<PAGE>
As filed with the Securities and Exchange Commission on March 17, 2000
Registration No. 333-91655
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT No. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
SONIC SOLUTIONS
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(Exact Name of Registrant as Specified in
Its Charter)
California 93-0925818
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(State or Other Jurisdiction of Incorporation or (I.R.S. Employer
Organization) Identification No.)
101 Rowland Way, Suite 110
Novato, CA 94945
(415) 893-8000
(Address, including zip code, and telephone number,
including area code, of Registrant's Principal
Executive Offices)
Robert J. Doris
Sonic Solutions
101 Rowland Way, Suite 110
Novato, CA 94945
(415) 893-8000
(Name and Address, including zip code, and telephone
number, including area code, of Registrant's
Agent For Service)
With copies of all orders, notices and communications to:
August J. Moretti, Esq.
HELLER EHRMAN WHITE & MCAULIFFE
2500 Sand Hill Road, Suite 100, Menlo Park, California 94025-7063 (650) 234-4229
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans,
please check the following box. [_]
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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
registration statement for the same offering. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Amount to be Proposed Maximum Offering Proposed Maximum Amount of
Title of Securities to be Registered Registered Price per Share(2) Aggregate Offering Price Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, no par value(1) 539,712 $ 2.96875 $ 1,602,270 $ 445.43
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TOTAL: $ 1,602,270 $ 445.43
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</TABLE>
(1) In accordance with Rule 416 under the Securities Act of 1933, Common Stock
offered hereby shall also be deemed to cover additional securities to be
offered or issued to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933,
as amended, based on the average of the high and low prices of the Common
Stock on the Nasdaq National Market on November 19, 1999, as reported in
The Wall Street Journal.
-----------------------
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 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
P R O S P E C T U S
539,712 SHARES
SONIC SOLUTIONS
COMMON STOCK
This prospectus may be used only in connection with the resale, from time
to time, of up to 539,712 shares of common stock, no par value, of Sonic
Solutions by Hambrecht & Quist Guaranty Finance LLC ("Hambrecht & Quist"). The
shares covered by this prospectus are to be sold by Hambrecht & Quist and
include the following:
(1) 169,712 shares upon conversion of our shares of Series C Preferred
Stock which Hambrecht & Quist acquired pursuant to a private
securities subscription agreement dated March 31, 1998,
(2) 250,000 shares upon conversion of our shares of Series C Preferred
Stock which Hambrecht & Quist acquired pursuant to a second private
securities subscription agreement dated October 15, 1999 and
(3) 120,000 shares upon exercise of warrants held by Hambrecht & Quist
that Hambrecht & Quist acquired pursuant to a warrant purchase
agreement dated October 15, 1999.
We will not receive any proceeds from the sale of shares by Hambrecht &
Quist.
Our common stock is traded on the Nasdaq National Market under the symbol
"SNIC".
SECURITIES OFFERED THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK.
(See "RISK FACTORS" ON PAGE 4)
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 date of this prospectus is March 17, 2000
1
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Section Page
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<S> <C>
I. The Company 3
II. Risk Factors 4
III. Where You Can Find More Information 8
IV. Documents Incorporated By Reference 8
V. Prospectus Supplements 9
VI. Forward Looking Statements 9
VII. Use of Proceeds 9
VIII. Selling Stockholder 9
IX. Plan of Distribution 11
X. Distribution of Capital Stock 12
XI. Legal Matters 13
XII. Experts 13
XIII. Other Events 13
</TABLE>
2
<PAGE>
THE COMPANY
We develop workstations used by professionals to edit and process audio and
video information. Our products are computer based, and usually include both
plug-in hardware and applications software installed on a personal computer. Our
customers use various kinds of peripheral devices -- for example, disk drives,
streaming tape drives, and audio and video tape recorders -- along with our
products. Although we do not manufacture or sell the personal computer of
peripheral devices used with our products, we typically talk about the complete
configuration of personal computer, Sonic hardware, Sonic software, and
peripherals as a Sonic workstation.
We currently market two workstation product lines: SonicStudio(TM) and DVD
Creator(TM). SonicStudio is a line of professional audio workstations that our
customers use to prepare audio for release on digital audio compact discs, for
release with video and film entertainment, and for broadcast on radio. DVD
Creator is a line of DVD-Video/Audio production workstations which supports the
preparation and assembly of video and audio assets for release on the new
DVD-Video disc format and the upcoming DVD-Audio disc format.
During the quarter ended September 30, 1999 we began shipments of two new
products: DVDit!(TM) authoring application which provides simplified DVD
authoring capabilities to consumer, "prosumer," and some professional users, and
DVD Fusion, which is a part of our DVD Creator product line provides video
producers and editors a comprehensive set of tools for encoding, authoring and
proofing DVD-Video titles derived from projects created on non-linear video
editing systems such as those provided by Avid Technology and Media 100.
Because DVDit! is aimed at a broader market than our traditional
professional products we are building a distribution capability for it. There
are three elements to this effort:
1. We are adding dealers and distributors for DVDit!, some of which
already carry some of our professional products, but many of which
do not. In the near term we are targeting dealers and distributors
specializing in digital video applications. In the longer term we
plan to target dealers and distributors who participate in the
broader personal computer marketplace.
2. We are entering into "bundling" arrangements with various other
companies in which copies of DVDit! are included or "bundled" with
shipments of those companies' products. These companies (we refer
to them as "OEM Partners") are motivated to include our software as
a value added offering for their customers. We are motivated to
enter into bundling arrangements because it generates revenue for
us as well as creates a large installed base of customers to whom
we can sell upgraded or enhanced versions of our products. To
facilitate such bundling arrangements we have designed different
limited-feature versions of DVDit!. Currently we are shipping two
such versions - DVDit!-LE ("Limited Edition") and DVDit!-SE
("Standard Edition") - and have announced the future availability
of another version - DVDit!-PE ("Professional Edition").
3. We have initiated a web-based retail store for our DVDit! products.
Our web store is intended both to meet retail demand for our DVDit!
products as well as to service upgrade orders for our products, in
particular, the upgrade orders which derive from our bundle
shipments by our OEM partners.
3
<PAGE>
Building distribution for DVDit! will be a time-consuming and expensive
process. Since this is a new kind of product for us, there is significant
risk that our efforts, or at least some of them will not be successful.
Our products generally include application software and specialized
hardware installed on a personal computer. Our products are designed to improve
the productivity and effectiveness of media professionals, enabling them to
process and manipulate more material in a given amount of time and to achieve
results which would have been impossible using traditional linear analog or
digital technology.
RISK FACTORS
Purchasing our stock involves a high degree of risk. In this section of the
prospectus we discuss specific risks associated with an investment in our
company.
You should read this section of the prospectus especially closely. You
should consider carefully whether an investment in our company is an appropriate
investment for you. We do not intend to issue any dividends in the foreseeable
future, so the only purpose of investment in our shares is to enjoy a potential
increase in the shares' value. If you cannot afford to lose the value of your
investment, in either the short or long term, purchasing our shares is not
appropriate for you.
We have had losses in four of the five past years and we may not be
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profitable in the future. We were unprofitable during four of the last five
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fiscal years. For example, in fiscal year 1998, we had a net loss of $5,876,000
and in fiscal year 1999, we had a net loss of $1,859,000. We were unprofitable
during each quarter of the 1997 and 1998 fiscal years, and during the first
three quarters of the 1999 fiscal year.
We were unprofitable in the first, second and third quarters of fiscal year 2000
and we may be unprofitable in the remaining quarters of the 2000 fiscal year.
For example, in the third quarter of fiscal year 2000 (ended December 31, 1999),
our net loss was $1,942,000. We may not be profitable at any time in the future.
Our lack of profitability could cause our share price to decline. The other
risks identified below could also cause the value of our shares to decline. We
cannot, however, estimate the likelihood that our shares will decline in value
or the amount by which they may decline.
Repayment of $1,000,000 debt to Hambrecht & Quist will seriously deplete
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our cash balances. As of September 30, 1999, we had $1,682,000 in cash and cash
- -----------------
equivalents and as of December 31, 1999, we had $2,018,000 in cash and cash
equivalents. As of November 15, 1999 and December 31, 1999, we had an
outstanding balance due on a bank credit line in the amount of $921,720 as well
as debt in the amount of $1,000,000 due Hambrecht and Quist in monthly
installments beginning in November of 1999. We owe this amount to Hambrecht &
Quist under a financing facility that was originally put in place in December,
1996. This facility was used to finance our operations and to lease equipment.
Repayment of these debts will seriously deplete our cash balances, and might
therefore cause us to cease or significantly curtail our operations.
During the last three years we had negative operating cash flows and expect
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this to continue. We will need additional financing in order to continue to
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operate. During the last three fiscal years we had a negative operating
- -------
cash flow prior to financing activities of $34,000, $1,412,000 and $124,000 for
the fiscal years ended March 31, 1997, 1998 and 1999 respectively. This means
that without access to outside capital we would have had to cease or
significantly curtail operations. We believe that we may continue to run a
negative operating cash flow for the foreseeable future, and will continue to
need to obtain additional financing to continue to operate. If we are unable to
obtain such financing, then we will have to cease or significantly curtail
operations.
4
<PAGE>
Our stock purchase agreement with Kingsbridge Capital Limited may be
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unavailable or insufficient to meet our future cash needs. In May 1999, we
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entered into an agreement with Kingsbridge Capital Limited which allows us to
sell up to a total of 1,800,000 shares of stock to Kingsbridge from time to
time. As of the date of this prospectus, we had the right to sell up to 483,333
shares to Kingsbridge, which is 1,800,000 less 1,316,667 shares that we have
already sold under the new agreement. Our ability to sell stock to Kingsbridge,
however, is subject to a number of terms and conditions, including, for example,
continued listing of our stock on NASDAQ, continued effectiveness of a
registration statement, continued accuracy of representations and warranties
made to Kingsbridge and lack of material adverse changes to our business. The
risk to us is that, because of these and other conditions, at the time we need
cash in the future, the stock sale arrangement with Kingsbridge may be
unavailable or insufficient to meet our cash needs. If the stock purchase
agreement with Kingsbridge is unavailable or insufficient to meet our needs when
we need cash, we may have to cease or significantly curtail operations.
If new digital formats that we utilize are unsuccessful, it is unlikely
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that we will generate sufficient revenues to recover our development cost. Our
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business involves new digital audio and video formats, such as DVD-Video and
DVD-Audio. If these formats prove to be unsuccessful, we would have to prepare
for a new format, which would require us to incur substantial development costs
to develop professional tools that will be marketable only if the new format is
successful. If the new format is not successful, it is likely that we will not
generate sufficient revenues to recover our development costs.
We may have to incur significant product redesign costs if chip
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manufacturers discontinue or redesign their products. Our products are based on
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integrated circuits or "chips" produced by other companies. If these chip
manufacturers discontinue or redesign the chips we use for our products, then we
will likely incur significant costs to redesign our own products to handle these
changes. We cannot estimate the amount of these costs or the likelihood that we
will have to redesign our products.
Our reliance on outsourcing and single suppliers for our manufacturing and
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components makes us vulnerable to supplier operational problems. Our outsourcing
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program commits responsibility for almost all of our manufacturing activities to
a single supplier. In addition, we often use components that are only available
from a single source. Reliance on a single supplier for manufacturing or for
certain manufacturing components makes us vulnerable to operating or financial
problems encountered by those suppliers.
If we fail to protect our products' intellectual property rights, such as
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trade secrets, we may not be able to market our products. To the extent that we
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use patents to protect our proprietary rights, we may not be able to obtain
needed patents or, if granted, the patents may be held invalid or otherwise
indefensible. In addition, we make extensive use of trade secrets that we may
not be able to protect. We may not be able to market our products if we cannot
protect our intellectual property rights.
Other companies' intellectual property rights may prevent our current or
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future product development and sales. We have never conducted a comprehensive
- ------------------------------------
patent search relating to the technology we use in our products. There may be
issued or pending patents owned by third parties that relate to our products. If
so, we could incur substantial costs defending against patent infringement
claims or we could even be blocked from selling our products.
Other companies may succeed in obtaining valid patents covering one or more
of the key techniques we utilize in our products. If so, we may be forced to
obtain required licenses or implement alternative non-infringing approaches.
5
<PAGE>
Our products are designed to adhere to industry standards, such as DVD-ROM,
DVD-Video, DVD-Audio and MPEG video. A number of companies and organizations
hold various patents that claim to cover various aspects of DVD and MPEG
technology. We have concluded license agreements with certain companies relative
to some of these technologies. For instance, we have entered into license
agreements with Dolby Licensing Corporation covering Dolby Digital Audio
Meridian Lossless Packing.
Regarding claims for patent infringement, some of the purchase and
license agreements we have with our customers allocate responsibility to our
customers for satisfying any such claims, while some of our customer purchase
and license agreements allocate such responsibility to us. Regardless of the
provisions of our customer purchase and license agreements, third parties could
pursue us claiming that our products infringe various patents. Patent
infringement litigation could be time consuming and costly. If the litigation
resulted in an unfavorable outcome for us, we could be subject to substantial
damage claims and a requirement that we obtain a royalty or license agreement to
continue using the technology in issue. Such royalty or license agreements might
not be available to us on acceptable terms, or at all, resulting in serious harm
or to our business. In this regard a group of companies have formed an
organization called MPEG-LA to enforce the rights of certain holders of certain
patents covering aspects of MPEG-2 video technology. We have been asked by
MPEG-LA to enter into a license agreement with them. We have not entered into
such an agreement with MPEG-LA, though we are continuing to evaluate the
situation.
Because a majority of our products operate only on Macintosh computers,
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the potential success of our products is tied to the success of this platform.
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All of our current products except DVDit! and many of our future products
operate on Macintosh computers manufactured by Apple Computer. If Macintosh
computers become in short supply, sales of our products will likely decline. If
there is a decrease in the use of the Macintosh as a preferred computing
platform in the professional and corporate audio and video markets, there will
likely be a decrease in demand for our products. If there are changes in the
operating system or architecture of the Macintosh, it is likely that we will
incur significant costs to adapt our products to the changes.
Some of our competitors possess greater technological and financial
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resources than we do. There is a substantial risk that competing companies will
- --------------------
produce better or more cost-effective products, or will be better equipped than
we are to promote them in the marketplace.
We have little ability to reduce expenses to compensate for reduced sales.
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We tend to close the greatest number of sales in the last month or last weeks of
a quarter and we generally do not know until quite late in a quarter whether our
sales expectations for the quarter will be met. Because most of our quarterly
operating expenses and our inventory purchasing is committed prior to quarter
end, we have little ability to reduce expenses to compensate for reduced sales.
Approximately 10% of our revenue derives from sales to a single company.
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During the last two fiscal years, 1998 and 1999, and the first three quarters of
fiscal year 2000, between 10% and 11%, of our revenue was derived from sales of
audio processing subsystems to Discreet Logic. A decrease in Discreet Logic's
business or its demand for our product would cause a significant decrease in our
revenue.
A significant portion of our revenue derives from sales made to foreign
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customers located primarily in Europe and Japan. Revenue derived from these
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customers accounted for approximately 47% of our revenues in fiscal year 1999.
These foreign customers expose us to the following risks:
6
<PAGE>
. currency movements in which the U.S. dollar becomes significantly
stronger with respect to foreign currencies, thereby reducing relative
demand for our products outside the United States;
. import and export restrictions and duties;
. foreign regulatory restrictions, for example, safety or radio
emissions regulations; and
. liquidity problems in various foreign markets.
The conversion of outstanding Preferred Stock and additional sales of stock
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to Kingsbridge will dilute the relative ownership of existing common
- --------------------------------------------------------------------
stockholders and could result in lower market price for our stock. The
- -----------------------------------------------------------------
conversion of the Series C Preferred Stock owned by Hambrecht & Quist and
additional sales of stock to Kingsbridge will have a dilutive impact on our
security holders. On February 15, 2000, we had 11,259,720 shares of common stock
outstanding. For example, we may issue up to an additional 539,712 shares of
common stock to Hambrecht & Quist and up to an additional 483,333 shares of
common stock to Kingsbridge, representing in total about 9% of our
outstanding common stock. As a result, our net income or loss per share could be
significantly affected in future periods causing a reduction in the market price
of our common stock.
7
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and other
documents with the Commission. You may read and copy any document we file at
the Commission's public reference room at Judiciary Plaza Building, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549. You should call 1-800-SEC-0330
for more information on the public reference room. The Commission also
maintains an internet site at http://www.sec.gov where information regarding
issuers, including Sonic Solutions, may be found. Such reports, proxy
statements and other information can also be inspected at the Commission's
regional offices at 7 World Trade Center, Suite 1300, New York, New York 10048
and 500 West Madison, Chicago, Illinois 60661, and at the offices of the Nasdaq
Stock Market at 9513 Key West Avenue, Rockville, Maryland 20850-3389.
This prospectus is part of a registration statement that we filed with the
Commission, Registration No. 333-91655. The registration statement contains
more information than this prospectus regarding Sonic Solutions and its common
stock, including additional exhibits and schedules. You can get a copy of the
registration statement from the Commission at the address listed above or from
its internet site.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed pursuant to the 1934 Act, as amended, are
incorporated into this prospectus by reference:
(1) our Annual Report on Form 10-K for the fiscal year ended
March 31, 1999;
(2) our Quarterly Report on Form 10-Q for the fiscal quarters ended
June 30, 1999, September 30, 1999 and December 31, 1999; and
(3) the description of our Common Stock contained in the registration
statement filed under the 1934 Act registering such Common Stock under
Section 12 of the 1934 Act.
All documents we file pursuant to Section 13(a), 13(c), 14 or 15(d) of the
1934 Act after the date of this prospectus and prior to the termination of the
offering of the securities offered in this prospectus shall be deemed to be
incorporated by reference in this prospectus.
We will undertake to provide without charge to each person, including any
beneficial owner, to whom a copy of this prospectus has been delivered, upon the
written or oral request of such person, a copy of any or all of the documents
referred to above which have been or may be incorporated in this prospectus by
reference, other than exhibits to such documents which are not specifically
incorporated by reference into the information that this prospectus
incorporates. Requests for such copies should be directed to: 101 Rowland Way,
Suite 110, Novato, California 94945, Attention: Investor Relations, telephone:
(415) 893-8000.
8
<PAGE>
PROSPECTUS SUPPLEMENTS
Hambrecht & Quist may acquire from us shares of common stock covered by
this prospectus by way of conversion of the Series C Preferred Stock which
Hambrecht & Quist acquired pursuant to the March 31, 1998 and October 15, 1999
subscription agreements and upon exercise of a warrant issued to Hambrecht &
Quist on October 15, 1999. Hambrecht & Quist may elect to convert these shares
and exercise the warrant at different times. The amount of common shares to be
issued to Hambrecht & Quist upon conversion of Series C Preferred Stock will be
determined by the conversion rate applicable at the time of each conversion.
The current conversion rate for conversion of Shares of Series C Preferred Stock
is 1.625 shares of common stock for each share of Series C Preferred Stock
converted. We may, from time to time, supplement this prospectus to reflect the
amount of shares of common stock to be resold by Hambrecht & Quist.
FORWARD LOOKING STATEMENTS
Forward looking statements made in this prospectus or in the documents
incorporated by reference herein that are not statements of historical fact are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended.
A number of risks and uncertainties, including those discussed under the
caption "Risk Factors" above and the documents incorporated by reference herein
could affect such forward-looking statements and could cause actual results to
differ materially from the statements made.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations or projections of future performance
other than those contained in this prospectus. Any such other information,
projections or representations must not be relied upon as having been
authorized. The delivery of this prospectus or any sale under this prospectus at
any time does not imply that the information in this prospectus is correct as of
any time after the date of this prospectus. This prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities in any
jurisdiction where, and to any person to whom, it is unlawful to make such offer
or solicitation.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by
Hambrecht & Quist.
SELLING STOCKHOLDER*
The following table sets forth information regarding beneficial ownership
of our common stock by Hambrecht & Quist as of November 1, 1999 and information
regarding common stock to be sold by Hambrecht & Quist. Hambrect & Quist
informed us at the time it purchased the Series C Preferred Stock that is
convertible into the common stock covered by this prospectus that it was
purchasing the stock in the ordinary course of business and that at that time,
it did not have any agreements or understandings, directly or indirectly, with
any person or entity to distribute the shares. Because Hambrecht & Quist may
sell some or all of the shares of common stock offered in this prospectus, and
because there are currently no agreements, arrangements or understandings with
respect to the sale of any of the shares of common stock offered by this
prospectus, we cannot provide an estimate of the actual amount of shares of
common stock that Hambrecht & Quist will hold after completion of a
distribution. See "Plan of Distribution".
9
<PAGE>
<TABLE>
<CAPTION>
Common Stock Common Stock
Beneficially Owned Beneficially Owned
Prior To Offering(1) Common After Offering
------------------------ Stock -------------------------
Number Percent(2) To Be Sold Number Percent(2)
---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Hambrecht & Quist Guaranty 581,140 5.2% 539,712 41,428 0.4%
Finance, LLC
One Bush Street
San Francisco, CA 94104
TOTALS 581,140 5.2% 539,712 41,428 0.4%
</TABLE>
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(1) Hambrecht & Quist currently is deemed to beneficially own
(a) the 420,818 shares of common stock issuable upon conversion of the
Series C Preferred Stock acquired by Hambrecht & Quist, at the current
conversion rate of 1.625-to-1;
(b) 160,100 shares of common stock issuable upon exercise of warrants held
by Hambrecht & Quist (see "Description of Capital Stock"); and
(c) 222 shares of common stock.
(2) Applicable percentage of ownership is based on 11,259,720 shares of Common
Stock outstanding as of February 15, 2000.
Hambrecht & Quist loaned $3,000,000 to Sonic Solutions under a business
loan agreement, entered into by the two parties on December 24, 1996. Sonic
Solutions borrowed this money for working capital purposes. Sonic Solutions also
issued warrants to Hambrecht & Quist to purchase 40,100 shares of common stock
in consideration for the loan. On March 31, 1998, Hambrecht & Quist cancelled
$1,500,000 the loan in exchange for 461,538 shares of Series C Preferred stock
of Sonic Solutions. Hambrecht & Quist also agreed to extend the repayment terms
of the $1,500,000 balance to October 1999 and Sonic Solutions agreed to extend
the expiration date of the warrant to December 24, 2003. On October 15, 1999,
Hambrecht & Quist cancelled an additional $500,000 of the indebtedness in
exchange for 153,846 shares of Series C Preferred stock of Sonic Solutions and
further agreed to extend the repayment terms of the $1,000,000 loan balance.
Sonic Solutions issued a warrant to Hambrecht & Quist to purchase 120,000 shares
of common stock as additional consideration for the extension.
The shares of common stock offered in this prospectus by Hambrecht & Quist
may be acquired, by way of conversion of the Series C Preferred Stock which
Hambrecht & Quist acquired pursuant to the 1998 and 1999 subscription agreements
between Sonic Solutions and Hambrecht & Quist. Under the subscription
agreements, Hambrecht & Quist represented to us that it was acquiring the shares
of Series C Preferred Stock from Sonic Solutions without any present intention
of effecting a distribution of those shares. However, in accordance with the
subscription agreements, we agreed to register the underlying shares of common
stock issuable upon conversion of the Series C Preferred Stock held by Hambrecht
& Quist, for resale by Hambrecht & Quist to permit such resales from time to
time in the market or in privately-negotiated transactions. On April 22, 1998,
Sonic Solutions registered 461,538 of the underlying shares of common stock
issuable upon conversion of the Series C Preferred Stock at a one-to-one
conversion rate.
10
<PAGE>
This prospectus covers
(1) shares of common stock issuable upon conversion of the Series C
Preferred Stock that Hambrecht & Quist acquired pursuant to the March 31, 1998
subscription agreement that are not covered by the April 22, 1998 prospectus
(the incremental shares of common stock are due to a change in the conversion
rate from 1-to-1 to 1.625-to-1);
(2) shares issuable upon conversion of the Series C Preferred Stock that
Hambrecht & Quist acquired pursuant to the October 15, 1999 subscription
agreement, convertible at a rate of 1.625-to-1; and
(3) shares issuable upon exercise of the warrant held by Hambrecht & Quist
to purchase 120,000 shares of common stock.
We will prepare and file such amendments and supplements to the
registration statement as may be necessary from time to time in accordance with
the rules and regulations of the Securities Act to keep it effective for a
period of approximately two years.
We have filed with the Commission a Registration Statement under the
Securities Act with respect to the securities offered by this prospectus. As
permitted by the rules and regulations of the Commission, this prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. For further information with respect to our
company and the securities offered by this prospectus, please refer to the
Registration Statement and the exhibits thereto, which may be examined without
charge at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
which may be obtained from the Commission upon payment of the prescribed
fees.
- ---------------------
* This page may be modified from time to time to reflect the number of shares
of common stock acquired by Hambrecht & Quist by way of conversion of the
Series C Preferred Stock.
PLAN OF DISTRIBUTION
All or a portion of the shares of common stock offered by this prospectus
by Hambrecht & Quist may be delivered and/or sold in transactions from time to
time on the over-the- counter market, on the Nasdaq National Market, in
negotiated transactions, or a combination of such methods of sale. These sales
shall be made at market prices prevailing at the time, at prices related to such
prevailing prices or at negotiated prices. Hambrecht & Quist may effect such
transactions by selling to or through one or more broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from Hambrecht & Quist. Hambrecht & Quist and any
broker-dealers that participate in the distribution may under certain
circumstances be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by such broker-dealers and any
profits realized on the resale of shares of common stock offered by this
prospectus by them may be deemed to be underwriting discounts and commissions
under the Securities Act. Hambrecht & Quist may agree to indemnify such broker-
dealers against certain liabilities, including liabilities under the Securities
Act. In addition, Sonic Solutions has agreed to indemnify Hambrecht & Quist with
respect to the shares of common stock offered by this prospectus against certain
liabilities, including liabilities under the Securities Act, or, if such
indemnity is unavailable, to contribute toward amounts required to be paid in
respect of such liabilities.
11
<PAGE>
Any broker-dealer participating in such transactions as agent may receive
commissions from Hambrecht & Quist (and, if they act as agent for the purchaser
of shares, from such purchaser). Broker-dealers may agree with Hambrecht & Quist
to sell a specified number of shares at a stipulated price per share, and, to
the extent such a broker-dealer is unable to do so acting as agent for Hambrecht
& Quist, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer commitment to Hambrecht & Quist. Broker-dealers who
acquire shares as principal may resell such shares from time to time in
transactions (which may involve crosses and block transactions and which may
involve sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market, in negotiated
transactions or otherwise at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such shares commissions computed as described above. To
the extent required under the Securities Act, a supplemental prospectus will be
filed, disclosing (a) the name of any such broker-dealers; (b) the number of
shares of common stock involved; (c) the price at which such shares of common
stock are to be sold; (d) the commissions paid or discounts or concessions
allowed to such broker-dealers, where applicable; (e) that such broker-dealers
did not conduct any investigation to verify the information set out or
incorporated by reference in this prospectus, as supplemented; and (f) other
facts material to the transaction.
Under applicable rules and regulations under the 1934 Act, any person
engaged in the distribution of the resale of shares may not simultaneously
engage in market making activities with respect to the common stock of Sonic
Solutions for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, Hambrecht & Quist
will be subject to applicable provisions of the Exchange Act, and the rules and
regulations thereunder, including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of shares of Sonic
Solutions' common stock by Hambrecht & Quist.
Hambrecht & Quist will pay all commissions and transfer taxes associated
with the sale of securities by them. The shares of common stock offered by this
prospectus are being registered pursuant to our contractual obligations and we
have paid the expenses of the preparation of this prospectus.
DESCRIPTION OF CAPITAL STOCK
As of the date of this prospectus, our authorized capital stock consists of
30,000,000 shares of common stock, no par value, and 10,000,000 shares of
preferred stock, no par value.
Common Stock
As of February 15, 2000, there were 11,259,720 shares of common stock
outstanding held of record by approximately 175 registered stockholders.
We believe however, that many beneficial holders of its common stock
have registered their shares in nominee or street name, and that there are
substantially more than 175 beneficial owners. The holders of shares of common
stock are entitled to one vote per share on all matters to be voted on by
stockholders, except that holders may cumulate their votes in the election of
directors. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of common stock are entitled to receive ratably such
dividends as may be declared by the board of directors in its discretion from
funds legally available therefor. In the event of a liquidation, dissolution, or
winding up of our company, holders of common stock are entitled to share
ratably in all assets remaining after payment of liabilities and the liquidation
preference of any outstanding preferred stock. Holders of common stock have no
preemptive rights and have no rights to convert their common stock into any
other securities. The outstanding shares of common stock are fully paid and
nonassessable.
12
<PAGE>
Preferred Stock
The board of directors has the authority to issue up to 10,000,000 shares
of preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences and the
number of shares constituting any series or the designation of such series,
without any further vote or action by the shareholders. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change in control of Sonic Solutions or making removal of management more
difficult without further action by the shareholders and could adversely affect
the rights and powers, including voting rights, of the holders of common stock.
This could have the effect of decreasing the market price of the common stock.
As of October 15, 1999, 461,538 shares of preferred stock were designated as
Series C Preferred Stock, 425,384 of which were issued and outstanding, all of
which are convertible into shares of common stock. We have no present plans
to issue any additional shares of Preferred Stock.
Warrants
In connection with our receipt of a financing facility in December 1996,
we issued warrants to purchase 130,100 shares of common stock at an exercise
price of $7.00 per share and warrants to purchase 130,100 shares of common stock
at an exercise price of $10.00 per share. The warrants may be exercised at any
time on or before December 24, 2003. In December 1997, all of the $7 warrants
were exercised. In March 1998, in connection with renegotiation of the terms of
the financing facility, the exercise price of 90,000 of the $10 warrants was
reduced to $3.25. On October 15, 1999, in connection with a renegotiation of
financing terms with Hambrecht & Quist, we issued warrants to purchase 120,000
shares of common stock at an exercise price of $2.50. As of the date of this
prospectus, there remain outstanding warrants to purchase a total of 160,100
shares of our common stock.
LEGAL MATTERS
The legality of the issuance of the securities being offered hereby is
being passed upon for Sonic Solutions by Heller Ehrman White & McAuliffe, Menlo
Park, California.
EXPERTS
The financial statements and schedule of Sonic Solutions as of March 31,
1999 and March 31, 1998 and for each of the years in the three-year period ended
March 31, 1999, are incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.
OTHER EVENTS
In October, 1999, we renegotiated our financing arrangement with Hambercht
& Quist Guaranty Finance. The agreement we reached involved the restructuring of
$1,500,000 debt into 250,000 shares of Series C Convertible Preferred Stock and
$1,000,000 of debt. The interest rate on the restructured debt is 7.25% and the
debt and interest is payable in monthly installments beginning on November 1,
1999 and continuing through April 30, 2001. In connection with this agreement,
we issued warrants to purchase 120,000 shares of common stock at an exercise
price of $2.50. These warrants expire on April 30, 2006. We also changed the
conversion rate of our Series C Convertible Preferred Stock so that each share
of Series C Convertible Preferred Stock is convertible into 1.625 shares of
Common Stock. The incremental conversion feature and the warrants will be
recorded at their fair value which will result in a charge of approximately
$400,000 to earnings.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses Of Issuance And Distribution.
-------------------------------------------
The following table sets forth various expenses in connection with the sale
and distribution of the securities being registered. All of the amounts shown
are estimates except for the Securities and Exchange Commission Registration
Fee.
Securities and Exchange Commission Registration Fee $ 445.43
Accounting Fees $ 2,500.00
Legal Fees and Disbursements $ 10,000.00
Miscellaneous $ 2,500.00
TOTAL $ 15,445.43
ITEM 15. Indemnification Of Officers And Directors.
-----------------------------------------
Section 317 of the California Corporations Code permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law. Article
III of the Registrant's Amended and Restated Articles of Incorporation provides
for the indemnification of officers, directors and third parties acting on
behalf of the Registrant to the fullest extent permissible under California law.
The Registrant has entered into indemnification agreements with its directors
and executive officers to the maximum extent permitted under California law.
ITEM 16. Exhibits.
--------
EXHIBIT DESCRIPTION
--------- ------------------------------------------------------------
4.1* Private Securities Subscription Agreement between Registrant
and Hambrecht & Quist Guaranty Finance, LLC dated as of
March 31, 1998
4.2** Private Securities Subscription Agreement between Registrant
and Hambrecht & Quist Guaranty Finance, LLC dated as of
October 15, 1999
4.3** Common Stock Warrant Purchase Agreement between Registrant
and Hambrecht & Quist Guaranty Finance, LLC dated as of
October 15, 1999
4.4** Warrant to Purchase 120,000 Shares of Common Stock between
Registrant and Hambrecht & Quist Guaranty Finance, LLC dated
as of October 15, 1999
II-1
<PAGE>
5** Opinion of Heller Ehrman White & McAuliffe
10** Promissory Note between Registrant and Hambrecht & Quist
Guaranty Finance, LLC dated as of October 15, 1999
23.1 Consent of Heller Ehrman White & McAuliffe (included in
Exhibit 5)
23.2 Consent of KPMG LLP
24** Power of Attorney
* Incorporated by reference to Exhibit 4 of Form S-3 filed with the
Commission on April 22, 1998.
**Incorporated by reference to Exhibits of Form S-3 filed with the Commission on
November 24, 1999.
ITEM 17. Undertakings.
------------
A. The undersigned Company 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 10(a)(3) of
the Securities Act of 1933;
(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;
Provided, however, that paragraphs (i) and (ii) shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
II-2
<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.
B. That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to section 13(a)
or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offering therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted against the Registrant 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Novato, State of California, on the 16th day of
March, 2000.
Sonic Solutions
By /s/ Robert J. Doris
-------------------------
ROBERT J. DORIS,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement on Form S-3 has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- -----
<S> <C> <C>
/s/ Robert J. Doris President and Director March 16, 2000
- ------------------------
ROBERT J. DORIS
Mary C. Sauer* Senior Vice President of
- ------------------------ Business Development and
MARY C. SAUER Director
Robert M. Greber* Director
- ------------------------
ROBERT M. GREBER
Peter J. Marguglio* Director
- ------------------------
PETER J. MARGUGLIO
A. Clay Leighton* Senior Vice President of
- ------------------------ Worldwide Operations and
A. CLAY LEIGHTON Finance and Chief
Financial Officer
(Principal Financial
Accounting Officer)
/s/ Robert J. Doris
- ------------------------
*ROBERT J. DORIS
(Attorney-in-fact)
</TABLE>
II-4
<PAGE>
SONIC SOLUTIONS
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
----------- ----------------------------------------------------------------- ---------------
<S> <C> <C>
4.1* Private Securities Subscription Agreement between Registrant
and Hambrecht & Quist Guaranty Finance, LLC dated as of
March 31, 1998
4.2** Private Securities Subscription Agreement between Registrant
and Hambrecht & Quist Guaranty Finance, LLC dated as of October
15, 1999
4.3** Common Stock Warrant Purchase Agreement between Registrant and
Hambrecht & Quist Guaranty Finance, LLC dated as of October 15,
1999
4.4** Warrant to Purchase 120,000 Shares of Common Stock between
Registrant and Hambrecht & Quist Guaranty Finance, LLC dated as
of October 15, 1999
5** Opinion of Heller Ehrman White & McAuliffe
10** Promissory Note between Registrant and Hambrecht & Quist
Guaranty Finance, LLC dated as of October 15, 1999
23.1 Consent of Heller Ehrman White & McAuliffe (included in Exhibit 5)
23.2 Consent of KPMG LLP
24** Power of Attorney
</TABLE>
* Incorporated by reference to Exhibit 4 of Form S-3 filed with the
Commission on April 22, 1998.
** Incorporated by reference to Exhibits of Form S-3 filed with the Commission
on November 24, 1999.
<PAGE>
Exhibit 23.2
The Board of Directors
Sonic Solutions:
We consent to incorporation by reference in the registration statement
on Form S-3 of Sonic Solutions of our report dated April 26, 1999, except as to
note 11, which is as of May 29, 1999, relating to the balance sheets of Sonic
Solutions as of March 31, 1999 and 1998, and the related statements of
operations, shareholders' equity and cash flows for each of the years in the
three-year period ended March 31, 1999 and the related financial statement
schedule, which report appears in the March 31, 1999 annual report on Form 10-K
of Sonic Solutions, and to the reference to our firm under the heading "Experts"
in the registration statement.
/s/ KPMG LLP
San Francisco, California
March 17, 2000
