As filed with the Securities and Exchange Commission on February 8, 1999
Registration No. 333-14931
========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
POST EFFECTIVE AMENDMENT NO. 1
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 Amount Proposed Proposed
Class of to be Maximum Maximum Amount
Securities Registered Offering Aggregate of
Price per Offering Registration
Unit (1) Price (1) Fee (2)
- -------------------------------------------------------------------------
Common Stock, 2,927,849 $6.25 $18,299,056 $5,546
$.01 par shares
value
per share
=========================================================================
(1) Estimated solely for the purpose of calculating the registration
fee in accordance with Rule 457(c) of the Securities Act of 1933.
(2) Registration fees were paid with the original filing on Form S-3,
Registration No. 333-14931.
------------------------
Explanatory Note
The Post-Effective Amendment No. 1 to the Registrant Statement on
Form S-3 amends the prospectus dated January 12, 1997, filed pursuant to
424(b) by holders of certain Common Stock and warrants to purchase Common
Stock 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.
<PAGE>
PROSPECTUS File No. 333-14931
2,927,849 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 February 3, 1999, the closing bid price of
the Common Stock on the OTC Electronic Bulletin Board was $0.625 per
share.
The shares of Common Stock offered hereby represent approximately
15.2% of the total number of shares outstanding at February 3, 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 $24,000, 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 February 8, 1999.
TABLE OF CONTENTS
Page
----
Available Information 1
Incorporation of Certain Documents by Reference 2
Risk Factors 2
Year 2000 Issues 10
Recent Developments 11
Use of Proceeds 11
Selling Securityholders 11
Plan of Distribution 15
Description of Capital Stock 15
Experts 19
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 Transition Report on Form 10-K for the
transition period from April 1, 1997 through December 31, 1997;
(2) The Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998 and the amendment to the Company's Quarterly
Report on Form 10-Q/A for the quarter ended September 30, 1998;
(3) The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998;
(4) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998;
(5) The Company's Definitive Proxy Statement on Schedule 14A as
filed with the Commission on April 20, 1998;
(6) The Company's Current Reports on Form 8-K filed January 6,
1999, December 23, 1998 and December 15, 1998;
(7) 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
(8) 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.
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.
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 and
$20,874,101 during the fiscal years ended March 31, 1994, 1995, 1996 and
1997, respectively, $8,949,652 during the nine months ended December 31,
1997, and $11,880,708 during the nine months ended September 30, 1998,
resulting in an accumulated deficit of $74,064,548 as of September 30,
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. In addition, the Company
received a going concern opinion as discussed in Note 2 of Notes to
Financial Statements contained in its Form 10-K for the nine-month
transition period ended December 31, 1997.
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
February 3, 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.
In the event the Company's working capital, as augmented by proceeds
from the recent sale of Common Stock described above and any sales
revenue, prove to be insufficient to fund operations (due to
unanticipated expenses, delays, problems, or otherwise). Furthermore,
depending upon the Company's progress in the development of its products
and technology and manufacturing capabilities, acceptance of its products
and technology by third parties, and the state of the capital markets,
the Company may also determine that it is advisable to raise additional
equity capital. In addition, in the event that the Company receives a
larger than anticipated number of purchase orders for its VSPA
semiconductor package, it may require resources substantially greater
than it currently has or than are otherwise available to the Company, and
the Company may be required to raise additional capital or engage third
parties (as to which engagement there can be no assurance) to assist the
Company in meeting such orders. The Company is dependent upon the
success of the efforts discussed above to expand its marketing activities
in order to obtain additional orders for its VSPA semiconductor package
to continue efforts that may lead to the commercialization of additional
products and technologies and to finance other working capital
requirements. There can be no assurance that additional financing will
be available to the Company when needed on commercially reasonable terms
or at all. The inability of the Company to obtain additional financing
when needed would have a material adverse effect on the Company,
including possibly requiring the Company to significantly curtail or
cease its operations. To the extent that any future financing involves
the sale of the Company's equity securities, the Company's then existing
stockholders may be substantially diluted.
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 Common Stock to be listed, or the suspension of
trading in the 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.
Certain warrants for Common Stock have 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. Helix and its affiliates currently hold approximately
2.3% of the Company's outstanding Common Stock (not including share
issuable upon exercise of warrants).
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
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
December 31, 1998, the Company had obtained 18 United States patents and
an aggregate of 39 foreign patents. In addition, the Company had pending
a total of 15 United States and 31 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 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.
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 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 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.
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 15.2% 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 January 28, 1999, the Company had issued 1,999,976
shares of Common Stock upon conversion of 166 shares of the Series A-3
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. 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.
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.
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 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.
RECENT DEVELOPMENTS
The Company engaged Grant Thornton LLP as the Company's independent
accountants to audit the Company's financial statements. This engagement
became effective as of January 4, 1999.
The Common Stock was delisted from the Nasdaq National Market
effective December 16, 1998. The Nasdaq Qualification Panel believed
that the Company would not be able to sustain compliance with the Net
Tangible Asset requirement of $4 million, and the Company was currently
not in compliance with the minimum bid price of $1.00 per share. On
December 17, 1998, the Common Stock began trading on the NASD OTC
Electronic Bulletin Board system under the symbol "PNDA."
On December 11, 1998, the Company and 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.
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 curtailed production and sale of systems. It is believed that
the associated inventory as currently valued is diminishing with the
passage of time, whereby the recoverable costs will only hold constant in
a sale of the business unit as a whole. The Company is currently
evaluating the technological marketplace for the systems inventory and
believes that a valuation adjustment may be appropriate. This settlement
amount will be 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.
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.
None of the Selling Securityholders beneficially owns 5% or more of the
Company's outstanding Common Stock.
Of the 2,927,849 shares of Common Stock offered hereby, 1,087,833
currently outstanding shares of Common Stock were acquired by the Selling
Securityholders from the Company in the Private Placement Financing and
1,087,833 shares of Common Stock are issuable upon the exercise of
warrants acquired by the Selling Securityholders from the Company in the
Private Placement Financing. Such shares of Common Stock and warrants
were issued to 18 accredited investors, all of whom are identified as
Selling Securityholders herein. The warrants have a term of five years,
an exercise price of $0.75 per share and are callable in the event the
Common Stock has a closing market price of at least $26.00 per share for
30 consecutive days.
The remaining 752,183 shares of Common Stock offered hereby are
issuable upon the exercise of warrants held by (i) designees of Southeast
Research Partners, Inc., which served as placement agent in the Private
Placement Financing (the "SRP Warrants"), (ii) Mallory Factor, the
principal of MFI (the "MFI Warrant"), and (iii) Whale Securities Co.,
L.P. ("Whale"), which was underwriter of the Company's initial public
offering in May 1994 (the "Whale Warrant"). The SRP Warrants and the MFI
Warrant are described above under "Recent Developments"). The Whale
Warrant was issued pursuant to a Warrant Agreement executed in May 1994
(the "Warrant Agreement") and entitles Whale to purchase up to 200,000
shares of Common Stock at an exercise price of $6.75 per share and to
purchase up to 100,000 additional warrants (the "Underlying Warrants") at
an exercise price of $.135 per Underlying Warrant. Each Underlying
Warrant is exercisable for the purchase of one share of Common Stock of
the Company at an exercise price of $6.00 per share. The Whale Warrant
is exercisable as to the 200,000 shares of Common Stock covered thereby
during the three-year period commencing May 16, 1996. Each Underlying
Warrant is exercisable until July 11, 2001. Whale has the right to cause
the securities issued pursuant to the Warrant Agreement to be registered
under the Securities Act on the terms and conditions set forth in the
agreement.
None of the above-described warrants to purchase Common Stock are
offered hereby.
To the best of the Company's knowledge, the following table sets
forth certain information with respect to the Selling Securityholders as
of December 31, 1998:
<TABLE>
<CAPTION>
Shares Owned Prior
to Offering Shares Offered Hereby
<S> <C> <C> <C> <C> <C> <C> <C>
Shares
Owned
Selling Warrant Warrant After the
Securityholders Shares Shares (2) Total Shares (3) Shares (4) Total Offering
- --------------- ------ ---------- ----- ---------- ---------- ----- --------
Ruegg Bank AG 15,000 15,000 30,000 15,000 15,000(4) 30,000 0
AGF Growth
Equity 201,522 147,174 348,696 120,000 120,000(4) 240,000 108,696
Torbay Company 330,610 220,470 551,080 180,000 180,000(4) 360,000 191,080
Franklin
Street Trust
Company (5) 76,500 75,000 151,500 75,000 75,000(4) 150,000 1,500
Spinnaker
Technology
Fund, LP 66,500 66,500 133,000 66,500 66,500(4) 133,000 0
Lynn Factor (6) 89,500 30,000 119,500 30,000 30,000(4) 60,000 59,500
Robert Baron (7) 25,500 15,000 40,500 15,000 15,000(4) 30,000 10,500
James E.
Lineberger 13,333 13,333 26,666 13,333 13,333(4) 26,666 0
Frog Hollow
Partners 10,000 10,000 20,000 10,000 10,000(4) 20,000 0
Jerome E.
Collins 5,000 5,000 10,000 5,000 5,000(4) 10,000 0
Helix
Investments
Ltd. (8) 1,145,533 371,022 1,516,555 200,000 200,000(4) 400,000 1,116,555
C. Daryl
Hollis 2,500 1,500 4,000 1,500 1,500(4) 3,000 1,000
Brant
Investments
Ltd. 86,940 70,000 156,940 70,000 70,000(4) 140,000 16,940
Davis U.S.
Growth Fund 12,500 12,500 24,000 12,500 12,500(4) 25,000 0
Stanford W.
Crane, Jr. (9) 5,860 1,000 6,860 1,000 1,000(4) 2,000 6,860
Robert T.
McAleer 3,000 7,396 10,396 3,000 7,396(10) 10,396 0
Peter R.
McMullin 3,000 11,213 14,213 3,000 11,213(11) 14,213 0
Travelers
Group 267,000 267,000 534,000 267,000 267,000(4) 534,000 0
Gayle Bolton 0 1,964 1,964 0 1,964(12) 1,964 0
Arnold Brief 0 155 155 0 155(12) 155 0
David A.
Buchsbaum 0 146 146 0 146(12) 146 0
Alexander
Cotsalas 0 928 928 0 928(12) 928 0
Phillip L.
Dodge 0 618 618 0 618(12) 618 0
Timothy L.
Jones 0 1,082 1,082 0 1,082(12) 1,082 0
Peter L.
Larkworthy 0 927 927 0 927(12) 927 0
Deborah J.
Nash 0 310 310 0 310(12) 310 0
H. Hickman
Powell 0 10,974 10,974 0 10,974(12) 10,974 0
Peter J.
Quartararo, Jr. 0 773 773 0 773(12) 773 0
John J.
Seaman 0 310 310 0 310(12) 310 0
Lawrence
Talisman 0 5,000 5,000 0 5,000(12) 5,000 0
Jay M.
Wasserman 0 464 464 0 464(12) 464 0
Robert
Wasserman 0 155 155 0 155(12) 155 0
Josephthal,
Lyon & Ross, Inc. 0 15,768 15,768 0 15,768(12) 15,768 0
Mallory Factor 0 400,000 400,000 0 400,000(13) 400,000 0
Whale Securities
Co., L.P. (14) 0 87,213 87,213 0 87,213(15) 87,213 0
William G. Walters 0 175,011 175,011 0 175,011(15) 175,011 0
Elliot J. Smith 21,500 25,887 47,387 0 25,887(15) 25,887 21,500
Estate of Howard
D. Harlow 0(16) 9,609 9,609(16) 0 9,609(15) 9,609 0(16)
(16)
Nicholas Anari 0 1,023 1,023 0 1,023(15) 1,023 0
Cynthia Buckwalter 0 285 285 0 285(15) 285 0
James D.
Whitten 23,500(17) 972 24,472 0 972(15) 972 23,500(17)
- ----------------------
(1) Assumes all of the Selling Securityholders' shares of Common
Stock offered hereby are sold and no additional shares are acquired. If
the amount exceeds one percent of the total number of shares of Common
Stock outstanding (10,065,108 shares of Common Stock as of September 30,
1996), the percent of class is set forth. Each Selling Securityholder's
percentage ownership is determined by assuming that options or warrants
that are held by such person (but not those held by any other person) and
which are exercisable within 60 days after September 30, 1996 have been
exercised.
(2) Represents shares of Common Stock issuable upon exercise of
warrants issued by the Company.
(3) Represents shares of Common Stock issued pursuant to the Private
Placement Financing and being offered hereby.
(4) Represents shares of Common Stock issuable upon exercise of
warrants issued in the Private Placement Financing and being offered
hereby.
(5) Shares owned includes 1,500 shares of Common Stock held by George
Salley, an affiliate of Franklin Street Investment Company, none of which
are offered hereby.
(6) Shares owned includes 18,000 shares of Common Stock held by Ms.
Lynn Factor's husband, none of which are offered hereby.
(7) Shares owned includes 10,500 shares of Common Stock held by Mr.
Baron's wife, none of which are offered hereby.
(8) Shares owned includes 18,932 shares held by James T.A. Wooder or
members of his immediate family and 1,000 shares issuable upon the
exercise within 60 days after September 30, 1996 of options held by Mr.
Wooder. Mr. Wooder, a director of the Company, is a Vice President of
Helix Investments (Canada) Inc., the sole shareholder of Helix (PEI)
Inc., which is the sole shareholder of Philippi Investments Ltd.
(9) Shares and Warrant Shares owned includes 5,000 shares of Common
Stock held by Mr. Crane jointly with his wife and 1,000 shares issuable
upon the exercise of warrants held by Mr. Crane jointly with his wife.
(10) Includes 3,000 shares issuable upon exercise of warrants issued
in the Private Placement Financing and 4,396 shares issuable upon
exercise of SRP Warrants.
(11) Includes 3,000 shares issuable upon exercise of warrants issued
in the Private Placement Financing and 8,213 shares issuable upon
exercise of SRP Warrants.
(12) Represents shares of Common Stock issuable upon exercise of the
SRP Warrants and being offered hereby.
(13) Represents shares of Common Stock issuable upon exercise of the
MFI Warrant and being offered hereby.
(14) These securities are held in the name of Whale for the account
of certain equity owners and former equity owners on Whale. Does not
include an indeterminate number of shares of Common Stock held in Whale's
trading account.
(15) Represents shares of Common Stock issuable upon exercise of the
Whale Warrant and the Underlying Warrants and being offered hereby.
(16) Does not include 7,500 shares of Common Stock owned by the widow
of Mr. Harlow and 4,500 shares of Common Stock owned by her IRA.
(17) Represents 1,000 shares of Common Stock owned by Whitten Group,
Inc., 1,000 shares of Common Stock held jointly with Mrs. Whitten. 7,500
shares of Common Stock held by Mrs. Whitten, 6,500 shares of Common Stock
held by Mr. Whitten's IRA, 4,500 shares of Common Stock held by Mrs.
Whitten's IRA, and 3,000 shares of Common Stock held by trusts of which
Mr. Whitten is the Trustee. Does not include 10,000 shares of Common
Stock and 10,000 Warrant Shares offered hereby held by Frog Hollow
Partners, of which Mrs. Whitten is the general partner.
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 to various purchasers, or pledged or hypothecated, or
they may be retained. The Selling Securityholders may elect to sell the
Shares in negotiated transactions at prices and on terms related to the
then-current market price or otherwise, or in market transactions, in
each case without the participation of underwriters, brokers or dealers.
The Selling Securityholders may also from time to time offer the Shares
through brokers, dealers or agents, or with the permission of the Company
through underwriters, who may receive underwriting discounts, concessions
or commissions from the Selling Securityholders and/or the purchasers for
whom they act as agent. In that event, the offers or sales may be made
(i) by a block trade in which a broker or dealer, engaged for the
purpose, will attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction,
(ii) by purchases by a broker or dealer as principal and resale by such
broker or dealer for its own account, (iii) by ordinary brokerage
transactions or transactions in which the broker solicits purchasers,
(iv) with the permission of the Company, in an underwritten transaction,
or (v) otherwise. In the event that brokers or dealers are engaged by
the Selling Securityholders, such brokers or dealers may arrange for
other brokers or dealers to participate. The Company has been advised by
the Selling Securityholders that they have not, as of the date hereof,
entered into any arrangement with a broker-dealer for the sale of Shares
through a block trade, special offering, exchange distribution or
secondary distribution of a purchase by a broker-dealer.
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 have advised the Company that, during
such time as they may be engaged in a distribution of the Shares, they
will comply with Regulation M under the Exchange Act.
The public offering of the Shares by the Selling Securityholders
will terminate on the earlier of (a) January 22, 2000, or (b) the date on
which all Shares have been sold by the Selling Securityholders. The
Company has agreed with the Selling Securityholders to prepare and file
with the Commission any amendments or supplements to the Registration
Statement and this prospectus as may be necessary to keep the
Registration Statement effective through such offering period.
The Company will pay certain expenses incidental to the offering and
sale of the Shares to the public estimated to be approximately $60,000.
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 February 3, 1999, there were 19,185,660 shares of Common Stock
outstanding and held of record by 272 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 Common Stock to be
listed, or the suspension of trading in the 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.
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.
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.
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 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 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 . . . . . . . . . . $ 3,006
Legal and accounting fees and expenses . 19,000 *
Miscellaneous . . . . . . . . . . . . . . 1,994 *
=======
TOTAL $ 24,000 * 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.
The following exhibits are included as a part of this Registration
Statement:
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 Holland & Knight LLP *
23.1 Consent of Holland & Knight LLP (included in Exhibit 5.1) *
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney
- --------------------
* 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. 1 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 5th day of February, 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. 1 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 Officer, February 5, 1999
- ------------------------- President and Director
Stanford W. Crane, Jr. (Principal Executive
Officer)
/s/ Melissa F. Crane Acting Chief Financial February 5, 1999
- ------------------------- Officer (Principal
Melissa F. Crane Financial and Accounting
Officer)
/s/ Claud L. Gingrich Director February 5, 1999
- -------------------------
Claud L. Gingrich
/s/ Rao R. Tummala Director February 5, 1999
- -------------------------
Rao R. Tummala
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 *
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 PricewaterhouseCoopers LLP
24.1 -- Power of Attorney
- ----------------
* Incorporated herein by reference.
Exhibit 23.2
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in the
Prospectus constituting part of this Post-Effective Amendment No. 1 to
the Registration Statement on Form S-3 (No. 333-14931) 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
February 5 1999
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