As filed with the Securities and Exchange Commission on June 10, 1999
Registration No. 333-47595
=====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
POST EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
THE PANDA PROJECT, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0323354
(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 this Registration Statement becomes
effective.
------------------------
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, other than in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for
the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
=====================================================================
Title of
Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Unit (1) Price (1) Fee (2)
- ---------------------------------------------------------------------
Common Stock, 2,150,000 $ 4.66 $10,019,000 $3,005.70
$.01 par value shares (3)
per share
=====================================================================
(1) Estimated solely for the purpose of calculating the registration
fee in accordance with Rule 457(c) and based upon the average of the
high and low prices for the Common Stock on March 4, 1998 reported on
the Nasdaq National Market.
(2) Registration fees were paid with the original filing on Form S-
3, Registration No. 333-47595.
(3) Includes shares of Common Stock which may be offered pursuant to
this Registration Statement consisting of an estimated 2,000,000
shares issuable upon conversion of Series A Convertible preferred
Stock and 150,000 shares issuable upon exercise of Common Stock
Purchase Warrants. In addition to the shares set forth in the table,
the amount to be registered includes an indeterminate number of shares
issuable upon conversion of or in respect of the Series A Convertible
Preferred Stock and Common Stock Purchase Warrants, as such number may
be adjusted as a result of stock splits, stock dividends and anti-
dilution provisions (including floating conversion prices) in
accordance with Rule 416.
Explanatory Note
This Post-Effective Amendment No. 2 to the Registration Statement
on Form S-3 amends the prospectus dated July 17, 1998 filed pursuant
to Rule 424(b) by holders of the Series A Convertible Preferred Stock
and Common Stock Purchase Warrants in connection with offers and sales
of the Common Stock on the OTC Electronic Bulletin Board and in the
over-the-counter market at negotiated prices related to the prevailing
market prices at the time of sale.
---------------------
PROSPECTUS File No. 333-47595
2,150,000 Shares
THE PANDA PROJECT, INC.
Common Stock
----------------------
All of the shares of common stock, par value $.01 per share
("Common Stock"), of The Panda Project, Inc. (the "Company") offered
hereby (the "Shares") are being sold by certain securityholders of the
Company (the "Selling Securityholders"). See "SELLING
SECURITYHOLDERS." The Company will not receive any of the proceeds
from the sale of the Shares by the Selling Securityholders.
The Shares covered by this Prospectus may be sold from time to
time by the Selling Securityholders, or by their pledgees, donees,
transferees or other successors in interest, on the over-the-counter
market, through the writing of options on the Shares, in ordinary
brokerage transactions, in negotiated transactions, or otherwise, at
market prices prevailing at the time of sale or at negotiated prices.
See "PLAN OF DISTRIBUTION."
The Selling Securityholders and intermediaries through whom the
Shares are sold may be deemed "underwriters" within the meaning of
Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Shares offered, and any profits realized or commissions
received may be deemed underwriting compensation. The Company and the
Selling Securityholders have agreed to certain indemnification
arrangements with respect to the offering. See "PLAN OF
DISTRIBUTION."
The Common Stock is traded on the OTC Electronic Bulletin Board
under the symbol "PNDA." On June 7, 1999, the closing bid price of
the Common Stock on the OTC Electronic Bulletin Board was $0.168 per
share.
The shares of Common Stock offered hereby represent approximately
10.2% of the total number of shares outstanding at June 7, 1999.
Sales of all or part of the Shares offered hereby could have a
negative impact on the market price of the Common Stock and adversely
affect the ability of the Company to raise capital through the sale of
its equity securities. See "RISK FACTORS -- Negative Effect of Future
Sales of Stock on Market Prices and Ability to Raise Capital" and
"PLAN OF DISTRIBUTION."
The Company will pay all the expenses, estimated to be $25,000,
in connection with this offering, other than selling expenses and
underwriting discounts, if applicable.
----------------------
The Common Stock offered hereby involves a high degree of risk.
See "RISK FACTORS" beginning on page 2.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
The date of this Prospectus is June 10, 1999.
TABLE OF CONTENTS
Page
----
Available Information .............................................. 1
Incorporation of Certain Documents by Reference .................... 2
Recent Developments ................................................ 2
Risk Factors........................................................ 3
Year 2000 Issues ...................................................11
Use of Proceeds ....................................................12
Selling Securityholders ............................................12
Plan of Distribution ...............................................14
Description of Capital Stock .......................................15
Experts ............................................................18
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. Further information on the Commission's Public
Reference Room in Washington, D.C. can be obtained by calling the
Commission at 800-SEC-0330. The Common Stock of the Company is traded
on the OTC Electronic Bulletin Board.
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. 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998;
(2) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999;
(3) The Company's Definitive Proxy Statement on Schedule 14A
as filed with the Commission on April 20, 1998;
(4) The Company's Current Report on Form 8-K filed May 18,
1999;
(5) 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; and
(6) All other reports filed by the Registrant pursuant to
Section 13(a) and 15(d) of the Exchange Act since the end of fiscal
year 1997.
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., 951 Broken Sound Parkway, Boca Raton, Florida 33487,
Attention: Chief Financial Officer, (561) 994-2300.
RECENT DEVELOPMENTS
On May 14, 1999, the Company has entered into an agreement with
Silicon Bandwidth, Inc., ("SBI") to sell its intellectual property
portfolio as well as the fixed assets related to its interconnect and
semiconductor business (the "Acquisition"). As consideration for
assets being transferred to SBI, the Company will receive a 10% equity
interest in SBI (the "SBI Interest"). As part of the sale, the
Company has restructured its outstanding loans with Helix PEI
("Helix") that have been in default since February 15, 1999. SBI will
assume such Helix loans upon closing. Additionally, the Company has
entered into an agreement with the Convertible Preferred A Holders for
conversion of the outstanding preferred shares into common shares at a
fixed price of $.261. The restructuring of both agreements is
contingent upon the closing of the Acquisition. The transaction is
subject to customary closing conditions, including the approval of the
Company's shareholders. Helix and the Convertible Preferred A holders
have entered into a Voting Agreement with SBI and such holders own
sufficient shares to assure the approval of the transaction by the
Company's shareholders. Upon Closing of the Acquisition, the assets
of the Company will consist primarily of the SBI Interest.
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 Joseph A. Sarubbi entered
into a settlement agreement (the "Settlement Agreement") relating to
litigation in which Mr. 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 Mr. 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 which have been delivered
to Mr. Sarubbi. The Company will register those shares for Mr.
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
has been recorded as a charge against Company earnings for the quarter
ended December 31, 1998.
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.
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.
RISK OF NON-COMPLETION OF THE ACQUISITION. The Acquisition may
not take place if the Company's shareholders do not approve it. There
is no guarantee that such approval will occur, or that the Acquisition
will occur in the timeframe contemplated, if at all.
INVESTMENT RISK. Upon closing of the Acquisition, the assets of
the Company will consist primarily of its SBI Interest. SBI has no
operating history upon which an evaluation of its prospects can be
made.
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. The Company has a limited number of customers in the
prototype, preproduction and early production stage.
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 and
Technology Products, 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
semiconductor packages and connectors can be sold, as to which there
can be no assurance. Since inception (April 8, 1992), the Company has
incurred significant net losses, including losses of $1,800,340,
$6,931,346, $23,894,426, $20,874,101, $8,949,652 and $17,474,696
during the fiscal years ended March 31, 1994, 1995, 1996, 1997 and the
nine months ended December 31, 1997 and the year ended December 31,
1998, respectively, resulting in an accumulated deficit of $80,340,249
as of December 31, 1998. Inasmuch as the Company expects to continue
to incur substantial operating expenses 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. The Company received a going concern opinion
as discussed in Note B of Notes to Financial Statements contained in
its Form 10-K for the year ended December 31, 1998.
SIGNIFICANT CAPITAL REQUIREMENTS; NEED FOR ADDITIONAL FINANCING.
The Company's capital requirements in connection with its operations
and development activities have been significant. 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 7, 1999, the Company raised capital of
approximately $76.3 million (after deduction of underwriting
discounts, commissions and other selling costs) through the sale of
Common Stock, Series A-3 Convertible Preferred Stock ("Series A
Preferred"), warrants and subordinated debentures and from the
exercise of stock options and warrants.
The Company requires substantial working capital to fund its
business. The Company has had significant operating losses and
negative cash flow from operations since inception and expects to
continue to do so for the foreseeable future. It has depended upon
proceeds of sales of its securities to fund its operations since its
inception. The Company's capital requirements depend on several
factors, including the rate of market acceptance of its products, the
ability to expand its client base, the growth of sales and marketing,
and other factors. If capital requirements vary materially from those
currently planned, the Company 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 favorable terms or it may not be available at all. The Company may
be unable to develop or enhance its products, take advantage of future
opportunities or respond to competitive pressures without additional
funding. These limitations placed on the Company due to its inability
to secure additional funding could have a material adverse affect on
the Company's business, financial condition and operating results.
The Company's current working capital is insufficient to operate the
Company. The Company is currently seeking additional financing;
however, in the event that the Company cannot obtain additional
financing, it will be forced to cease operations.
The Company has issued 600 shares of Section A Preferred for an
aggregate purchase price of $6,000,000. The terms of the Series A
Preferred, as amended, provide that upon the occurrence of certain
"Triggering Events", including suspension of sales under the
Registration Statement relating to shares issuable upon conversion of
Series A Preferred, 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
(collectively, "NASDAQ"), 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. Certain Triggering Events have occurred and have not been
remedied as of the date hereof. In addition, if the Company is unable
to issue shares of Common Stock upon conversion of Series A Preferred
for any reason, including because the Company (i) does not have a
sufficient number of shares of Common Stock authorized and available,
(ii) is otherwise prohibited by applicable law, rules or regulations,
including without limitation NASDAQ Rule 4460 (which prohibits the
issuance at less than market value of a number of shares which equals
or exceeds 20% of a company's outstanding securities without
shareholder approval) (the "Exchange Cap"), or (iii) fails to have a
sufficient number of shares of Common Stock registered for resale
under a registration statement, the rate of dividend on the Series A
Preferred, shall be permanently increased by 2% commencing on the
first day of each of the second and third such 30-day periods (or part
thereof); and an additional 1% on the first day of each consecutive
30-day period (or part thereof) thereafter until such securities have
been duly converted or redeemed; provided that in no event shall the
rate of dividend exceed the lower of 20% and the highest rate
permitted by applicable law. The Company agreed to use its best
efforts to obtain shareholder approval prior to October 31, 1998 of
issuance of shares of Common Stock in excess of the Exchange Cap;
however, this NASDAQ rule is no longer relevant due to the Company's
delisting from NASDAQ.
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.
In August 1998, the Company completed a private placement of
2,254,601 shares of its Common Stock for aggregate gross proceeds of
$3.625 million (the "Private Placement"). 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. The Private Placement Warrants expire on August
13, 2003. Issuance of shares of Common Stock pursuant to exercise of
the Private Placement Warrants is subject to approval of the Company's
shareholders. Under the terms of the Securities Purchase Agreement
relating to the Private Placement, in the event of certain decreases
in the price of the Company's Common Stock from the date of closing of
the Private Placement to the six-month and/or one-year anniversary
dates of such closing, the Company will also be required to issue
certain additional shares of common Stock to the investors (the "Fill-
Up Shares").
In the event (i) the common Stock is delisted or suspended from
trading on NASDAQ, (ii) the Fill-Up Share of shares of Common Stock
issuable pursuant to the exercise of the Private Placement Warrants
are not issuable or are not listed with NASDAQ, or (iii) the Company
fails to issue the Fill-Up Shares as required, the Company shall pay
to the investors in the Private Placement $100,000 for each full 30-
day period that the condition continues. Although such events have
occurred, the Company has not made any payments to date under this
provision.
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 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 end users as
to the distinctive characteristics and anticipated benefits of the
Company's proposed products and technologies. Accordingly, due to
their commitment to their own products, such entities may be inhibited
from doing business with the Company. In addition, many end users may
be reluctant to use or sell the Company's products and technologies
until a sufficient number of other end users have already committed to
do so. The Company has hired sales and marketing personnel for its
VSPA semiconductor package and Compass Connector. The Company's
ability to generate revenue from the sale of the VSPA semiconductor
packages or Compass Connectors will be dependent upon, among other
things, its ability to effectively use the internal sales force to
market its products. There can be no assurance that the Company's
marketing efforts will be successful.
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.
COMPETITION; TECHNOLOGICAL OBSOLESCENCE. The markets that the
Company intends to enter are characterized by intense competition.
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
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.
DEPENDENCE ON MANUFACTURERS AND SUPPLIERS; LACK OF MANUFACTURING
EXPERIENCE AND CAPABILITY. Although the Company has developed the
ability to manufacture the VSPA semiconductor package and has made
arrangements with third-party manufacturers to produce certain
versions of the VSPA semiconductor package, there can be no assurance
that sufficient quantities of VSPA will be able to be produced to meet
demand. In the event the Company's current sources are unable to
produce VSPA in sufficient 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 an arrangement with LG Cable & Machinery Ltd. to
supply the Compass V Connector. 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 customer demand.
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. 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.
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 28, 1999, the Company had obtained 19 United States patents and an
aggregate of 43 foreign patents. In addition, the Company had pending
a total of 17 United States and 30 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.
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.
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 line of 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.
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
Company has not yet filed an answer to the complaint and the outcome
is both immeasurable and undeterminable. There can be no assurance
that the Company will be successful in defending this litigation.
On December 11, 1998, the Company and Joseph A. Sarubbi entered
into a settlement agreement (the "Settlement Agreement") relating to
litigation in which Mr. 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 Mr. 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 which have been delivered
to Mr. Sarubbi. The Company will register those shares for Mr.
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 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, or to obtain accurate quotations as to the
price of, the Company's securities.
As a result of the Company's delisting on the Nasdaq National
Market, trading in the Company's Common Stock is subject to rules
under the Exchange Act which 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 regulations 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 Company's
Common Stock, which could severely limit the market liquidity of the
Common Stock and the ability of purchasers in this offering to sell
the Company's Common Stock in the secondary market.
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.
NEGATIVE EFFECT OF FUTURE SALES OF STOCK ON MARKET PRICE AND
ABILITY TO RAISE CAPITAL. Future sales of substantial amounts of
Common Stock, including the Shares offered hereby, or the perception
that such sales could occur, could have a negative impact on the
market price on the Common Stock and adversely affect the ability of
the Company to raise capital through the sale of its equity
securities. Virtually all of the outstanding Common Stock, including
the Shares offered hereby, 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 Shares offered
hereby represent approximately 10.2% of the total number of shares of
Common Stock outstanding at December 31, 1998. See "PLAN OF
DISTRIBUTION."
POTENTIAL FOR DILUTION; REGISTRATION RIGHTS; OUTSTANDING OPTIONS
AND WARRANTS. As of June 7, 1999, the Company had issued 3,650,214
shares of Common Stock upon conversion of 246 shares of the Series A-3
Convertible Preferred Stock ("Series A Preferred"); 384 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 have
not been remedied as of the date hereof. The Company has entered into
an agreement with the holders of the Series A Preferred whereby such
holders have agreed to waive all amounts owed due to the occurrence of
previous Triggering Events.
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 February 3,
1999, the registration statement relating to these shares of Common
Stock has not been declared effective and the Company could be subject
to such penalty payments. The Company also agreed that in the event
of decreases in the average closing bid price of the Common Stock for
the twenty 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. 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 agreed to
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.
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 aforementioned
securities may also adversely affect 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.
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 June 7, 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. SBI will assume the
Company's obligations under these loans upon closing of the
Acquisition. 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 March 31, 1999. This accounting
treatment has no impact on the Company's cash balance.
ANTI-TAKEOVER 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.
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 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."
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.
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,
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.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Shares by the Selling Securityholders.
SELLING SECURITYHOLDERS
All of the shares of Common Stock of the Company offered hereby
are being sold by the Selling Securityholders named below. The
Company will receive none of the proceeds from the sale of shares
offered hereby. To the best knowledge of the Company, none of the
Selling Securityholders 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 7, 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 (i) an estimated number of shares not to exceed 293,328 shares
issuable upon conversion of an aggregate of 600 shares of Series A
Preferred sold in a private placement completed on February 11, 1998
(this number excludes an aggregate of 1,999,776 shares that had been
sold pursuant to the Prospectus prior to October 30, 1998), and (ii)
150,000 shares issuable upon the exercise of Common Stock Purchase
Warrants (the "Warrants") granted by the Company in connection with
such private placement. The Warrants are exercisable during the
period beginning February 11, 1998 and ending February 11, 2003 at an
exercise price of $3.50 per share.
Shares Shares
Owned Shares Owned
Selling Prior to Offered After
Securityholders (1) Offering Hereby Offering
AGR Halifax Fund, Ltd. (2)(3)(4) 694,215 234,092 460,123
Leonardo, L.P. (2)(3)(5) 403,139 96,391 306,748
GAM Arbitrage Investments,
Inc. (2)(3)(5) 10,328 10,328 --
AG Super Fund International
Partners, L.P. (2)(3)(5) 10,328 10,328 --
Raphael, L.P. (2)(3)(5) 82,005 20,655 61,350
Ramius Fund, Ltd. (2)(3)(4) 126,450 34,425 92,025
Pine Street Asset Management,
L.P. (2)(3) 6,885 6,885 --
Samuel R. Shipley (2)(7) 24,500 7,500 17,000
Kevin J. Raidy (2)(7) 41,500 7,500 34,000
Bradley J. Ackerman (2)(7) 56,000 15,000 41,000
- --------------------
(1) The persons named in this table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them, except as indicated in the other footnotes
to this table. Beneficial ownership is determined in accordance with
the rules of the United States Securities and Exchange Commission.
Assuming the sale of shares offered hereby, AGR Halifax Fund, Ltd. and
Leonardo, L.P. will own 2.2% and 1.4%, respectively, of the Company's
Common Stock. All other Selling Securityholders will own less than 1%
of the Company's Common Stock.
(2) The number of shares set forth in the table represents an
estimate of the number of shares of Common Stock to be offered by the
Selling Securityholders. The actual number of shares of Common Stock
issuable upon conversion of Series A Preferred is indeterminate, is
subject to adjustment and could be materially less or more than such
estimated number depending on factors which cannot be predicted by the
Company at this time, including, among other factors, the future
market price of the Common Stock. To the extent the average closing
bid price of the Company's Common Stock for the five days preceding
conversion of Series A Preferred exceeds $2.73 per share, the number
of shares of Common Stock offered hereby will be less than the amount
shown. The closing bid price for the Company's Common Stock on June
7, 1999 was $0.168 per share. The actual number of shares of Common
Stock offered hereby and included in the Registration Statement,
includes such additional number of shares of Common Stock as may be
issued or issuable upon conversion of the Series A Preferred or upon
exercise of the Warrants by reason of, in the case of the Series A
Preferred, the floating conversion price mechanisms applicable to the
Series A Preferred, or, in the case of Series A Preferred and the
Warrants, by reason of any stock split, stock dividend or similar
transaction involving the Common Stock, in order to prevent dilution,
in accordance with Rule 416 under the Securities Act.
(3) The number of shares shown includes the following number of
shares of Common Stock issuable upon exercise of Warrants: AGR
Halifax Fund, Ltd., 68,000; Leonardo, L.P., 28,000 shares; GAM
Arbitrage Investments, Inc., 3,000 shares; AG Super Fund International
Partners, L.P., 3,000 shares; Raphael, L.P., 6,000 shares; Ramius
Fund, Ltd., 10,000 shares; and Pine Street Asset Management, L.P.,
2,000 shares. The remainder of the shares offered excludes 1,999,776
shares of Common Stock previously issued upon conversion of Series A
Preferred and sold by the Selling Securityholders pursuant to the
Prospectus.
(4) AG Ramius Partners, LLC ("AG Ramius"), a registered investment
advisor, acts pursuant to contract as discretionary investment advisor
for AGR Halifax Fund, Ltd. and Ramius Fund, Ltd., holding voting and
dispositive powers with respect to securities acquired for their
accounts. In such capacity, AG Ramius may be considered a beneficial
owner of shares of Common Stock that such Selling Securityholders own
or have the right to acquire.
(5) Angelo, Gordon & Co., LP ("Angelo Gordon"), a registered
investment advisor that is one of the members of AG Ramius, or its
affiliates, manages the accounts of Leonardo, L.P., GAM Arbitrage
Investments, Inc., Raphael, L.P. and AG Super Fund, Ltd. on a
discretionary basis. In such capacity, Angelo Gordon may be
considered a beneficial owner of shares of Common Stock that such
Selling Securityholders own or have the right to acquire.
(6) Shares offered consist of shares of Common Stock issuable upon
exercise of Warrants. Shares owned does not include an aggregate of
43,252 shares of Common Stock owned by Shipley Raidy Capital Partners,
LP, which such persons may be deemed to own beneficially by virtue of
their positions with Shipley Raidy Capital Partners, LP.
The Selling Securityholders identified above may have sold,
transferred or otherwise disposed of, in transactions exempt from the
registration requirements of the Securities Act, all or a portion of
Common Stock since the date on which the information in the preceding
table is presented. Information concerning the Selling
Securityholders may change from time to time and any such changed
information will be set forth in supplements to this prospectus if and
when necessary. Because the Selling Securityholders may offer all or
some of the Common Stock that they hold pursuant to the offering
contemplated by this prospectus, no estimate can be given as to the
amount of the Common Stock that will be held by the Selling
Securityholders upon the termination of this offering. See "PLAN OF
DISTRIBUTION."
PLAN OF DISTRIBUTION
The Shares may be offered for sale from time to time by the
Selling Securityholders, or by their pledgees, donees, transferees or
other successors in interest, 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 Selling
Securityholders, or their pledgees, donees, transferees or other
successors in interest, 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, or their pledgees, donees, transferees or
other successors in interest, 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 pledgees, donees,
transferees or other successors in interest, 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 Selling Securityholders and any other persons participating
in the sale or distribution of the Shares will be subject to
applicable provisions of the Exchange Act and the rules and
regulations thereunder, which provisions may limit the timing of
purchases and sales of any of the Shares by the Selling
Securityholders or any other such person. The foregoing may affect
the marketability of the Shares.
The Company has agreed to indemnify the Selling Securityholders,
or their transferees or assignees, against certain liabilities,
including liabilities under the Securities Act, or to contribute to
payments the Selling Securityholders or their prospective pledgees,
donees, transferees or other successors in interest, may be required
to make in respect thereof.
The public offering of the Shares by the Selling Securityholders
will terminate on the earlier of (a) five years from the date of this
Prospectus (subject to extension in the event dispositions of Shares
under the Registration Statement of which this Prospectus is a part
are suspended by the Company as permitted under the Registration
Rights Agreement), 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
$20,000. The Company will not pay for, among other expenses, selling
expenses or underwriting discounts, if applicable.
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 7, 1999, there were 21,154,910 shares of Common Stock
outstanding and held of record by 278 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.
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 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 OTC Electronic Bulletin Board, 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. The Company has entered into an agreement with the
holders of the Series A Preferred whereby such holders have agreed to
waive all amounts owed due to the occurrence of previous Triggering
Events.
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 twenty-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 May
24, 1999, no Fill-Up Shares have 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 June 7, 1999 totaled 13,622,762.
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. A portion of this liability has been waived in an
agreement by and between the Company and the holders of the Series A
Preferred whereby such holders have agreed to waive all amounts due
for failure to issue the Fill-Up Shares.
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 June 7, 1999, the registration statement relating to
these shares of Common Stock has 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
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 Annual Report on Form 10-K of The Panda Project, Inc.
for the year ended December 31, 1998 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 B of the financial statements) of Grant
Thornton LLP for the year ended December 31, 1998, and 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) as of December 31, 1997 and for
the nine-month period ended December 31, 1997 and for the year ended
March 31, 1997 of PricewaterhouseCoopers LLP. Such financial
statements are incorporated herein by reference in reliance upon such
reports given upon the authority of such firms as experts in
accounting and auditing.
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 . . . . . . . . . .$ 3,006
Legal and accounting fees and expenses . 20,000 *
Miscellaneous . . . . . . . . . . . . . 1,994 *
============
TOTAL $ 25,000 * Estimated
Item 15. Indemnification of Directors and Officers. Florida
Business Corporation Act.
Section 607.0850(1) of the Florida Business Corporation Act (the
"FBCA") provides that a Florida corporation, such as the Registrant,
shall have the power to indemnify any person who is or was a party to
any proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against liability incurred in connection with such
proceeding, including any appeal thereof, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation and, with respect to any
criminal action of proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 607.0850(2) of the FBCA provides that a Florida
corporation shall have the power to indemnify any person who is or was
a party to any proceeding by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or
was a director, officer, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses and amounts paid in
settlement not exceeding, in the judgment of the board of directors,
the estimated expense of litigating the proceeding to conclusion,
actually and reasonably incurred in connection with the defense or
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.
See the Exhibit Index included immediately preceding the Exhibits
to this Registration Statement, which is incorporated herein by
reference.
Item 17. Undertakings.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "Securities
Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information
set forth in this Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in
this Registration Statement; provided, however, that paragraphs (1)(i)
and (1)(ii) do not apply if the information required to be included in
a post- effective amendment by those paragraphs is contained in
periodic reports filed by the Company pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") that are incorporated by reference in this
Registration Statement.
(2) That, for the purposes of determining any liability under
the Securities Act, each post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
The Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
Company pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and
(2) For purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3
and has duly caused this Post-Effective Amendment No. 2 to the
Registration Statement on Form S-3 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 June, 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 Post-Effective Amendment No. 2 to the Registration
Statement on Form S-3 has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Stanford W. Crane, Jr. Chief Executive June 8, 1999
- -------------------------- Officer, President
Stanford W. Crane, Jr. and Director
(Principal Executive
Officer)
/s/ Melissa F. Crane Acting Chief June 8, 1999
- -------------------------- Financial Officer
Melissa F. Crane (Principal Financial
and Accounting
Officer)
/s/ William Ahearn Director June 8, 1999
- --------------------------
William Ahearn
EXHIBIT INDEX
-------------
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 *
3.3 -- Fourth Articles of Amendment of Amended Restated
Articles of Incorporation (filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K filed
February 23, 1998) *
3.4 -- Fifth Articles of Amendment of Amended Restated
Articles of Incorporation (filed as Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q filed
May 20, 1998) *
3.5 -- Sixth Articles of Amendment of Amended Restated
Articles of Incorporation (filed as Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q/A filed
July 2, 1998) *
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 Holland & Knight LLP *
23.1 -- Consent of Holland & Knight LLP (included in Exhibit
5.1) *
23.2 -- Consent of Grant Thornton LLP
23.3 -- Consent of PricewaterhouseCoopers LLP
- -------------------
* Incorporated herein by reference.
Exhibit 23.2
Consent of Independent Certified Public Accountants
We have issued our reports dated March 18, 1999, accompanying the
consolidated financial statements and schedule included in the Annual
Report of The Panda Project, Inc. on Form 10-K for the year ended
December 31, 1998. We hereby consent to the incorporation by
reference of said reports in the Registration Statement of The Panda
Project, Inc. on Form S-3 (File No. 333-47595, effective July 1,
1998).
Grant Thornton LLP
Weston, Florida
June 4, 1999
Exhibit 23.3
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. 2 to
the Registration Statement on Form S-3 (No. 333-47595) of our report
dated March 10, 1998 which relates to the financial statements of The
Panda Project, Inc. as of December 31, 1997 and for the nine-month
period ended December 31, 1997 and for the year ended March 31, 1997,
appearing on page F-3 of The Panda Project, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1998. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
June 9, 1999
