PROSPECTUS Rule 424(b)
File No. 333-39287
107,020 Shares
THE PANDA PROJECT, INC.
Common Stock
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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 July 14, 1998, the closing
sale price of the Common Stock on the Nasdaq National Market was $3.06
per share.
The shares of Common Stock offered hereby represent
approximately .87% of the total number of shares outstanding at June
30, 1998. 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 $15,000,
in connection with this offering, other than selling expenses and
underwriting discounts, if applicable.
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The Common Stock offered hereby involves a high degree of
risk. See "Risk Factors" beginning on page 4.
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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.
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The date of this Prospectus is July 16, 1998.
TABLE OF CONTENTS
Page
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Available Information.....................................3
Incorporation of Certain Documents by Reference...........4
Risk Factors..............................................4
Year 2000 Issues..........................................15
Use of Proceeds...........................................15
Selling Securityholders...................................16
Plan of Distribution......................................17
Description of Capital Stock..............................18
Experts...................................................21
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Page 3
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 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.
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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 Transition Report on Form 10-K for the
transition period from April 1, 1997 through December 31, 1997;
(2) The Company's Quarterly Report on Form 10-Q and Form 10-Q/A
for the quarter ended March 31, 1998;
(3) The Company's Current Reports on Form 8-K filed January 14,
1998 and February 11, 1998; 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.
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," "intends" 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.
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1. LIMITED PRODUCT DEVELOPMENT AND OPERATING HISTORY. 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 Computer Systems,
from licensing fees and from the activities associated with its grant
from the Defense Advanced Research Projects Agency. The Company does
not anticipate deriving larger revenues from operations until such
time, if ever, that greater numbers of its Computer Systems,
semiconductor packages and connectors can be sold, as to which there
can be no assurance. Since inception (April 8, 1992), Company has
incurred significant net losses, including losses of $1,800,340,
$6,931,346, $23,894,426 and $20,874,101 during the fiscal years ended
March 31, 1994, 1995, 1996 and 1997, respectively, $8,949,652 during
the nine months ended December 31, 1997, and $3,811,033 during the
quarter ended March 31, 1998, resulting in an accumulated deficit of
$66,676,586 as of March 31, 1998. Inasmuch as the Company expects to
continue to incur operating expenses totaling approximately $1,000,000
per month related to its research and development and sales and
marketing activities (including salaries of executive, technical and
research and development personnel), the Company anticipates that 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. In addition,
the Company received a going concern opinion as discussed in Note 2 of
Form 10-K dated December 31, 1997.
3. SIGNIFICANT CAPITAL REQUIREMENTS; NEED FOR ADDITIONAL
FINANCING. The Company's capital requirements in connection with its
operations and development activities have been significant, and such
requirements may continue to be significant if the Company receives
large numbers of purchase orders for its Computer Systems,
semiconductor packages and connectors. The Company has been dependent
primarily upon the proceeds of sales of its securities to fund its
activities since inception. During the period from inception through
June 30, 1998, the Company raised approximately $69 million (after
deduction of underwriting discounts, commissions and other selling
costs) through the sale of Common Stock, Series A Convertible
Preferred Stock, warrants and subordinated debentures and from the
exercise of stock options and warrants. Since June 1996, the Company
has entered into five agreements to license its VSPA and Compass
Connector technologies and has begun to receive revenues under two of
these agreements. 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 has issued 600 shares of Series A-2 Convertible
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Preferred Stock ("Series A Preferred") for an aggregate purchase price
of $6,000,000. The terms of the Series A Preferred, as amended May
14, and July 2, 1998, provide that upon the occurrence of certain
"Triggering Events", including suspension of sales under the
Registration Statement, failure of the Company's Common Stock to be
listed, or the suspension of trading in the Company's Common Stock, on
the Nasdaq National Market or the Nasdaq SmallCap Market, or failure
of the Company to convert shares of Series A Preferred as required,
the Company shall pay the holders $100,000 on the first day of each
month until the Triggering Events have been remedied. Any requirement
that the Company pay such amounts could have a material adverse impact
on the Company in the event the Triggering Event causing such payment
is not remedied on a timely basis. See "Description of Capital Stock
- -- Series A Convertible Preferred Stock."
On May 28, 1998 and June 22, 1998, the Company borrowed $750,000
and $1,000,000, respectively, from Helix (PEI) Inc. ( Helix ). The loan
for $750,000 is due and payable on July 10, 1998 (Helix has agreed to
extend this loan until August 15, 1998) and the loan for $1,000,000 is
due and payable on August 15, 1998. Both loans are secured by the
Company's intellectual property. With respect to the loans, the
Company also agreed to issue Helix warrants to purchase an aggregate
of 350,000 shares of the Company's Common Stock at exercise prices
ranging from $3.5625 to $3.75 per share, or the price per share at
which the next equity financing is carried out by the Company, if
less. The warrants have a term of two years. The Company expects the
proceeds of the Helix financing and its other available resources will
be sufficient to sustain operations until completion of longer term
financing, which the Company is actively seeking.
Helix and its affiliates currently hold approximately 12% of the
Company's common stock. James T. A. Wooder, a director of the Company,
is a Vice President of Helix's parent, Helix Investments (Canada),
Inc.
The Company is actively seeking additional financing. Although
the Company believes such financing will be completed, there can be no
assurance that the Company will be able to obtain such financing on
commercially reasonable terms or at all. The inability of the Company
to repay the Helix loans when due or the inability of the Company to
arrange longer term financing would have a material adverse effect on
the Company and could cause the Company to be unable to implement its
business strategy, or to otherwise significantly curtail or cease its
operations. 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. In
addition, in the event that the Company receives a larger than
anticipated number of purchase orders for its Archistrat Computers or
VSPA semiconductor package, 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. There can be
no assurance that additional financing will be available to the
Company when needed on commercially reasonable terms or at all. The
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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.
The common stock of the Company is listed on the Nasdaq National
Market ("NMS") and as such, the Company must comply with the NMS
listing requirements including the maintenance of net tangible assets
of at least $4,000,000. As of March 31, 1998, the Company was not in
compliance with the listing requirements of NMS. However, in
connection with revisions to the terms of the Series A Preferred,
which became effective July 2, 1998, all provisions for redemption and
liquidated damages which were previously included in the terms of the
Series A Preferred were eliminated. These revisions allow for the
reclassification of the balance of Series A Preferred shares to
permanent equity as of the effective date of the new terms. In the
event the Company is unable to maintain such requirements in the
future, its common stock could be subject to delisting from the NMS.
If this were to occur, the Company s common stock could be adversely
affected and the Company's ability to raise additional capital could
be limited.
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 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 value-added resellers
("VARs") and end users as to the distinctive characteristics and
anticipated benefits of the Company's proposed products and
technologies. Many OEMs and VARs 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 and VARs may be reluctant to use or sell the
Company's products and technologies until a sufficient number of other
OEMs and VARs have already committed to do so. The Company has hired
sales and marketing personnel for its Computer Systems and for its
VSPA semiconductor package and Compass Connector, and it has
established a network of twelve independent sales organizations to
supplement the Company's internal sales force. The Company's ability
to generate revenue from the sale of Computer Systems or the licensing
or sale of Computer Systems, VSPA semiconductor packages or Compass
Connectors will be dependent upon, among other things, its ability to
effectively use the internal sales force and its network of
independent sales organizations to market its products. There can be
no assurance that the Company's marketing efforts will be successful.
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5. UNCERTAINTY OF PRODUCT AND TECHNOLOGY DEVELOPMENT;
TECHNOLOGICAL FACTORS; DEPENDENCE ON THIRD-PARTY PRODUCT DESIGN
CHANGES. 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 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 computer products. 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 Computer Systems compete with computers offered by such
companies as Silicon Graphics, Inc., Sun Microsystems, Inc., Dell
Computer Corporation, Compaq Computer Corporation, Gateway 2000,
Hewlett-Packard Co. and other smaller companies. The Company's
Technology Products compete with semiconductor packages and connectors
offered by numerous manufacturers. Many 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 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 the Company's products and technologies.
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,
to adapt its products to be compatible with specific products
manufactured by others, and to successfully develop and market new
products. There can be no assurance that the Company will be able to
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compete successfully, that its competitors or future competitors will
not develop technologies or products that render the Company's
products and technology obsolete or less marketable or that the
Company will be able to successfully enhance its products or
technology or adapt them satisfactorily.
7. DEPENDENCE ON MANUFACTURERS AND SUPPLIERS; LACK OF
MANUFACTURING EXPERIENCE AND CAPABILITY. The Company has developed the
ability to manufacture the VSPA semiconductor package in its own
facility in Boca Raton, Florida. The automated machinery used in the
manufacturing process has been designed and built by the Company to
produce VSPA parts based on anticipated customer demand. The machines
have a wide range of flexibility in terms of the pin count of the VSPA
packages they will produce, and expected production capacity ranges
from 235,000 parts per month to 290,000 parts per month, depending
upon the pin count of the package. Two automated machines have been
produced and a third is in production, and commercial scale production
of the VSPA product has recently commenced. There can be no assurance
that the Company will be able to complete additional machines within a
reasonable period of time, or be capable of producing the quantities
of VSPA that are anticipated. In the event the Company is unable to
produce VSPA in high volumes within a reasonable period of time, or at
all, delays in securing alternative manufacturing sources would result
and would have a material adverse effect on the Company's operations.
The Company has developed the capability to manufacture the
Compass II Connector products required for its Computer Systems in its
own facility in Boca Raton, Florida. 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 II Connector. Although the
Company's supply of this component is currently adequate to meet its
needs, no assurance can be given that such supplier can produce such
component in sufficient quantities in the future. The Company has an
arrangement with LG Cable & Machinery Ltd. to supply the Compass V
Connector which the Company expects to use in certain models of its
Rock City computers. Although the Company anticipates that it will be
able to obtain Compass V Connectors from LG Cable & Machinery Ltd.
under this arrangement, no assurance can be given that the supply of
such component will be in quantities sufficient to meet the Company's
needs.
The Company anticipates that it will be dependent on third
parties for the manufacture and/or assembly of printed circuit boards,
chassis and other subassemblies, as well as for the supply of various
of the components, incorporated into the Computer Systems, and for
performing the final assembly configuration, certain quality control
testing and delivery of such computers. Although the Company has
arrangements with certain contract manufacturers to manufacture
certain subassemblies and to assemble certain models of the Computer
Systems, 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. The
Company believes that these components are available from multiple
sources, and the Company anticipates that it will obtain certain of
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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 to be used in the Computer Systems
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.
At a future date, the Company may determine that the development
of manufacturing capabilities with respect to the Computer Systems
(and/or their subassemblies or components) is necessary or
appropriate. The establishment of manufacturing and/or assembly
capabilities may result in significant expense and is subject to
numerous risks, including unanticipated technological problems and
delays. The failure of the Company to successfully manufacture its
Computer Systems would have a material adverse effect on the Company.
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, President 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 which extends to
January 1999, 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, 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. As
of May 19, 1998, the Company had obtained eleven United States patents
and an aggregate of 39 foreign patents. In addition, the Company had
pending a total of 20 United States and 26 foreign patent
applications. These patents and pending applications relate to VSPA,
Compass PGA, various designs of the Computer Systems, the use of the
Compass Connector in Compass PGA and in the Computer Systems, and a
PCB manufacturing technology known as "Well Tech PCB". The Company's
foreign patent filings have been made in selected countries, including
the Republic of China (Taiwan), Germany, the United Kingdom, Ireland
and France. The Company will continue to file applications in certain
foreign jurisdictions to secure protection in those jurisdictions in
accordance with the Patent Cooperation Treaty and the Paris Convention
for the Production of Industrial Property (which allows such filings
to relate back to the original filing date in the United States)
covering the Company's technology and proposed products. 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 pending
patent applications will ultimately result in an issued patent.
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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 relies on confidentiality and nondisclosure
arrangements with its employees, consultants and others involved with
the Company's product and technological development efforts. There
can be no assurance that these agreements will provide meaningful
protection to the Company or that other companies will not acquire
information which the Company considers proprietary. Moreover, there
can be no assurance that other companies will not independently
develop know-how comparable or superior to that of the Company.
The Company has registered the Archistrat, VSPA and Rock City
trademarks with the U.S. Patent and Trademark Office and has applied
for appropriate trademark, copyright and other legal protection for
its product names, logos and other identifications. There can be no
assurance that the Company will not be precluded by others from using
any of such identifications or creating proprietary rights with
respect to them.
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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 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 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 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.
Although actions of the Company with respect to the Crane-Panda
License must be authorized by a majority of the Company's independent
directors, and the Company and Mr. Crane would be represented by
separate counsel in the event of a dispute concerning the Crane-Panda
license, 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.
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.
<PAGE>
Page 13
11. SUBSTANTIAL CONTROL BY MANAGEMENT. As of the June 30,
1998, officers and directors of the Company own of record and
beneficially approximately 40% 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. POTENTIAL FOR DILUTION; REGISTRATION RIGHTS; OUTSTANDING
OPTIONS AND WARRANTS. The Company currently has outstanding an
aggregate of 600 shares of Series A Preferred. In the event certain
conditions are met, the Company has the right to cause the issuance of
an additional 400 shares of Series A Preferred. Shares of Series A
Preferred are convertible into shares of Common Stock pursuant to a
formula whereby the purchase price of the shares to be converted
($10,000 per share) plus any accrued dividends are divided by a
conversion price based on the lesser of a fixed conversion price or a
floating conversion price based on the market price of the Common
Stock. If converted at the fixed conversion price of $3.50 per share,
the outstanding Series A Preferred would be convertible into
approximately 1,714,000 shares of Common Stock. Depending on market
conditions at the time of conversion, the number of shares issuable
could prove to be significantly greater in the event of a decrease in
the trading price of the Common Stock. Purchasers of Common Stock
could therefore experience substantial dilution upon conversion of the
Series A Preferred. In addition, an increase in the amount of Common
Stock in the public market as a result of such conversion could
reduce the market price of the Common Stock.
Pursuant to a Registration Rights Agreement dated February 11,
1998 (the "Registration Rights Agreement"), the shares of Common Stock
into which the outstanding Series A Preferred may be converted plus
shares of Common Stock issuable upon exercise of warrants to purchase
up to 150,000 shares of Common Stock issued in connection with the
sale of the Series A Preferred are being registered by means of the
Registration Statement. In addition, the Company has also granted to
Mr. Crane the right to include up to approximately 496,000 of his
shares of Common Stock (which volume restrictions will be eliminated
<PAGE>
Page 14
after May 16, 1999) each year in certain registration statements which
may be filed by the Company. The possibility that substantial amounts
of Common Stock may be sold in the public market may adversely affect
prevailing market prices for the Common Stock and could impair the
Company's ability in the future to raise additional capital through
the sale of its equity securities.
As of June 30, 1998, the Company has reserved 3,225,321 shares of
Common Stock, including 150,000 shares subject to warrants issued in
connection with the sale of the Series A Preferred, for issuance upon
the exercise of warrants. In the event the 400 additional shares of
Series A Preferred described above are issued, the Company would be
required to issue Warrants to purchase an additional 100,000 shares of
Common Stock. In addition, the Company has reserved 1,579,326 shares
of Common Stock as of June 30, 1998 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. EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS. The
Company's Amended and Restated Articles of Incorporation authorize the
Board of Directors to issue up to 2,000,000 shares of Preferred Stock
and to determine the price, rights, preferences and privileges,
including voting rights, of those shares without any further vote or
action of the shareholders. The rights of the holders of the
Company's Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock issued
by the Company, including shares of Series A Preferred which are
currently outstanding or may be issued in the future. In addition,
without the prior written approval of the holders of 66 2/3% of the
Series A Preferred shares, the Company shall not (1) consolidate or
merge with another corporation or other entity or person, whereby the
shareholders of the Company own in the aggregate less than 50% of the
ultimate parent or surviving entity, 2)transfer all or substantially
all of the Company's assets to another corporation or other entity or
<PAGE>
Page 15
person, or 3) fix a record date for the declaration of a distribution
or dividend, whether payable in cash, securities or assets (other than
shares of common stock). The Company's Amended and Restated Articles
of Incorporation also provide for staggered terms for the members of
the Board of Directors. Certain provisions of the Company's By-laws,
the issuance of Preferred Stock, certain provisions of the Company's
Amended and Restated Articles Incorporation, and the staggered Board
of Directors could have a depressive effect on the Company's stock
price or discourage a hostile bid in which shareholders could receive
a premium for their shares. In addition, these provisions could have
the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company, or delay,
prevent or deter a merger, acquisition, tender offer or proxy contest
for the Company. See "Description of Capital Stock".
16. 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.
17. 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
Company's financial condition may be subject to wide fluctuations in
response to quarter-to-quarter variations in operating results,
general conditions in the semiconductor packaging and computer
industries, changes in earnings estimates and recommendations by
analysts and other events.
YEAR 2000 ISSUES
The Company has developed preliminary plans to address the
possible exposures related to the impact on its computer systems of
the Year 2000. Key financial, information and operational systems
will be assessed and plans will be developed to address required
systems modifications. While the Company has not completed its detail
plans with regards to this uncertainty, management believes, based on
discussions with vendors of its major business applications and Year
2000 Compliance certificates received from the related software
developers, that the financial impact of making the required systems
changes, if any, will not be material to the Company's financial
position, results of operations or cash flows.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Shares by the Selling Securityholders.
<PAGE>
Page 16
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 June 30, 1998 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) 42,667 and 27,429 shares, respectively, issuable upon
the exercise of warrants (the "Warrants") held by Dusseldorf
Securities Limited and designees of Jefferies & Company, Inc., which
were granted in connection with a private placement by the Company of
subordinated convertible debentures completed on April 14, 1997, and
(ii) up to 36,924 shares (the "IIRG Shares") issuable to International
Investor Relations Group, Inc. pursuant to a consulting agreement
dated June 9, 1997 (the "Consulting Agreement"). The Warrants are
exercisable during the period beginning April 14, 1997 and ending
April 2, 2002 at exercise prices of $6.75 per share, in the case of
the Warrant issued to Dusseldorf Securities Limited and $7.00 per
share, in the case of the Warrants held by designees of Jefferies &
Company, Inc. All of the IIRG shares have been issued as of the date
hereof.
Shares Shares
Owned Shares Owned
Selling Prior to Offered After
Securityholders Offering Hereby Offering
- --------------- -------- ------- --------
Dusseldorf Securities
Limited 73,585 42,667 30,918
John J. Radecki, Jr. 304 304 --
Andrew R. Whittaker &
Stephani Whittaker, JTWROS 1,015 1,015 --
M. Brent Stevens 304 304 --
Kenneth S. Taratus, Jr. 243 243 --
Joseph Francis Maly, Jr. 122 122 --
David P. St. Jean 304 304 --
David J. Losito 304 304 --
Nauman Toor 152 152 --
<PAGE>
Page 17
Joel Nicholas Woolard &
Jean Curtis Woolard JTWROS 91 91 --
John G. Chiles Ttee F/B/O
John G. Chiles & Chnthia M.
Chiles Rev Tr Dtd 8/1/90 304 304 --
Robert Michael Werle&
Constance L. Hilladr Werle
JTWROS 304 304 --
Daniel O. Conwill, IV 2,027 2,027 --
Chris M. Kanoff &
Mary Ellen Kanoff JTWROS 2,024 2,024 --
Christopher W. Allick &
Alice P. Allick 8,533 8,533 --
Richard Handler &
Martha Handler JTWROS 122 122 --
Jeffrey Kent Weinhuff 304 304 --
JEFCO c/o Jefferies &
Company, Inc. 10,972 10,972 --
International Investor
Relations Group, Inc. 36,924 (1) 36,924 (1) --
--------
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, or
to pledgees, donees or other transferees, in each case without the
participation of underwriters, brokers or dealers. The shares may
also be offered for sale and sold by any such donees, pledgees or
other transferees. The Selling Securityholders or such donees,
pledgees or other transferees 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 or their donees, pledgees
<PAGE>
Page 18
or other transferees, 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.
The public offering of the Shares by the Selling Securityholders
will terminate on the earlier of (a) two years 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
$15,000. The Company will not pay for, among other expenses, selling
expenses or underwriting discounts, if applicable. The Company has
agreed to indemnify Dusseldorf Securities Ltd. and Jeffries & Company,
Inc. against certain liabilities, including liabilities under the
Securities Act, in connection with the offering of the Shares made
pursuant to this Prospectus.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of
50,000,000 shares of Common Stock, $.01 par value, and 2,000,000
shares of Preferred Stock, $.01 par value ("Preferred Stock").
COMMON STOCK
As of June 30, 1998, there were 12,247,782 shares of Common
Stock outstanding and held of record by 281 shareholders.
The holders of Common Stock are entitled to one vote for each
share held. Holders of Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors out of funds
legally available therefor. In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are
entitled to receive all assets of the Company available for
distribution to shareholders, subject to any preferential rights of
any then outstanding Preferred Stock. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any
other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock
are, and all shares of Common Stock to be outstanding upon completion
of this offering, will be fully paid and non-assessable.
<PAGE>
Page 19
PREFERRED STOCK
The Board of Directors has the authority to issue up to 2,000,000
shares of Preferred Stock in one or more series and to fix the voting
powers, designations, preferences and relative participating, optional
or other special rights, and qualifications, limitations or
restrictions thereof, including without limitation, dividend rights
and conversion rights, without any further vote or action by
shareholders. The issuance of Preferred Stock could adversely effect
the voting power of holders of Common Stock and the likelihood that
such holders will receive dividend payments and payments upon
liquidation and could have the effect of delaying, deterring or
preventing a change in control of the Company.
SERIES A CONVERTIBLE PREFERRED STOCK
The Board of Directors of the Company has designated 1,000 shares
of the Preferred Stock as Series A-2 Convertible Preferred Stock
("Series A Preferred") with the rights, preferences, privileges and
terms set forth in the Company's Sixth Articles of Amendment of
Amended and Restated Articles of Incorporation ("Articles of
Amendment"). The Company has issued 600 shares of Series A Preferred
for an aggregate purchase price of $6,000,000. In the event certain
conditions are met, the Company has the right to cause the issuance of
400 additional shares of Series A Preferred.
Holders of Series A Preferred are entitled to receive a dividend
of 5% per annum of the purchase price of such shares, payable
quarterly, at the option of the Company either in cash or as an
accrual to the purchase price utilized in computing the number of
shares of Series A Preferred issuable on conversion. So long as any
Series A Preferred is outstanding, no dividends may be paid nor shall
any distribution be made, on Common Stock or other shares junior in
rank to the Series A Preferred ("Junior Shares") unless all dividends
for all past quarterly dividend periods have been paid or declared and
a sum of cash or amount of shares sufficient for the payment thereof
set apart.
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of Series A
Preferred are entitled to receive in cash from the assets of the
Company, before any amount shall be paid to holders of Junior Shares,
an amount per share of Series A Preferred equal to the sum of (i) the
purchase price for such share and (ii) any accrued but unpaid
dividends thereon. If the amounts available for distribution are
insufficient to pay the full amount due to holders of Series A
Preferred, and shares of other classes or series of preferred stock of
the Company that are of equal rank to the Series A Preferred then each
holder of Series A Preferred and such other shares shall receive a
percentage of the amounts available for distribution ratably in
proportion to the respective amounts of such assets to which they
otherwise would be entitled.
Holders of Series A Preferred shall have no voting rights except
as required by law or as specified in the Articles of Amendment.
Pursuant to the Articles of Amendment, the affirmative vote of the
holders of at least two-thirds of the outstanding shares of Series A
<PAGE>
Page 20
Preferred is required for (i) any amendment to the Company's Articles
of Incorporation which would alter the rights and preferences of the
Series A Preferred or otherwise impair the rights of the holders of
Series A Preferred relative to the holders of the Common Stock or the
holders of any other class of capital stock, or (ii) any issuance of
more than the 1,000 shares of Series A Preferred. In addition, without
the prior written approval of the holders of 66 2/3% of the Series A
Preferred shares, the Company shall not (1) consolidate or merge with
another corporation or other entity or person, whereby the
shareholders of the Company own in the aggregate less than 50% of the
ultimate parent or surviving entity, 2)transfer all or substantially
all of the Company's assets to another corporation or other entity or
person, or 3) fix a record date for the declaration of a distribution
or dividend, whether payable in cash, securities or assets (other than
shares of common stock).
Shares of Series A Preferred are convertible into shares of
Common Stock pursuant to a formula whereby the purchase price of the
shares to be converted plus accrued dividends are divided by a
conversion price defined as the lower of (i) $3.50, subject to
adjustment in the event of certain dilutive issuances of securities by
the Company or for stock splits or similar events (the "Fixed
Conversion Price"), or (ii) a percentage of the average closing bid
price of the Common Stock for the five days immediately preceding
conversion equal to 92%, if conversion occurs during the period
beginning 120 days and ending 180 days after issuance of the Series A
Preferred, or 90%, if conversion occurs after 180 days from issuance
of the Series A Preferred. The conversion of Series A Preferred into
shares of Common Stock may not occur during the period prior to 120
days after issuance except at the Fixed Conversion Price. All
outstanding Series A Preferred will automatically convert into Common
Stock, at the then applicable conversion price, on the fifth
anniversary of issuance. In addition, the Company has the right to
require that all unconverted shares of Series A Preferred be converted
to Common Stock at any time if the closing bid price of the Common
Stock is equal to $12.00 per share for a period of twenty consecutive
trading days.
The terms of the Series A Preferred, provide that upon the
occurrence of certain "Triggering Events", including suspension of
sales under the Registration Statement, failure of the Company's
Common Stock to be listed, or the suspension of trading in the
Company's Common Stock, on the Nasdaq National Market or the Nasdaq
SmallCap Market, or failure of the Company to convert shares of Series
A Preferred as required, the Company shall pay the holders $100,000 on
the first day of each month until the Triggering Events have been
remedied.
FLORIDA LAW AND CERTAIN ANTI-TAKEOVER CHARTER PROVISIONS
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
shareholders. The Florida Affiliated Transactions Act generally
requires supermajority approval by disinterested directors or
<PAGE>
Page 21
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.
The Company's Amended and Restated Articles of Incorporation
provide that the authorized number of directors may be changed only by
resolution of the Board of Directors, that the Board of Directors is
classified into three classes, only one of which shall be elected at
any given annual meeting and that directors can only be removed for
cause. These provisions, which require the vote of at least two-
thirds of the shareholders to amend, could have the effect delaying,
deterring or preventing a change in control of the Company or depress
any market price of the Common Stock or discouraging hostile bids in
which shareholders of the Company could receive a premium for their
shares of Common Stock.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company has been appointed as the
transfer agent and the registrar for the Company's Common Stock.
EXPERTS
The financial statements incorporated in this Prospectus by
reference to the Transition Report on Form 10-K of The Panda Project,
Inc. for the transition period ended December 31, 1997 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 2 to the financial statements) of
PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
