As filed with the Securities and Exchange Commission on March 9, 1999
Registration No. 333-71229
========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------------
THE PANDA PROJECT, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0323354
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
951 Broken Sound Parkway
Boca Raton, Florida 33487
(561) 994-2300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Melissa F. Crane
Acting Chief Financial Officer
The Panda Project, Inc.
951 Broken Sound Parkway
Boca Raton, Florida 33487
(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 the effective date of this Registration Statement.
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, check the following box. [x]
If the registrant elects to deliver its latest annual report to
securityholders, or a complete and legal facsimile thereof, pursuant to
item 11(a)(1) of this Form, check the following box. [x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) 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. [ ]
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 Share (1) Price (1) Fee (1)
- ------------------------------------------------------------------------
Common Stock,
par value 1,775,000
$.01 per share shares $0.531 $942,525 $282.75 (2)
========================================================================
(1) Estimated solely for the purpose of calculating the registration
fee in accordance with Rule 457(c) under the Securities Act of
1933.
(2) Registration fees were paid with previous filings on Form S-2,
Registration No. 333-71229.
----------------------------
Explanatory Note
This Post-Effective Amendment No. 1 to the Registration Statement on
Form S-2 amends the prospectus dated February 3, 1999, filed by the
Company in connection with the offers and sales of the Common Stock by a
certain securityholder on the OTC Electronic Bulletin Board and in the
over-the-counter market.
PROSPECTUS File No. 333-71229
1,775,000 Shares
THE PANDA PROJECT, INC.
Common Stock
----------------------
This prospectus will offer 1,775,000 shares of common stock of The
Panda Project, Inc., proposed to be sold from time to time by Joseph A.
Sarubbi pursuant to a settlement agreement. The Company does not expect
to receive any of the proceeds from the sale of the common stock by the
Selling Securityholder.
The Selling Securityholder may offer his Panda Project common stock
through public or private transactions at prevailing market prices.
Panda Project common stock is listed on the OTC Electronic Bulletin Board
with the ticker symbol: "PNDA." On March 4, 1999, the closing price of
one share of Panda Project common stock on the OTC Electronic Bulletin
Board was $0.49.
The common stock offered under this prospectus represents
approximately 9.0% of the total number of shares of Common Stock
outstanding on March 4, 1999. The sale of this common stock 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" on pages 6 and 12.
The common stock offered under this prospectus has not been
registered under the blue sky or securities laws of any jurisdiction.
Any broker or dealer should assure the existence of an exemption from
registration or ensure such registration in connection with the offer and
sale of the common stock.
The Company will pay all the expenses in connection with this
offering, other than selling expenses and counsel fees and expenses
incurred by the Selling Securityholder, if applicable. These expenses
are estimated to be $12,283.
---------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 2.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this prospectus is March 9, 1999.
TABLE OF CONTENTS
Page
----
Where You Can Find More Information 1
Incorporation of Certain Documents by Reference 2
Risk Factors 2
Year 2000 Issues 8
Recent Developments 9
Use of Proceeds 9
Settlement 9
Selling Securityholder 11
Plan of Distribution 11
Description of Capital Stock 11
Experts 14
Unless the context indicates otherwise, the term "Company" and
references to "we," "our" and "Panda Project" in this prospectus refer to
The Panda Project, Inc.
WHERE YOU CAN FIND MORE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended. In accordance with this
Act, the Company files reports and other information with the Securities
and Exchange Commission (the "Commission"). The Common Stock of the
Company is traded on the OTC Electronic Bulletin Board.
You may read and copy any document we file with the Commission at
the Public Reference Room of the Commission, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. Further information on the operation of
the Commission's Public Reference Room in Washington, D.C. can be
obtained by calling the Commission at 800-SEC-0330.
The Commission also maintains an Internet world wide web site that
contains reports, proxy statements and other information about issuers,
like the Company, who file electronically with the Commission. The
address of that site is http://www.sec.gov.
This prospectus is part of a Registration Statement we filed with
the Commission. The prospectus does not contain all of the information
set forth in the Registration Statement and its exhibits and schedules.
Certain items are omitted in accordance with the rules and regulations of
the Commission.
You should rely on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized
anyone else to provide you with different information. We are not making
an offer of the shares of Common Stock in any state where the offer is
not permitted. You should not assume that the information in this
prospectus or any supplement is accurate as of any date other than the
date on the front of those documents.
The Company maintains a World Wide Web site at www.pandaproject.com.
Information contained in the Company's World Wide Web site shall not be
deemed to be part of this prospectus.
THIS PROSPECTUS IS ACCOMPANIED BY A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997, THE COMPANY'S
MOST RECENT QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER
30, 1998 WHICH FORM 10-Q WAS SUBSEQUENTLY AMENDED.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows the Company to "incorporate by reference"
information in this prospectus, which means that the Company can disclose
important information to you by referring you to another document filed
separately with the Commission. The information incorporated by
reference is deemed to be part of this prospectus, except for any
information superseded by information in this prospectus. This
prospectus incorporates by reference the documents listed below that the
Company has previously filed with the Commission. These documents
contain important information about the Company and its finances.
Company Filings Period or Date Filed
--------------- --------------------
Transition Report on Form 10-K For the transition period from
April 1, 1997 through December 31, 1997
Quarterly Reports on Form 10-Q, Quarter ended September 30, 1998,
as amended June 30, 1998 and March 31, 1998
Definitive Proxy Statement on Filed with the Commission on
Schedule 14A April 20, 1998
Current Reports on Form 8-K Filed January 6, 1999, December 23,
1998 and December 15, 1998
Registration Statement on Form 8-A Filed May 5, 1994, registering the
Common Stock under Section 12(g) of
the Exchange Act
The Company also incorporates by reference additional documents that
it may file with the Commission. These documents include periodic
reports, like Annual Reports on Form 10-K, Quarterly Reports on Form 10-
Q, Current Reports on Form 8-K, proxy statements and other filings.
Later information filed with the Commission under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 updates and supersedes
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). You can
obtain documents incorporated by reference in this Registration Statement
by requesting them in writing or by telephone from the Company at the
following address:
The Panda Project, Inc.
951 Broken Sound Parkway
Boca Raton, Florida 33487
Attention: Chief Financial Officer
(561) 994-2300
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY
CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER
INFORMATION IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO INVEST IN
SHARES OF OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY
OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD BE
MATERIALLY ADVERSELY AFFECTED. THIS COULD CAUSE THE TRADING PRICE OF OUR
COMMON STOCK TO DECLINE, AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.
THIS PROSPECTUS ALSO CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. THESE STATEMENTS RELATE TO OUR
FUTURE PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THESE STATEMENTS
MAY BE IDENTIFIED BY THE USE OF WORDS SUCH AS "EXPECTS," "ANTICIPATES,"
"INTENDS," "PLANS" AND SIMILAR EXPRESSIONS. OUR ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE DISCUSSED IN THESE STATEMENTS. FACTORS THAT
COULD CONTRIBUTE TO THESE DIFFERENCES INCLUDE THOSE DISCUSSED BELOW AND
ELSEWHERE IN THIS PROSPECTUS.
HISTORY OF LOSSES AND EXPECTATION OF FUTURE LOSSES. We are a
development stage company with limited operating revenue. We have
incurred losses in each year since our inception in 1992. As of
September 30, 1998, we had an accumulated deficit of approximately $74
million. We expect to continue to experience substantial losses for the
next few years until the Company is able to generate sufficient revenues
to support its operations. We are unable to predict the extent of any
future losses or the time required to achieve profitability.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING. We require
substantial working capital to fund our business. We have had
significant operating losses and negative cash flow from operations since
inception and expect to continue to do so for the foreseeable future. We
have depended upon proceeds of sales of our securities to fund our
operations since our inception. Our capital requirements depend on
several factors, including the rate of market acceptance of our products,
the ability to expand our client base, the growth of sales and marketing,
and other factors. If capital requirements vary materially from those
currently planned, we may require additional financing sooner than
anticipated. If additional funds are raised through the issuance of
equity securities, the percentage ownership of the shareholders of the
Company will be reduced, shareholders may experience additional dilution,
or such equity securities may have rights, preferences or privileges
senior to those of the holders of the Common Stock. Additional financing
for the Company may not be available when needed on terms favorable to us
or it may not be available at all. We may be unable to develop or
enhance our products, take advantage of future opportunities or respond
to competitive pressures without additional funding. These limitations
placed on the Company due to our inability to secure additional funding
could materially adversely affect the Company's business, financial
condition and operating results.
UNCERTAINTY OF MARKET ACCEPTANCE. The products and technologies
currently being sold or developed by the Company utilize newly developed
designs. We believe that our existing and proposed technology and
products represent significant advancements in semiconductor packaging
technology. Demand for the Company's existing and proposed products,
however, is subject to a high degree of uncertainty. Such high degrees
of uncertainty are 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 potential purchasers as to
the distinctive characteristics and anticipated benefits of the Company's
proposed products and technologies. Potential purchasers may be
inhibited from doing business with the Company due to their commitment to
their existing products. In addition, many potential purchasers may be
reluctant to use the Company's products and technologies until a
sufficient number of other potential purchasers have already committed to
do so. We have hired sales and marketing personnel for its VSPA
semiconductor package and Compass Connector. The Company's marketing
efforts may not be successful. If we are unable to market our products
successfully, our business, financial condition and operating results
will be materially adversely affected.
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 timely introduction of
our products and technology into the marketplace. There can be no
assurance (1) that the Company's products and technology will
satisfactorily perform the functions for which they are designed, (2)
that they will meet applicable price or performance objectives or (3)
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 us to incur
additional costs which would have a material adverse effect on the
Company.
COMPETITION. The Company operates in markets that are subject to
intense competitive pressures that could affect prices or demand for the
Company's products and services. The effect of competition on prices and
demand may result in reduced profit margins and/or loss of market
opportunity. Certain competitors of the Company dominate their
industries and have the financial resources to enable them to withstand
substantial price competition or downturns in the market for
semiconductor packages, related technologies and/or computers. The
Company faces the possibility (1) that we will not be able to compete
successfully, (2) that our competitors or future competitors will develop
technologies or products that render the Company's products and
technology obsolete or less marketable or (3) that we will not be able to
successfully enhance our products or technology or adapt them
satisfactorily.
DEPENDENCE ON MANUFACTURERS AND SUPPLIERS; LACK OF MANUFACTURING
EXPERIENCE AND CAPABILITY. The Company has developed the ability to
manufacture the VSPA semiconductor package. We have also made
arrangements with third-party manufacturers to produce certain versions
of the VSPA semiconductor package. Despite these existing production
arrangements, the Company may not be able to produce sufficient
quantities of VSPA to meet demand. Any inability to meet the demand for
our products would have a material adverse effect on the Company's
business, financial conditions and operating results.
The Company has an arrangement with LG Cable & Machinery Ltd. to
supply the Compass V Connector. The Company anticipates that it will be
able to obtain Compass V Connectors from LG Cable & Machinery Ltd. under
this arrangement. If the supply of such component is not delivered in
quantities sufficient to meet the customer demand, our business,
financial condition and operating results will be materially adversely
affected.
DEPENDENCE ON KEY PERSONNEL. Because of the specialized technical
nature of our business, we are highly dependent upon qualified
scientific, technical and managerial personnel. The competition for
qualified personnel in the technology field is intense. We may not be
able to attract and retain the qualified personnel necessary for the
development of our business. The loss of the services of existing
personnel, as well as the failure to recruit additional key scientific,
technical and managerial personnel in a timely manner, would be
detrimental to our research and development programs and to our business.
The Company may not be able to continue to hire additional qualified
personnel or retain such necessary personnel. The failure to attract and
retain the necessary personnel could materially adversely affect our
business, financial condition and operating results. We maintain "key
man" life insurance on Mr. Crane's life in the amount of $2,000,000.
INTELLECTUAL PROPERTY. Trademarks, patents, copyrights, trade
secrets and other intellectual property are critical to our success, and
we rely on trademark, trade secret protection and confidentiality and/or
license agreements with our employees, clients, partners and others to
protect our proprietary rights. We seek to protect our proprietary
position by, among other methods, filing United States and foreign patent
applications related to our proprietary technology, inventions and
improvements that are important to the development of our business.
Proprietary rights relating to our technologies will be protected from
unauthorized use by third parties only to the extent that they are
covered by valid and enforceable patents or copyrights or are effectively
maintained as trade secrets. As of March 4, 1999, the Company had
obtained 18 United States patents and an aggregate of 39 foreign patents
pending. We currently have a total of 15 patent applications pending in
the United States and 31 foreign patent applications. Pending patent
applications may not result in patents being issued. In addition, the
laws of some foreign countries do not protect our intellectual property
rights to the same extent as do the laws of the United States. The
patent position of high technology companies involves complex legal and
factual questions and, therefore, we cannot predict their validity and
enforceability with certainty. Even if issued, our patent applications
may be challenged, invalidated, held unenforceable or circumvented.
Further, rights granted under future patents may not provide proprietary
protection or competitive advantages to us against competitors with
similar technology. Others may independently develop similar
technologies or duplicate technologies developed by us. Effective
trademark and trade secret protection may not be available in every
country in which our products and services are made available online.
The steps we have taken to protect our proprietary rights may not be
adequate, and third parties may infringe upon or misappropriate our trade
secrets, trademarks, trade dress and similar proprietary rights. Others
may independently develop substantially equivalent intellectual property.
Any significant failure to protect our intellectual property in a
meaningful manner could materially adversely affect our business,
financial condition and operating results. In addition, litigation may
be necessary in the future to enforce our intellectual property rights,
to protect our trade secrets or to determine the validity and scope of
the proprietary rights of others. Such litigation could result in
substantial costs and diversion of management and technical resources,
which could materially adversely affect our business, financial condition
and operating results.
DEPENDENCE ON THE CRANE-PANDA LICENSING AGREEMENT; POTENTIAL
CONFLICTS OF INTEREST. Under 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. No sales
requiring the payment of royalties to Mr. Crane under the Crane-Panda
License have occurred to date. 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 materially adversely affect
the Company's business, financial condition and operating results. The
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. Despite these
procedural safeguards, a conflict of interest may arise with respect to
the Crane-Panda License and such conflict may not 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. In certain circumstances, the
3M License provides for the payment of a royalty to Mr. Crane. As of the
date of this prospectus, Mr. Crane had received no such payments.
LITIGATION. On October 16, 1998, a complaint was filed against the
Company in the United States District Court for the Southern District of
New York by Promethean Investment Group, L.L.C. The complaint alleges
breach of contract by the Company for failing to proceed with a financing
transaction and seeks damages in an unspecified amount in excess of
$270,000 or a declaration that the Company is required to proceed with
the financing transaction. The outcome is both immeasurable and
undeterminable. We may not be successful in defending this litigation.
Even if the Company is successful in defending itself in such litigation,
the diversion of critical resources involved in defending and settling
these actions could have a substantial material adverse effect on the
Company.
On December 11, 1998, the Company and Joseph A. Sarubbi ("Sarubbi")
entered into a settlement agreement (the "Settlement Agreement") relating
to litigation in which Sarubbi has obtained a judgment against the
Company in the amount of $1,227,041. Under the Settlement Agreement, the
Company has agreed to pay Sarubbi total consideration worth $1,000,000 of
which $240,000 has been paid in cash and the remainder is to be satisfied
upon the sale of Panda Project shares which have been delivered to
Sarubbi by the Company. The Company will register those shares for
Sarubbi pursuant to the Registration Statement of which this prospectus
is a part. The parties have agreed to petition the Florida Court of
Appeals for the Fourth District to dismiss the litigation within five
business days after the Company's obligations in the Settlement Agreement
have been completed. If such obligations are not completed, the judgment
will remain in effect. This settlement amount will be recorded as a
charge against Company earnings for the quarter ended December 31, 1998.
DELISTING FROM NASDAQ NATIONAL MARKET; "PENNY STOCK" REGULATIONS.
The Company was delisted from the Nasdaq National Market, effective
December 16, 1998, due to its inability to sustain compliance with the
Net Tangible Asset requirement of $4 million and because the Company was
not currently in compliance with the minimum bid price of $1.00 per
share. On December 17, 1998, the Company began trading on the NASD OTC
Electronic Bulletin Board system or in what is commonly referred to as
the "pink sheets." As a result, an investor may find it more difficult to
dispose of the Company's securities or to obtain accurate quotations as
to the price of, such securities. In addition, delisting may affect our
ability to issue additional securities or to secure additional financing.
The Company's delisting on the Nasdaq National Market will cause
trading in the Common Stock to be subject to additional rules under the
Exchange Act. These rules require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as
a penny stock. A 'penny stock' is defined to include any over-the-counter
equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. The rules require the delivery, prior to
any transaction in a penny stock, of a disclosure schedule prescribed by
the Commission relating to the penny stock market, subject to certain
exemptions. In addition, such regulations impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other
than established customers and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must
make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to
sale. The additional burdens imposed upon broker-dealers by such
requirements may discourage broker-dealers from effecting transactions in
the Common Stock, which could severely limit the market liquidity of the
Common Stock and the ability of purchasers in this offering to sell the
Common Stock in the secondary market.
NEGATIVE EFFECT OF FUTURE SALES OF STOCK ON MARKET PRICE AND ABILITY
TO RAISE CAPITAL. Future sales of substantial amounts of Common Stock in
the public market after this offering or the perception that such sales
could occur could materially adversely affect the market price on the
Common Stock and our future ability to raise capital through the sale of
equity securities. Virtually all of the outstanding Common Stock,
including the Common Stock offered hereby, are freely tradeable in the
public markets without restriction, subject in some cases to the volume
limitations imposed by Rule 144 under the Securities Act. The Common
Stock offered hereby represent approximately 9.0% of the total number of
shares of Common Stock outstanding at March 4, 1999. See "PLAN OF
DISTRIBUTION."
RISK OF INTERNATIONAL SALES. Conducting business outside of the
United States is subject to certain risks, including:
- changes in regulatory requirements and tariffs;
- reduced protection of intellectual property rights;
- difficulties in distribution;
- the burden of complying with a variety of foreign laws; and
- political or economic constraints on international trade or
instability.
In addition, all of our international sales are currently priced in
U.S. dollars, but future sales or licensing of our products or
technologies outside the United States may be subject to the risks
associated with fluctuations in currency exchange rates.
POTENTIAL FOR DILUTION; REGISTRATION RIGHTS; OUTSTANDING OPTIONS AND
WARRANTS. As of March 4, 1999, the Company had issued 3,419,752 shares
of Common Stock upon conversion of 237 shares of the Series A-3
Convertible Preferred Stock ("Series A Preferred"); 363 shares of Series
A Preferred remain outstanding. In the event certain conditions are met,
the Company has the right to issue 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. The number of shares issuable upon conversion of Series A
Preferred 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 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. Additionally, 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 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.
Certain Triggering Events have occurred and had not been remedied as of
the date hereof.
In connection with a private placement completed on August 14, 1998,
the Company agreed to register for sale 2,346,626 shares of Common Stock
and 2,346,626 shares of Common Stock issuable upon exercise of Common
Stock Purchase Warrants. The Company's failure to register such Common
Stock within 90 days of such sale could subject the Company to penalty
payments to these investors. As of March 4, 1999, the registration
statement relating to these shares of Common Stock had not been declared
effective and the Company could be subject to such payments. The Company
also agreed that in the event of decreases in the average closing bid
price of the Common Stock for the 20 trading days immediately preceding
the six-month and/or one-year anniversaries of the closing of the private
placement, the Company would, with shareholder approval, issue to
investors in the private placement a number of Fill-Up Shares. These
Fill-Up Shares would in effect cause the investors to have acquired the
number of shares of Common Stock which they would have purchased had the
purchase price paid by investors in the private placement as of the
closing date been the same as the twenty-day average closing bid price of
the Common Stock as of such anniversary dates. The number of Fill-Up
Shares to be issued could be substantial if the market price of the
Common Stock decreases significantly. Such an increase in the amount of
Common Stock in the public market could reduce the market price of the
Common Stock and possibly result in a change in control of the Company.
As of March 4, 1999, no Fill-Up Shares had been issued. If Fill-Up
Shares had been issued, the number of Fill-Up Shares which the Company
would have been required to issue on March 4, 1999, totaled 11,049,762.
In the event (i) the Common Stock is delisted or suspended from trading
on Nasdaq, (ii) the Fill-Up Shares and shares issuable upon exercise of
the Private Placement Warrants are not issuable or are not listed with
Nasdaq, or (iii) if the Company fails to issue Fill-Up Shares as
required, then the Company shall pay to the initial investors $100,000
for each full 30-day period that the condition continues. As of March 4,
1999, no such required payments had been made. See "DESCRIPTION OF
CAPITAL STOCK - Private Placement."
On December 15, 1998, the Company reduced the exercise price of
certain common stock purchase warrants if the warrantholders accelerate
the expiration date of their warrants from July 11, 2001 to January 5,
1999. The exercise price was reduced from $11.00 to $0.75. Prior to
January 5, 1999, warrants representing 553,333 shares were exercised at
this reduced price, and the Company received net proceeds of $414,999.75
upon such exercise.
The Company has reserved 7,366,738 shares of Common Stock, including
150,000 shares subject to warrants issued in connection with the sale of
the Series A Preferred, 2,346,626 shares subject to the Private Placement
Warrants and 2,850,000 shares subject to the Helix Warrants, 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 745,100 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 previously mentioned securities may also adversely affect
the terms under which the Company could obtain additional equity capital.
If a significant number of these securities is exercised, the resulting
increase in the amount of the Common Stock in the public market may
reduce the market price of the Common Stock.
OUTSTANDING INDEBTEDNESS. The Company has outstanding loans from
Helix (PEI) Inc. ("Helix") in the aggregate principal amount of
$2,000,000. The loans bear interest at an annual rate equal to the prime
rate of interest payable by the Royal Bank of Canada plus 2%, are secured
by the Company's intellectual property and were due and payable on
February 15, 1999. As of March 4, 1999 this principal amount due Helix
has not been repaid. The inability of the Company to repay the Helix
loans when due may have a material adverse effect on the Company,
including possible loss of rights to its intellectual property through
foreclosure, and could cause the Company to be unable to implement its
business strategy or force the Company to otherwise significantly curtail
or cease its operations. In connection with the Helix loans, the Company
has issued to Helix warrants to purchase an aggregate of 2,850,000 shares
of Common Stock at exercise prices ranging from $1.63 to $2.125 per share
(collectively, the "Helix Warrants"). The Helix Warrants have expiration
dates ranging from December 19, 1999 to August 7, 2000. These warrants
have been valued at an aggregate of approximately $4,324,000. A total of
$4,324,000 has been charged to amortization expense for these warrants
through February 15, 1999. This accounting treatment has no impact on
the Company's cash balance. Helix and its affiliates currently hold
approximately 2.3% of the Company's outstanding Common Stock (not
including shares issuable upon exercise of warrants).
ANTI-TAKEOVER STATUTES. Certain provisions of our Amended and
Restated Articles of Incorporation and Florida law could make a merger,
tender offer or proxy context involving the Company more difficult, even
if such events could be beneficial to the interests of the shareholders.
Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of the common stock. See
"DESCRIPTION OF CAPITAL STOCK - Florida Law and Certain Anti-takeover
Charter Provisions."
POSSIBLE LACK OF RESOURCES OF SELLING SECURITYHOLDER. The Selling
Securityholder may be deemed to be an Underwriter pursuant to the
Securities Act. As Underwriters, they may become liable to the
purchasers of the Common Stock offered under this prospectus pursuant to
the terms of the Securities Act if certain provisions of the Securities
Act are not complied with by them. The Selling Securityholder may not
have the financial resources to discharge any such liability.
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
Like many other companies, Year 2000 computer issues create certain
risks for us. If our financial, operational and information systems do
not correctly recognize the process date information beyond the year
1999, it could have a significant adverse impact on the Company's ability
to process information, which could create significant potential
liability for the Company. To address potential Year 2000 issues with
its internal systems, we have evaluated these systems. The initial
assessment indicated that certain internal systems should be upgraded or
replaced as part of a solution to the Year 2000 problem. The costs
incurred to date related to these programs have not been material. The
estimated cost to be incurred by us in the future is not expected to
exceed $20,000. These estimates do not include potential costs related
to any customer or other claims or the cost of internal software and
hardware replaced in the normal course of business. These estimates are
based on our current assessment of the projects and may change as the
project progresses.
We are also working with key suppliers of products and services to
monitor their progress toward Year 2000 compliance. The failure of a
major supplier to become Year 2000 Compliant on a timely basis could
materially adversely affect our business, financial condition and
operating results.
We have begun internal discussions concerning contingency, planning
to address potential problem areas with internal systems and with
suppliers and other third parties. We expect assessment, remediation and
contingency planning activities to continue throughout the year 1999 with
the goal of resolving all material internal and external systems and
third-party issues. While the Company has not completed its detail plans
with regards to this uncertainty, our 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.
We deem "Year 2000 Compliant" to mean software that can
individually, and in combination with all other systems, products or
processes with which the software is designed to interface, continue to
operate successfully (both in functionality and performance in all
material respects) over the transition into the twenty-first century when
used in accordance with the documentation relating to such software.
Year 2000 Compliance includes being able to, before, on and after January
1, 2000, substantially conform to the following:
- use logic pertaining to dates which allow users to identify
and/or use the century portion of any date fields without
special processing;
- respond to all date elements and ate input to resolve any
ambiguity as to century in a disclosed, defined and pre-
determined manner; and
- provide date information in ways which are unambiguous as to
century.
This may be achieved by permitting or requiring the century to be
specified or where the date element is represented without a century, the
correct century in unambiguous for all manipulations involving that
element.
RECENT DEVELOPMENTS
The Company engaged Grant Thornton LLP as the Company's independent
accountants to audit the Company's financial statements. This engagement
became effective as of January 4, 1999.
The Common Stock was delisted from the Nasdaq National Market
effective December 16, 1998. The Nasdaq Qualification Panel believed
that the Company would not be able to sustain compliance with the Net
Tangible Asset requirement of $4 million, and the Company was currently
not in compliance with the minimum bid price of $1.00 per share. On
December 17, 1998, the Common Stock began trading on the NASD OTC
Electronic Bulletin Board system under the symbol PNDA.
On December 11, 1998, the Company and Sarubbi entered into the
Settlement Agreement relating to litigation in which Sarubbi has obtained
a judgment against the Company in the amount of $1,227,041. Under the
Settlement Agreement, the Company has agreed to pay Sarubbi total
consideration worth $1,000,000 of which $240,000 has been paid in cash
and the remainder is to be satisfied upon the sale of shares of Common
Stock which have been delivered to Sarubbi by the Company. The Company
will register those shares for Sarubbi pursuant to the Registration
Statement of which this prospectus is a part. The parties have agreed to
petition the Florida Court of Appeals for the Fourth District to dismiss
the litigation within five business days after the Company's obligations
in the Settlement Agreement have been completed. If such obligations are
not completed, the judgment will remain in effect.
On November 18, 1998, James T. A. Wooder resigned as a director of
the Company.
On November 2, 1998, Company entered into a letter of intent for the
sale of its systems business. The letter of intent contemplated that the
documents and sale would be completed in 120 days. This now seems
unlikely to happen in the original time frame; however, management does
believe that it will occur in the future. As a result of the pending
sale and a shift to solely concentrate on the technology business, the
Company curtailed production and sale of systems. It is believed that
the associated inventory as currently valued is diminishing with the
passage of time, whereby the recoverable costs will only hold constant in
a sale of the business unit as a whole. The Company is currently
evaluating the technological marketplace for the systems inventory and
believes that a valuation adjustment may be appropriate.
The Company has recently received firm purchase commitments for
orders of its VSPA semiconductor package from National Semiconductor
Corporation and Honeywell s Solid State Electronics Center in addition to
previous firm purchase commitments from Veridicom, EG&G, SEEQ
Technologies Incorporated, Motorola, Kaiser Aerospace & Electronics,
Tamarack Microelectronics Inc., Lucent Technologies and Saab Dynamics.
The Company anticipates that these purchase commitments will result in
increased revenues, although there can be no assurance that such
anticipated revenues will materialize.
USE OF PROCEEDS
The Company does not expect to receive any proceeds from the sale of
shares of Common Stock by the Selling Securityholder.
SETTLEMENT
Under the Settlement Agreement, the Company has agreed to pay
Sarubbi total consideration of $1,000,000 of which $240,000 has been paid
in cash and the remaining $760,000 (the "Outstanding Obligation") is to
be satisfied upon the sale of shares of Common Stock which have been
delivered to Sarubbi by the Company.
The Company has issued 1,775,000 shares of its Common Stock to
Sarubbi pursuant to the Settlement Agreement. The shares of Common Stock
issued to Sarubbi are restricted securities within the meaning of the
Securities Act and cannot be offered for sale without an effective
registration statement covering such offer and sale or pursuant to an
applicable exemption from the registration requirements of the Securities
Act. Pursuant to the terms of the Settlement Agreement, the Company
filed the Registration Statement (of which this prospectus is a part) and
will use its best efforts to keep the Registration Statement effective
until all of the Common Stock is disposed or by Sarubbi. Expenses of
this offering, estimated at $12,283, will be paid by the Company.
The number of shares of Common Stock that may be sold by Sarubbi are
subject to a limitation of 25,000 shares per business day. All trades
will be made through a registered broker. All sums received by Sarubbi
as a result of his sale of Common Stock, reduced by any transaction cost
such as broker's fees and commissions incurred by Sarubbi in the course
of such sales, will reduce the aggregate amount of the Outstanding
Obligation on a dollar-for-dollar basis. Upon satisfaction of the
Outstanding Obligation, any remaining shares of Common Stock held by
Sarubbi will be returned to the Company. If the Outstanding Obligation
has not been satisfied upon sale of the Common Stock, the Company will
repay the Outstanding Obligation within 10 days.
SELLING SECURITYHOLDER
All of the shares of Common Stock of the Company offered hereby are
being sold by the Selling Securityholder named below. The Company will
receive none of the proceeds from the sale of shares offered hereby. The
Selling Securityholder is a former director of the Company.
The following table sets forth information concerning the beneficial
ownership of shares of Common Stock by the Selling Securityholder as of
March 4, 1999 and the number of such shares included for sale in this
prospectus, assuming the sale of all Shares being offered by this
prospectus. The shares offered hereby consist of 1,775,000 shares of
Common Stock acquired by Sarubbi pursuant to a settlement agreement.
Selling Shares Owned Shares Shares Owned
Securityholder Prior to Offering Offered Hereby After Offering
- ------------- ----------------- -------------- --------------
Joseph A. Sarubbi 1,775,000 1,775,000 0
PLAN OF DISTRIBUTION
The Shares will be offered and sold by the Selling Securityholder
for its own account. The Settlement Agreement between Sarubbi and the
Company prohibits the resale of more than 25,000 shares of the Common
Stock on any business day. The Company will not receive any proceeds
form the sale of the Common Stock pursuant to this prospectus. The
Company has agreed to pay the expenses of registration of the Common
Stock, including the Company's legal and accounting fees and counsel fees
and expenses incurred by the Selling Securityholder.
The Selling Securityholder may offer and sell the Common Stock from
time to time in transactions on the OTC Electronic Bulletin Board or in
brokerage transactions at prevailing market prices. Sales may be made to
or through brokers or dealers who may receive compensation in the form of
discounts, concessions or commissions from the Selling Securityholder or
the purchasers of Common Stock for whom such brokers or dealers may act
as agent or to whom they may sell as principal, or both. As of the date
of this prospectus, the Company is not aware of any agreement,
arrangement or understanding between any broker or dealer and the Selling
Securityholder.
The Selling Securityholder and any brokers or dealers acting in
connection with the sale of the Common Stock hereunder may be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities
Act, and any commissions received by them and any profit realized by them
on the resale of Common Stock as principals may be deemed underwriting
compensation under the Securities Act.
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 March 3, 1999, there were 19,827,985 shares of Common Stock
outstanding and held of record by 274 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 nonassessable.
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-3 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 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 20 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 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. Certain Triggering
Events have occurred and have not been remedied as of the date hereof.
PRIVATE PLACEMENT
On August 14, 1998, the Company completed an agreement for the sale
of 2,346,626 shares of its Common Stock and 2,346,626 shares of Common
Stock issuable upon the exercise of Common Stock Purchase Warrants in a
private placement to accredited investors with gross proceeds of
approximately $3.8 million of which all but $200,000 has been funded as
of the date hereof (the "Private Placement"). Expenses of the Private
Placement were approximately $230,000. In addition to the shares of
Common Stock purchased by each investor in the Private Placement, such
investor received a warrant (the "Private Placement Warrants") to
purchase an equal number of shares of Common Stock, subject to adjustment
for stock splits and similar events, at an exercise price of $2.55 per
share. Upon exercise of the Private Placement Warrants, an investor may
elect to receive a reduced number of shares of Common Stock in lieu of
tendering the warrant exercise price in cash. The Private Placement
Warrants have a term of five years expiring August 13, 2003. Issuance of
shares of Common Stock pursuant to exercise of the Private Placement
Warrants requires the approval of the Company's shareholders.
Under the terms of the Securities Purchase Agreement relating to the
Private Placement, if on either the six-month or the one-year anniversary
of the date of closing of the Private Placement (each an "Anniversary
Date"), the average closing bid price of the Common Stock for the 20
trading day period ending on the trading day immediately prior to the
applicable Anniversary Date is less than the closing price ($2.0375) or
the prior Anniversary Price in the event the six-month Anniversary Price
is less than the closing price, respectively, the Company is required to
issue a number of shares of Common Stock within ten days after the
Anniversary Date, equal to the product of (i) (x) the difference between
the closing price (or if the measurement date is the one-year Anniversary
Date, the six-month Anniversary Price if the six-month Anniversary Price
is less than the closing price) and the applicable Anniversary Price,
multiplied by .85, multiplied by (y) the number of shares of Common Stock
purchased by the investors in the Private Placement and not sold or
assigned to non-affiliated third parties, divided by (ii)(x) the
applicable Anniversary Price multiplied by (y) .85. The shares issuable
pursuant to this formula are referred to in this Registration Statement
as the "Fill-Up Shares." Issuance of the Fill-up Shares pursuant to
these provisions requires the approval of the Company's shareholders.
The Company has agreed to seek the necessary shareholder approval
prior to issuance of shares of Fill-Up Shares and common stock issuable
upon exercise of the Private Placement Warrants. As of March 4, 1999, no
Fill-Up Shares have been issued. If Fill-Up Shares had been issued, the
number of Fill-Up Shares which the Comapny would have been required to
issue on March 4, 1999, totaled 11,049,762.
In the event (i) the Common Stock is delisted or suspended from
trading on Nasdaq, (ii) the Fill-Up Shares and shares issuable upon
exercise of the Private Placement Warrants are not issuable or are not
listed with Nasdaq, or (iii) if the Company fails to issue Fill-Up Shares
as required, then the Company shall pay to the initial investors $100,000
for each full 30-day period that the condition continues. As of March 4,
1999, no such required payments had been made.
The Company has agreed to file a registration statement with the
Commission to effect the registration for resale of the Common Stock
issued in the Private Placement and the and pursuant to the Fill-Up
provisions. If the registration statement is not declared effective by
the Commission within 90 days after the closing of the Private Placement,
the Company may be liable to investors for penalty payments for each
month that such registration statement has not been declared effective.
As of March 4, 1999, the registration statement relating to these shares
of Common Stock had not been declared effective and the Company could be
subject to such penalty payments. The Company shall pay to the holders
of the common stock an amount ranging from 1% to 3% of the purchase
price paid for the common shares issued multiplied by: (i) the number of
months (prorated for partial months) after the end of such 90-day period
and prior to the date the Registration Statement is declared effective by
the Commission exclusive of certain delays which are attributable to the
holders, (ii) exclusive of Allowed Delays (as defined), the number of
months (prorated for partial months) that sales cannot be made pursuant
to the Registration Statement after the Registration Statement has been
declared effective and (iii) exclusive of Allowed Delays the number of
months (prorated for partial months) that the Common Stock is not listed
or included for quotation on the Nasdaq, NYSE or AMEX or that trading
thereon is halted after the Registration Statement has been declared
effective.
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 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
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 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.
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.
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 $ 283
Legal and accounting fees and expenses $ 10,500 *
Miscellaneous $ 1,500
===========
TOTAL $ 12,838 *
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 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 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 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.
Exhibit Description of Exhibit
------- ----------------------
3.1 Amended and Restated Articles of Incorporation of the
Company, as amended *
3.2 Amended and Restated By-Laws of the Company *
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. 33-6694-A)) *
5.1 Opinion of Morgan, Lewis & Bockius LLP
23.1 Consent of Morgan, Lewis & Bockius LLP (included in
Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
- --------------------
* 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;
(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; 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 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
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, 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 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, 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.
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-2 and
has duly caused this Post-Effective Amendment No. 1 to the Registration
Statement on Form S-2 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boca Raton, State of Florida,
on this 8th day of March, 1999.
THE PANDA PROJECT, INC.
By: /s/ STANFORD W. CRANE, JR.
-------------------------------
Stanford W. Crane, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form S-2 has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ STANFORD W. CRANE, JR.
- -------------------------
Stanford W. Crane, Jr. Chief Executive Officer, March 8, 1999
President and Director
(Principal Executive
Officer)
/s/ MELISSA F. CRANE
- ------------------------
Melissa F. Crane Acting Chief Financial March 8, 1999
Officer (Principal
Financial and
Accounting Officer)
/s/ CLAUD L. GINGRICH
- -----------------------
Claud L. Gingrich Director March 8, 1999
/s/ RAO R. TUMMALA
- ------------------------
Rao R. Tummala Director March 8, 1999
EXHIBIT INDEX
-------------
Exhibit Description of Exhibit
5.1 -- Opinion of Morgan, Lewis & Bockius LLP
23.1 -- Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.1)
23.2 -- Consent of PricewaterhouseCoopers LLP
Exhibit 5.1
March 9, 1999
The Panda Project, Inc.
951 Broken Sound Parkway, N.W., Suite 200
Boca Raton, Florida 33487
Re: Public Offering of Common Stock
Pursuant to Registration Statement on Form S-2
Ladies and Gentlemen:
We have acted as counsel to The Panda Project, Inc., a Florida
corporation (the "Company"), in connection with a registration on Form S-
2 (the "Registration Statement") to be filed with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended (the "Act"), relating to the sale of up to 1,775,000 shares of
common stock of the Company, par value $.01 per share ("Common Stock"),
all of which will be sold from time to time by the Selling Securityholder
named in the Registration Statement on the over-the-counter market and
directly through broker-dealers.
We have examined the Registration Statement and such corporate records,
documents, statutes and decisions as we have deemed relevant in rendering
this opinion.
Based on the foregoing, it is our opinion that the Common Stock was
validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not thereby admit
that we come within the category of persons whose consent is required
under Section 7 of the Act or the rules or regulations of the SEC
thereunder.
Very truly yours,
Exhibit 23.2
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the
Prospectus constituting part of this Post-Effective Amendment No. 1 to
the Registration Statement on Form S-2 (Registration No. 333-71229) of
The Panda Project, Inc. of our report dated March 10, 1998, appearing of
page F-2 of The Panda Project Inc.'s Transition Report on Form 10-K for
the transition period ended December 31, 1997. We also consent to the
incorporation by reference of our report on the Financial Statement
Schedule, appearing on page F-25 of such Transition Report on Form 10-K.
We also consent to the reference to us under the heading "Experts" in
such Prospectus.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
March 9, 1999
