As filed with the Securities and Exchange Commission on April 28, 1997
Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------------------
THE PANDA PROJECT, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 65-0323354
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
901 YAMATO ROAD
BOCA RATON, FLORIDA 33431
(561) 994-2300
-------------------------------------------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------------
C. DARYL HOLLIS
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
THE PANDA PROJECT, INC.
901 YAMATO ROAD
BOCA RATON, FLORIDA 33431
(561) 994-2300
---------------------------------------------------------
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[ ]
<PAGE>
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ______
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] _________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
---------------------------
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.
<TABLE>
<CAPTION>
===============================================================================
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO TO BE PRICE PER OFFERING REGISTRATION
BE REGISTERED REGISTERED UNIT PRICE FEE(1)
- ------------- ---------- --------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value
per share(1) 48,418 shares $4.3125(1) $208,802.63(1) $63.28
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) and based upon the average of the high and low
prices for the Common Stock on April 23, 1997 reported on the Nasdaq National
Market.
</TABLE>
<PAGE>
SUBJECT TO COMPLETION DATED APRIL 28, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
48,418 Shares
THE PANDA PROJECT, INC.
Common Stock
---------------------
All of the shares of common stock, par value $.01 per share ("Common
Stock"), of The Panda Project, Inc. (the "Company") offered hereby (the
"Shares") are being sold by certain securityholders of the Company (the "Selling
Securityholders"). See "Selling Securityholders." The Company will not receive
any of the proceeds from the sale of the Shares by the Selling Securityholders.
The Selling Securityholders have advised the Company that they propose
to sell the Shares from time to time in the over-the-counter market, in ordinary
brokerage transactions or otherwise at market prices prevailing at the time of
sale or at negotiated prices. See "Plan of Distribution." The Common Stock is
traded on the Nasdaq National Market under the symbol "PNDA." On April 23, 1997,
the last reported sale price of the Common Stock on the Nasdaq National Market
was $4.125 per share.
The shares of Common Stock offered hereby represent approximately .47%
of the total number of shares outstanding at April 24, 1997. Sales of all or
part of the Shares offered hereby could have a negative impact on the market
price of the Common Stock and adversely affect the ability of the Company to
raise capital through the sale of its equity securities. See "Risk Factors --
Negative Effect of Future Sales of Stock on Market Prices and Ability to Raise
Capital" and "Plan of Distribution."
The Company will pay all the expenses, estimated to be $25,000, in
connection with this offering, other than selling expenses and underwriting
discounts, if applicable.
----------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 3.
----------------------
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 May __, 1997.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Available Information.................................. 1
Incorporation of Certain Documents
by Reference......................................... 2
Risk Factors........................................... 3
Recent Developments.................................... 13
Use of Proceeds........................................ 14
Selling Securityholders................................ 14
Plan of Distribution................................... 15
Experts................................................ 16
<PAGE>
AVAILABLE INFORMATION
The Panda Project, Inc. (the "Company") is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Common Stock of the Company is traded on the
Nasdaq National Market. Reports and other information concerning the Company may
be inspected at the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 with respect to the Shares (herein, together with all amendments and
exhibits, referred to as the "Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act"). This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto, as certain items are omitted in accordance with the rules and
regulations of the Commission. For further information pertaining to the Company
and the Shares, reference is made to such Registration Statement and the
exhibits and schedules thereto, which may be inspected without charge at the
office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of which may be obtained from the Commission at prescribed rates. The
Commission also makes electronic filings publicly available in the Internet
within 24 hours of acceptance. The Commission's Internet address is
http://www.sec.gov. The Commission's Web site also contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD
<PAGE>
BE UNLAWFUL. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL.
INFORMATION CONTAINED IN THE COMPANY'S WEB SITE SHALL NOT BE DEEMED TO
BE PART OF THIS PROSPECTUS.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1996;
(2) The Company's Current Report on Form 8-K dated April 25, 1997;
(3) The Company's Quarterly Reports on Form 10-Q for the quarters
ended June 30, 1996, September 30, 1996 and December 31, 1996; and
(4) The Company's Registration Statement on Form 8-A filed May 5,
1994, registering the Common Stock under Section 12(g) of the Exchange Act.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the termination of the offering of the Common Stock
registered hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the documents incorporated by reference into this Prospectus
(without exhibits to such documents other than exhibits specifically
incorporated by reference into such documents). Requests for such copies should
be directed to The Panda Project, Inc., 901 Yamato Road, Boca Raton, Florida
33431, Attention: Chief Financial Officer, (561) 994-2300.
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<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE COMMON
STOCK OFFERED BY THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS
ARE MADE ONLY AS OF THE DATE OF THIS PROSPECTUS. WITHOUT LIMITING THE FOREGOING,
THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS" AND SIMILAR EXPRESSIONS
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED BELOW AND ELSEWHERE IN THIS PROSPECTUS.
1. LIMITED PRODUCT DEVELOPMENT AND OPERATING HISTORY. Although the
Company has recently begun commercialization of certain products, other products
and technologies are undergoing additional testing and certification which may
ultimately lead to their commercialization. The Company's viability,
profitability and growth will depend in part upon successful commercialization
of these other products and technologies. There can be no assurance that these
efforts will be successful or that any of the proposed additional products will
be developed successfully. Further, the Company has a limited operating history
upon which an evaluation of its prospects can be made. Such prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered in the establishment of a new business in the evolving electronics
industry, which is characterized by an increasing number of market entrants and
intense competition, as well as those encountered in the shift from development
to commercialization of new products based on innovative technologies.
2. LIMITED REVENUES; HISTORY OF SIGNIFICANT LOSSES; ACCUMULATED
DEFICIT; ANTICIPATED FUTURE LOSSES. To date, the Company has generated limited
revenues from the sale of its products, primarily its computer systems, from its
Defense Advanced Research Projects Agency ("DARPA") grant and from licensing
fees. The Company does not anticipate deriving larger revenues from operations
until such time, if ever, that greater numbers of its products, including its
VSPA semiconductor package ("VSPA"), Compass Connectors and computer systems,
can be manufactured and sold and until royalties are received from existing and
future licenses for its semiconductor packaging and connector products, as to
which there can be no assurance. Further, of the $596,569 and $837,359 of
revenues recognized in the quarters ended June 30, 1996 and September 30, 1996,
respectively, $326,752 and $539,091 related to a barter transaction with a
software developer wherein the Company accepted software licenses, consulting
and training services, and services associated with the certification of the
Company's 4s workstation to use the software developer's CAD program and porting
the software onto the 4s product, in exchange for 53 of its Archistrat 4s
workstations. Management believes the amount of revenue recognized reflects the
fair value of the licenses and other services received and
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<PAGE>
approximated the normal selling price of the service. Since inception (April 8,
1992), the Company has incurred significant operating losses, including losses
of $1,800,340, $6,931,346, $23,894,426 and $17,217,703 during the fiscal year
ended March 31, 1994, the fiscal year ended March 31, 1995, the fiscal year
ended March 31, 1996, and the nine months ended December 31, 1996 respectively,
resulting in an accumulated deficit of $50,259,503 as of December 31, 1996. In
addition, the Company anticipates it will incur additional losses during the
next six to nine months. Such losses will continue until such time, if ever, as
the Company is able to generate sufficient revenues to support its operations.
There can be no assurance that the Company will ever be able to generate
sufficient revenues to achieve profitable operations.
3. SIGNIFICANT CAPITAL REQUIREMENTS; DEPENDENCE ON OFFERING PROCEEDS.
The Company's capital requirements in connection with its operations and
development activities have been and will continue to be significant. The
Company has been primarily dependent upon the proceeds of sales of its
securities to fund its activities since inception. During the period from
inception through April 24, 1997, the Company raised capital of approximately
$63,000,000 (after deduction of underwriting discounts, commissions and other
selling costs) through the sale of Common Stock, debentures and warrants, and
from the exercise of warrants and options. Since June 1996, the Company has
entered into five agreements to license its VSPA and Compass Connector
technologies and began to receive revenues under one of these agreements during
the quarter ended December 31, 1996. The Company anticipates earning revenues
under one or more of the other agreements by the end of the first quarter of the
Company's fiscal year which begins on April 1, 1997. In addition, the Company
has taken actions to significantly reduce its expenses in all areas including
compensation and benefits, research and development and selling and
administrative expenses. The Company anticipates, based on current plans and
assumptions relating to its operations, including the recently implemented
reductions in expenses, that its working capital at April 24, 1997, as augmented
by anticipated revenues, should be sufficient to satisfy the Company's
anticipated cash requirements for normal, recurring operating expenses and for
the anticipated capital expenditures necessary to acquire the equipment to
manufacture initial quantities of VSPA semiconductor packages to meet expected
purchase orders.
In the event the Company's plans change or its assumptions prove to be
inaccurate or the Company's working capital at April 24, 1997, as augmented by
any sales revenue, proves to be insufficient to fund operations (due to
unanticipated expenses, delays, problems, or otherwise), the Company would be
required to seek additional financing. Furthermore, depending upon the Company's
progress in the development of its products and technology and manufacturing
capabilities, acceptance of its products and technology by third parties, and
the state of the capital markets, the Company may also determine that it is
advisable to raise additional equity capital, possibly within the next
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<PAGE>
six to nine months. In addition, in the event that the Company receives a larger
than anticipated number of purchase orders for VSPA, it may require resources
substantially greater than it currently has or than are otherwise available to
the Company, and the Company may be required to raise additional capital or
engage third parties (as to which engagement there can be no assurance) to
assist the Company in meeting such orders. The Company has no current
arrangements with respect to, or sources of, additional financing, and there can
be no assurance that additional financing will be available to the Company when
needed on commercially reasonable terms or at all. The inability of the Company
to obtain additional financing when needed would have a material adverse effect
on the Company, including possibly requiring the Company to significantly
curtail or cease its operations. To the extent that any future financing
involves the sale of the Company's equity securities, the Company's then
existing stockholders may be substantially diluted.
4. UNCERTAINTY OF MARKET ACCEPTANCE. The products and technologies
currently being sold or developed by the Company utilize newly developed
designs. Although the Company believes that its existing and proposed technology
and products represent significant advancements in semiconductor packaging and
interconnect devices, computer technology, demand for the Company's existing and
proposed products is subject to a high degree of uncertainty, as is typical in
the case of newly-developed products. Achieving marketing acceptance for the
Company's technology and existing and proposed products will require substantial
marketing efforts and expenditure of significant funds to educate key original
equipment manufacturers ("OEMs") and end users as to the distinctive
characteristics and anticipated benefits of the Company's products and
technologies. Many OEMs manufacture and/or sell components and computers
competitive with those being developed by the Company and have achieved
significant market acceptance for their products. Accordingly, due to their
commitment to their own products, such entities may be inhibited from doing
business with the Company. In addition, many OEMs may be reluctant to use or
sell the Company's proposed products and technologies until a sufficient number
of other OEMs have already committed to do so. The Company currently has limited
marketing experience and limited financial, personnel and other resources to
undertake the extensive marketing activities that will be necessary to market
its proposed products and technologies as their development is completed. The
Company's ability to generate revenue from the sale or the licensing of its
products and technologies will be dependent upon, among other things, its
ability to build an effective sales organization. There can be no assurance that
the Company will be able to formalize any marketing arrangements or that its
marketing efforts will be successful.
5. UNCERTAINTY OF PRODUCT AND TECHNOLOGY DEVELOPMENT; TECHNOLOGICAL
FACTORS; DEPENDENCE ON THIRD-PARTY PRODUCT DESIGN CHANGES. Although the
Company's Archistrat computer systems has been sold in limited quantities, the
Company's other products and technologies, including VSPA and Compass Connector
Products, have not
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<PAGE>
yet been commercialized to the degree necessary to produce meaningful amounts of
revenue. The Company's development efforts are subject to all of the risks
inherent in the development of new products and technology (including
unanticipated delays, expenses or technical or other problems, as well as the
possible insufficiency of funding to complete development). The Company's
success will depend in part upon its products and technology meeting acceptable
cost and performance criteria, and upon their timely introduction into the
marketplace. There can be no assurance that the Company's products and
technology which have not yet been commercialized will ever be successfully
developed, and even if developed, that they will satisfactorily perform the
functions for which they are designed, that they will meet applicable price or
performance objectives or that unanticipated technical or other problems will
not occur which would result in increased costs or material delays in their
development or commercialization. In addition, technology as complex as that
which will be incorporated into the Company's proposed products may contain
errors which become apparent subsequent to widespread commercial use. Remedying
such errors could delay the Company's plans and cause it to incur additional
costs which would have a material adverse effect on the Company. The Company's
success will also be dependent upon the Company's ability to adapt its products
to be compatible with the products of third-party manufacturers of computers,
telecommunications equipment and other products that use semiconductor packages
and interconnect devices. In addition, the Company will be dependent on certain
potential customers redesigning or otherwise modifying their products to fully
utilize the Company's proposed products and technology. Although the Company
believes that potential customers will undertake such modifications to take
advantage of the anticipated performance advantages of the Company's proposed
products, the costs of making such adaptations could prevent them from doing so
on a timely basis, or at all. The failure of the Company to adapt its products
and technology to be compatible with products of third-party manufacturers or
the failure of potential customers to make necessary modifications or to
redesign their products to accommodate the Company's products could have a
material adverse effect on the Company's ability to sell or license its proposed
products or technology.
6. COMPETITION; TECHNOLOGICAL OBSOLESCENCE. The markets that the
Company intends to enter are characterized by intense competition. The Company's
Archistrat computer systems compete with "midrange" systems (server and
workstation systems having prices and performance characteristics between
mainframe and desktop computers and typically utilizing a proprietary operating
system), such as the Hewlett-Packard Net Server LS, Compaq 1500 and Compaq 4500.
VSPA and the Compass Connector compete with semiconductor packages and
connectors produced and marketed by numerous manufacturers. All of these
companies have substantially greater financial, technical, personnel and other
resources than the Company and have established reputations for success in the
development, licensing, sale and servicing of their products and technology.
Certain of these competitors dominate their industries and have the financial
resources necessary to enable them to withstand
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<PAGE>
substantial price competition or downturns in the market for semiconductor
packages, related technologies and/or computers. In addition, certain companies
may be developing technologies or products of which the Company is unaware,
which may be functionally similar, or superior, to some or all of those being
developed by the Company. The markets for the technology and products being
developed by the Company are characterized by rapid changes and evolving
industry standards often resulting in product obsolescence or short product life
cycles. Accordingly, the ability of the Company to compete will depend on its
ability to complete development and introduce to the marketplace in a timely and
cost-competitive manner additional products and technology, to continually
enhance and improve its existing and proposed products and technology, to adapt
its proposed products to be compatible with specific products manufactured by
others, and to successfully develop and market new products and technology.
There can be no assurance that the Company will be able to compete successfully,
that its competitors or future competitors will not develop technologies or
products that render the Company's proposed products and technology obsolete or
less marketable or that the Company will be able to successfully enhance its
proposed products or technology or adapt them satisfactorily.
7. DEPENDENCE ON MANUFACTURERS AND SUPPLIERS; LACK OF MANUFACTURING
EXPERIENCE AND CAPABILITY. The Company has developed the capability to
manufacture VSPA as well as the Compass Connector products in limited quantities
in its own facility and is using funds obtained from the recent sale of
subordinated convertible debentures to expand its capability to manufacture
VSPA. The Company has also entered into an agreement with Sun Precision Works,
Pvt. Ltd. for the production of the male connector component of the Compass
Connector. Further, the Company has licensed the Compass Connector technology to
LG Cable & Machinery Ltd. of Korea ("LGC"), and LGC is expected to be producing
Compass Connectors by June 1997. Although the Company's supply of VSPA and
Compass Connectors is currently adequate to meet its needs, no assurance can be
given that the Company or its suppliers can produce such components in
sufficient quantities in the future, or that the Company will be able to develop
alternative sources of supply within its projected development schedules, or at
all. The Company expects that significant commercialization of the products and
technologies will require it to enter into direct licensing arrangements, joint
ventures or strategic alliances with respect to the manufacture of certain of
these products. If the Company is unsuccessful in developing such manufacturing
capabilities or in licensing certain products and technologies being developed
or in developing relationships with manufacturers and suppliers, its lack of
manufacturing capabilities could limit its ability otherwise to commercialize
such products.
The Company anticipates that it will be dependent on third parties for
the manufacture and/or assembly of the printed circuit boards, frame, exterior,
base fabrication and other subassemblies, as well as for the supply of various
of the components, incorporated into the Archistrat computer systems, and for
performing the final assembly
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<PAGE>
configuration, certain quality control testing and delivery of such servers.
Although the Company has identified certain potential manufacturers and
suppliers for its subassembly and component needs, it does not currently have a
manufacturing or supply arrangement in place with a third party. The Company
believes it will be able to negotiate satisfactory manufacturing and supply
contracts; however, the failure to do so could have a material adverse effect on
the Company. Even if the Company were able to enter into suitable manufacturing
arrangements for necessary subassemblies, there can be no assurance that such
manufacturers will dedicate sufficient production capacity to satisfy the
Company's requirements within scheduled delivery times or at all. In addition,
the failure or delay by the Company's suppliers in fulfilling its anticipated
component needs would adversely affect the Company's ability to develop and
market its products and technology. While the Company believes that these
components are available from multiple sources, the Company anticipates that it
will obtain certain of them from a single or limited number of sources of
supply. In the event that certain of such suppliers are unable or unwilling to
provide the Company with components on commercially reasonable terms, or at all,
delays in securing alternative sources of supply could result in a material
adverse effect on the Company's operations.
8. DEPENDENCE ON KEY PERSONNEL. The success of the Company will be
dependent on the continued personal efforts of Stanford W. Crane, Jr., its
Chairman and Chief Executive Officer and the principal inventor of its
proprietary products and technologies, and certain other key personnel. Although
Mr. Crane has entered into a five-year employment agreement with the Company,
the agreement provides that he may resign by giving six months' notice at any
time. The loss of his services would have a material adverse effect on the
Company. The Company has obtained key-man insurance on Mr. Crane's life in the
amount of $2,000,000. The success of the Company also is dependent upon its
ability to hire and retain additional qualified executive, scientific,
production and marketing personnel. Although the Company has been able to hire
qualified personnel since its initial public offering in May 1994, there can be
no assurance that the Company will be able to hire additional qualified
personnel or retain such necessary personnel.
9. PATENTS AND PROPRIETARY INFORMATION. The Company's success will
depend on its ability to obtain patents, protect trade secrets, and operate
without infringing on the proprietary rights of others. The Company has pending
a total of 17 United States patent applications and 30 foreign patent
applications with respect to its VSPA, Compass PGA and Well Tech PCB designs and
Archistrat Computer designs and in connection with the use of the Compass
Connector in its Compass PGA semiconductor packages and the Archistrat
Computers. In addition, the Company has obtained an aggregate of 7 United States
design and utility patents and an aggregate of 33 foreign utility and design
patents and registrations in several countries, including the Republic of China
(Taiwan), Germany, the United Kingdom, Ireland and France. The Company also
intends to file patent applications in several other foreign
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<PAGE>
jurisdictions to secure protection in those jurisdictions in accordance with the
Patent Cooperation Treaty and the Paris Convention for the Protection of
Industrial Property (which allows such filings to relate back to the original
filing date in the United States). To the extent possible, the Company also
intends to file patent applications with respect to products and technology that
it may develop in the future.
There can be no assurance that any of the Company's patent applications
will ultimately result in an issued patent. Moreover, the patent laws of other
countries may differ from those of the United States as to the patentability of
the Company's products or technology, and the degree of protection afforded by
foreign patents may be different from that in the United States. The failure by
the Company to obtain patents for which applications are currently pending could
have a material adverse effect on the Company's ability to commercialize
successfully its proposed technology and products. Even if the Company is able
to obtain such patents, there can be no assurance that any such patents will
afford the Company commercially significant protection for its technology or
products. In addition, other companies may independently develop equivalent or
superior technologies or products and may obtain patent or similar rights with
respect to them. Although the Company believes that its technology has been
independently developed and that its technology does not infringe on the patents
or violate the proprietary rights of others, there can be no assurance that any
of the Company's technology or products, will not be determined to infringe upon
the patents or proprietary rights of others, or that patents or proprietary
rights of others will not have an adverse effect on the ability of the Company
to do business. If the Company's technology or products were determined to
infringe on the patents, trademarks or proprietary rights of others, the Company
could, under certain circumstances, become liable for damages, which also could
have a material adverse effect on the Company. Moreover, in the event that the
Company's technology or proposed products were deemed to infringe upon the
rights of others, the Company would be required to obtain licenses to utilize
such technology. There can be no assurance that the Company would be able to
obtain such licenses in a timely manner or on acceptable terms and conditions,
and the failure to do so could have a material adverse effect on the Company. If
the Company were unable to obtain such licenses, it could encounter significant
delays in product market introductions while it attempted to design around the
infringed upon patents or rights, or could find the development, manufacture or
sale of products requiring such licenses to be foreclosed. In addition, patent
disputes are common in the computer industry and there can be no assurance that
the Company will have the financial resources to enforce or defend a patent
infringement or proprietary rights action.
The Company also relies on trade secrets and proprietary know-how and
employs various methods, including confidentiality and nondisclosure
arrangements with its employees, consultants and others involved with the
Company's product and technological development efforts, to protect the
concepts, ideas and documentation relating to
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<PAGE>
its proprietary technologies. There can be no assurance that these arrangements
will provide meaningful protection to the Company or that other companies will
not acquire information which the Company considers to be proprietary. Moreover,
there can be no assurance that other companies have not or will not
independently develop know-how comparable to or superior to that of the Company.
10. DEPENDENCE ON THE CRANE-PANDA LICENSING AGREEMENT; POTENTIAL
CONFLICTS OF INTEREST. Pursuant to a license agreement entered into in January
1996 between the Company and Mr. Crane (the "Crane-Panda License"), Mr. Crane
has granted the Company the nonexclusive right to utilize the Compass Connector,
a key component in the commercialization of the Company's Archistrat computer
systems and the development and commercialization of Compass PGA. The
Crane-Panda License was executed in connection with the conversion to a
nonexclusive license of the 3M License described below and supersedes an earlier
license agreement between Mr. Crane and the Company relating to the Compass
Connector. Under the Crane-Panda License, the Company is required to pay Mr.
Crane a royalty on any sales of Compass Connectors as discrete parts in the
amount of 5% of the net sales price for the first five years of the term of the
agreement, 2.5% of the net sales price for the next five years of the term of
the agreement and 2% of the net sales price thereafter, provided that no royalty
is payable until aggregate net sales of the Compass Connector as discrete parts
exceed $100,000. The royalty rate will be reduced after the fifth anniversary of
the agreement if no patent remains in effect with respect to the Compass
Connector. No royalty is payable on sales of the Compass Connector as
incorporated in the Archistrat computer systems or other computer system or
assembly. The Company may grant sublicenses under the Crane-Panda License, but
only for the use of products as incorporated in the Archistrat computer systems
or other computer system or assembly. To date, there have been no sales
requiring the payment of royalties to Mr. Crane under the Crane-Panda License.
The Crane-Panda License obligates the Company to maintain proprietary
information relating to the Compass Connector on a confidential basis, notify
Mr. Crane of any evidence of infringement with respect to the Compass Connector
and related technology, and cooperate with Mr. Crane to contest any such
infringement. In the event that the Company becomes bankrupt or insolvent or
defaults in any of its material obligations under the Crane-Panda License and
fails to cure any such defaults within specified cure periods, Mr. Crane may
terminate the Crane-Panda License. The Company is substantially dependent upon
the Crane-Panda License. The termination of the agreement under any
circumstances would have a material adverse effect on the Company. There can be
no assurance that conflicts of interest will not arise with respect to the
Crane-Panda License or that such conflicts will be resolved in a manner
favorable to the Company. In addition, Mr. Crane retains ownership of the
Compass Connector technology, and has the right to grant licenses to or
otherwise transfer rights to the Compass Connector technology to third parties.
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In September 1992, Mr. Crane granted an exclusive license (the "3M
License") to Minnesota Mining and Manufacturing Co. ("3M") to develop,
manufacture, use and sell the Compass Connector other than as part of a computer
system. In February 1996, Mr. Crane and 3M agreed to convert the 3M License to a
nonexclusive license. The 3M License provides in certain circumstances for the
payment of a royalty to Mr. Crane. As of the date of this Prospectus, Mr. Crane
had received no such payments.
11. SUBSTANTIAL CONTROL BY MANAGEMENT. As of the date of this
Prospectus, officers and directors of the Company own of record and beneficially
approximately 38% of the issued and outstanding shares of Common Stock and are
thus able to exert substantial influence over the policies and affairs of the
Company.
12. RISKS RELATING TO POTENTIAL INTERNATIONAL OPERATIONS. Although the
Company currently prices all of its international sales in U.S. dollars, future
sales or licensing of its products or technologies outside the U.S., may be
subject to the risks associated with fluctuations in currency exchange rates.
The Company may also be subject to other risks associated with international
operations, including tariff regulations and requirements for export licenses,
particularly with respect to the export of certain technologies (which licenses
may on occasion be delayed or difficult to obtain), unexpected changes in
regulatory requirements, longer accounts receivable requirements, difficulties
in managing international operations, potentially adverse tax consequences,
economic and political instability, restrictions on repatriation of earnings,
and the burdens of complying with a wide variety of foreign laws. In addition,
the laws of certain countries do not protect the Company's products and
intellectual property rights to the same extent as do the laws of the United
States. There can be no assurance that such factors will not have a material
adverse effect on the Company's future international sales or licenses and,
consequently, on the Company's business and operations as a whole.
13. NEGATIVE EFFECT OF FUTURE SALES OF STOCK ON MARKET PRICE AND
ABILITY TO RAISE CAPITAL; SUBSTANTIAL RESERVED SHARES. Future sales of
substantial amounts of Common Stock, including the Shares offered hereby, or the
perception that such sales could occur, could have a negative impact on the
market price of the Common Stock and adversely affect the ability of the Company
to raise capital through the sale of its equity securities. Virtually all of the
outstanding Common Stock, including the Shares offered hereby, is freely
tradeable in the public markets without restriction, subject in some cases to
the volume limitations imposed by Rule 144 under the Securities Act and
restrictions under Regulation S under the Securities Act. On April 14, 1997 the
Company issued 4% subordinated convertible debentures (the "Debentures") in the
aggregate principal amount of $4,800,000. The Debentures are convertible into
Common Stock at a price per share equal to the lesser of $5.625 or 82% of the
average closing bid price for the Common Stock for the five days preceding
conversion. Assuming conversion of the Debentures at 82% of the closing bid
price for the
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Common Stock on April 24, 1997 ($4.125) and payment of interest on the
Debentures in cash, the shares issuable upon conversion of the Debentures
represent approximately 14% of the total number of shares of Common Stock
outstanding at April 24, 1997. A decrease in the market value of the Common
Stock would increase the number of shares issuable upon conversion of the
Debentures, resulting in additional dilution to shareholders.
As of April 24, 1997, the Company had reserved 2,209,321 shares of
Common Stock for issuance upon the exercise of warrants. In addition, the
Company has reserved 586,400 shares of Common Stock for issuance to employees,
officers, directors and consultants under its 1995 Employee Stock Incentive
Plan, 1993 Performance Incentive Plan and Non-Employee Director Stock Option
Plan. The price which the Company may receive for the Common Stock issuable upon
exercise of such warrants and options will, in all likelihood, be less than the
market price of the Common Stock at the time of such exercise. Consequently, for
the life of such warrants and options, the holders thereof may have been given,
at nominal cost, the opportunity to profit from a rise in the market price of
the Common Stock. The exercise of all of the aforementioned securities may also
adversely effect the terms under which the Company could obtain additional
equity capital. Should a significant number of these securities be exercised,
the resulting increase in the amount of the Common Stock in the public market
may reduce the market price of the Common Stock.
14. ANTITAKEOVER STATUTES. Florida has enacted legislation that may
deter or frustrate takeovers of the Company. The Florida Control Share Act
generally provides that shares acquired in excess of certain specified
thresholds, starting at 20%, will not possess any voting rights unless such
voting rights are approved by a majority vote of a corporation's disinterested
shareholders. The Florida Affiliated Transactions Act generally requires
supermajority approval by disinterested directors or shareholders of certain
specified transactions between a corporation and holders of more than 10% of the
outstanding voting shares of the corporation or their affiliates.
15. POSSIBLE LACK OF RESOURCES OF SELLING SECURITYHOLDERS. The Selling
Securityholders may be deemed to be Underwriters pursuant to the Securities Act,
and in that regard may become liable to the purchasers of the Common Stock
offered hereby pursuant to the terms of the Securities Act if certain provisions
of the Securities Act are not complied with by them. There can be no assurance
that any of the Selling Securityholders have the financial resources to
discharge any such liability.
16. GENERAL. Because of factors discussed above and other factors, past
financial performance should not be considered an indicator of future
performance. Investors should not use historical trends to anticipate future
results and should be aware that the trading price of the Company's Common Stock
may be subject to wide fluctuations in response to quarter-to-quarter variations
in operating
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results, general conditions in the semiconductor packaging and computer
industries, changes in earnings estimates and recommendations by analysts and
other events.
RECENT DEVELOPMENTS
DEBENTURE FINANCING. On April 14, 1997, the Company completed a private
placement of subordinated convertible debentures (the "Debentures") in the
aggregate principal amount of $4,800,000. The Company plans to use the proceeds
of this transaction to expand manufacturing capacity for the Company's VSPA
semiconductor package and for working capital and general corporate purposes.
In connection with the transaction, the Company paid a fee of $384,000
to Dusseldorf Securities Limited ("Dusseldorf") of which $192,000 was paid in
cash and the balance by the issuance to Dusseldorf of 30,918 shares of Common
Stock (the "DSL Shares"). In addition, the Company agreed to issue to Dusseldorf
and Jefferies & Company, Inc. ("Jefferies") warrants (the "Warrants"),
exercisable during the period beginning April 14, 1997 and ending April 2, 2002
to purchase 42,667 shares and 27,429 shares, respectively, of Common Stock of
the Company ("Common Stock") at respective exercise prices of $6.75 and $7.00
per share. The debentures, the DSL Shares and the Dusseldorf warrant have been
or will be issued pursuant to an exemption from registration under Regulation S
under the Securities Act of 1933; such issuance was made solely to non-U.S.
persons in an offshore transaction and resale of such securities is restricted
in the manner provided in Regulation S. The Jefferies warrant is being issued in
a private placement under Regulation D under the Securities Act of 1933.
The principal amount of the Debentures is convertible into shares of
Common Stock at a price equal to the lesser of $5.625 or 82% of the average
closing bid price for the Common Stock for the five days preceding the date of
conversion. Transfer of the Debentures and the shares issuable upon conversion
thereof is prohibited until May 29, 1997 with respect to the first $2,400,000 of
principal, and June 13, 1997 with respect to the remaining $2,400,000 of
principal, except pursuant to registration under the Securities Act of 1933 or
an exemption therefrom. The Debentures bear interest at the rate of 4% per
annum, payable in cash or Common Stock, and mature on April 2, 1999, at which
time all outstanding principal and accrued but unpaid interest shall be
converted to Common Stock. Any conversion of the Debentures is subject to the
condition that in no event shall the aggregate number of shares issuable upon
conversion of the Debentures, equal or exceed 2,071,249 shares, i.e. 20% of the
Company's outstanding stock before the transaction. The Company shall have the
right to redeem the Debentures with 60 days notice to the purchasers at a
redemption price equal to 122% of the outstanding principal amount.
In connection with this transaction, the Company has agreed to file a
Registration Statement on Form S-3 with the Securities and
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Exchange Commission to effect the registration of the DSL Shares for resale. The
Company has also agreed to effect the registration of the shares issuable upon
conversion of the Debentures in the event of certain amendments to Regulation S
and has granted certain piggyback registration rights to the holders of the
Warrants.
DTM SETTLEMENT. In March 1997, the Company settled certain litigation
with Direct Target Manufacturing, Inc. ("DTM"). Under the settlement agreement,
DTM and certain other parties released the Company from all claims in connection
with the litigation and the Company agreed to pay $40,000 toward the plaintiff's
legal fees, to issue 17,500 shares of Common Stock to DTM and to file a
registration statement with respect to such shares within 60 days after the date
of the settlement agreement.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Securityholders.
SELLING SECURITYHOLDERS
All of the shares of Common Stock of the Company offered hereby are
being sold by the Selling Securityholders named below. The Company will receive
none of the proceeds from the sale of shares offered hereby. To the best
knowledge of the Company, none of the Selling Securityholders beneficially owns
5% or more of the Company's outstanding Common Stock and none of the Selling
Securityholders has held any office or maintained any material relationship with
the Company or its predecessors or affiliates over the past three years.
The following table sets forth information concerning the beneficial
ownership of shares of Common Stock by the Selling Securityholders as of April
24, 1997 and the number of such shares included for sale in this Prospectus,
assuming the sale of all Shares being offered by this Prospectus. The Common
Stock offered hereby consists of (i) 30,918 shares issued in connection with the
sale of the Debentures; and (ii) 17,500 shares issued in settlement of the DTM
litigation.
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<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED PRIOR SHARES SHARES OWNED
TO OFFERING OFFERED HEREBY AFTER OFFERING
------------------ -------------- --------------
SELLING SECURITYHOLDERS
- -----------------------
<S> <C> <C> <C>
Dusseldorf Securities 73,585(1) 30,918 42,667
Limited
Direct Target
Marketing, Inc. 17,500 17,500 -
</TABLE>
_______________
(1) Consists of 42,667 shares of Common Stock issuable upon exercise of
Warrants.
PLAN OF DISTRIBUTION
The Shares may be offered for sale from time to time by the Selling
Securityholders to various purchasers, or they may be retained. The Selling
Securityholders may elect to sell the Shares in negotiated transactions at
prices and on terms related to the then-current market price or otherwise, or in
market transactions, in each case without the participation of underwriters,
brokers or dealers. The Selling Securityholders may also from time to time offer
the Shares through brokers, dealers or agents, or through underwriters, who may
receive underwriting discounts, concessions or commissions from the Selling
Securityholders and/or the purchasers for whom they act as agent. In that event,
the offers or sales may be made (i) by a block trade in which a broker or
dealer, engaged for the purpose, will attempt to sell the Shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction, (ii) by purchases by a broker or dealer as principal and resale by
such broker or dealer for its own account, (iii) by ordinary brokerage
transactions or transactions in which the broker solicits purchasers, (iv) with
the permission of the Company, in an underwritten transaction, or (v) otherwise.
In the event that brokers or dealers are engaged by the Selling Securityholders,
such brokers or dealers may arrange for other brokers or dealers to participate.
Any Shares which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
In offering the Shares, the Selling Securityholders and any
broker-dealers and any other participating broker-dealers who execute sales for
the Selling Securityholders may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales, and any profits
realized by the Selling Securityholders and the compensation of such
broker-dealers may be deemed to be underwriting discounts and commissions.
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<PAGE>
The public offering of the Shares by the Selling Securityholders will
terminate on the earlier of (a) nine months from the date of this Prospectus, or
(b) the date on which all Shares have been sold by the Selling Securityholders.
The Company will pay certain expenses incidental to the offering and
sale of the Shares to the public estimated to be approximately $30,000. The
Company will not pay for, among other expenses, selling expenses or underwriting
discounts, if applicable.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-K of The Panda Project, Inc. for the year ended
March 31, 1996 have been so incorporated in reliance on the report (which
contains an explanatory paragraph relating to The Panda Project, Inc.'s ability
to continue as a going concern as described in Note 1 to the financial
statements) of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with
the sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All these expenses will be paid by the
Company.
NATURE OF EXPENSE
SEC Registration fee......................................... $ 64
Nasdaq Listing Fee........................................... 968
Legal and accounting fees and expenses....................... 20,000*
Miscellaneous................................................ 3,968*
--------
TOTAL $25,000*
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Florida Business Corporation
Act.
Section 607.0850(1) of the Florida Business Corporation Act (the
"FBCA") provides that a Florida corporation, such as the Registrant, shall have
the power to indemnify any person who is or was a party to any proceeding (other
than an action by, or in the right of, the corporation), by reason of the fact
that he is or was a director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against liability incurred in connection with such proceeding,
including any appeal thereof, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action of proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 607.0850(2) of the FBCA provides that a Florida corporation
shall have the power to indemnify any person who is or was a party to any
proceeding by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses and amounts paid in
settlement not exceeding, in the judgment of the board of directors, the
estimated expense of litigating the proceeding to conclusion, actually and
reasonably incurred in connection with the defense or
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settlement of such proceeding, including any appeal thereof. Such
indemnification shall be authorized if such person acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the corporation, except that no indemnification shall be made under Section
607.0850(2) in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable unless, and only to the extent that, the
court in which such proceeding was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
Section 607.0850 of the FBCA further provides that, to the extent that
a director, officer, employee or agent of a corporation has been successful on
the merits or otherwise in defense of any proceeding referred to in subsection
(1) or subsection (2), or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses actually and reasonably incurred by him in
connection therewith; that indemnification provided pursuant to Section 607.0850
is not exclusive; and that the corporation may purchase and maintain insurance
on behalf of a director, officer, employee or agent of the corporation against
any liability asserted against him or incurred by him in any such capacity or
arising out of his status as such whether or not the corporation would have the
power to indemnify him against such liabilities under Section 607.0850.
Notwithstanding the foregoing, Section 607.0850 of the FBCA provides
that indemnification of advancement of expenses shall not be made to or on
behalf of any director, officer, employee or agent if a judgment or other final
adjudication establishes that his actions, or omissions to act, were material to
the cause of action so adjudicated and constitute: (a) a violation of the
criminal law, unless the director, officer, employee or agent had reasonable
cause to believe his conduct was lawful or had no reasonable cause to believe
his conduct was unlawful; (b) a transaction from which the director, officer,
employee or agent derived an improper personal benefit; (c) in the case of a
director, a circumstance under which the liability provisions regarding unlawful
distributions are applicable; or (d) willful misconduct or a conscious disregard
for the best interests of the corporation in a proceeding by or in the right of
the corporation to procure a judgment in its favor or in a proceeding by or in
the right of a shareholder.
Section 607.0831 of the FBCA provides that a director of a Florida
corporation is not personally liable for monetary damages to the corporation or
any other person for any statement, vote, decision, or failure to act, regarding
corporate management or policy, by a director, unless: (a) the director breached
or failed to perform his duties as a director, and (b) the director's breach of,
or failure to perform, those duties constitutes: (1) a violation of the criminal
law, unless the director had reasonable cause to believe his conduct was
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<PAGE>
lawful or had no reasonable cause to believe his conduct was unlawful; (2) a
transaction from which the director derived an improper personal benefit, either
directly or indirectly; (3) a circumstance under which the liability provisions
regarding unlawful distributions are applicable; (4) in a proceeding by or in
the right of someone other than the corporation or a shareholder, recklessness
or an act or omission which was committed in bad faith or with malicious purpose
or in a manner exhibiting wanton and willful disregard of human rights, safety
or property.
ARTICLES OF INCORPORATION OF THE REGISTRANT
The Articles of Incorporation of the Registrant (the "Articles")
provide that, to the fullest extent permitted by applicable law, as amended from
time to time, the Registrant will indemnify any person who is or was a party or
is threatened to be made a party to an action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that
such person is or was a director, officer, employee or agent of the Registrant
or serves or served any other enterprise at the request of the Registrant. This
indemnification includes the right to advancement of expenses when allowed
pursuant to applicable law.
In addition, the Articles provide that a director of the Registrant
shall not be personally liable to the Registrant or its shareholders for
monetary damages for breach of the director's fiduciary duty. However, the
Articles do not eliminate or limit the liability of a director for any of the
following reasons: (i) a breach of the director's duty of loyalty to the
Registrant or its shareholders; (ii) acts or omissions not in good faith or that
involve intentional misconduct or knowing violation of law; (iii) a violation
under Section 607.0834 of the FBCA (which imposes liability upon directors for
unlawful distributions); (iv) a transaction from which the director derived an
improper personal benefit; or (v) an act or omission occurring before the
effective date of the Articles.
INDEMNIFICATION
The Registrant has entered into or intends to enter into
Indemnification Agreements with its directors (collectively, the "Agreements")
which provide that each director is entitled to indemnification to the fullest
extent permitted by applicable law. Such indemnification will cover all
expenses, liabilities, judgments (including punitive and exemplary damages),
penalties, fines (including excise taxes relating to employee benefit plans and
civil penalties) and amounts paid in settlement which are incurred or imposed
upon the director if the director is a party or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding of any kind,
whether civil, criminal, administrative or investigative (including actions by
or in the right of the Registrant and any preliminary inquiry or claim by any
person or authority), by reason of the fact that the director is or was a
director, officer, employee or agent of the Registrant or is or was serving at
the Registrant's request as a director, officer, employee or
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agent of another corporation (including a subsidiary), partnership, joint
venture, trust or other enterprise against liability incurred in connection with
such proceeding, including any appeal thereof (collectively, the "Covered
Matters"). Pursuant to the Agreements, the directors are presumed to be entitled
to indemnification irrespective of whether the Covered Matter involves
allegations of intentional misconduct, alleged violations of Section 16(b) of
the Exchange Act, alleged violations of Section 10(b) of the Exchange Act
(including Rule 10b-5 thereunder), breach of the director's fiduciary duties
(including duties of loyalty or care) or any other claim.
In addition to the foregoing, the Company maintains a director and
officer liability insurance policy insuring directors and officers of the
Registrant against certain liabilities.
ITEM 16. EXHIBITS.
See the Exhibit Index included immediately preceding the Exhibits to
this Registration Statement, which is incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this 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 this Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
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PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do 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 Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") that are incorporated by reference in this Registration
Statement.
(2) That, for the purposes of determining any liability under the
Securities Act, each 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 the time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the
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Securities Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective; and
(2) For purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boca Raton, State of Florida, on this 25th day
of April, 1997.
THE PANDA PROJECT, INC.
By: /s/ STANFORD W. CRANE, JR.
-----------------------------
Stanford W. Crane, Jr.
President
POWER OF ATTORNEY
We, the undersigned officers and directors of The Panda Project, Inc.,
hereby severally constitute Stanford W. Crane, Jr., C. Daryl Hollis and Gilbert
B. Kaplan and any of them singly, our true and lawful attorneys with full power
to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-3 filed
herewith and any and all subsequent amendments to said Registration Statement
(including post-effective amendments, exhibits thereto and other documents in
connection therewith) and any subsequent registration statement filed by the
Registrant pursuant to Rule 462(b) of the Securities Act of 1933, as amended,
which relates to this Registration Statement, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, and generally to do all such things in our names and
behalf in our capacities as officers and directors to enable The Panda Project,
Inc. to comply with all requirements of the Securities and Exchange Commission,
hereby ratifying and confirming our signatures as they may be signed by said
attorneys, or any of them, to said Registration Statement and any and all
amendments thereto.
II-7
<PAGE>
<TABLE>
<CAPTION>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ STANFORD W. CRANE, JR. Chief Executive Officer, April 25, 1997
- ----------------------- President and Director
Stanford W. Crane, Jr. (Principal Executive
Officer)
/s/ C. DARYL HOLLIS Executive Vice President April 25, 1997
- ----------------------- and Chief Financial Officer
C. Daryl Hollis (Principal Financial and
Accounting Officer
/s/ JAMES T.A. WOODER Director April 25, 1997
- ----------------------
James T.A. Wooder
/s/ CLAUD L. GINGRICH Director April 25, 1997
- ----------------------
Claud L. Gingrich
/s/ RAO R. TUMMALA Director April 25, 1997
- ----------------------
Rao R. Tummala
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ----
3.1 -- Amended and Restated Articles of
Incorporation of the Company, as amended
(filed as Exhibit 3.1 to the Company's
Registration Statement on Form S-3
(File No. 333-14931))...................... *
3.2 -- Amended and Restated By-Laws of the
Company (filed as Exhibit 3.2 to the
Company's Registration Statement on
Form SB-2 (File No. 33-76694-A))........... *
4.1 -- Specimen Certificate of Common Stock of
the Company (filed as Exhibit 4.1 to the
Company's Registration Statement on
Form SB-2 (File No. 33-76694-A))........... *
4.2 -- Form of 4% Subordinated Convertible
Debenture of the Company (filed as Exhibit
4.1 to the Company's Report on Form 8-K
filed April 25, 1997)...................... *
4.3 -- Form of Common Stock Purchase Warrant issued
to Purchasers of Debentures (filed as
Exhibit 4.2 to the Company's Report on Form
8-K filed April 25, 1997).................. *
5.1 -- Opinion of Holland & Knight................
23.1 -- Consent of Holland & Knight (included in
Exhibit 5.1)...............................
23.2 -- Consent of Price Waterhouse LLP............
24.1 -- Power of Attorney (included on page II-7)..
99.1 -- Offshore Securities Subscription Agreement
dated April 2, 1997 (filed as Exhibit 99.1
to the Company's Report on Form 8-K filed
April 25, 1997)............................ *
- ------------------------
* Incorporated herein by reference.
II-9
EXHIBIT 5.1
HOLLAND & KNIGHT
[LETTERHEAD]
April 28, 1997
The Panda Project, Inc.
901 Yamato Road
Boca Raton, FL 33431
RE: THE PANDA PROJECT, INC. (THE "COMPANY") - REGISTRATION
STATEMENT ON FORM S-3
Gentlemen:
You have requested our opinion in connection with the above-referenced
Registration Statement, (the "Registration Statement"), under which certain
shareholders (the "Selling Shareholders") intend to offer and sell in a public
offering, from time to time, an aggregate of 48,418 shares (the "Shares") of the
common stock, $.01 par value per share, of the Company (the "Common Stock").
We have reviewed copies of the Articles of Incorporation and Bylaws of the
Company, and have examined such corporate documents and records and other
certificates, and have made such investigations of law, as we have deemed
necessary in order to render the opinion hereinafter set forth.
Based upon and subject to the foregoing, we are of the opinion that the Shares
are duly authorized, validly issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an exhibit to the Registration
Statement. In giving this consent, we do not hereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
Holland & Knight
By: /s/ STEVEN SONBERG
--------------------------
Steven Sonberg
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
June 24, 1996, appearing on page F-2 of The Panda Project Inc.'s Annual Report
on Form 10-K for the year ended March 31, 1996. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
- ------------------------
Price Waterhouse LLP
Fort Lauderdale, Florida
April 25, 1997
