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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 1-12694
SOLIGEN TECHNOLOGIES, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
WYOMING 95-4440838
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
19408 LONDELIUS STREET
NORTHRIDGE, CALIFORNIA 91324
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(818) 718-1221
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares of issuer's common stock outstanding as of February 3, 1998:
32,682,338
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
SOLIGEN TECHNOLOGIES, INC.
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 1997
and March 31, 1997 ................................................. 3
Consolidated Statements of Operations for the three and nine months
ended December 31, 1997 and 1996 ................................... 4
Consolidated Statements of Cash Flows for the nine months ended
December 31, 1997 and 1996 .......................................... 5
Notes to Consolidated Financial Statements ......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................. 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings................................................... 12
Item 2. Changes in Securities and Use of Proceeds........................... 13
Item 6. Exhibits and Reports on Form 8-K.................................... 14
Signatures ......................................................... 15
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 529,000 $ 506,000
Accounts receivable 647,000 723,000
Inventories 135,000 160,000
Prepaid expenses 56,000 49,000
---------- ----------
Total current assets 1,367,000 1,438,000
Property, plant and equipment 2,128,000 2,112,000
Less allowance for depreciation and amortization 1,225,000 1,004,000
---------- ----------
Net property, plant and equipment 903,000 1,108,000
Other assets 40,000 34,000
---------- ----------
TOTAL ASSETS $2,310,000 $2,580,000
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 393,000 $ 360,000
Trade accounts payable 410,000 251,000
Payroll and related expenses 151,000 146,000
Accrued expenses 109,000 105,000
Deferred revenue 169,000 131,000
---------- ----------
Total current liabilities 1,232,000 993,000
Notes payable, net of current portion 50,000 100,000
Stockholders' equity:
Common stock, no par value:
Authorized -- 50,000,000 shares;
Issued and outstanding: 32,682,338 at December 31
and 31,434,283 at March 31 10,185,000 9,776,000
Accumulated deficit (9,157,000) (8,289,000)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,028,000 1,487,000
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,310,000 $2,580,000
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------ -------------------------------
1997 1996 1997 1996
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
REVENUES $1,188,000 $1,334,000 $3,685,000 $ 2,627,000
---------- ---------- ---------- -----------
COST OF REVENUES 818,000 654,000 2,588,000 1,617,000
---------- ---------- ---------- -----------
Gross profit 370,000 680,000 1,097,000 1,010,000
---------- ---------- ---------- -----------
OPERATING EXPENSES:
Research and development 261,000 260,000 780,000 803,000
Selling 143,000 171,000 408,000 521,000
General and administrative 278,000 264,000 790,000 760,000
Non-cash compensation 39,000 -- 117,000 --
---------- ---------- ---------- -----------
Total operating expenses 721,000 695,000 2,095,000 2,084,000
---------- ---------- ---------- -----------
Loss from operations (351,000) (15,000) (998,000) (1,074,000)
OTHER INCOME (EXPENSE):
Interest income -- 4,000 2,000 15,000
Interest expense (8,000) (15,000) (23,000) (282,000)
Other income 152,000 -- 152,000 103,000
---------- ---------- ---------- -----------
Total other income (expense) 144,000 (11,000) 131,000 (164,000)
---------- ---------- ---------- -----------
LOSS BEFORE PROVISION FOR
INCOME TAXES (207,000) (26,000) (867,000) (1,238,000)
Provision for state income taxes -- 3,000 1,000 3,000
---------- ---------- ---------- -----------
NET LOSS $ (207,000) $ (29,000) $ (868,000) $(1,241,000)
---------- ---------- ---------- -----------
BASIC AND DILUTIVE
LOSS PER SHARE $ (0.01) $ (0.00) $ (0.03) $ (0.04)
---------- ---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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SOLIGEN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
-----------------------------
1997 1996
---------- ------------
<S> <C> <C>
Cash flows from operating activities
Net loss $(868,000) $(1,241,000)
Depreciation and amortization 293,000 285,000
Non-cash interest expense on convertible debt -- 250,000
Non cash compensation expense 117,000 --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 76,000 (542,000)
(Increase) decrease in inventories 63,000 (22,000)
(Increase) decrease in prepaid expenses (7,000) 16,000
Increase (decrease) in trade accounts payable 159,000 (230,000)
Increase (decrease) in payroll and related expenses 5,000 (38,000)
Increase in accrued expenses 4,000 2,000
Increase in deferred revenues 38,000 273,000
(Increase) decrease in other assets (6,000) 9,000
--------- -----------
Net cash used for operating activities (126,000) (1,238,000)
--------- -----------
Cash flows from investing activities:
Additions in property, plant and equipment (126,000) (146,000)
--------- -----------
Net cash used for investing activities (126,000) (146,000)
--------- -----------
Cash flows from financing activities:
Principal payments under capital lease obligations (27,000) (50,000)
Payments on notes payable (4,000) --
Proceeds from issuance of notes payable 220,000 --
Cancellation of notes payable to former owners of A-RPM (205,000) --
Convertible debentures, net of issuance costs -- 666,000
Exercise of warrants and sale of common stock 291,000 --
--------- -----------
Net cash provided by financing activities 275,000 616,000
--------- -----------
Net increase (decrease) in cash 23,000 (768,000)
Beginning of period 506,000 1,189,000
--------- -----------
End of period $ 529,000 $ 421,000
--------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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SOLIGEN TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The financial information included herein for the three and nine-month
periods ended December 31, 1997 and 1996 is unaudited; however, such
information reflects all adjustments consisting only of normal recurring
adjustments which are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows
for the interim periods. The financial information as of March 31, 1997, is
derived from Soligen Technologies, Inc's 1997 Form 10-KSB and 1997 Form
10-KSB/A-1. The interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's 1997 Form 10-KSB and 1997 Form 10-KSB/A-1.
The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.
ACCOUNTING POLICIES
Reference is made to Note 1 of Notes to Financial Statements in the Company's
Annual Report on Form 10-KSB for the summary of significant accounting
policies.
INVENTORIES
Inventories are stated at the lower of cost or market on a first-in,
first-out basis. Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31 1997
----------------
<S> <C>
Raw materials $ 84,000
Work in process 35,000
Finished goods 16,000
---------
Total inventory $135,000
---------
</TABLE>
DEFERRED REVENUE
Deferred revenue relates to the DSPC technology profit center. The deferred
revenue related to machine revenues results mainly from the Company's
issuance of licenses for the use of the machines, or to support the machines
in the form of maintenance, rather than the outright sale of machines.
6
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DEBT
NOTES PAYABLE AND CAPITAL LEASES
Notes payable and capital leases consist of the following at December 31, 1997
<TABLE>
<S> <C>
Notes payable to former owners of A-RPM, $100,000
(see Part II, Item 1)
Other notes due through 1998 222,000
Capital leases 121,000
--------
Total capital leases and notes payable 443,000
Less current portion (393,000)
--------
Long term portion $ 50,000
--------
</TABLE>
7
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENT AND ASSOCIATED RISKS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE BASED LARGELY ON THE
COMPANY'S CURRENT EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF RISKS AND
UNCERTAINTIES INCLUDING, AMONG OTHERS (i) CUSTOMER ACCEPTANCE OF THE
COMPANY'S "ONE STOP SHOP" PARTS NOW PROGRAM; AND (ii) THE COMPANY'S ABILITY
TO OBTAIN ADDITIONAL FINANCING REQUIRED TO SUPPORT ITS CONTINUING OPERATIONS
AND PROJECTED REVENUE GROWTH. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THESE FORWARD-LOOKING STATEMENTS. IN VIEW OF THESE RISKS AND UNCERTAINTIES,
THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS CONTAINED IN
THIS QUARTERLY REPORT ON FORM 10-QSB WILL IN FACT TRANSPIRE.
The following discussion should be read in conjunction with the accompanying
Financial Statements of Soligen Technologies, Inc. ("STI") and its
wholly-owned subsidiaries Soligen, Inc. ("Soligen") and Altop, Inc. ("Altop")
(collectively referred to herein as the "Company") including the notes
thereto, included elsewhere in this Quarterly Report.
OVERVIEW
The Company has developed a proprietary technology known as Direct Shell
Production Casting ("DSPC-Registered Trademark-"). This technology is
embodied in the Company's DSPC 300 System (the "DSPC System"), which produces
ceramic casting molds directly from Computer Aided Design ("CAD") files.
These ceramic molds are used to cast metal parts, which conform to the CAD
design. This unique capability distinguishes the DSPC System from rapid
prototyping technologies, which are characterized by the ability to produce
non-functional, three-dimensional representations of parts from CAD files.
The Company's DSPC System is based upon proprietary technology developed by
the Company and certain patent and other proprietary rights licensed to
Soligen, Inc. ("Soligen"), a wholly-owned subsidiary of the Company, by the
Massachusetts Institute of Technology ("MIT") pursuant to a license agreement
(the "License") dated October 18, 1991, as amended. Pursuant to the License,
MIT granted Soligen an exclusive, world-wide license to develop, manufacture,
market and sell products utilizing certain technology and processes for the
production of ceramic casting molds for casting metal parts patented by MIT
until October 1, 2006, and on a non-exclusive basis thereafter until the
expiration of the last patent relating to the licensed technology. The
exclusive period may be extended by mutual agreement of both parties.
The Company believes that the rapid mold production capabilities of the DSPC
System provide a substantial competitive advantage over existing producers of
cast metal parts. Use of the DSPC System eliminates the need to produce
tooling (patterns and core boxes) for limited runs of metal parts, thereby
reducing both the time and the labor otherwise required to produce ceramic
casting molds for casting the metal parts. It provides for a paradigm shift
by enabling engineers to postpone the design or the fabrication of production
casting tooling until after the designed part
8
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has been functionally tested. This ability, in addition to expediting the
design verification and testing, enables manufacturers to save time and money
by designing the production casting tools, which are required for large
production runs, once and most likely correctly on the first attempt. The
DSPC System can be also used to produce the production tooling (usually made
of steel), required to cast the parts in larger production runs. To
capitalize on this advantage, the Company plans to form a network of rapid
response production facilities owned either by the Company or by licensed
third parties when sufficient capital is available. This network will
operate under the trade name Parts Now-Registered Trademark- service. These
facilities will include DSPC production facilities and foundries with
in-house machine shops. The Company intends to establish itself as a leading
manufacturer of cast metal parts by providing a seamless transition from CAD
file to finished part.
The Company is completing its transition from a development stage company
towards its goal of being a manufacturing / service company with continuing
revenues from operations. The Company operates four major revenue-generating
profit centers:
1. PARTS NOW CENTER ("PARTS NOW"): Oversees the "one stop shop" production
services from receipt of the customer's CAD file through production. Parts
Now is responsible for any contract which requires a combination of the
DSPC production center and conventional casting and CNC machining
expertise. It consists of program managers who oversee the transition from
CAD to first article, to tooling, to conventional casting and later to mass
production. The Parts Now Center acquires services from the DSPC
Production Center and the conventional casting and machining center at
cost.
2. DSPC PRODUCTION CENTER: Revenues result from the production and sale of
first article and short run quantities of cast metal parts made directly
from the customer's CAD file. This center also provides DSPC parts and
tool making services to the Parts Now Center. These services are charged
to Parts Now at cost. Revenues for this product line were initiated in the
quarter ended March 31, 1995.
3. CONVENTIONAL CASTING CENTER ("PRODUCTION PARTS"): Revenues result from the
production and sale of production quantities of cast and machined aluminum
parts for industrial customers. The Company began generating revenues in
this area through Altop, its aluminum foundry and machine shop, in July
1994. This center is limited to conventional casting of aluminum parts
that do not utilize DSPC made tooling.
4. DSPC TECHNOLOGY CENTER: Revenues result from the sale, lease, license or
maintenance of DSPC machines and from participation in research and
development projects wherein Soligen provides technological expertise.
9
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RESULTS OF OPERATIONS
Revenues for the three months ended September 30, 1997, and the three and
nine months ended December 31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION> THREE MONTHS
ENDED THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
------------- --------------------------- ----------------------------
1997 1997 1996 1997 1996
---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Parts Now-Registered Trademark- $ 118,000 $ 400,000 $ 690,000 $ 886,000 $1,157,000
DSPC-Registered Trademark- production 612,000 529,000 282,000 1,691,000 472,000
Production parts 229,000 188,000 235,000 635,000 835,000
DSPC-Registered Trademark- technology 305,000 71,000 127,000 473,000 163,000
---------- ---------- ---------- ----------
Total revenues $1,264,000 $1,188,000 $1,334,000 $3,685,000 $2,627,000
---------- ---------- ---------- ----------
</TABLE>
Parts Now and DSPC combined revenues increased 27% from $730,000 in the
second quarter ended September 30, 1997 to $929,000 in the third quarter
ended December 31, 1997. Compared to the comparable period a year ago, DSPC
revenues increased 88% from $282,000 to $529,000. Parts Now revenues
declined 42% from $690,000 in the third quarter of fiscal 1997 to $400,000 in
the third quarter of fiscal 1998. The decline is a result of a positive
change in the nature of the new Parts Now programs which are spread over a
longer time period. Despite the growing interest in Parts Now programs,
which resulted in an increase in number and dollar value of Parts Now
programs booked, the immediate effect on the revenues of Parts Now programs
was a decrease in revenues in the quarter ended December 31, 1997.
Consequently, combined revenues for Parts Now and DSPC in the third quarter
of fiscal 1998 decreased by $43,000 or 4% over the similar period last year.
The backlog at the end of the third and fourth quarters of fiscal 1997 for
the Parts Now programs was less than 90 days while the backlog for the Parts
Now programs at the end of the third quarter of fiscal 1998 is spread over
several quarters. Management is encouraged by the increase in DSPC revenues
and believes the increase in the duration of Parts Now programs should result
in reduced volatility in the Parts Now programs product line.
Production parts revenues decreased from $229,000 for the quarter ended
September 30, 1997 to $188,000 or 18% for the quarter ended December 31,
1997. Production parts revenues decreased to $188,000 for the three months
ended December 31, 1997 from $235,000 or 20% for the similar period ended
December 31, 1996. In addition, production parts revenues decreased to
$635,000 for the nine months ended December 31, 1997 from $835,000 or 24% for
the similar period last year. The Company continues to de-emphasize
conventional castings and gradually replace them with Parts Now programs.
The Company believes that this transition enables it to replace lower profit
margin business segments, unrelated to Parts Now business strategy, with
Parts Now programs.
DSPC technology's revenues decreased to $71,000 from $305,000 for the
quarters ended December 31, 1997 and September 30, 1997, respectively. DSPC
technology revenues deceased to $71,000 from $127,000 for the quarters ended
December 31, 1997 and 1996, respectively, and increased to $473,000 from
$163,000 for the nine months ended December 31, 1997 and 1996,
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respectively. The period ended September 30, 1997 included a $250,000
machine sale as previously noted. This sale of a DSPC machine is an unusual
event and is a part of the Company's support of MIT's licensees. Future
sales of machines to other MIT licensees will depend on the development of
their business.
The Company's revenues for the third quarter ended December 31, 1997, were
$1,188,000, a decrease of 11% compared to $1,334,000 in the quarter ended
December 31, 1996. Revenues for the quarter ended September 30, 1997
included a $250,000 machine sale; excluding this machine sale, revenues
increased from $1,014,000 to $1,188,000 or 17% for the quarter ended December
31, 1997. This machine sale was to another licensee of MIT's technology for
a non-competing field of use. Total revenues for the nine months ended
December 31, 1997 were $3,685,000, an increase of 40% compared to $2,627,000
for the nine months ended December 31, 1996. Combined revenues for Parts Now
and DSPC for the nine months ended December 31, 1997 increased to $2,577,000
from $1,629,000 or 58% over the nine months ended December 31, 1996.
Gross profit for the three and nine months ended December 31, 1997, was
$370,000 and $1,097,000, respectively, as compared to $680,000 and $1,010,000
for the three and nine months ended December 31, 1996. Beginning in the
first quarter ended June 30, 1997 and continuing through the third quarter
ended December 31, 1997, the Company has made and continues to make
investments in programs leading to the manufacture of production tooling.
The manufacture of production tooling is critical to the Company's business
strategy although in the short term it has a negative impact on gross
margins. In the third quarter of fiscal 1997 margins were high as a result
of parts and tooling shipped in the same quarter The launch of a Parts Now
program involves the creation of production tooling by DSPC. Production
tooling is a new application for DSPC and its launch requires more resources
at this stage. The main advantage of Parts Now programs is in the ability to
commence production rapidly. The margins on the Parts Now program product
are higher than conventional foundry margins. For the nine months ended
December 31, 1997, gross profits increased by $87,000 or 9% over the similar
period of the previous year. Consequently, gross margin as a percentage of
revenues decreased to 31 from 51 percent for the three-month periods ending
December 31, 1997, and 1996, respectively, and decreased to 30 from 38
percent for the nine months ended December 31, 1997 and 1996, respectively.
Research and development expenses were $261,000 and $260,000 for the quarters
ended December 31, 1997 and 1996, respectively. For the nine months ended
December 31, 1997 and 1996, research and development expenses were $780,000
or 21% of revenues and $803,000 or 31% of revenues, respectively. The
Company intends to continue development of the DSPC technology and its
applications as key to its business strategy.
Selling expenses decreased to $143,000 for the quarter ended December 31,
1997, from $171,000 for the quarter ended December 31, 1996. For the nine
months ended December 31, 1997 and 1996, selling expenses deceased to
$408,000 from $521,000, respectively. The decrease in selling expenses was
the result of the consolidation of Altop's and Soligen's sales departments.
11
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General and administrative expenses increased to $278,000 for the quarter
ended December 31, 1997 from $264,000 for the quarter ended December 31,
1996. General and administrative expenses increased to $790,000 for the nine
months ended December 31, 1997 from $760,000 for the nine months ended
December 31, 1996.
The Company issued stock options to non-employees in fiscal 1996 and,
according to SFAS 123, non-cash compensation expense is to be recognized over
the expected period of benefit. As a result, the Company recognized $39,000
and $117,000, respectively, in the quarter and nine months ended December 31,
1997, and expects to recognize a total of approximately $156,000 non-cash
compensation expense during fiscal 1998.
On December 15, 1997, the Company settled its lawsuit and counterclaim with
A-RPM and recognized $152,000 other income in the quarter ended December 31,
1997. The other income is a result of the Company reversing notes payable,
net of accrued interest and legal expenses. (see Part II, Item 1).
CASH AND SOURCES OF LIQUIDITY
As of December 31, 1997, the Company had $1,176,000 in cash and accounts
receivable, a decrease of $53,000 from $1,229,000 at March 31, 1997. At
December 31, 1997, the Company reported working capital of $135,000 compared
to working capital of $445,000 at March 31, 1997.
In August 1997, the Company entered into an agreement with a commercial
lender for an up to $1 million revolving line of credit, collateralized by
receivable, inventory and fixed assets. The credit facility provides for the
advance rate of 75% of eligible accounts receivable.
The Company requires significant funds to continue operations. The Company
believes the net proceeds of notes payable issued in December 1997, current
cash and its revolving line of credit will be sufficient to meet its working
capital and capital expenditures requirements through April 30, 1998. The
Company is actively seeking to raise additional funds; however, there can be
no assurance to the success of these efforts.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A-RPM LAWSUIT AND COUNTERCLAIM SETTLEMENT
On June 30, 1994, Altop, Inc., a wholly owned subsidiary of the Company,
acquired substantially all of the assets of A-RPM Corporation, an aluminum
foundry and machine shop located in Santa Ana, California. The assets were
acquired pursuant to an Asset Purchase Agreement between
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Altop, A-RPM, the Company and Leland K. and Nancy B. Lowry, the sole
shareholders of A-RPM. As payment for the assets, Altop delivered an initial
cash payment in the amount of $100,000 and three promissory notes in the
total principal amount of $220,000. Altop also assumed certain liabilities of
A-RPM and agreed to deliver an additional payment of up to $100,000
contingent upon determination of certain net asset values according to a
formula set forth in the Asset Purchase Agreement.
On March 22, 1995, the Company and Altop commenced an action against A-RPM
and the Lowrys in the Superior Court for Orange County, California. The
complaint in this action seeks damages for breach of the Asset Purchase
Agreement, fraud, and negligent misrepresentation. Pending resolution of
this dispute, the Company provided for a $305,000 liability in its
consolidated financial statements.
A Settlement Agreement and Mutual General Release was executed on December
15, 1997, in which Altop, Inc. and the Company agreed to pay to Leland K. and
Nancy B. Lowry the sum of $100,000, without interest, according to the
following schedule:
<TABLE>
<S> <C>
January 1, 1998 $ 20,000
February 1, 1998 through October 1, 1998 $ 8,500 per month
November 1, 1998 3,500
</TABLE>
All of the parties settled all known disputes and resolved the claims to the
above referenced actions. To secure the payment obligation, Altop and the
Company executed a Stipulated Judgment in the Superior Court for Orange
County, California on December 15, 1997.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) In December 1997, the Company's Board of Directors approved a short-term
debt and warrant financing. The offering was completed in a private
placement transaction to accredited investors only pursuant to Regulation D
and Rule 506 thereunder. A total of six investors loaned a total of $220,000
to the Company in December 1997, and one investor loaned an additional
$40,000 to the Company in January 1998. Each investor received a promissory
note in the principal amount of the amount loaned, bearing interest at the
rate of 12% per annum and due six months from the date of the promissory
note. In addition, for each dollar loaned to the Company the investors
received a common stock purchase warrant exercisable for two shares of the
Company's common stock (resulting in the issuance of warrants exercisable for
a cumulative total of 520,000 shares of the Company's common stock). The
warrants are exercisable for a period of five years at $0.50 per share. A
finder's fee in the amount of $17,000 was paid to a non-employee member of
the Company's Board of Directors in consideration of services provided in
connection with the financing. One of the investors was a non-employee
member of the Company's Board of Directors, one investor was an employee
member of the Company's Board of Directors, and the remaining five investors
were private investors.
13
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------- --------------------
<S> <C>
2.1 Share Exchange Agreement and Amendments (1)
2.2 MIT Share Acquisition Agreement (1)
2.3 Escrow Agreement (1)
2.4 Pooling Agreement (1)
3.1 Articles of Incorporation of Soligen Technologies, Inc. (1)
3.2 Bylaws of Soligen Technologies, Inc. (1)
3.3 First Amendment to Bylaws (3)
4.1 Modification Agreement (Pooling) (6)
4.2 Subscription Agreement for Private Placement (5)
4.3 Subscription Agreement for Private Placement (5)
4.4 Subscription Agreement for Private Placement (2)
4.5 Common Stock Purchase Warrant Agreement
11.1 Computation of Net Loss Per Share
27. Financial Data Schedule
</TABLE>
(1) Incorporated by reference to the Registration Statement on Form 10-SB (Reg.
No. 1-12694) filed by the Company on December 20, 1993.
(2) Incorporated by reference to Amendment No. 1 to the Registration Statement
on Form 10-SB (Reg. No. 1-12694) filed by the Company on February 7, 1994.
(3) Incorporated by reference to Amendment No. 2 to the Registration Statement
on Form 10-SB (Reg. No. 1-12694) filed by the Company on February 22, 1994.
(5) Incorporated by reference to Form 10-QSB filed by the Company on November
14, 1995.
(6) Incorporated by reference to Form 10-KSB filed by the Company on June 17,
1996.
(b) No reports on Form 8-K were filed during the quarter ended December 31,
1997.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
SOLIGEN TECHNOLOGIES, INC.
Date: February 13, 1998 By: /s/ Yehoram Uziel
---------------------------------------
Yehoram Uziel
President, CEO and Chairman of the Board
(Principal executive officer)
Date: February 13, 1998 By: /s/ Robert Kassel
---------------------------------------
Robert Kassel
Chief Financial Officer
(Principal financial officer)
15
<PAGE>
EXHIBIT 4.5
THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES
LAWS, AND NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
COVERING ANY SUCH TRANSACTION INVOLVING SAID SECURITIES, OR (ii) THE ISSUER
RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER OF SAID SECURITIES
SATISFACTORY TO THE ISSUER STATING THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION OR THE ISSUER OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION
IS EXEMPT FROM REGISTRATION.
WARRANT TO PURCHASE _______
SHARES OF COMMON STOCK
STOCK PURCHASE WARRANT
TO PURCHASE SHARES OF COMMON STOCK
OF SOLIGEN TECHNOLOGIES, INC.
Void After December 11, 2002
FOR VALUE RECEIVED, SOLIGEN TECHNOLOGIES, INC., a Wyoming
corporation (the "Company"), hereby grants to _________________ (the "Initial
Warrant Holder"), the right, subject to the terms of this Warrant, to
purchase at any time and from time to time during the period commencing on
the "Initial Exercise Date" (as defined below) and ending on the "Expiration
Date" (as defined below) up to ______________________ fully paid and
nonassessable shares of Common Stock of the Company. The exercise price
shall be $0.50 per share (the "Basic Exercise Price"). The Basic Exercise
Price and the number of shares that may be purchased are subject to
adjustment under the terms of this Warrant.
Section 1. DEFINITIONS.
As used in this Warrant, unless the context otherwise requires:
"AGREEMENT" means that certain Subordinated Promissory Note
Purchase Agreement, of even date herewith, between the Company and the
Purchasers named therein.
"BASIC EXERCISE PRICE" means the price at which each Warrant Share
may be purchased upon exercise of this Warrant, as stated in the introductory
paragraph.
"COMMON STOCK" means the Common Stock of the Company.
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"EXERCISE DATE" means any date when this Warrant is exercised, in
whole or in part, in the manner indicated in Sections 2.1 and 2.2 below.
"EXERCISE PRICE" means the Basic Exercise Price; provided, however,
that if an adjustment is required under Section 7.1 of this Warrant, then the
"Exercise Price" means, after such adjustment, the price at which each
Warrant Share may be purchased upon exercise of this Warrant immediately
after the last such adjustment.
"EXPIRATION DATE" means the earlier of (a) 12:00 midnight (Los
Angeles time) on December 11, 2002, and (b) thirty (30) days after notice has
been delivered in accordance with Section 2.1(b) hereof.
"INITIAL EXERCISE DATE" means the date of this Warrant.
"INITIAL WARRANT HOLDER" has the meaning specified in the
introductory paragraph.
"PERSON" means an individual, corporation, partnership, trust,
joint venture or other form of business entity.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and all rules and regulations promulgated thereunder, or any
act, rules or regulations which replace the Securities Act or any such rules
and regulations.
"SUBSEQUENT WARRANT" has the meaning specified in Section 2.3 below.
"WARRANT HOLDER" means the Initial Warrant Holder or, upon
assignment of this Warrant by the Initial Warrant Holder (or a subsequent
Warrant Holder), such assignee.
"WARRANT SHARE(S)" means any share(s) of Common Stock, or other
securities, issued or issuable upon exercise of this Warrant.
Section 2. DURATION AND EXERCISE OF WARRANT.
2.1 EXERCISE PERIOD.
(a) Subject to the provisions hereof, this Warrant may be
exercised at any time and from time to time during the period
commencing on the Initial Exercise Date and ending on the
Expiration Date. After the Expiration Date, this Warrant shall
become void and all rights to purchase Warrant Shares hereunder
shall thereupon cease; and
(b) The Company shall have the right to give notice, in
accordance with Section 11.2, of the early expiration of this
Warrant at any time after the following conditions have been
satisfied:
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(i) the Company's Common stock shall have traded above
one dollar and fifty cents per share (unadjusted for splits or
stock dividends) for twenty (20) consecutive trading days on
any nationally recognized stock exchange or NASDAQ following
the earliest date of the satisfaction of condition;
(ii) the average weekly trading volume of the Company's
Common Stock during such twenty (20) consecutive trading days
is equal to or greater than 400,000 shares of Common Stock
(adjusted downward for any reverse splits);
(iii) the shares of Common Stock to be issued upon
such exercise have been registered under the Securities Act
and may be freely sold by the holders of such shares under the
Securities Act or, if not so registered, all such shares of
Common Stock must be eligible to be sold by the holders
pursuant to Rule 144(k) promulgated under the Securities Act;
AND
(iv) the Company's earnings per share, on a fully-taxed
basis, calculated according to GAAP and on a fully-diluted
basis (giving effect to the conversion of all convertible
securities and including outstanding warrants and options
using the Treasury Method) for the trailing four (4) quarters
shall in aggregate be no less than $0.10.
2.2 METHOD OF EXERCISE AND PAYMENT.
(a) METHOD OF EXERCISE. Subject to Section 2.1 hereof and
compliance with all applicable Federal and state securities laws,
the purchase right represented by this Warrant may be exercised, in
whole or in part, by the Warrant Holder by (i) surrender of this
Warrant and delivery of the Exercise Form attached hereto, duly
executed, at the principal office of the Company and (ii) payment
to the Company of an amount equal to the product of the then
applicable Exercise Price multiplied by the number of Warrant
Shares then being purchased. At the election of the Warrant
Holder, the purchase price may be paid by surrender of this Warrant
for the full number of shares for which this Warrant is then
exercisable less that number of shares having a fair market value
equal to the aggregate exercise price. For purposes of this
Section 2.2(a), fair market value shall be determined as follows:
(i) if the Company's Common Stock is publicly traded at the time of
exercise, fair market value shall be determined by appropriate
reference to the prices or quotes available for the most recent
purchases and sales of the Company's Common Stock as of the last
business day prior to the date of such exercise; and (ii) if the
Company's Common Stock is not publicly traded at the time of
exercise, fair market value shall be deemed to be the fair value of
the Common Stock as determined in good faith by the Company's Board
of Directors after taking into consideration all factors that it
deems appropriate, including, without limitation, recent sale and
offer prices of the Common Stock in private transactions negotiated
at arm's length.
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<PAGE>
(b) METHOD OF PAYMENT. Payment shall be made either by check
drawn on a United States bank and for United States funds made
payable to the Company, or by wire transfer of United States funds
for the account of the Company.
(c) DELIVERY OF CERTIFICATE. In the event of any exercise of
the purchase right represented by this Warrant, certificates for
the Warrant Shares so purchased shall be delivered to the Warrant
Holder within thirty (30) days of delivery of the Exercise Form
and, unless this Warrant has been fully exercised or has expired, a
new warrant representing the portion of the Warrant Shares with
respect to which this Warrant shall not then have been exercised
shall also be issued to the Warrant Holder within such thirty (30)
day period.
2.3 SECURITIES ACT COMPLIANCE/RESTRICTIONS UPON TRANSFER. Unless
the issuance of the Warrant Shares shall have been registered under the
Securities Act, as a condition of its delivery of certificates for the
Warrant Shares, the Company may require the Warrant Holder (including the
transferee of the Warrant Shares in whose name the Warrant Shares are to be
registered) to deliver to the Company, in writing, representations regarding
the Warrant Holder's sophistication, investment intent, acquisition for his
own account and such other matters as are reasonable and customary for
purchasers of securities in an unregistered private offering. The Company
may place conspicuously upon each Subsequent Warrant and upon each
certificate representing the Warrant Shares a legend substantially in the
following form, the terms of which are agreed to by the Warrant Holder
(including such transferee):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED SOLELY
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. SUCH
SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER, PLEDGE OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS
UNLESS SOLD PURSUANT TO RULE 144 OF THE ACT.
The Company need not register a transfer of this Warrant or the Warrant
Shares unless the conditions specified in such legend are satisfied. Subject
to the foregoing transfer restrictions set forth in this Section 2.3, this
Warrant is transferable, in whole or in part, on the books of the Company,
upon surrender of this Warrant to the Company, together with a written
assignment duly executed by the Warrant Holder and delivery of funds
sufficient to pay any transfer taxes payable by reason of such transfer.
Section 3. VALIDITY AND RESERVATION OF WARRANT SHARES. The
Company represents and warrants that all Warrant Shares issued upon exercise
of this Warrant will be validly issued, fully paid,
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<PAGE>
nonassessable and not subject to preemptive or similar rights. The Company
agrees that, as long as this Warrant may be exercised, the Company will have
authorized and reserved for issuance upon exercise of this Warrant a
sufficient number of shares of Common Stock to provide for exercise in full
of this Warrant.
Section 4. FRACTIONAL SHARE. No fractional Warrant Shares shall
be issued upon the exercise of this Warrant, and the number of Warrant shares
to be issued shall be rounded to the nearest whole number.
Section 5. LIMITED RIGHTS OF WARRANT HOLDER. The Warrant Holder
shall not, solely by virtue of being the Warrant Holder of this Warrant, have
any of the rights of a stockholder of the Company, either at law or equity,
until this Warrant shall have been exercised.
Section 6. LOSS OF WARRANT. Upon receipt by the Company of
satisfactory evidence of the loss, theft, destruction or mutilation of this
Warrant and either (in the case of loss, theft or destruction) reasonable
indemnification and a bond satisfactory to the Company if requested by the
Company or (in the case of mutilation) the surrender of this Warrant for
cancellation, the Company will execute and deliver to the Warrant Holder,
without charge, a new warrant of like denomination.
Section 7. CERTAIN ADJUSTMENTS OF EXERCISE PRICE.
7.1 ADJUSTMENT OF EXERCISE PRICE. The number, class and Exercise
Price of securities for which this Warrant may be exercised are subject to
adjustment from time to time upon the happening of certain events as
hereinafter provided:
7.1.1 RECAPITALIZATION. If the outstanding shares of the
Company's Common Stock are divided into a greater number of shares
or the Company issues a stock dividend on its outstanding Common
Stock, the number of shares of Common Stock purchasable upon the
exercise of this Warrant shall be proportionately increased and the
Exercise Price shall be proportionately reduced and, conversely, if
the outstanding shares of Common Stock are combined into a smaller
number of shares of Common Stock, the number of shares of Common
Stock purchasable upon the exercise of this Warrant shall be
proportionately reduced and the Exercise Price shall be
proportionately increased. The increases and reductions provided
for in this Section 7.1.1 shall be made with the intent and, as
nearly as practicable, the effect that neither the percentage of
the total equity of the Company obtainable on exercise of this
Warrant nor the price payable for such percentage shall be affected
by any event described in this Section 7.1.1.
7.1.2 MERGER OR REORGANIZATION, ETC. In the event of any
change in the Common Stock through merger, consolidation,
reclassification, reorganization, partial or complete liquidation
or other change in the capital structure of the Company (not
including the issuance of additional shares of capital stock other
than by stock dividend or stock split), then, as a condition of
such change in the capital structure of the Company, appropriate
and adequate
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provision shall be made so that the Warrant Holder of this Warrant
will have the right thereafter to receive upon the exercise of this
Warrant the kind and amount of shares of stock or other securities
or property to which it would have been entitled if immediately
prior to such merger, consolidation, reclassification,
reorganization, recapitalization or other change in the capital
structure, it had held the number of shares of Common Stock then
obtainable upon the exercise of this Warrant. In any such case
appropriate adjustment shall be made in the applications of the
provisions set forth herein with respect to the rights and interest
thereafter of the Warrant Holder, to the end that the provisions
set forth herein shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other
property thereafter deliverable upon the exercise of this Warrant.
7.2 NOTICE OF ADJUSTMENT. Whenever an event occurs requiring any
adjustment to be made pursuant to Section 7.1, the Company shall promptly
file with its Secretary or an Assistant Secretary at its principal office and
with its stock transfer agent, if any, a certificate of its chief executive
officer specifying such adjustment, setting forth in reasonable detail the
acts requiring such adjustment, and stating such other facts as shall be
necessary to show the manner and figures used to compute such adjustment.
Such chief executive officer's certificate shall be made available at all
reasonable times for inspection by the Warrant Holder. Promptly (but in no
event more than 30 days) after each such adjustment, the Company shall give a
copy of such certificate by certified mail to the Warrant Holder.
Section 8. SUBDIVISION OF WARRANT. At the request of the Warrant
Holder in connection with a transfer of a portion of this Warrant upon
surrender of this Warrant for such purpose to the Company at its principal
office, the Company at its expense (except for any transfer tax payable) will
issue and exchange therefor new Warrants of like tenor and date representing
in the aggregate the amount of the Warrant Shares.
Section 9. REGISTRATION RIGHTS.
9.1 DEFINITIONS. For purposes of this Section 9:
(a) The term "register", "registered" and "registration"
refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the
Securities Act, and the declaration or ordering of effectiveness of
such registration statement or document;
(b) The term "Registrable Securities" means any Common Stock
issued or issuable upon exercise of this Warrant, excluding,
however, any Registrable Securities sold by a person in a
transaction in which his rights are not assigned under Section 9.6
hereof.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common
Stock outstanding which are, and the number of shares of Common
Stock issuable pursuant to then exercisable or convertible
securities which are, Registrable Securities; and
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(d) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in
accordance with Section 9.10 hereof.
9.2 COMPANY REGISTRATION.
(a) If the Company proposes to register (including for this
purpose a registration effected by the Company for shareholders
other than the Holders) any of its capital stock or other
securities under the Securities Act in connection with the public
offering of such stock or securities solely for cash (other than a
registration on any form which does not include substantially the
same information as would be required to be included in a
registration statement covering the sale of the Registrable
Securities), the Company shall, each such time, promptly give each
Holder written notice of such registration together with a list of
the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable blue sky or other
state securities laws. Upon the written request of each Holder
given within twenty (20) days after giving of such written notice
by the Company in accordance with Section 11.2, the Company shall,
subject to the limitations set forth in subsection 9.2(b) below,
cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be
registered.
(b) The right of any Holder to registration pursuant to this
Section 9.2 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders
distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the underwriter or
underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 9.2, if the
underwriter determines that marketing factors require a limitation
of the number of shares to be underwritten, and: (i) if such
registration is the first registered offering of the sale of the
Company's securities to the public, then the underwriter may
(subject to the allocation priority set forth below) exclude some
or all Registrable Securities from such registration and
underwriting; or (ii) if such registration is other than the first
registered offering of the sale of the Company's securities to the
general public, then the underwriter may (subject to the allocation
priority set forth below) limit the number of Registrable
Securities to be included in the registration and underwriting to
not less than twenty-five percent (25%) of the number of securities
included therein. In the event of such a limitation, the Company
shall so advise all Holders requesting registration, and the number
of shares of securities that may be included in the registration
and underwriting shall be allocated in the following manner: The
securities of the Company held by officers and directors of the
Company (other than Registrable Securities and other than
securities held by persons who, by virtue of contracts with the
Company, are entitled to include their securities in such
registration) shall be excluded from such registration and
underwriting to the extent required by such limitation, and, if a
further limitation of the number of shares is required, the number
of shares that may be included in the
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<PAGE>
registration and underwriting shall be allocated among all other
holders (including Holders of Registrable Securities) thereof in
proportion, as nearly as practicable, to the respective amounts of
securities (including Registrable Securities) which would otherwise
be entitled to inclusion in such registration held by such Holders
or holders at the time of filing the registration statement. If any
Holder disapproves of the terms of any such underwriting, he may
elect to withdraw therefrom by written notice to the Company and
the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
(c) The Company's obligations under this Section 9.2 shall
terminate with respect to any Holder one year after the Expiration
Date.
9.3 EXPENSES OF REGISTRATION.
(a) As used in this Section 9.3, "Registration Expenses"
shall mean all expenses incurred by the Company in complying with
Section 9.2, hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and disbursements of
a single counsel for all Holders, blue sky fees and expenses, and
the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular
employees of the Company which would be paid in any event by the
Company); and "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale.
(b) All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to this Section
9 shall be borne by the Company; and all Selling Expenses shall be
borne by the Holders of the securities so registered pro rata on
the basis of the number of shares so registered and sold.
9.4 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 9.
9.5 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 9:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the officers, directors
and agents of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the
Securities Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the 1934 Act or other federal or
state law or common law doctrine related to fraud, insofar as such
losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a
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"Violation"): (i) any untrue statement or alleged untrue statement
of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission
or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the 1934 Act, any state securities
law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law; and the Company will pay
as incurred any legal or other expenses reasonably incurred by each
such Holder, officer, director, agent, underwriter, or controlling
person in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 9.8(a) shall not
apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such
Holder, officer, director, agent, underwriter or controlling
person; provided further, however, that the foregoing indemnity
agreement is subject to the condition that, insofar as it relates
to any such untrue statement, alleged untrue statement, omission,
or alleged omission made in a preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the
time the registration statement becomes effective, or in the
amended prospectus filed with the SEC pursuant to Rule 424(b) (the
"Final Prospectus"), such indemnity agreement shall not inure to
the benefit of any underwriter, or any Holder or any party
otherwise entitled to indemnification hereunder (if there is no
underwriter), if a copy of the Final Prospectus was not furnished
to the person or entity asserting the loss, liability, claim, or
damage at or prior to the time such action is required by the
Securities Act.
(b) Promptly after receipt by an indemnified party under this
Section 9.5 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim
in respect thereof is to be made against any indemnifying party
under this Section 9.5, notify the indemnifying party in writing of
the commencement thereof and the indemnifying party shall have the
right to participate in, and, to the extent the indemnifying party
so desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if the
indemnifying party shall not have engaged counsel within a
reasonable period of time to assure the defense of such action, or
if representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding.
The failure to notify an indemnifying party within a reasonable
time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying
party of any liability to the indemnified party
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<PAGE>
under this Section 9.5, but the omission so to notify the
indemnifying party will not relieve it of any liability that it may
have to any indemnified party otherwise than under this Section 9.5.
9.6 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 9 may be
assigned by a Holder to: (a) any entity which is controlling, controlled by
or under common control with any Warrant Holder, any member of Warrant
Holder's immediate family (being limited to spouses and lineal ancestors and
descendants) or any partnership composed of, or trust for the primary benefit
of, the Warrant Holder or members of such Warrant Holder's immediate family;
(b) a general or limited partner of the Warrant Holder; or (c) any other
transferee or assignee of such securities upon the transfer or assignment of
securities representing at least twenty-five percent (25%) of the total
number of shares of Warrant Shares purchased by the Warrant Holder pursuant
to this Warrant; provided that the Company is, within a reasonable time after
any such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned and an Assumption Agreement in the
form attached as EXHIBIT A to this Warrant executed by the party receiving
the assignment of registration rights pursuant to this Section 9; and
provided, further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities
Act.
9.7 "MARKET STAND-OFF AGREEMENT". The Warrant Holder hereby
agrees that it shall not, to the extent requested by the Company and any
underwriter of securities of the Company in a registered offering in which
such Warrant Holder had a right to sell Registrable Securities hereunder,
sell or otherwise transfer or dispose of any Registrable Securities during
the one hundred eighty (180) day period following the effective date of such
registration statement; PROVIDED, however, that:
(a) Such agreement shall be applicable only to the first such
registration statement of the Company which covers shares (or
securities) to be sold on its behalf to the public in an
underwritten offering; and
(b) Such agreement is conditioned upon all employees,
officers and directors of the Company and all other persons with
contractual registration rights (whether or not pursuant to this
Warrant) entering into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Warrant Holder (and the shares or securities of every other person subject to
the foregoing restriction) until the end of such ninety (90) day period.
9.8 MODIFICATION OF RIGHTS. Any of the terms and provisions of
this Section 9 shall be subject to modification from time to time upon
written agreement between at least fifty-one percent (51%) in interest of the
Holders and the Company.
Section 10. REPRESENTATIONS AND WARRANTIES.
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10.1 BY WARRANT HOLDER. The Warrant Holder represents and
warrants to the Company as follows:
(a) This Warrant and the Warrant Shares issuable upon exercise
thereof are being acquired for its own account, for investment and
not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the
Securities Act. Upon exercise of this Warrant, the Warrant Holder
shall, if so requested by the Company, confirm in writing, in a
form satisfactory to the Company, that the securities issuable upon
exercise of this Warrant are being acquired for investment and not
with a view toward distribution or resale.
(b) The Warrant Holder understands that the Warrant and the
Warrant Shares have not been registered under the Securities Act by
reason of their issuance in a transaction exempt from the
registration and prospectus delivery requirements of the Act
pursuant to Section 4(2) or Section 4(6) thereof, and that they
must be held by the Warrant Holder indefinitely, and that the
Warrant Holder must therefore bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is
registered under the Securities Act or is exempted from such
registration.
(c) The Warrant Holder has such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of the purchase of this Warrant and the Warrant
Shares purchasable pursuant to the terms of this Warrant and of
protecting its interests in connection therewith.
(d) The Warrant Holder is able to bear the economic risk of
the purchase of the Warrant Shares pursuant to the terms of this
Warrant.
10.2 BY COMPANY. The Company represents and warrants to the
Warrant Holder those representations and warranties as set forth in Section
3.1 of that certain Subordinated Promissory Note Purchase Agreement, of even
date herewith, between the Company and the Purchasers named therein.
Section 11. MISCELLANEOUS.
11.1 SUCCESSORS AND ASSIGNS. The provisions of this Warrant shall
be binding upon and inure to the benefit of the Company, the Warrant Holder
and their respective permitted successors and assigns hereunder.
11.2 NOTICES. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be sent by telex
or facsimile transmission (FAX) to the number set forth below or by telegram
to the address set forth below (in each such case notice shall be deemed
given on the date of transmission) or by overnight air courier service (in
which case notice shall be deemed given when received by addressee or on the
second (2nd) day after the date of delivery to the courier, whichever is
earlier), or by registered or certified mail, return receipt requested,
postage
- 11 -
<PAGE>
prepaid and properly addressed (in which case notice shall be deemed given
when received by the addressee or on the fifth (5th) day after the date of
mailing, whichever is earlier), to the addresses set forth below, or such
other address as a party may hereafter provide notice of to the other:
IF TO THE COMPANY:
Soligen Technologies, Inc.
19408 Londelius Street
Northridge, California 91324
FAX: (818) 718-0760
Attn: President
Copy to:
Garvey, Schubert & Barer
1191 Second Avenue, 18th Floor
Seattle, WA 98101
FAX: 206-464-0125
Attn: Bruce A. Robertson
IF TO THE WARRANT HOLDER:
The Warrant Holder's last known FAX number or address as it appears
on the books of the Company.
11.3 APPLICABLE LAW. The validity, interpretation and performance
of this Warrant shall be governed by the laws of the State of California.
11.4 HEADINGS. The headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.
DATED: , 1997.
------------------------
SOLIGEN TECHNOLOGIES, INC.
By
------------------------------------------
Name:
----------------------------------
Title:
----------------------------------
- 12 -
<PAGE>
EXHIBIT A
ASSUMPTION AGREEMENT
In connection with the transfer of _________ Warrant Shares issued
or issuable pursuant to that certain Stock Purchase Warrant to Purchase
Shares of Common Stock of Soligen Technologies, Inc. dated
__________________, 1997 (the "Warrant"), the undersigned hereby agrees that
with regard to such shares it shall be bound by the terms and conditions of
the Warrant, as a Warrant Holder (as defined in Section 1 of the Warrant).
- 13 -
<PAGE>
EXHIBIT 11.1
SOLIGEN TECHNOLOGIES, INC.
COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------- -----------------------------
1997 1996 1997 1996
------------ ---------- ----------- ------------
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding 32,678,634 30,080,540 32,240,344 29,852,400
Net loss $ (207,000) $ (29,000) $ (868,000) $(1,241,000)
Basic and dilutive loss per share $ (0.01) $ (0.00) $ (0.03) $ (0.04)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE INCLUDES SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-QSB FOR THE QUARTER AND YEAR TO DATE AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 529
<SECURITIES> 0
<RECEIVABLES> 659
<ALLOWANCES> 12
<INVENTORY> 135
<CURRENT-ASSETS> 1,367
<PP&E> 2,128
<DEPRECIATION> 1,225
<TOTAL-ASSETS> 2,310
<CURRENT-LIABILITIES> 1,232
<BONDS> 0
0
0
<COMMON> 10,185
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,310
<SALES> 3,685
<TOTAL-REVENUES> 3,685
<CGS> 2,588
<TOTAL-COSTS> 2,588
<OTHER-EXPENSES> 2,095
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> (867)
<INCOME-TAX> 1
<INCOME-CONTINUING> (868)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (868)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
