As filed with the Securities and Exchange Commission on January 26, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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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)
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Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box. [x]
If the registrant elects to deliver its latest annual report to
securityholders, or a complete and legal facsimile thereof, pursuant to
item 11(a)(1) of this Form, check the following box. [x]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box. [ ]
CALCULATION OF REGISTRATION FEE
Proposed
Title of Maximum
Each Class Amount Proposed Aggregate
of Securities to be Maximum Offering Amount of
to be Registered Offering Price(1) Registration
Common Stock,
par value $.01 1,750,000
per share shares $0.531 $929,250 $278.76
(1) Estimated solely for the purpose of calculating the registration fee
in accordance with Rule 457(c) under the Securities Act of 1933
based on the average of the high and low bid prices reported on the
OTC Electronic Bulletin Board on January 22, 1999.
---------------------------
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
PROSPECTUS
1,750,000 Shares
THE PANDA PROJECT, INC.
Common Stock
-----------------------
This prospectus will offer 1,750,000 shares of common stock of The
Panda Project, Inc., proposed to be sold from time to time by Joseph A.
Sarubbi pursuant to a settlement agreement. The Company does not expect
to receive any of the proceeds from the sale of the common stock by the
Selling Securityholder.
The Selling Securityholder may offer his Panda Project common stock
through public or private transactions at prevailing market prices.
Panda Project common stock is listed on the OTC Electronic Bulletin
Board with the ticker symbol: "PNDA." On January 22, 1999, the closing
price of one share of Panda Project common stock on the OTC Electronic
Bulletin Board was $0.531.
The common stock offered under this prospectus represents
approximately 9.5% of the total number of shares of Common Stock
outstanding on January 22, 1999. The sale of this common stock could
have a negative impact on the market price of the Common Stock and
adversely affect the ability of the Company to raise capital through the
sale of its equity securities. See "RISK FACTORS - Negative Effect of
Future Sales of Stock on Market Prices and Ability to Raise Capital" and
"PLAN OF DISTRIBUTION" on pages 6 and 12.
The common stock offered under this prospectus has not been
registered under the blue sky or securities laws of any jurisdiction,
and any broker or dealer should assure the existence of an exemption
from registration or ensure such registration in connection with the
offer and sale of the common stock.
The Company will pay all the expenses, estimated to be $11,778, in
connection with this offering, other than selling expenses and counsel
fees and expenses incurred by the Selling Securityholder, if applicable.
-----------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 2.
-----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------
The date of this prospectus is January 26, 1999.
TABLE OF CONTENTS
Page
Where You Can Find More Information 1
Incorporation of Certain Documents by Reference 2
Risk Factors 2
Year 2000 Issues 8
Recent Developments 8
Use of Proceeds 9
Settlement 9
Selling Securityholder 10
Plan of Distribution 10
Description of Capital Stock 10
Experts 14
WHERE YOU CAN FIND MORE 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"). In accordance with the Exchange Act, the
Company files reports and other information with the Securities and
Exchange Commission (the "Commission"). The Common Stock of the Company
is traded on the OTC Electronic Bulletin Board.
The Company has filed with the Commission a Registration Statement
on Form S-2 that registers Company common stock (together with all
amendments and exhibits, referred to as the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act").
This prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, as
certain items are omitted in accordance with the rules and regulations
of the Commission.
In addition, the Company files reports, proxy statements and other
information with the Commission under the Exchange Act. You may read
and copy this information at the following location of the Commission:
Public Reference Room
450 Fifth Street, N.W.
Washington, D.C. 20549
You may also obtain copies of the information by mail from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, at prescribed rates. Further information
on the operation of the Commission's Public Reference Room in
Washington, D.C. can be obtained by calling the Commission at
800-SEC-0330.
The Commission also maintains an Internet world wide web site that
contains reports, proxy statements and other information about issuers,
like the Company, who file electronically with the Commission. The
address of that site is http://www.sec.gov.
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. If such other information or
representations are given or made, they must not be relied upon as
having been authorized by the Company. Neither the delivery of this
prospectus nor any sale made under this prospectus shall, under any
circumstances, create any implication that there has been no change in
the affairs of the Company since the date of this prospectus or that the
information contained in this prospectus 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 this prospectus 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.
The Company maintains a World Wide Web site at
www.pandaproject.com. Information contained in the Company's World Wide
Web site shall not be deemed to be part of this prospectus.
THIS PROSPECTUS IS ACCOMPANIED BY A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997, THE COMPANY'S
MOST RECENT QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1998 (THE "PANDA 10-Q") AND THE COMPANY'S AMENDMENT TO THE
PANDA 10-Q.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows the Company to "incorporate by reference"
information in this prospectus, which means that the Company can
disclose important information to you by referring you to another
document filed separately with the Commission. The information
incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information in this prospectus.
This prospectus incorporates by reference the documents listed below
that the Company has previously filed with the Commission. These
documents contain important information about the Company and its
finances.
Company Filings Period or Date Filed
- --------------------------------- ------------------------------
Transition Report on Form 10-K For the transition period from
April 1, 1997 through December 31,
1997
Quarterly Reports on Form 10-Q, Quarter ended September 30, 1998,
as amended June 30, 1998 and March 31, 1998
Definitive Proxy Statement on Filed with the Commission on
Schedule 14A September 17, 1998
Current Reports on Form 8-K Filed January 6, 1999, December
23, 1998 and December 15, 1998
Registration Statement on Form 8-A Filed May 5, 1994, registering the
Common Stock under Section 12(g)
of the Exchange Act
The Company also incorporates by reference additional documents
that it may file with the Commission. These documents include periodic
reports, like Annual Reports on Form 10-K, Quarterly Reports on Form 10-
Q, Current Reports on Form 8-K, proxy statements and other filings.
Later information filed with the Commission updates and supersedes this
prospectus.
The Company will provide without charge to each person to whom this
prospectus is delivered, upon written or oral request of such person, a
copy of any or all of the documents incorporated by reference into this
prospectus (without exhibits to such documents other than exhibits
specifically incorporated by reference into such documents). You can
obtain documents incorporated by reference in this Registration
Statement by requesting them in writing or by telephone from the Company
at the following address: The Panda Project, Inc., 951 Broken Sound
Parkway, Boca Raton, Florida 33487, Attention: Chief Financial Officer,
(561) 994-2300.
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY
CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER
INFORMATION IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO INVEST IN
SHARES OF OUR COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY
OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD BE
MATERIALLY ADVERSELY AFFECTED. THIS COULD CAUSE THE TRADING PRICE OF
OUR COMMON STOCK TO DECLINE, AND YOU MAY LOSE PART OR ALL OF YOUR
INVESTMENT.
THIS PROSPECTUS ALSO CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. THESE STATEMENTS RELATE TO OUR
FUTURE PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. THESE STATEMENTS
MAY BE IDENTIFIED BY THE USE OF WORDS SUCH AS "EXPECTS," "ANTICIPATES,"
"INTENDS," "PLANS" AND SIMILAR EXPRESSIONS. OUR ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE DISCUSSED IN THESE STATEMENTS. FACTORS
THAT COULD CONTRIBUTE TO THESE DIFFERENCES INCLUDE THOSE DISCUSSED BELOW
AND ELSEWHERE IN THIS PROSPECTUS.
HISTORY OF LOSSES AND EXPECTATION OF FUTURE LOSSES. We are a
development stage company with limited operating revenue. We have
incurred losses in each year since our inception in 1992. As of
September 30, 1998, we had an accumulated deficit of approximately $74
million. We expect to continue to experience substantial losses for the
next few years until the Company is able to generate sufficient revenues
to support its operations. We are unable to predict the extent of any
future losses or the time required to achieve profitability.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING. We
require substantial working capital to fund our business. We have had
significant operating losses and negative cash flow from operations
since inception and expect to continue to do so for the foreseeable
future. We have depended upon proceeds of sales of our securities to
fund our operations since our inception. Our capital requirements
depend on several factors, including the rate of market acceptance of
our products, the ability to expand our client base, the growth of sales
and marketing, and other factors. If capital requirements vary
materially from those currently planned, we may require additional
financing sooner than anticipated. If additional funds are raised
through the issuance of equity securities, the percentage ownership of
the shareholders of the Company will be reduced, shareholders may
experience additional dilution, or such equity securities may have
rights, preferences or privileges senior to those of the holders of the
Common Stock. Additional financing for the Company may not be available
when needed on terms favorable to us or it may not be available at all.
We may be unable to develop or enhance our products, take advantage of
future opportunities or respond to competitive pressures without
additional funding. These limitations placed on the Company due to its
inability to secure additional funding could materially adversely affect
the Company's business, financial condition and operating results.
UNCERTAINTY OF MARKET ACCEPTANCE. The products and technologies
currently being sold or developed by the Company utilize newly developed
designs. We believe that our existing and proposed technology and
products represent significant advancements in semiconductor packaging
technology. Demand for the Company's existing and proposed products,
however, is subject to a high degree of uncertainty. Such high degrees
of uncertainty are typical in the case of newly developed products.
Achieving marketing acceptance for the Company's technology and existing
and proposed products will require substantial marketing efforts and
expenditure of significant funds to educate potential purchasers as to
the distinctive characteristics and anticipated benefits of the
Company's proposed products and technologies. Potential purchasers may
be inhibited from doing business with the Company due to their
commitment to their existing products. In addition, many potential
purchasers may be reluctant to use the Company's products and
technologies until a sufficient number of other potential purchasers
have already committed to do so. The Company has hired sales and
marketing personnel for its VSPA semiconductor package and Compass
Connector. The Company's marketing efforts may not be successful. If
we are unable to market our products successfully, our business,
financial condition and operating results will be materially adversely
affected.
UNCERTAINTY OF PRODUCT AND TECHNOLOGY DEVELOPMENT; TECHNOLOGICAL
FACTORS; DEPENDENCE ON THIRD-PARTY PRODUCT DESIGN CHANGES. The
Company's success will depend in part upon its products and technology
meeting acceptable cost and performance criteria, and upon timely
introduction of our products and technology into the marketplace. There
can be no assurance (1) that the Company's products and technology will
satisfactorily perform the functions for which they are designed, (2)
that they will meet applicable price or performance objectives or (3)
that unanticipated technical or other problems will not occur which
would result in increased costs or material delays in their development
or commercialization. In addition, technology as complex as that which
will be incorporated into the Company s proposed products may contain
errors which become apparent subsequent to widespread commercial use.
Remedying such errors could delay the Company s plans and cause it to
incur additional costs which would have a material adverse effect on the
Company.
COMPETITION. The Company operates in markets that are subject to
intense competitive pressures that could affect prices or demand for the
Company s products and services. The effect of competition on prices
and demand may result in reduced profit margins and/or loss of market
opportunity. Certain competitors of the Company dominate their
industries and have the financial resources to enable them to withstand
substantial price competition or downturns in the market for
semiconductor packages, related technologies and/or computers. The
Company faces the possibility (1) that we will not be able to compete
successfully, (2) that our competitors or future competitors will
develop technologies or products that render the Company s products and
technology obsolete or less marketable or (3) that we will not be able
to successfully enhance its products or technology or adapt them
satisfactorily.
DEPENDENCE ON MANUFACTURERS AND SUPPLIERS; LACK OF MANUFACTURING
EXPERIENCE AND CAPABILITY. The Company has developed the ability to
manufacture the VSPA semiconductor package. We have also made
arrangements with third-party manufacturers to produce certain versions
of the VSPA semiconductor package. Despite these existing production
arrangements, the Company may not be able to produce sufficient
quantities of VSPA to meet demand. Any inability to meet the demand for
its products would have a material adverse effect on the Company s
business, financial conditions and operating results.
The Company has an arrangement with LG Cable & Machinery Ltd. to
supply the Compass V Connector. The Company anticipates that it will be
able to obtain Compass V Connectors from LG Cable & Machinery Ltd. under
this arrangement. If the supply of such component is not delivered in
quantities sufficient to meet the customer demand, our business,
financial condition and operating results will be materially adversely
affected.
DEPENDENCE ON KEY PERSONNEL. Because of the specialized technical
nature of our business, we are highly dependent upon qualified
scientific, technical and managerial personnel. The competition for
qualified personnel in the technology field is intense. We may not be
able to attract and retain the qualified personnel necessary for the
development of our business. The loss of the services of existing
personnel, as well as the failure to recruit additional key scientific,
technical and managerial personnel in a timely manner, would be
detrimental to our research and development programs and to our
business. We maintain key man life insurance on Mr. Crane s life in
the amount of $2,000,000. The Company may not be able to continue to
hire additional qualified personnel or retain such necessary personnel.
The failure to attract and retain the necessary personnel could
materially adversely affect our business, financial condition and
operating results.
INTELLECTUAL PROPERTY. Trademarks, patents, copyrights, trade
secrets and other intellectual property are critical to our success, and
we rely on trademark, trade secret protection and confidentiality and/or
license agreements with our employees, clients, partners and others to
protect our proprietary rights. We seek to protect our proprietary
position by, among other methods, filing United States and foreign
patent applications related to our proprietary technology, inventions
and improvements that are important to the development of our business.
Proprietary rights relating to our technologies will be protected from
unauthorized use by third parties only to the extent that they are
covered by valid and enforceable patents or copyrights or are
effectively maintained as trade secrets. As of December 31, 1998, the
Company had obtained 18 United States patents and an aggregate of 39
foreign patents. We currently have a total of 15 patent applications
pending in the United States and 31 foreign patent applications.
Pending patent applications may not result in patents being issued. In
addition, the laws of some foreign countries do not protect our
intellectual property rights to the same extent as do the laws of the
United States. The patent position of high technology companies
involves complex legal and factual questions and, therefore, we cannot
predict their validity and enforceability with certainty. Even if
issued, our patent applications may be challenged, invalidated, held
unenforceable or circumvented. Further, rights granted under future
patents may not provide proprietary protection or competitive advantages
to us against competitors with similar technology. Others may
independently develop similar technologies or duplicate technologies
developed by us. Effective trademark and trade secret protection may
not be available in every country in which our products and services are
made available online. The steps we have taken to protect our
proprietary rights may not be adequate, and third parties may infringe
upon or misappropriate our trade secrets, trademarks, trade dress and
similar proprietary rights. Others may independently develop
substantially equivalent intellectual property. Any significant failure
to protect our intellectual property in a meaningful manner could
materially adversely affect our business, financial condition and
operating results. In addition, litigation may be necessary in the
future to enforce our intellectual property rights, to protect our trade
secrets or to determine the validity and scope of the proprietary rights
of others. Such litigation could result in substantial costs and
diversion of management and technical resources, which could materially
adversely affect our business, financial condition and operating
results.
DEPENDENCE ON THE CRANE-PANDA LICENSING AGREEMENT; POTENTIAL
CONFLICTS OF INTEREST. Under a license agreement entered into in
January 1996 between the Company and Mr. Crane (the Crane-Panda
License ), Mr. Crane has granted the Company the nonexclusive right to
utilize the Compass Connector, a key component in the commercialization
of the Company s Computer Systems and the development and
commercialization of Compass PGA. The Crane-Panda License was executed
in connection with the conversion to a nonexclusive license of the 3M
License described below and supersedes an earlier license agreement
between Mr. Crane and the Company relating to the Compass Connector.
Under the Crane-Panda License, the Company is required to pay Mr. Crane
a royalty on any sales of Compass Connectors as discrete parts in the
amount of 5% of the net sales price for the first five years of the term
of the agreement, 2.5% of the net sales price for the next five years of
the term of the agreement and 2% of the net sales price thereafter,
provided that no royalty is payable until aggregate net sales of the
Compass Connector as discrete parts exceed $100,000. The royalty rate
will be reduced after the fifth anniversary of the agreement if no
patent remains in effect with respect to the Compass Connector. No
royalty is payable on sales of the Compass Connector as incorporated in
the Computer Systems or other computer system or assembly. The Company
may grant sublicenses under the Crane-Panda License, but only for the
use of products as incorporated in the Computer Systems or other
computer system or assembly. No sales requiring the payment of
royalties to Mr. Crane under the Crane-Panda License have occurred to
date. The Crane-Panda License obligates the Company to maintain
proprietary information relating to the Compass Connector on a
confidential basis, notify Mr. Crane of any evidence of infringement
with respect to the Compass Connector and related technology, and
cooperate with Mr. Crane to contest any such infringement. In the event
that the Company becomes bankrupt or insolvent or defaults in any of its
material obligations under the Crane-Panda License and fails to cure any
such defaults within specified cure periods, Mr. Crane may terminate the
Crane-Panda License. The Company is substantially dependent upon the
Crane-Panda License. The termination of the agreement under any
circumstances would materially adversely affect the Company s business,
financial condition and operating results. The actions of the Company
with respect to the Crane-Panda License must be authorized by a majority
of the Company s independent directors, and the Company and Mr. Crane
would be represented by separate counsel in the event of a dispute
concerning the Crane-Panda License. Despite these procedural
safeguards, a conflict of interest may arise with respect to the Crane-
Panda License and such conflict may not be resolved in a manner
favorable to the Company. In addition, Mr. Crane retains ownership of
the Compass Connector technology, and has the right to grant licenses to
or otherwise transfer rights to the Compass Connector technology to
third parties.
In September 1992, Mr. Crane granted an exclusive license (the 3M
License ) to Minnesota Mining and Manufacturing Co. ( 3M ) to develop,
manufacture, use and sell the Compass Connector other than as part of a
computer system. In February 1996, Mr. Crane and 3M agreed to convert
the 3M License to a nonexclusive license. In certain circumstances, the
3M License provides for the payment of a royalty to Mr. Crane. As of the
date of this prospectus, Mr. Crane had received no such payments.
LITIGATION. On October 16, 1998, a complaint was filed against the
Company in the United States District Court for the Southern District of
New York by Promethean Investment Group, L.L.C. The complaint alleges
breach of contract by the Company for failing to proceed with a
financing transaction and seeks damages in an unspecified amount in
excess of $270,000 or a declaration that the Company is required to
proceed with the financing transaction. The outcome is both
immeasurable and undeterminable. The Company may not be successful in
defending this litigation. Even if the Company is successful in
defending itself in such litigation, the diversion of critical resources
involved in defending and settling these actions could have a
substantial material adverse effect on the Company.
On December 11, 1998, the Company and Joseph A. Sarubbi ( Sarubbi )
entered into a settlement agreement (the Settlement Agreement )
relating to litigation in which Sarubbi has obtained a judgment against
the Company in the amount of $1,227,041. Under the Settlement
Agreement, the Company has agreed to pay Sarubbi total consideration
worth $1,000,000 of which $240,000 has been paid in cash and the
remainder is to be satisfied upon the sale of shares which have been
delivered to Sarubbi. The Company will register those shares for
Sarubbi pursuant to the Registration Statement of which this prospectus
is a part. The parties have agreed to petition the Florida Court of
Appeals for the Fourth District to dismiss the litigation within five
business days after the Company s obligations in the Settlement
Agreement have been completed. If such obligations are not completed,
the judgment will remain in effect.
DELISTING FROM NASDAQ NATIONAL MARKET; PENNY STOCK REGULATIONS.
The Company was delisted from the Nasdaq National Market, effective
December 16, 1998, due to its inability to sustain compliance with the
Net Tangible Asset requirement of $4 million and because the Company was
not currently in compliance with the minimum bid price of $1.00 per
share. On December 17, 1998, the Company began trading on the NASD OTC
Electronic Bulletin Board system or in what is commonly referred to as
the pink sheets. As a result, an investor may find it more difficult
to dispose of the Company s securities or to obtain accurate quotations
as to the price of, such securities. In addition, delisting may affect
our ability to issue additional securities or to secure additional
financing.
The Company s delisting on the Nasdaq National Market will cause
trading in the Common Stock to be subject to additional rules under the
Exchange Act. These rules require additional disclosure by
broker-dealers in connection with any trades involving a stock defined
as a penny stock. A penny stock is defined to include any over-the-
counter equity security that has a market price of less than $5.00 per
share, subject to certain exceptions. The rules require the delivery,
prior to any transaction in a penny stock, of a disclosure schedule
prescribed by the Commission relating to the penny stock market, subject
to certain exemptions. In addition, such regulations impose various
sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors
(generally institutions). For these types of transactions, the
broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser s written consent to the
transaction prior to sale. The additional burdens imposed upon
broker-dealers by such requirements may discourage broker-dealers from
effecting transactions in the Common Stock, which could severely limit
the market liquidity of the Common Stock and the ability of purchasers
in this offering to sell the Common Stock in the secondary market.
NEGATIVE EFFECT OF FUTURE SALES OF STOCK ON MARKET PRICE AND
ABILITY TO RAISE CAPITAL. Future sales of substantial amounts of Common
Stock in the public market after this offering or the perception that
such sales could occur could materially adversely affect the market
price on the Common Stock and our future ability to raise capital
through the sale of equity securities. Virtually all of the outstanding
Common Stock, including the Common Stock offered hereby, are freely
tradeable in the public markets without restriction, subject in some
cases to the volume limitations imposed by Rule 144 under the Securities
Act. The Common Stock offered hereby represent approximately 9.5% of
the total number of shares of Common Stock outstanding at January 22,
1999. See PLAN OF DISTRIBUTION.
RISK OF INTERNATIONAL SALES. Conducting business outside of the
United States is subject to certain risks, including:
[ ] changes in regulatory requirements and tariffs;
[ ] reduced protection of intellectual property rights;
[ ] difficulties in distribution;
[ ] the burden of complying with a variety of foreign laws; and
[ ] political or economic constraints on international trade or
instability.
In addition, all of our international sales are currently priced in
U.S. dollars, but future sales or licensing of our products or
technologies outside the United States may be subject to the risks
associated with fluctuations in currency exchange rates.
POTENTIAL FOR DILUTION; REGISTRATION RIGHTS; OUTSTANDING OPTIONS
AND WARRANTS. As of October 30, 1998, the Company had issued 1,999,976
shares of Common Stock upon conversion of 166 shares of the Series A-2
Convertible Preferred Stock ( Series A Preferred ); 486 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.
In connection with a private placement completed on August 14,
1998, the Company 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.
The Company has reserved 7,366,738 shares of Common Stock,
including 150,000 shares subject to warrants issued in connection with
the sale of the Series A Preferred, 2,346,626 shares subject to the
Private Placement Warrants and 2,850,000 shares subject to the Helix
Warrants, for issuance upon the exercise of warrants. In the event the
400 additional shares of Series A Preferred described above are issued,
the Company would be required to issue Warrants to purchase an
additional 100,000 shares of Common Stock. In addition, the Company has
reserved 745,100 shares of Common Stock for issuance to employees,
officers, directors and consultants under its 1995 Employee Stock
Incentive Plan, 1993 Performance Incentive Plan and Non-Employee
Director Stock Option Plan. The price which the Company may receive for
the Common Stock issuable upon exercise of such warrants and options
will, in all likelihood, be less than the market price of the Common
Stock at the time of such exercise. Consequently, for the life of such
warrants and options, the holders thereof may have been given, at
nominal cost, the opportunity to profit from a rise in the market price
of the Common Stock. The exercise of all of the previously mentioned
securities may also adversely affect the terms under which the Company
could obtain additional equity capital. If a significant number of
these securities is exercised, the resulting increase in the amount of
the Common Stock in the public market may reduce the market price of the
Common Stock.
ANTI-TAKEOVER STATUTES. Certain provisions of our Amended and
Restated Articles of Incorporation and Florida law could make a merger,
tender offer or proxy context involving the Company more difficult, even
if such events could be beneficial to the interests of the shareholders.
Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of the common stock. See
DESCRIPTION OF CAPITAL STOCK Florida Law and Certain Anti-takeover
Charter Provisions.
POSSIBLE LACK OF RESOURCES OF SELLING SECURITYHOLDER. The Selling
Securityholder may be deemed to be an Underwriter pursuant to the
Securities Act. As Underwriters, they may become liable to the
purchasers of the Common Stock offered under this prospectus pursuant to
the terms of the Securities Act if certain provisions of the Securities
Act are not complied with by them. The Selling Securityholder may not
have the financial resources to discharge any such liability.
GENERAL. Because of factors discussed above and other factors,
past financial performance should not be considered an indicator of
future performance. Investors should not use historical trends to
anticipate future results and should be aware that the Company s
financial condition may be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results, general conditions
in the semiconductor packaging and computer industries, changes in
earnings estimates and recommendations by analysts and other events.
YEAR 2000 ISSUES
Like many other companies, Year 2000 computer issues create certain
risks for us. If our financial, operational and information systems do
not correctly recognize the process date information beyond the year
1999, it could have a significant adverse impact on the Company s
ability to process information, which could create significant potential
liability for the Company. To address potential Year 2000 issues with
its internal systems, we have evaluated these systems. The initial
assessment indicated that certain internal systems should be upgraded or
replaced as part of a solution to the Year 2000 problem. The costs
incurred to date related to these programs have not been material. The
estimated cost to be incurred by us in the future is not expected to
exceed $20,000. These estimates do not include potential costs related
to any customer or other claims or the cost of internal software and
hardware replaced in the normal course of business. These estimates are
based on our current assessment of the projects and may change as the
project progresses.
We are also working with key suppliers of products and services to
monitor their progress toward Year 2000 compliance. The failure of a
major supplier to become Year 2000 Compliant on a timely basis could
materially adversely affect our business, financial condition and
operating results.
We have begun internal discussions concerning contingency, planning
to address potential problem areas with internal systems and with
suppliers and other third parties. We expect assessment, remediation
and contingency planning activities to continue throughout the year 1999
with the goal of resolving all material internal and external systems
and third-party issues. While the Company has not completed its detail
plans with regards to this uncertainty, management believes, based on
discussions with vendors of its major business applications and Year
2000 Compliance certificates received from the related software
developers, that the financial impact of making the required systems
changes, if any, will not be material to the Company s financial
position, results of operations or cash flows.
We deem Year 2000 Compliant to mean software that can
individually, and in combination with all other systems, products or
processes with which the software is designed to interface, continue to
operate successfully (both in functionality and performance in all
material respects) over the transition into the twenty-first century
when used in accordance with the documentation relating to such
software. Year 2000 Compliance includes being able to, before, on and
after January 1, 2000, substantially conform to the following:
[ ] use logic pertaining to dates which allow users to identify
and/or use the century portion of any date fields without
special processing;
[ ] respond to all date elements and ate input to resolve any
ambiguity as to century in a disclosed, defined and pre-
determined manner; and
[ ] provide date information in ways which are unambiguous as to
century.
This may be achieved by permitting or requiring the century to be
specified or where the date element is represented without a century,
the correct century in unambiguous for all manipulations involving that
element.
RECENT DEVELOPMENTS
On November 2, 1998, the Company entered into a letter of intent
for the sale of its systems business. The letter of intent contemplated
that the documents and sale would be completed in 120 days. This now
seems unlikely to happen in the original time frame; however, management
does believe that it will occur in the future. As a result of the
pending sale and a shift to solely concentrate on the technology
business, the Company curtained production and sale of systems. It is
believed that the associated inventory as currently valued is
diminishing with the passage of time, whereby the recoverable costs will
only hold constant in a sale of the business unit as a whole. The
Company is currently evaluating the technological marketplace for the
systems inventory and believes that a valuation adjustment may be
appropriate.
The Company engaged Grant Thornton LLP as the Company s independent
accountants to audit the Company s financial statements. This
engagement became effective as of January 4, 1999.
The Common Stock was delisted from the Nasdaq National Market
effective December 16, 1998. The Nasdaq Qualification Panel believed
that the Company would not be able to sustain compliance with the Net
Tangible Asset requirement of $4 million, and the Company was currently
not in compliance with the minimum bid price of $1.00 per share. On
December 17, 1998, the Common Stock began trading on the NASD OTC
Electronic Bulletin Board system under the symbol PNDA.
On December 11, 1998, the Company and Sarubbi entered into the
Settlement Agreement relating to litigation in which Sarubbi has
obtained a judgment against the Company in the amount of $1,227,041.
Under the Settlement Agreement, the Company has agreed to pay Sarubbi
total consideration worth $1,000,000 of which $240,000 has been paid in
cash and the remainder is to be satisfied upon the sale of shares of
Common Stock which have been delivered to Sarubbi. The Company will
register those shares for Sarubbi pursuant to the Registration Statement
of which this prospectus is a part. The parties have agreed to petition
the Florida Court of Appeals for the Fourth District to dismiss the
litigation within five business days after the Company s obligations in
the Settlement Agreement have been completed. If such obligations are
not completed, the judgment will remain in effect.
On November 18, 1998, James T. A. Wooder resigned as a director of
the Company.
The Company has recently received firm purchase commitments for
orders of its VSPA semiconductor package from National Semiconductor
Corporation and Honeywell s Solid State Electronics Center in addition
to previous firm purchase commitments from Veridicom, EG&G, SEEQ
Technologies Incorporated, Motorola, Kaiser Aerospace & Electronics,
Tamarack Microelectronics Inc., Lucent Technologies and Saab Dynamics.
The Company anticipates that these purchase commitments will result in
increased revenues, although there can be no assurance that such
anticipated revenues will materialize.
USE OF PROCEEDS
The Company does not expect to receive any proceeds from the sale
of the Shares by the Selling Securityholder.
SETTLEMENT
Under the Settlement Agreement, the Company has agreed to pay
Sarubbi total consideration of $1,000,000 of which $240,000 has been
paid in cash and the remaining $760,000 (the Outstanding Obligation )
is to be satisfied upon the sale of shares of Common Stock which have
been delivered to Sarubbi.
The Company has issued 1,750,000 shares of its Common Stock to
Sarubbi pursuant to the Settlement Agreement. The shares of Common
Stock issued to Sarubbi are restricted securities within the meaning of
the Securities Act and cannot be offered for sale without an effective
registration statement covering such offer and sale or pursuant to an
applicable exemption from the registration requirements of the
Securities Act. Pursuant to the terms of the Settlement Agreement, the
Company filed the Registration Statement (of which this prospectus is a
part) and will use its best efforts to keep the Registration Statement
effective until all of the Common Stock is disposed or by Sarubbi.
Expenses of this offering, estimated at $11,778, will be paid by the
Company.
The number of shares of Common Stock that may be sold by Sarubbi
are subject to a limitation of 25,000 shares per business day. All
trades will be made through a registered broker. All sums received by
Sarubbi as a result of his sale of Common Stock, reduced by any
transaction cost such as broker s fees and commissions incurred by
Sarubbi in the course of such sales, will reduce the aggregate amount of
the Outstanding Obligation on a dollar-for-dollar basis. Upon
satisfaction of the Outstanding Obligation, any remaining shares of
Common Stock held by Sarubbi will be returned to the Company. If the
Outstanding Obligation has not been satisfied upon sale of the Common
Stock, the Company will repay the Outstanding Obligation within 10 days.
SELLING SECURITYHOLDER
All of the shares of Common Stock of the Company offered hereby are
being sold by the Selling Securityholder named below. The Company will
receive none of the proceeds from the sale of shares offered hereby.
The Selling Securityholder is a former director of the Company.
The following table sets forth information concerning the
beneficial ownership of shares of Common Stock by the Selling
Securityholder as of January 22, 1999 and the number of such shares
included for sale in this prospectus, assuming the sale of all Shares
being offered by this prospectus. The shares offered hereby consist of
1,750,000 shares of Common Stock acquired by Sarubbi pursuant to a
settlement agreement.
Shares Owned Shares Shares Owned
Selling Prior to Offered After
Securityholder Offering Hereby Offering
- ---------------------------------------------------------------------
Joseph A. Sarubbi 1,750,000 1,750,000 0
PLAN OF DISTRIBUTION
The Shares will be offered and sold by the Selling Securityholder
for its own account. The Settlement Agreement between Sarubbi and the
Company prohibits the resale of more than 25,000 shares of the Common
Stock on any business day. The Company will not receive any proceeds
form the sale of the Common Stock pursuant to this prospectus. The
Company has agreed to pay the expenses of registration of the Common
Stock, including the Company s legal and accounting fees and counsel
fees and expenses incurred by the Selling Securityholder.
The Selling Securityholder may offer and sell the Common Stock from
time to time in transactions on the OTC Electronic Bulletin Board, in
brokerage transactions at prevailing market prices or in transactions at
negotiated prices. Sales may be made to or through brokers or dealers
who may receive compensation in the form of discounts, concessions or
commissions from the Selling Securityholder or the purchasers of Common
Stock for whom such brokers or dealers may act as agent or to whom they
may sell as principal, or both. As of the date of this prospectus, the
Company is not aware of any agreement, arrangement or understanding
between any broker or dealer and the Selling Securityholder.
The Selling Securityholder and any brokers or dealers acting in
connection with the sale of the Common Stock hereunder may be deemed to
be underwriters within the meaning of Section 2(11) of the Securities
Act, and any commissions received by them and any profit realized by
them on the resale of Common Stock as principals may be deemed
underwriting compensation under the Securities Act.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, $.01 par value, and 2,000,000 shares of
Preferred Stock, $.01 par value ( Preferred Stock ).
COMMON STOCK
As of January 22, 1999, there were 18,493,993 shares of Common
Stock outstanding and held of record by 276 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-2 Convertible Preferred Stock
( Series A Preferred ) with the rights, preferences, privileges and
terms set forth in the Company s Sixth Articles of Amendment of Amended
and Restated Articles of Incorporation ( Articles of Amendment ). The
Company has issued 600 shares of Series A Preferred for an aggregate
purchase price of $6,000,000. In the event certain conditions are met,
the Company has the right to cause the issuance of 400 additional shares
of Series A Preferred.
Holders of Series A Preferred are entitled to receive a dividend of
5% per annum of the purchase price of such shares, payable quarterly,
at the option of the Company either in cash or as an accrual to the
purchase price utilized in computing the number of shares of Series A
Preferred issuable on conversion. So long as any Series A Preferred is
outstanding, no dividends may be paid nor shall any distribution be
made, on Common Stock or other shares junior in rank to the Series A
Preferred ( Junior Shares ) unless all dividends for all past quarterly
dividend periods have been paid or declared and a sum of cash or amount
of shares sufficient for the payment thereof set apart.
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of Series A
Preferred are entitled to receive in cash from the assets of the
Company, before any amount shall be paid to holders of Junior Shares, an
amount per share of Series A Preferred equal to the sum of (i) the
purchase price for such share and (ii) any accrued but unpaid dividends
thereon. If the amounts available for distribution are insufficient to
pay the full amount due to holders of Series A Preferred, and shares of
other classes or series of preferred stock of the Company that are of
equal rank to the Series A Preferred then each holder of Series A
Preferred and such other shares shall receive a percentage of the
amounts available for distribution ratably in proportion to the
respective amounts of such assets to which they otherwise would be
entitled.
Holders of Series A Preferred shall have no voting rights except as
required by law or as specified in the Articles of Amendment. Pursuant
to the Articles of Amendment, the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Series A 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 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.
PRIVATE PLACEMENT
On August 14, 1998, the Company completed an agreement for the sale
of 2,346,626 shares of its common stock 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.
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.
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. The Company shall pay to the holders of the common stock an
amount ranging from 1% to 3% of the purchase price paid for the common
shares issued multiplied by: (i) the number of months (prorated for
partial months) after the end of such 90-day period and prior to the
date the Registration Statement is declared effective by the Commission
exclusive of certain delays which are attributable to the holders, (ii)
exclusive of Allowed Delays (as defined), the number of months (prorated
for partial months) that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been
declared effective and (iii) exclusive of Allowed Delays the number of
months (prorated for partial months) that the Common Stock is not listed
or included for quotation on the Nasdaq, NYSE or AMEX or that trading
thereon is halted after the Registration Statement has been declared
effective.
FLORIDA LAW AND CERTAIN ANTI-TAKEOVER CHARTER PROVISIONS
Florida has enacted legislation that may deter or frustrate
takeovers of the Company. The Florida Control Share Act generally
provides that shares acquired in excess of certain specified thresholds,
starting at 20%, will not possess any voting rights unless such voting
rights are approved by a majority vote of a corporation's shareholders.
The Florida Affiliated Transactions Act generally requires supermajority
approval by disinterested directors or shareholders of certain specified
transactions between a corporation and holders of more than 10% of the
outstanding voting shares of the corporation or their affiliates.
The Company's Amended and Restated Articles of Incorporation
authorize the Board of Directors to issue up to 2,000,000 shares of
Preferred Stock and to determine the price, rights, preferences and
privileges, including voting rights, of those shares without any further
vote or action of the shareholders. The rights of the holders of the
Company's Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock issued by the
Company, including shares of Series A Preferred which are currently
outstanding or may be issued in the future. In addition, without the
prior written approval of the holders of 66 2/3% of the Series A
Preferred shares, the Company shall not (1) consolidate or merge with
another corporation or other entity or person, whereby the shareholders
of the Company own in the aggregate less than 50% of the ultimate parent
or surviving entity, (2) transfer all or substantially all of the
Company's assets to another corporation or other entity or person, or
(3) fix a record date for the declaration of a distribution or dividend,
whether payable in cash, securities or assets (other than shares of
common stock). The Company's Amended and Restated Articles of
Incorporation also provide for staggered terms for the members of the
Board of Directors. Certain provisions of the Company's By-laws, the
issuance of Preferred Stock, certain provisions of the Company's Amended
and Restated Articles Incorporation, and the staggered Board of
Directors could have a depressive effect on the Company's stock price or
discourage a hostile bid in which shareholders could receive a premium
for their shares. In addition, these provisions could have the effect
of making it more difficult for a third party to acquire a majority of
the outstanding voting stock of the Company, or delay, prevent or deter
a merger, acquisition, tender offer or proxy contest for the Company.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company has been appointed as the
transfer agent and the registrar for the Company's Common Stock.
EXPERTS
The financial statements incorporated in this prospectus by
reference to the Transition Report on Form 10-K of The Panda Project,
Inc. for the transition period ended December 31, 1997 have been so
incorporated in reliance on the report (which contains an explanatory
paragraph relating to The Panda Project, Inc.'s ability to continue as a
going concern as described in Note 2 to the financial statements) of
PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses in connection
with the sale and distribution of the securities being registered, other
than the underwriting discounts and commissions. All these expenses
will be paid by the Company.
Nature of Expense
- -----------------
SEC registration fee $ 278
Legal and accounting fees and expenses 10,000 *
Miscellaneous 1,500 *
TOTAL $ 11,778 * Estimated
Item 15. Indemnification of Directors and Officers. Florida
Business Corporation Act.
Section 607.0850(1) of the Florida Business Corporation Act (the
"FBCA") provides that a Florida corporation, such as the Registrant,
shall have the power to indemnify any person who is or was a party to
any proceeding (other than an action by, or in the right of, the
corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, against liability incurred in connection with such
proceeding, including any appeal thereof, if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action of
proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 607.0850(2) of the FBCA provides that a Florida corporation
shall have the power to indemnify any person who is or was a party to
any proceeding by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses and amounts paid in
settlement not exceeding, in the judgment of the board of directors, the
estimated expense of litigating the proceeding to conclusion, actually
and reasonably incurred in connection with the defense or settlement of
such proceeding, including any appeal thereof. Such indemnification
shall be authorized if such person acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests
of the corporation, except that no indemnification shall be made under
Section 607.0850(2) in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable unless, and only to
the extent that, the court in which such proceeding was brought, or any
other court of competent jurisdiction, shall determine upon application
that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled
to indemnity for such expenses which such court shall deem proper.
Section 607.0850 of the FBCA further provides that, to the extent
that a director, officer, employee or agent of a corporation has been
successful on the merits or otherwise in defense of any proceeding
referred to in subsection (1) or subsection (2), or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided pursuant to Section 607.0850 is not exclusive;
and that the corporation may purchase and maintain insurance on behalf
of a director, officer, employee or agent of the corporation against any
liability asserted against him or incurred by him in any such capacity
or arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liabilities under
Section 607.0850.
Notwithstanding the foregoing, Section 607.0850 of the FBCA
provides that indemnification of advancement of expenses shall not be
made to or on behalf of any director, officer, employee or agent if a
judgment or other final adjudication establishes that his actions, or
omissions to act, were material to the cause of action so adjudicated
and constitute: (a) a violation of the criminal law, unless the
director, officer, employee or agent had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his conduct was
unlawful; (b) a transaction from which the director, officer, employee
or agent derived an improper personal benefit; (c) in the case of a
director, a circumstance under which the liability provisions regarding
unlawful distributions are applicable; or (d) willful misconduct or a
conscious disregard for the best interests of the corporation in a
proceeding by or in the right of the corporation to procure a judgment
in its favor or in a proceeding by or in the right of a shareholder.
Section 607.0831 of the FBCA provides that a director of a Florida
corporation is not personally liable for monetary damages to the
corporation or any other person for any statement, vote, decision, or
failure to act, regarding corporate management or policy, by a director,
unless: (a) the director breached or failed to perform his duties as a
director, and (b) the director's breach of, or failure to perform, those
duties constitutes: (1) a violation of the criminal law, unless the
director had reasonable cause to believe his conduct was lawful or had
no reasonable cause to believe his conduct was unlawful; (2) a
transaction from which the director derived an improper personal
benefit, either directly or indirectly; (3) a circumstance under which
the liability provisions regarding unlawful distributions are
applicable; (4) in a proceeding by or in the right of someone other than
the corporation or a shareholder, recklessness or an act or omission
which was committed in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human rights, safety
or property.
Articles of Incorporation of the Registrant
The Articles of Incorporation of the Registrant (the "Articles")
provide that, to the fullest extent permitted by applicable law, as
amended from time to time, the Registrant will indemnify any person who
is or was a party or is threatened to be made a party to an action, suit
or proceeding (whether civil, criminal, administrative or investigative)
by reason of the fact that such person is or was a director, officer,
employee or agent of the Registrant or serves or served any other
enterprise at the request of the Registrant. This indemnification
includes the right to advancement of expenses when allowed pursuant to
applicable law.
In addition, the Articles provide that a director of the Registrant
shall not be personally liable to the Registrant or its shareholders for
monetary damages for breach of the director's fiduciary duty. However,
the Articles do not eliminate or limit the liability of a director for
any of the following reasons: (i) a breach of the director's duty of
loyalty to the Registrant or its shareholders; (ii) acts or omissions
not in good faith or that involve intentional misconduct or knowing
violation of law; (iii) a violation under Section 607.0834 of the FBCA
(which imposes liability upon directors for unlawful distributions);
(iv) a transaction from which the director derived an improper personal
benefit; or (v) an act or omission occurring before the effective date
of the Articles.
Indemnification
The Registrant has entered into or intends to enter into
Indemnification Agreements with its directors (collectively, the
"Agreements") which provide that each director is entitled to
indemnification to the fullest extent permitted by applicable law. Such
indemnification will cover all expenses, liabilities, judgments
(including punitive and exemplary damages), penalties, fines (including
excise taxes relating to employee benefit plans and civil penalties) and
amounts paid in settlement which are incurred or imposed upon the
director if the director is a party or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding of any
kind, whether civil, criminal, administrative or investigative
(including actions by or in the right of the Registrant and any
preliminary inquiry or claim by any person or authority), by reason of
the fact that the director is or was a director, officer, employee or
agent of the Registrant or is or was serving at the Registrant's request
as a director, officer, employee or agent of another corporation
(including a subsidiary), partnership, joint venture, trust or other
enterprise against liability incurred in connection with such
proceeding, including any appeal thereof (collectively, the "Covered
Matters"). Pursuant to the Agreements, the directors are presumed to be
entitled to indemnification irrespective of whether the Covered Matter
involves allegations of intentional misconduct, alleged violations of
Section 16(b) of the Exchange Act, alleged violations of Section 10(b)
of the Exchange Act (including Rule 10b-5 thereunder), breach of the
director's fiduciary duties (including duties of loyalty or care) or any
other claim.
In addition to the foregoing, the Company maintains a director and
officer liability insurance policy insuring directors and officers of
the Registrant against certain liabilities.
Item 16. Exhibits.
Exhibit Description of Exhibit
------- ----------------------
3.1 Amended and Restated Articles of Incorporation of the
Company, as amended *
3.2 Amended and Restated By-Laws of the Company *
4.1 Specimen Certificate of Common Stock of the Company
(filed as Exhibit 4.1 to the Company's Registration Statement on Form
SB-2 (File No. 33-6694-A)) *
5.1 Opinion of Morgan, Lewis & Bockius LLP
23.1 Consent of Morgan, Lewis & Bockius LLP (included in
Exhibit 5.1) +
23.2 Consent of PricewaterhouseCoopers LLP
- -----------------------
* Incorporated herein by reference.
+ To be filed by amendment.
Item 17. Undertakings.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement; provided, however, that paragraphs (1)(i) and
(1)(ii) do not apply if the information required to be included in a
post- effective amendment by those paragraphs is contained in periodic
reports filed by the Company pursuant to Section 13 or Section 15(d) of
the Exchange Act that are incorporated by reference in this Registration
Statement.
(2) That, for the purposes of determining any liability under
the Securities Act, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
The Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Registrant s
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan s annual
report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed
to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Company pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this Registration Statement as of the time it was declared
effective; and
(2) For purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-2 and
has duly caused this Registration Statement on Form S-2 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Boca Raton, State of Florida, on this 26th day of January, 1999.
THE PANDA PROJECT, INC.
By:
---------------------------
Stanford W. Crane, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form S-2 has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
- ----------------------
Stanford W. Crane, Jr. Chief Executive Officer, January 26, 1999
President and Director
(Principal Executive Officer)
- ----------------------
Melissa F. Crane Acting Chief Financial January 26, 1999
Officer (Principal Financial
and Accounting Officer)
- -----------------------
Claud L. Gingrich Director January 26, 1999
- -----------------------
Rao R. Tummala Director January 26, 1999
EXHIBIT INDEX
Exhibit Description of Exhibit
23.2 -- Consent of PricewaterhouseCoopers LLP
Exhibit 23.2
Consent of Independent Certified Public Accounts
We hereby consent to the incorporation by reference in the
Prospectus constituting part of this Registration Statement on Form S-2
of our report dated March 10, 1998, appearing of page F-2 of The Panda
Project Inc.'s Transition Report on Form 10-K for the transition period
ended December 31, 1997. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which
appears on page F-25 of such Transition Report on Form 10-K. We also
consent to the reference to us under the heading Experts in such
Prospectus.
PricewaterhouseCoopers LLP
Fort Lauderdale, Florida
January 26, 1999
