company in the
future. As the number of software products in the industry increases and the
functionality of these products further overlaps, the Company believes software
programs will increasingly become subject to infringement claims. The cost of
responding to any such claim may be substantial, whether or not the assertion is
valid.
INTERNATIONAL OPERATIONS
Historical net revenues attributable to licenses made outside the U.S. have
been relatively insignificant. The Company anticipates, however, international
licenses will account for a significant portion of its net revenues in the
future. The Company's international licenses are currently denominated in U.S.
currency. An increase in the value of the U.S. dollar relative to foreign
currencies could make the Company's products less competitive in those markets.
The Company does not currently engage in foreign currency hedging transactions,
although it may implement such transactions in the future. In addition, foreign
countries may impose limitations on the amount of currency which may be
withdrawn from such countries, thereby adversely affecting the Company's
liquidity and geographic market scope.
CONTROL BY MANAGEMENT
As of July 11, 1996, the directors and officers of the Company owned
approximately 41% of the outstanding Common Stock outstanding. As a result,
these shareholders, acting together, are and will continue to be able to
exercise significant influence over all matters requiring shareholder approval,
including the election of directors and the approval of significant corporate
transactions.
EXERCISE OF WARRANTS AND OPTIONS
As of June 30, 1996, options and warrants to purchase an aggregate of
1,628,580 shares of Common Stock were outstanding, including 457,455 shares
issuable upon the exercise of options and warrants granted to officers,
directors and employees of the Company, and also including an additional (a)
71,125 shares issuable upon exercise of an outstanding warrant (the "Unit
Warrant") held by H.J. Meyers & Co., Inc. and/or certain of its affiliates
("Meyers"), (b) 71,125 shares issuable upon exercise of 71,125 Redeemable
Common Stock Purchase Warrants underlying the Unit Warrant (the "Underlying
Warrants"), (c) 28,875 share issuable upon exercise of another outstanding
warrant held by Meyers (the "Meyers Share Warrant"), and (d) 1,000,000 shares
issuable upon exercise of 1,000,000 outstanding Redeemable Common Stock
Purchase Warrants held by the public (the "Public Warrants"). (The Unit
Warrant, Underlying Warrants, Meyers Share Warrant and Public Warrants are
collectively referred to as the "Warrants.").
The Unit Warrant and the Meyers Share Warrant were issued in January 1995
to Meyers' predecessor in connection with its participation, as the
representative of the underwriters, in the Company's initial public offering.
The Public Warrants were issued to the public in connection with such offering.
The Unit Warrant, the Meyers Share Warrant and the Public Warrants are all
currently exercisable, provided that a current prospectus is in effect, subject
to compliance with applicable state securities laws. The Underlying Warrants,
when issued upon exercise of the Unit Warrant, will be substantively identical
to the Public Warrants and similarly exercisable. Shares of Common Stock and
8
<PAGE>
Underlying Warrants constituting Units will be immediately detachable and
separately transferable upon exercise of the Unit Warrant. Shares of Common
Stock and/or Underlying Warrants issued upon the exercise of Warrants will be
freely tradeable by persons other than affiliates of the Company.
The Unit Warrant entitles the registered holder thereof to purchase, at
any time or from time to time on or before January 17, 2000, up to 71,125
Units at a price of $6.00 per Unit, each Unit consisting of one share of
Common Stock and one Redeemable Common Stock Purchase Warrant. The Meyers
Share Warrant entitles the registered holder thereof to purchase, at any time
or from time to time on or before January 17, 2000, up to 28,875 shares of
Common Stock at a price of $6.00 per share. Each Public Warrant entitles and,
when issued, each Underlying Warrant will entitle the registered holder
thereof to purchase, at any time on or before January 17, 2000, one share of
Common Stock at a price of $6.25. The Public Warrants are and, when issued,
the Underlying Warrants will be subject to redemption by the Company at a
price of $.05 per Public or Underlying Warrant, on 30 days' prior written
notice, if the closing bid price of the Common Stock, as reported on Nasdaq
for 20 consecutive trading days ending within 15 days of the notice of
redemption, averages in excess of 160% of the then current exercise price per
Public or Underlying Warrant. The exercise price of, and the number of
securities subject to, each Warrant are subject to adjustment under certain
circumstances.
Holders of options and warrants have the opportunity to profit from a
rise in the market price of the Company's Common Stock, if any, without
assuming the risk of ownership. The existence of such options and warrants
may adversely affect the terms under which the Company could obtain
additional equity capital. The exercise of these warrants and options likely
will affect the market price of the Common Stock. In addition, the Company
has agreed it will register under federal and state securities laws the Unit
Warrant and the Meyers Share Warrant, and the securities issuable under such
warrants, under certain circumstances. Exercise of these registration rights
could involve substantial expense to the Company at a time when it could not
afford such expenditures.
SHARES ELIGIBLE FOR FUTURE SALE; OUTSTANDING REGISTRATION RIGHTS
Sales of a substantial number of shares of the Company's Common Stock in
the public market could adversely affect the market price for the Common
Stock. The shares of Common Stock issued upon exercise of the Warrants will
be eligible for sale in the public market without restriction under the
Securities Act, except for those shares owned by "affiliates" (as defined in
Rule 144 promulgated under the Securities Act), whose rights to sell will be
subject to certain limitations under Rule 144. Of the approximate 3.1 million
shares of Common Stock outstanding as of the date of this Prospectus,
approximately 1.8 million shares are currently eligible for sale in the
public market without restriction, and substantially all of the remaining
shares are eligible for sale in the public market subject to compliance with
Rule 144 or Rule 701 promulgated under Securities Act.
Notwithstanding these rights to resell, holders of certain shares of
Common Stock currently outstanding and outstanding warrants and options to
purchase shares of Common Stock are subject to lock-up agreements pursuant to
which they have agreed not to sell or otherwise dispose of any outstanding
shares, or shares subject to outstanding options or warrants, without the
prior written consent of Meyers. With respect to approximately 1.1 million
issued and outstanding shares, and approximately 370,000 shares subject to
options and warrants, held by such persons, the lock-up period expires on
January 18, 1997. With respect to approximately 197,000 shares held by such
persons, the lock-up period expires on July 18, 1996. After expiration of the
relevant lock-up period, the affected shares will be eligible for sale, in most
cases subject to the requirements of Rule 144 or Rule 701.
9
<PAGE>
The Company registered, on May 1, 1996, approximately 368,000 shares of
Common Stock issuable pursuant to the exercise of outstanding options and
options to be granted under the Company's stock option plans in the future.
Registered shares underlying such options and warrants were eligible for sale in
the public market commencing 20 days from the date the Company registered such
shares.
In addition, holders of an aggregate of approximately 569,000 shares of
Common Stock currently outstanding have certain demand or "piggyback" rights to
register their shares under the Securities Act. To the extent such demand
registration rights are exercised, Meyers has indicated to the Company that it
will waive the lock-up periods applicable to holders exercising such rights.
Other than with respect to approximately 48,000 shares with demand registration
rights, the Company knows of no plan, arrangement, agreement or intention on the
part of any holder of the Company's capital stock (whether currently outstanding
or subject to outstanding options and warrants) to seek Meyers' consent to
release lock-up agreements. Meyers has informed the Company that its general
policy with respect to granting such consent is to consider, at the time of
request of such consent, the current and future business prospects of the
particular company to which the request relates, and the market for such
company's securities, all on a case-by-case basis.
POSSIBLE LIMITATIONS ON TAX NET OPERATING LOSS CARRYFORWARDS
Prior to its initial public offering in January 1995, the Company had
accumulated tax net operating loss carryforwards of approximately $1,700,000 and
tax credit carryforwards of approximately $185,000. Due to the change in
ownership experienced by the Company as a consequence of such offering, the
amount of net operating loss carryforward available to be used in any given year
may be limited under Section 382 of the Internal Revenue Code of 1986, as
amended. The effect of this limitation, under certain circumstances, may result
in a partial delay over five years in the Company realizing the benefit of the
entire tax loss carryforward. The annual limitation is currently estimated to be
$375,000 per year.
POSSIBLE ILLIQUIDITY OF TRADING MARKETS
The Common Stock is listed for trading on the Nasdaq SmallCap Market. If
the Company should experience significant or prolonged losses from operations,
it may be unable to maintain the standards for continued quotation on the Nasdaq
SmallCap Market. These standards require the Company to maintain total assets of
at least $2 million and capital and surplus of at least $1 million ($2 million
should the minimum bid price of the Common Stock fall below $1.00 per share, in
which event the market value of the public float would have to equal or exceed
$1 million). In addition, the Company's Common Stock must be publicly held by at
least 300 shareholders owning at least 100,000 shares with a minimum market
value of $200,000. If these standards are not maintained, the Common Stock could
be subject to removal from the Nasdaq SmallCap Market. Trading, if any, in the
securities would thereafter be conducted in the over-the-counter market on an
electronic bulletin board established for securities that do not meet the Nasdaq
SmallCap Market listing requirements or in what are commonly referred to as the
"pink sheets." As a result, an investor would find it more difficult to dispose
of, or to obtain accurate quotations as to the price of, the Company's
securities.
The Commission has adopted regulations which generally define a "penny
stock" to be any equity security that is not quoted on Nasdaq and that has a
price (as therein defined) less than $5.00 per share, subject to certain
exceptions. If any of the Company's securities were removed from the Nasdaq
system, such securities may be deemed "penny stock." Various rules promulgated
under the Exchange Act impose certain "sales practice requirements" on broker-
dealers who sell such securities in
10
<PAGE>
nonexempt transactions, I.E., to persons other than established customers and
institutional "accredited investors." In particular, a broker-dealer must
make a special suitability determination for the purchaser and have received
the purchaser's written consent to the transaction prior to a nonexempt sale.
In addition, prior to any nonexempt transaction by a broker-dealer
involving a penny stock, the rules require delivery of a risk disclosure
document relating to the penny stock market. Disclosure is also required to be
made about compensation payable to both the broker-dealer and the registered
representative and current quotations for the securities. Monthly statements are
required to be sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny stocks. Other
restrictions may also apply.
The foregoing required penny stock restrictions will not apply to the
Company's securities for so long as such securities are listed on Nasdaq or meet
certain other restrictive criteria. There can be no assurance that the Company's
securities will qualify for exemption from the penny stock restrictions. If any
of the Company's securities were subject to the rules on penny stocks, the
market liquidity for such securities could be materially and adversely affected.
The Common Stock is also listed for trading on the Boston Stock Exchange.
If the Company were to experience significant or prolonged losses, however, it
may be unable to maintain the standards for continued listing on the Boston
Stock Exchange. As a result, an investor would find it more difficult to dispose
of, or to obtain accurate quotations for, the Company's securities.
EFFECT OF ANTITAKEOVER PROVISIONS
Certain provisions of Washington law and the Company's Articles of
Incorporation and Bylaws could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. Such provisions could limit the price that
certain investors might be willing to pay in the future for securities of the
Company. Certain of such provisions allow the Company to issue Preferred Stock,
without shareholder approval, with rights senior to those of the Common Stock
and to impose various procedural and other requirements which could make it more
difficult for shareholders to effect certain corporation actions.
USE OF PROCEEDS
The proceeds to the Company from the issuance of Common Stock upon the
exercise of the Warrant is estimated to be approximately $211,680. The Company
expects to use such proceeds for general working capital. The Company will not
receive any proceeds from the sale of the shares of Common Stock offered by the
Selling Shareholders. The Company will bear responsibility for expenses incurred
in connection with the registration of all shares of Common Stock offered
hereby. See "Selling Shareholders and Plan of Distribution."
11
<PAGE>
SELLING SHAREHOLDERS AND PLAN OF DISTRIBUTION
The 36,000 shares of Common Stock being offered by the Company may be issued
at the exercise price of $5.88 per share pursuant to the Warrant issued by
the Company to Pacific Crest Securities in connection with a private
placement completed in May 1996. The Warrant is exercisable for through May,
2001, and may be assigned in whole or in part by Pacific Crest Securities to
any of its officers or employees. The exercise price of, and the number of
shares subject to, the Warrant are subject to adjustment in certain
circumstances, such as, for example, a stock split, stock dividend or
reclassification of the Company's Common Stock. The Company will be
responsible for expenses incurred in connection with the registration of such
shares. The per share exercise price of the Warrant was determined in
negotiation with Pacific Crest Securities in May 1996.
The 521,530 shares of Common Stock being offered for the account of the
Selling Shareholders were purchased by the Selling Shareholders from the
Company in the private placement completed in May 1996. The Company will not
receive any of the proceeds from the sale of shares by the Selling
Shareholders, but will be responsible for expenses incurred in connection
with the registration of such shares. The Selling Shareholders will be
responsible for all selling commissions, underwriting fees and stock transfer
taxes applicable to the sale of shares pursuant to this Prospectus.
The shares of Common Stock offered hereby by the Selling Shareholders
may be sold from time to time by the Selling Shareholders or by pledgees,
donees, transferees or other successors-in-interest of the Selling
Shareholders. Such sales may be made on any exchange on which the Common
Stock is listed (the Common Stock is currently listed on the Boston Stock
Exchange, and the Company currently has no intention to list the Common Stock
on any other exchange), in the over-the-counter market or otherwise, at
prices and on terms then prevailing, at prices related to the then current
market price or in negotiated transactions. The shares of Common Stock
offered by the Selling Shareholders may be sold by any one or more of the
following methods: (a) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; (b) purchases by a broker or dealer as
principal and resales by such broker or dealer for its account pursuant to
this Prospectus; and (c) block trades or exchange distributions in accordance
with the rules of the applicable exchange. In addition, any such shares which
qualify for sale pursuant to Rule 144 under the Securities Act may be sold
under Rule 144 rather than pursuant to this Prospectus. In effecting sales,
brokers or dealers engaged by the Selling Shareholders may arrange for other
brokers or dealers to participate. Brokers or dealers will receive
commissions or discounts from Selling Shareholders in amounts to be
negotiated prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within
the meaning of the Securities Act, and the compensation received by them may
be deemed to be underwriting commissions or discounts.
Upon the Company being notified by a Selling Shareholder that any
material arrangement has been entered into with a broker or dealer for the
sale of any shares covered by this Prospectus, a prospectus supplement, if
required, will be distributed which will set forth the name of each such
Selling Shareholder and of the participating brokers or dealers, the number
of shares involved, the price at which such shares were sold and the
commissions paid or discounts or concessions allowed to such brokers or
dealers. In certain jurisdictions, the shares of Common Stock offered by the
Selling Shareholders may be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers.
Under the Exchange Act, any person engaged in a distribution of shares
of Common Stock offered by this Prospectus may not simultaneously engage in
market making activities with respect to the Common Stock during the
applicable "cooling off" period prior to the commencement of such
12
<PAGE>
distribution. In addition, and without limiting the foregoing, each Selling
Shareholder will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including without limitation Rules
10b-6 and 10b-7, which provisions may limit the timing of purchases and sales
of Common Stock by the Selling Shareholders. The Company has informed each
Selling Shareholder in writing that he or she is subject to the applicable
provisions of the Exchange Act and the rules and regulations thereunder. The
Company will inform Nasdaq, the Boston Stock Exchange and each of the Selling
Shareholders when the distribution of shares in this offering is completed.
None of the Selling Shareholders has had a position, office or other
material relationship with the Company within the past three years.
The following table sets forth certain information, as of July 11, 1996,
with respect to each of the Selling Shareholders. (Percentage holdings
denoted with an asterisk indicate less than 1%.)
13
<PAGE>
NUMBER OF PERCENTAGE OF
SHARES HELD CLASS HELD NUMBER OF
PRIOR TO PRIOR TO SHARES HELD
NAME OFFERING OFFERING AFTER OFFERING
---- --------- -------- -------------
Pacific Capital 5,000 * --
JDN Partners LP 30,000 * --
Eli Hazen 15,306 * --
Eli Hazen, TTEE, Early Warning
Designs 20,408 * --
Guarantee & Trust Co., TTEE,
Michael Tennant SEP IRA 12,000 * --
Paul Upcraft 10,000 * --
Paul Eisen 25,510 * --
Ronnie Stern 15,000 * --
Michael Bass 3,000 * --
David F. Bellet 10,000 * --
J. Boolbol 15,000 * --
Hare and Company, FBO WCM
JMT Small Cap Equity Stock Fund 21,600 * --
Hare and Company, FBO WCM
JMT Diversified Small Cap 8,400 * --
Fund
Victor Hazen 15,306 * --
MIKO Ltd. Defined Benefit
Account 15,000 * --
Judah Roth 15,000 * --
Susan Slotnick 4,000 * --
Howard Slotnick 15,000 * --
Robert T. Wilden & Diane M.
Wilden 10,000 * --
Thomas N. Boate, Jr. 5,000 * --
Ardys E. Braidwood 15,000 * --
Jeffrey L. and Ilona Crass 7,000 * --
Benjamin Gilchrist 25,000 * --
William L. Hebert 10,000 * --
Guarantee & Trust Co. TTEE,
Duane Hann M R-IRA 15,000 * --
James A. Larpenteur Jr 6,000 * --
Portland Partners, an Oregon
Limited Partnership 30,000 * --
William L. Wiprud, TTEE,
William L. Wiprud
Defined Benefit Trust 10,000 * --
Pacific University Growth Fund 35,000 1.1% --
Informed Investors Group 20,000 * --
Tennants & Associates, L.L.C. 10,000 * --
John J. Tennant, TTEE, Tennant
Related Cos. Trust 30,000 * --
Lorne House Nominees Ltd. 35,000 1.1% --
Craig Rosenthal 3,000 * --
TOTALS 521,530 16.6% --
14
<PAGE>
INDEMNIFICATION
The Company's Articles of Incorporation and Bylaws contain provisions
limiting the personal liability of directors and indemnifying directors,
officers, employees and agents for actions, in their capacity as such, to the
fullest extent permitted by law. The Company has also entered into
indemnification agreements with its directors and executive officers. Each of
the foregoing may include indemnification for liabilities under the
Securities Act. Insofar as indemnification for liabilities under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company, the Company has been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
LEGAL MATTERS
Certain legal matters with respect to the registration of the shares of
Common Stock offered hereby are being passed upon for the Company by
Cairncross & Hempelmann, Seattle, Washington. Cairncross & Hempelmann has not
represented any of the Selling Shareholders in connection with such
registration.
EXPERTS
The financial statements of the Company incorporated by reference from
the Company's Annual Report (Form 10-KSB) for the year ended March 31, 1996
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report thereon included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
15
<PAGE>
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. THE DELIVERY OF THIS PROSPECTUS,
UNDER ANY CIRCUMSTANCES, AT ANY TIME, DOES NOT
IMPLY THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
__________________
Page
----
Available Information............................. 2
Incorporation of Certain Documents by Reference... 2
The Company....................................... 3
Risk Factors...................................... 4
Use of Proceeds................................... 11
Selling Shareholders and Plan of Distribution..... 12
Indemnification................................... 15
Legal Matters..................................... 15
Experts........................................... 15
[LOGO]
521,530 SHARES
COMMON STOCK
_______________
PROSPECTUS
_______________
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the estimated expenses payable by
Registrant in connection with this registration statement on Form S-3:
S.E.C. filing fee $ 1,298
Printing and engraving expenses ........... 3,000
Accounting fees and expenses .............. 2,000
Legal fees and expenses ................... 8,000
Blue Sky filing fees and expenses ......... 8,000
Miscellaneous expenses .................... 2,702
--------
TOTAL .................................. $ 25,000
--------
--------
ITEM 15.INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 23B.08.320 of the Washington Business Corporation Act (the
"WBCA") authorizes a corporation to limit a director's liability to the
corporation or its shareholders for monetary damages for acts or omissions as
a director, except in certain circumstances involving intentional misconduct,
self dealing or illegal corporate loans or distributions, or any transaction
from which the director personally receives a benefit in money, property or
services to which the director is not legally entitled. Article 8 of
Registrant's Articles of Incorporation, as amended ("Registrant's Articles")
contains provisions implementing, to the fullest extent permitted by
Washington law, such limitations on a director's liability to Registrant and
its shareholders. Any amendment or repeal of such provisions may not
adversely affect any right or protection of a director of Registrant for or
with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
Sections 23B.08.500 through 23B.08.600 of the WBCA authorize a court to
award, or a corporation's board of directors to grant, indemnification to
directors and officers on terms sufficiently broad to permit indemnification
under certain circumstances for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"). Under the WBCA, a corporation
has the power to indemnify a director or officer made a party to a
proceeding, or advance or reimburse expenses incurred in a proceeding, under
any circumstances, except that no such indemnification shall be allowed on
account of: (i) acts or omissions of a director or officer finally adjudged
to be intentional misconduct or a knowing violation of the law; (ii) conduct
of a director or officer finally adjudged to be an unlawful distribution; or
(iii) any transaction with respect to which it was finally adjudged that such
director or officer personally received a benefit in money, property or
services to which the director or officer was not legally entitled. Article
9 of Registrant's Articles provides for indemnification of Registrant's
directors and officers, including those who serve at the request of
Registrant as trustees with respect to employee benefit plans, to the maximum
extent permitted by Washington law.
Registrant has entered or may enter into separate indemnification
agreements with its directors and officers, including those who serve at the
request of Registrant as trustees or administrators with respect to benefit
plans, containing provisions that are in some respects broader than the
specific indemnification provisions contained in the wbca. These agreements
require or may require Registrant, among other things, to indemnify such
directors, officers and plan trustees and administrators against certain
liabilities that may arise by reason of their status or service as directors,
officers or plan trustees or administrators, and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.
Directors and officers of Registrant are covered by insurance (with
certain exceptions and limitations) which indemnifies them against losses and
liabilities arising from certain alleged "wrongful acts," including alleged
errors or misstatements or misleading statements, or certain other alleged
wrongful acts or omissions constituting neglect or breach of duty.
II-1
<PAGE>
ITEM 16. EXHIBITS
Exhibit
Number Description
- ---------- -----------------------------------------------------------------
=> 4.1 Specimen Common Stock Certificate
5.1 Opinion of Cairncross & Hempelmann, P.S.
23.1 Consent of Arthur Andersen, LLP
23.2 Consent of Cairncross & Hempelmann, P.S. (included in opinion
filed as Exhibit 5.1)
24.1 Powers of Attorney (SEE SIGNATURE PAGE)
- -------------------------
=> Included in Registrant's Form SB-2 filed initially on October 6, 1994,
as amended and declared effective January 18, 1995 (No. 33-85230),
relating to Registrant's initial public offering of securities.
ITEM 17. UNDERTAKINGS
Registrant hereby undertakes: (1) to file, during any period in which
it offers or sells securities, a post-effective amendment to this
registration statement to (i) include any prospectus required by section
10(a)(3) of the Securities Act, (ii) reflect in the prospectus any facts or
events which, individually or together, represent a fundamental change in the
information in the registration statement, and (iii) include any additional
or changes material information on the plan of distribution; (2) for
determining liability under the Securities Act, to treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering
thereof; and (3) to file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
For determining any liability under the Securities Act, the Registrant
hereby undertakes: (1) to treat the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance upon Rule
430A and contained in a form of prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part of this
Registration Statement as of the time the Commission declared it effective;
and (2) to treat each post-effective amendment that contains a form of
prospectus as a new registration statement relating to the securities offered
therein, and the offering of such securities at that time as the initial bona
fide offering of the securities.
Insofar as indemnification for liabilities arising under the Securities
Act 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
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.
II-2
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Bellevue, State of Washington, on
July 15, 1996.
TIMELINE, INC.
By /s/ John W. Calahan
----------------------------
John W. Calahan
President
-- POWER OF ATTORNEY --
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John W. Calahan and Charles R.
Osenbaugh, or either of them, his or her attorneys-in-fact, with the power of
substitution, for him or her in any and all capacities, to sign any
amendments to this Registration Statement, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may do or cause
to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES CAPACITIES DATE
---------- ---------- ----
/s/ John W. Calahan Director
- ----------------------------- President July 15, 1996
John W. Calahan Chief Executive Officer
/s/ Donald K. Babcock
- ----------------------------- Director July 15, 1996
Donald K. Babcock Chief Technologist
Director, Executive Vice
/s/ Charles R. Osenbaugh President, Chief Financial July 15, 1996
- ----------------------------- Officer, Secretary and Treasurer
Charles R. Osenbaugh (principal financial and
accounting officer)
/s/ Michael R. Hallman
- ----------------------------- Director July 15, 1996
Michael R. Hallman
/s/ Kent L. Johnson Director July 15, 1996
- -----------------------------
Kent L. Johnson
II-3
<PAGE>
INDEX TO EXHIBITS
TO
FORM S-3
Exhibit
Number Description Location
------- ----------- ------------
5.1 Opinion of Cairncross &
Hempelmann, P.S. Document 2
23.1 Consent of Arthur Andersen LLP Document 3
<PAGE>
LAW OFFICES
CAIRNCROSS & HEMPELMANN
A PROFESSIONAL SERVICE CORPORATION
70TH FLOOR, COLUMBIA CENTER, 701 FIFTH AVENUE
SEATTLE, WASHINGTON 98104-7016
(206) 587-0700
SCOTT T. BELL FAX: (206) 587-2308
email: [email protected]
July 15, 1996
Timeline, Inc.
3055 - 112th Avenue N.E., Suite 106
Bellevue, Washington 98004
Re: Registration Statement on Form S-3
----------------------------------
To Whom It May Concern:
We have acted as counsel to Timeline, Inc. (the "Company") in connection
with the preparation of a Registration Statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), which the
Company is filing with the Securities and Exchange Commission with respect to an
aggregate of 557,530 shares of the Company's Common Stock (the "Shares"),
521,530 shares of which are being offered for sale by certain of the Company's
shareholders identified in the Registration Statement (the "Selling
Shareholders"), and 36,000 shares of which may be issued by the Company upon
exercise of an outstanding transferable warrant issued originally in June 1996
to Pacific Crest Securities (the "Warrant"). We have examined documents as we
have deemed necessary for the purpose of this opinion.
Based upon and subject to the foregoing, we are of the opinion that the
shares of the Company's Common Stock issued to the Selling Shareholders were
duly authorized, validly issued, fully paid and nonassessable, and that the
shares of the Company's Common Stock that may be issued pursuant to the Warrant
have been duly authorized and that, upon the issuance and sale thereof by the
Company in accordance with the terms of the Warrant, and the receipt of the
consideration therefor in accordance with the terms therein, such shares will be
validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name wherever
appearing in the Registration Statement, including any Prospectus constituting a
part thereof, and any amendments thereto. In giving such consents, we do not
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
CAIRNCROSS & HEMPELMANN, P.S.
/s/ Scott T. Bell
Scott T. Bell
STB:WAC
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated May 22, 1996
included in the Timeline, Inc. Form 10-KSB for the year ended March 31, 1996 and
to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Seattle, Washington
July 15, 1996
