As filed with the Securities and Exchange Commission on January 12, 1998.
Registration No. 333-39879
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------------
PRE-EFFECTIVE AMENDMENT NO. 3
ON
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------------------
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 16-1494566
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
---------------------------
15 Link Drive
Binghamton, New York 13904
(607) 722-3800
(Address, including ZIP Code, and Telephone Number, including Area Code,
of Registrant's Principal Executive Offices)
---------------------------
Geoffrey T. Burnham
Chief Executive Officer
Semiconductor Laser International Corporation
15 Link Drive
Binghamton, New York 13904
(607) 722-3800
(Name, Address, including ZIP Code, and Telephone Number,
including Area Code, of Agent for Service)
---------------------------
WITH A COPY TO:
Walter M. Epstein, Esq.
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, NY 10112
Telephone: (212) 698-7700
---------------------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effectiveness of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities 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 securities offered only 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. |_|
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[COVER PAGE CONTINUED]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Maximum Proposed Maximum
Title of Each Class of Securities to be Amount To Be Offering Price Aggregate Offering Amount Of
Registered Registered Per Share(1) Price(1) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, $0.01 par value(2) ........... 20,000(2) $1.9375(2) $38,750(2) $11.44(2)
====================================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933
solely for the purpose of calculating the registration fee based on
the average of the high ($2.125) and low ($1.750) prices as reported
on the SmallCap Market of The Nasdaq Stock Market on January 8,
1998.
(2) Includes shares of Common Stock, $0.01 par value per share ("Common
Stock"), of Semiconductor Laser International Corporation (the
"Company"), which are, in addition to 5,517,810 shares of Common
Stock previously registered. A registration fee of $3,650.13
relating to the registration of 5,517,810 shares of Common Stock was
previously paid. See "Prospectus Summary- Recent Developments-
October 1997 Private Placement" and "Selling Stockholders."
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities Exchange Commission, acting pursuant to
said Section 8(a), may determine.
2
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED January 12, 1998
PROSPECTUS
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
This Prospectus covers an aggregate of 5,537,810 shares of Common Stock
---------------------------
This Prospectus relates to the offering of 5,537,810 shares (the "Shares")
of Common Stock, par value $0.01 per share ("Common Stock"), of Semiconductor
Laser International Corporation (the "Company") which may be offered for sale by
certain stockholders of the Company (the "Selling Stockholders"), consisting of
(i) 4,712,810 Shares, issued upon conversion of 2,000,000 shares of Series A 8%
Convertible Preferred Stock, par value $0.01 per share ("Series A Preferred
Stock"), of the Company, (ii) 55,000 Shares issued to attorneys for the Company
as payment for outstanding legal fees of $96,250, in aggregate, (iii) 750,000
Shares issuable upon exercise of warrants (the "MDC Warrants") to purchase
shares of Common Stock issued to a consultant to the Company, and (iv) 20,000
shares issuable upon the exercise of warrants issued to another consultant to
the Company. See "Prospectus Summary-Recent Developments-October 1997 Private
Placement" and "Financial Public Relations Agreement," "Description of
Securities-MDC Warrants," "Selling Stockholders" and "Legal Matters."
The Shares may be sold from time to time by the Selling Stockholders, or
by the transferees of the holders of Common Stock, Series A Preferred Stock and
MDC Warrants. No underwriting arrangements have been entered into by the Selling
Stockholders. The distribution of the Shares of the Selling Stockholders and/or
their transferees may be effected in one or more transactions that may take
place on the over-the-counter market, including ordinary brokers transactions,
privately negotiated transactions or through sales to one or more dealers for
resale of the Shares as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Shares may be sold by the Selling Stockholders either (i) to a
broker or dealer as principal for resale by such broker or dealer for an amount
pursuant to this Prospectus (e.g., in a transaction with a "market maker"); (ii)
in brokerage transactions, including transactions in which the broker solicits
purchasers, or (iii) in privately negotiated transactions pursuant to any
applicable exemption under the Securities Act of 1933, as amended (the
"Securities Act"). Usual and customary or specifically negotiated brokerage fees
or commission may be paid by the Selling Stockholders in connection with such
sales. The Selling Stockholders and intermediaries through whom such Shares are
sold may be deemed "underwriters" within the meaning of the Securities Act, with
respect to the Shares offered. See "Plan of Distribution."
The Common Stock and certain warrants (the "Registered Warrants") to
purchase Common Stock (not including the MDC Warrants) are quoted on the Nasdaq
SmallCap Market under the trading symbols "SLIC" and "SLICW," respectively. On
January 8, 1998, the last reported sale prices of the Common Stock and the
Registered Warrants were $2.00 per share and $.313 per Registered Warrant,
respectively.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE PURCHASED
ONLY BY THOSE PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE
"RISK FACTORS" COMMENCING AT PAGE 12 OF THIS PROSPECTUS.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS
THE 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 January 12, 1998.
3
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the
"Commission") relating to the Shares offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and to the
exhibits relating thereto for further information with respect to the Company
and the securities offered hereby. Any statements contained herein concerning
the provisions of any document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission are not necessarily complete, and in each
instance reference is made to the copy of such document so filed as an exhibit
to, or incorporated by reference into, the Registration Statement. Each
statement shall be qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Securities Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith files reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information filed by the Company can 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 following Regional Offices of the
Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, registration statements and certain other filings
made electronically with the Commission through its "EDGAR" system are publicly
available through the Commission's site on the Internet's World Wide Web,
located at http://www.sec.gov. This Registration Statement, including all
exhibits thereto, has been filed with the Commission through EDGAR. Reports,
proxy and information statements and other information concerning the Company
can also be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:
(a) The Company's Annual Report on Form 10-KSB for the year ended December
31, 1996 filed with the Commission on March 28, 1997 (including the Company's
amended Annual Report on Form 10-KSB/A for the year ended December 31, 1996)
filed with the Commission on May 1, 1997;
(b) The Company's Quarterly Reports on Form 10-QSB for the quarters ended
September 30, 1997, June 30, 1997 and March 31, 1997 filed with the Commission
on November 6, 1997, August 14, 1997 and May 12, 1997, respectively;
(c) The Company's Proxy Statement with respect to its Annual Meeting of
Shareholders held on June 20, 1997 filed with the Commission on May 30, 1997.
In addition, all documents and reports subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the offering shall
be deemed to be incorporated by reference herein from their respective dates of
filing. Any statements 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 incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such 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 furnish, without charge, to any person to whom a copy of
this Prospectus is delivered, upon such person's written or oral request, a copy
of any and all of the documents that have been incorporated by reference in the
Registration Statement and herein (not including exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents). The Company will also furnish, without charge, to any such person
upon such person's written or oral request, a copy of the Company's most recent
Annual Report to Stockholders. Any such request should be directed to Mr.
Nicholas L. Prioletti, Jr., Semiconductor Laser International Corporation, 15
Link Drive, Binghamton, New York 13904, telephone number (607) 722-3800.
2
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PROSPECTUS SUMMARY
The following summary is intended to set forth certain pertinent facts and
highlights from material contained in the body of this Prospectus and the
Company's Report on Form 10-KSB for the fiscal year ended December 31, 1996, as
amended in the Company's Report on Form KSB/A for the year ended December 31,
1996 (the "Form 10-KSB"), the Form 10-QSB for the quarters ended September 30,
1997, June 30, 1997 and March 31, 1997 (collectively, the "Forms 10-QSB"), and
the Company's Proxy Statement with respect to its Annual Meeting of Shareholders
held on June 20, 1997 (the "Proxy Statement"), all of which are incorporated
herein by reference. The summary is qualified in its entirety by reference to
the more detailed information and consolidated financial statements appearing
elsewhere in this Prospectus and Form 10-KSB, Forms 10-QSB and Proxy Statement.
Each prospective investor is urged to read this Prospectus and the Form 10-KSB,
Forms 10-QSBs and Proxy Statement in their entirety. This summary is further
qualified in its entirety by reference to, and should be read in conjunction
with, the detailed information and financial statements, including the notes
thereto, appearing elsewhere in this Prospectus.
THE COMPANY
General
Semiconductor Laser International Corporation (the "Company") is a
Delaware corporation focused on developing, producing and marketing high power
semiconductor diode lasers ("HPDLs") which meet the quality standards of
existing HPDLs at lower cost. In furtherance of such goals, the Company had been
engaged, since its inception in 1993, primarily in developing and improving upon
the use of patented technology (known as Desorption Mass Spectrometric Control
("DMS")) to control and increase the reliability of a commonly known laser
manufacturing process referred to as Molecular Beam Epitaxy ("MBE"). The use of
the DMS technology (exclusively licensed to the Company by the United States Air
Force (the "Air Force") through the year 2004 pursuant to a license agreement
(the "License Agreement")) to control the MBE production of HPDLs not only
offers significant cost advantages over the MBE production of HPDLs without DMS
but, more importantly, also offers significant cost advantages over the
currently prevailing manufacturing process for HPDLs known as Metal Organic
Chemical Vapor Deposition ("MOCVD"). In addition, the Company has been granted
an exclusive worldwide license from Northwestern University relating to aluminum
free HPDLs, which generate greater power and evidence substantially longer life
and greater reliability than existing HPDLs. The Company has capitalized upon
such advantages to produce HPDLs which meet or exceed the quality standards of
existing HPDLs, at lower cost, thereby permitting the Company to reduce the
prices charged for HPDLs and facilitate new market applications for HPDL
products. See "Prospectus Summary-The Company-Strategy."
The Company manufactures its products at a newly constructed,
state-of-the-art, ultra-high technology facility in Broome County, New York
built to the Company's specifications. The site was acquired through a sale and
lease back transaction with the Broome County Industrial Development Agency (the
"Broome County IDA"). The Company currently utilizes 15,000 square feet at such
location and plans to ultimately expand its operations to 60,000 square feet.
See "Prospectus Summary-The Company-Manufacturing Facility."
The Company was incorporated in New York in September of 1993 and
reincorporated in Delaware in September 1997. See "Prospectus Summary-Recent
Developments-Reincorporation in Delaware."
Industry Background
Lasers produce a beam of radiation in the electromagnetic spectrum which
can be varied in intensity and wavelength depending upon the desired
application. This variable intensity enables high power lasers to be used as
power sources in a broad range of applications, including the materials
processing, fiber optic, telecommunications, printing, medical, dental,
automotive, machining, and optical storage industries.
The kind and number of applications that can benefit from utilizing HPDLs
include all applications requiring intense and efficient power, particularly
where reliability, long useful life (without adjustment or replacement of parts)
and, in some applications, smaller
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3
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size and/or adaptability to fiber optic coupling are significant. The immense
variety and magnitude of these applications and potential applications is
creating an expanding demand for HPDLs and, if lower prices for HPDLs can be
achieved, it is anticipated that new applications requiring lower priced HPDLs
will create significant additional demand.
There are currently three main types of high power lasers:
Carbon Dioxide Lasers. Carbon dioxide lasers are the oldest form of high
power lasers still in widespread use today. However, they are cumbersome, costly
to purchase and cannot be easily coupled to fiber optics. The principal market
for carbon dioxide lasers is materials processing where the relative power
inefficiency, bulk and waste emitting operating qualities of the carbon dioxide
laser are not significant deterrents to their continued use. The market for new
purchases of carbon dioxide lasers has shrunk dramatically in the last few years
in favor of solid state lasers.
Solid State Lasers. Solid state lasers improve upon many of the
troublesome carbon dioxide laser characteristics by virtue of their higher
efficiency, reduced cost and easy ability to be coupled to fiber optics and
their ability to incorporate HPDLs as a power source. As a result, solid state
lasers have increasingly dominated the medical laser device market and largely
replaced the purchase of new carbon dioxide lasers. Solid state lasers are
increasingly incorporating HPDLs to pump or boost their power output more
efficiently, creating a significant part of the current HPDL market. The
principal drawbacks of solid state lasers are that they have a relatively short
operating life, require frequent maintenance, including adjustments and parts
replacement, require more energy consumption than HPDLs and are otherwise less
efficient than HPDLs.
HPDLs. HPDLs, which have been incorporated increasingly as power sources
in solid state lasers, are starting to replace solid state lasers in certain
applications because of the longer operating life associated with HPDLs and
because HPDLs require little or no maintenance. HPDLs also have a distinct
advantage over solid state lasers in terms of efficiency. HPDLs convert
approximately 80% to 90% of their electrical input into photon energy while
solid state lasers without HPDLs to pump or boost their power output may convert
only about 5% to 10% of their energy input into photon output. This efficiency
explains why HPDLs have increasingly been utilized as a power source to boost a
solid state laser's output and why, when such efficiency is combined with the
HPDLs' other advantages over carbon dioxide lasers and solid state lasers, HPDLs
represent an increasing share of the high power laser markets.
Strategy
The Company competes against the existing MOCVD produced HPDLs by
producing HPDLs which exceed the quality standards of such products and can be
produced at substantially lower costs. The Company believes that its new
manufacturing technology permits it to reduce the prices charged for HPDLs of
superior power and longevity and greater reliability. In order to achieve this
objective, the Company will need to operate at higher production volumes. This
will require sales of large orders. To date, some customers have only purchased
products in smaller test quantities with further potential large orders
dependant upon the performance of such products. The Company is seeking to
attract and produce in larger quantities based upon manufacturing, marketing and
research strategies.
The Company's manufacturing strategy is to take advantage of the advance
in HPDL manufacturing technology made possible through its DMS/MBE process and
through its acquisition of rights relating to aluminum free HPDLs. The Company
controls all stages of HPDL manufacturing, including all aspects of the
processing and-packaging of its HPDL products, at its own manufacturing facility
where it utilizes the full benefit of its research and development efforts to
date. The Company plans to carry out a program of continuous improvement and
expansion of its manufacturing capabilities through the ongoing purchase of
equipment incorporating further improvements, as developed, and the expansion of
its manufacturing space, as needed, to capitalize on anticipated commercial
market acceptance of its products.
The equipment acquired by the Company for its manufacturing facility
incorporated the developments and modifications which the Company had previously
made to the DMS/MBE equipment used at the Air Force's Wright Laboratory pursuant
to the Cooperative Research and Development Agreement (the "Wright CRDA"). The
Wright CRDA expired in September 1996. The Company has the rights to use any
developments and modifications created under the Wright CRDA. Since the
expiration of the Wright CRDA, the Company has conducted further research and
development at its own facility. The Company believes it has made further
advances since September 1996 and that the expiration of the Wright CRDA has had
no material impact on the Company's financial condition or results of operation
or on its ability to continue further successful research and development
efforts.
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The Company believes that it has established, within the HPDL marketplace,
the credibility of its products, i.e. their comparable quality to those of
current HPDL manufacturers and their substantially lower cost. The Company
believes that once the quality of its product line and the lower prices charged
for its products is fully recognized, it will be able to achieve significant
market penetration. The Company participates in trade shows and publicizes its
improvements in scientific and trade journals.
The Company engages in ongoing research and development efforts to improve
its manufacturing process and new product development. The Company is also
involved in research and development partnerships with a number of academic
institutions which provide the Company, through their research collaboration,
with access to new technologies, new product applications, quality control
measures, testing equipment, and experienced research personnel.
License Agreement with the Air Force. The Company has an exclusive ten year
license on the DMS technology as it applies to laser technology, pursuant to its
License Agreement with the Air Force. The Air Force has received a patent with
respect to the DMS technology. The License Agreement is not assignable, other
than to the Company's subsidiaries, without the prior written approval of the
Air Force. Under the License Agreement, the Company is obligated to pay
royalties of .5% on all gross sales (other than sales to or for the U.S.
Government) of each laser or laser related product that was produced utilizing
any method defined in the Air Force's patent. In addition to the royalty
payments, the Company is obligated to pay a minimum royalty of $20,000 beginning
with the fifth year of the License Agreement (March 30, 1999). The Company was
required under the License Agreement to satisfy the Air Force that it had taken
effective steps to exploit the licensed technology commercially. The Company's
products currently being manufactured and sold represent the commercial
exploitation of the License Agreement as required by its terms. Failure to have
complied with this requirement could have resulted in loss of exclusive rights
under the License Agreement, which loss would have had a material adverse affect
on the Company. Any improvements developed by the Company of the licensed
technology will be the sole property of the Company. After 2004, unless
extended, the License Agreement will become nonexclusive. The Air Force has a
royalty free right to employ the DMS technology in non-commercial production of
HPDLs for its own use.
Northwestern License. The Company received an exclusive license from
Northwestern University ("Northwestern") commencing September 1, 1996 (the
"Northwestern License"), subject only to any rights of the United States
Government and non-commercial rights reserved by Northwestern. The Northwestern
License, subject to the limitations described in this paragraph will remain in
effect for the life of the underlying patent rights. The Northwestern License
covers patents and know how with respect to Aluminum Free High Power Compound
Semiconductor Lasers. Under the Northwestern License, the Company issued to
Northwestern an aggregate of 2,731 shares of Common Stock (1,231 shares issued
in September 1996 and 1,500 shares issued in November 1997) and made a payment
of $21,000. In addition, the Company is obligated to pay a royalty of 4% of the
first $1 million of sales, 3% of the next $4 million of sales, 2% of the next
$20 million of sales and 1% of all sales thereafter. Northwestern is also
entitled to 40% of any sublicense or similar payments received by the Company
and 5% of any payments from an assignee of rights under the Northwestern License
from the Company. The Company is obligated to meet certain developmental
requirements under the Northwestern License, all of which have been met to date.
The remaining requirements are the growth by the Company of licensed product by
the end of February 1998 and the first sale of licensed product by the end of
May 1998. The Company believes it will meet both requirements in a timely
fashion. There can, however, be no assurance that the Company will in fact meet
such requirements. If no licensed product is being offered for sale by the
Company at any time commencing September 1, 1999 the Northwestern License
becomes non-exclusive. The Company has the right to enforce any infringement
rights of Northwestern, if, Northwestern has not taken effective action within a
six month period or otherwise authorizes the Company to proceed.
With the benefit of the Northwestern License, the Company is planning to
manufacture and sell aluminum free HPDLs. The significant advantage over
existing HPDLs is the ability of aluminum free HPDLs to generate five times
greater power while evidencing substantially longer life and greater
reliability. The Company has received substantial interest in the aluminum free
HPDLs and believes it will offer major competitive advantages to the aluminum
based products of its competitors. The Company has been advised by another
company that it believes that the Northwestern License does not cover the
production of aluminum free HPDLs under manufacturing methods other than MOCVD.
Northwestern University and the Company believe that the patent rights and the
Northwestern License cover a broader range of production methods and plan to
take all steps necessary to protect their interests. The Company believes that
attempts by others to develop equivalent aluminum free technology will infringe
on its exclusive rights, which the Company, in coordination with Northwestern
University, plans to strongly enforce. The Company believes that the exclusive
right granted under the Northwestern License constituted a major competitive
advantage. However, the Company further believes that even if such rights are
ultimately determined not to cover manufacturing methods other than MOCVD, such
a determination will not
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materially adversely impact its financial condition and results of operation and
that the Company will be able to compete effectively with third party
competitors using other manufacturing methods. At this time, no litigation has
been instituted by the Company, Northwestern or any third party with respect to
the scope of the patent rights and under the Northwestern License.
In connection with the Northwestern License, the Company entered into a
consulting agreement with Professor Manijeh Razeghi of the Center for Quantum
Devices at Northwestern University. Professor Razeghi is the inventor of
Northwestern's patented technology. In consideration for her consulting
services, the Company issued 120,000 shares of Common Stock to Professor
Razeghi.
Current and Future Markets
The Company has been selling its products to customers for use in a wide
range of applications requested by customers. For a description of existing
products see "Prospectus Summary - Manufacturing and Products." A purchaser of
the Company's products will typically incorporate the products into a particular
device or application developed by such purchaser. Depending upon a customer's
needs, the products purchased from the Company can either be sold in an
unpackaged processed form or in a packaged processed form. In situations where
packaged products are sold, they generally provide the Company with a
substantially higher profit margin.
There are many industries which are currently engaged in product and
design programs for which specialized HPDL's will be essential. The development
of one or more of these areas could greatly increase the demand for the
Company's products. It should be noted that the Company may be required to
expand its operations in order to meet such potential demand and that there can,
however, be no assurance that such increased demand for the Company's products
will occur or that the Company will be able to sufficiently expand its
operations to meet such increased demand.
Manufacturing Facility
Initially, the Company has installed and is operating a single-wafer V-80H
DMS controlled MBE machine at its manufacturing facility, which machine is
capable of producing one three-inch HPDL wafer every 3 to 4 hours. (An HPDL
wafer is the completed crystal structure on which layers of material have been
deposited. The Company's HPDL products are produced from the completed HPDL
wafers.) The Company's manufacturing facility includes all related facilities
and equipment necessary for such production, such as a 4,500 sq. ft. class 1,000
clean room and the tooling and testing equipment for its production processing
line. The Company intends to expand its facility within the next year,
consistent with anticipated sales levels, and/or purchase additional equipment
for its existing facility which will provide the capability of producing
three-inch HPDL wafers and four-inch HPDL wafers. As of the date of this
Prospectus, the purchase of facilities and equipment has amounted to
approximately $2,700,000, net of accumulated depreciation.
On December 18, 1996 the Company entered into an agreement (the "Sale and
Leaseback Agreement") with the Broome County IDA, in which the Company sold and
leased back its manufacturing facilities and equipment to the Broome County IDA.
The Company entered into the Sale and Leaseback Agreement in order to take
advantage of certain benefits offered by the Broome County IDA to induce
economic expansion through tax abatement and expansion of employment levels The
sale price was $1.00 and the lease payment is $1.00 per year for twenty years.
In accordance with the Sale and Leaseback Agreement, the Company has the
unilateral right at any time to purchase from the Broome County IDA all assets
sold to them for the price of $1.00. The Sale and Leaseback Agreement also
provides that the Company would make payments in lieu of taxes at a rate
dependent on employment levels. All rights of ownership in the facilities and
equipment remain with the Company. This transaction was reflected on the books
of the Company as if there were no Sale and Leaseback on the basis that the
monetary values of the transaction and the property rights did not represent in
substance a true sale and leaseback transaction.
The Company has not yet received any significant property tax reductions
but expects to in the future as the increase in taxable basis and number of new
jobs created is incorporated into the taxing authority rolls.
The Company is required to create 5-10 new jobs per year to achieve up to
a 40% reduction in property taxes and up to 101 new jobs per year to achieve
property tax reductions of up to 70%.
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Manufacturing and Products
General
The manufacturing process for the growth of HPDL wafers and the further
manufacturing steps necessary to process and package these wafers into bars,
chips and multi-bar stacked arrays in original equipment manufacturer ("OEM") or
end user ready format is a highly technical process. The general description of
these processes which follows necessarily simplifies the essentials and by its
nature does not include many of the more intricate elements involved in
successfully carrying out the complex growth and manufacture of HPDLs.
Growth
The two principal growth methods which have been developed to manufacture
HPDLs are MOCVD, the process that the Company believes is used by most of its
competitors (including SDL, Inc.), and MBE, the process which the Company is
using. MOCVD has been the prevailing manufacturing process, to date, even though
the yields of acceptable or usable wafers associated with this process (when
compared with the total number of wafers grown) are believed to be as low as
10%. The MBE process has historically had even lower useable wafer yields.
However, by monitoring and controlling the MBE production process with its
licensed DMS technology, the Company has developed what it believes to be a
process capable of producing significantly higher yields of acceptable or usable
wafers (which meet the quality standards of existing MOCVD produced HPDLs) and,
thus, of producing such wafers at a significantly reduced cost per wafer.
The Company's HPDL manufacturing method, the MBE method, is a process of
growing HPDLs by depositing very thin layers of crystalline material on a wafer
substrate, using intense heat in an ultra high vacuum environment maintained
under strict clean room conditions. The process involves vaporizing aluminum,
gallium and arsenic in their metallic (molecular) forms (as opposed to a gaseous
form, such as that used in the MOCVD growth process, which would be subject to
extensive regulation) under intense heat, causing atoms of aluminum, gallium and
arsenic to travel from their sources to the heated wafer. This process results
in the depositing of layers of aluminum, gallium and arsenic on the wafer. The
MBE growth environment utilizes a vacuum at pressures so low that individual
molecules are unlikely to collide with one another; hence, they travel in a
molecular beam. It should be noted that the Company will also be producing
aluminum free wafers under the Northwestern License.
Prior to the development of DMS, the MBE process had limited success in
producing repeatable, high quality wafers that met the precise specifications
necessary for HPDLs. This resulted from an inability to sufficiently control the
growth process on a layer by layer basis. With DMS hardware and software
controls added to MBE, the Company has the ability to produce uniform HPDLs with
significantly higher yields of acceptable or useable wafers.
An additional cost advantage associated with the DMS controlled MBE
process is that while 100% of the wafers produced with MOCVD require testing
(due to the inherent lack of uniformity and reproducibility of the MOCVD process
output), only a 20% sample of the wafers produced with the DMS/MBE process needs
to be tested (due to the inherent uniformity of the MBE output when DMS is used
to control the process). In addition, while an MOCVD wafer growth production run
takes less time than an MBE wafer growth production run, the time required to
load and unload the wafers and to prepare each wafer for growth is less with the
MBE process. As a result, overall production times associated with the MOCVD and
the MBE/DMS growth manufacturing processes are basically equivalent.
Since the Company acquired the exclusive rights to the aluminum-free
technology from Northwestern University the Company has embarked upon a
development program to ascertain the most cost effective production technique
for this technology. The Company is evaluating MOCVD, gas source MBE and solid
source MBE/DMS. The Company currently has processed a number of aluminum-free
wafers and is encouraged by the preliminary results on this new product line.
See "Prospectus Summary-The Company-Strategy."
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Processing
After the growth process is completed and the wafers have been tested (a
complicated process requiring dedicated testing equipment) acceptable wafers are
processed and cut (a process referred to as cleaving) into one centimeter
individual laser bars. Each laser bar contains multiple laser chips or laser
emitters. The actual number varies depending upon the desired power
characteristics of the laser chip or emitter. The surface of the bars is then
given optical facet coatings in order to create the laser beam path that is
formed by the laser mirrors.
Processing is a complex skill requiring specialized training and ability.
Although, once grown (regardless of whether on a single-wafer or a multi-wafer
machine), wafers can be processed in batches, such processing takes expensive
dedicated equipment and generally requires several weeks to complete. The
Company has hired and continues to interview a number of highly skilled
processing engineers and continues to interview candidates for positions in
processing who are thoroughly familiar with all facets of this highly
specialized technical manufacturing process.
Because of the higher uniformity of the wafers grown using the DMS
controlled MBE process, the Company expects to be able to produce as many as 400
laser bars from each three-inch wafer produced on a single-wafer MBE machine.
Thus, from a single wafer, the Company anticipates that it could produce up to
4,000 single laser emitters or chips, based on one industry processing standard
of approximately 10 chips per bar. However, due to the increased handling
involved with the manufacture of single chips, the yields of commercially
acceptable products are substantially lower with such production. In addition,
while certain HPDL customers do buy single chips, such chips generally must each
be individually packaged into user ready format. In addition to packaged chips
and bars, the Company intends to market a portion of its output to customers
wishing to purchase unpackaged laser chips or bars (at lower prices than
packaged products). These unpackaged HPDL products are not currently offered for
sale by most of the Company's principal competitors.
Packaging
The final steps in the production process are the actual assembly and
packaging of the fully processed chips and bars into an OEM or end user ready
format. The Company's packages include a range of products, from single chip
devices, such as the C-Mount, the 9mm package and the TO-18 package, to multiple
chip devices, such as the single-LD bar package and the stacked array package.
Customers' applications and preferences dictate which package is best for their
needs, and adaptations of packages for specific product requirements can be
designed. Wherever appropriate, portions of the packaging process may be
subcontracted by the Company. Each packaging configuration can be utilized for
different applications with the principal differences being the power of the
laser diode device or its output and/or coupling connections. The sizes of the
typical HPDL products are merely a function of industry convention. Thus, the
one centimeter single-laser bar size could be easily modified by the Company or
its competitors to a different size. Various laser chip and bar package
configurations, currently in production and offered for sale, are described
below:
C-Mount
This is a single-chip packaging configuration where a laser diode chip is
mounted on a copper heatsink with a piece of ceramic insulator soldered on. The
C-mount package can be used for diode chips with an output power of up to 2
watts. The end products can be easily incorporated into the customers' OEM
systems.
9mm Package
This is also a single-chip packaging configuration mounted in a different
manner than that of the C-Mount. The 9mm package incorporates a copper heatsink
to which a cap with a window is added. This is a hermetically sealed package and
can be used in rough industrial environments. Diode chips with up to 1 watt
output power can be mounted on the 9mm packages, and the resulting units are
ready for OEM's to fit into their applications.
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TO-18 Package
A single-chip packaging configuration mounted differently than the C-Mount
and 9mm package. The TO-18 package is unique in that it has a base with threads
on it. It is also a hermetically sealed package, and can take laser chips with
output power of up to 1 Watt.
Single-LD Bar Package #1 (LD #1)
This single laser diode bar package is designed to accommodate a
one-centimeter-long 15-Watt laser diode bar. It consists of a copper base plate,
an electrical insulating plate and a copper top plate. The diode laser bar is
mounted P-side down on the copper base plate, and the N-side of the bar is
connected to the copper top plate electrically. This packaged configuration
creates a product that is deliverable to either OEM or commercial end users.
Single-LD Bar Package #2 (LD #2)
This single bar package is similar to LD #1, but with a smaller base
plate. It is designed for laser diode bars with a 10 Watt or less output power.
The packaged laser bar can be deliverable to either OEM or commercial end users.
Single-LD Bar Package #3 (LD #3)
This particular bar package is intended for laser diode bars with an
output power of 20 Watts or more. It is similar to LD # 1 in design except that
it has a thicker base plate. The packaged unit can be deliverable to either OEM
or commercial end users.
Stacked-Array Package
A stacked-array package is a packaging configuration that stacks a number
of single laser diode bars together onto a compact heatsink to increase the
overall power and brightness of the device. The packaged products are
deliverable to either OEM or commercial end users.
Fiber-Coupled Laser Diode Bar Package
This is a packaging configuration that takes one or several single-LD bar
packages and couples the output beam from those diodes into a single fiber or
fiber bundle. The result of the fiber coupling process is much higher output
brightness and more user-friendly beam delivering system.
The office of the Company is at 15 Link Drive, Binghamton, New York 13904,
telephone number: (607) 722-3800.
RECENT DEVELOPMENTS
October 1997 Private Placement
On October 27, 1997 (the "First Closing"), the Company completed a private
placement (the "Private Placement") of 10 Units (the "Units"), each Unit
consisting of 200,000 shares of Series A Preferred Stock, for an aggregate
purchase price of $3.5 million. The shares of Series A Preferred Stock were
issued and sold by the Company without registration under the Securities Act in
reliance upon the exemption from registration afforded by Section 3(b) of the
Securities Act and Section 506 of Regulation D promulgated under the Securities
Act in that they were sold solely to "accredited investors" as defined in Rule
501(a) of the Securities Act. Pursuant to the terms of the Private Placement,
one half of the purchase price of each Unit was paid at the First Closing and
the balance was paid as of December 11, 1997 (the "Second Closing"). Half of
each Unit (100,000 shares of Series A Preferred Stock) was delivered at the
First Closing and the balance of each Unit was delivered at the Second Closing.
State Street Securities, Inc., the placement agent for the Units (the "Placement
Agent"), was paid $525,000 for commissions and expenses of which $262,500 was
paid at the First Closing and $262,500 was paid at the Second Closing. After
deducting the Placement Agent's estimated commissions and expenses of $525,000,
in aggregate, the net proceeds of the Private Placement to the Company were
$2.975 million. The net proceeds of the Private Placement are projected to be
used to broaden the Company's presence in additional market applications, as
well as those
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currently being pursued by the Company, including the Digital Video Disc (DVD)
industry, and for working capital and general corporate purposes. There can,
however, be no assurance that the Company will use such proceeds to broaden the
Company's presence in any particular market application.
The shares of Series A Preferred Stock underlying the Units were
convertible, in whole or in part, at the option of the holder thereof and upon
notice to the Company, into fully paid and nonassessable shares of Common Stock
at the Conversion Rate. The Conversion Rate, subject to certain adjustments, was
in the event the conversion date occurred (i) on or prior to December 5, 1997,
one (1) share of Common Stock for each share of Series A Preferred Stock being
converted (the "One for One Conversion Rate"), and (ii) after December 5, 1997,
the number of shares of Common Stock equal to the number of shares of Series A
Preferred Stock being converted divided by the product of the average Market
Price of the Common Stock for the five (5) consecutive trading days immediately
prior to such conversion date multiplied by 70% (the "Conversion Formula"). The
Market Price for any date was the closing bid price of the Common Stock on such
date as reported by the National Association of Securities Dealers' Automated
Quotation System ( the "Market Price").
On December 30, 1997, the holders of all 2,000,000 outstanding shares of
Series A Preferred Stock converted their shares of Series A Preferred Stock into
4,712,810 shares of Common Stock, in aggregate. The number of shares of Common
Stock issued to each holder of the Series A Preferred Stock upon conversion of
the Series A Preferred Stock was determined by dividing the number of shares of
Series A Preferred Stock being converted by the product of the average Market
Price of the Common Stock for the five (5) consecutive trading days immediately
prior to December 30, 1997, multiplied by 70% ($0.424375) in accordance with the
terms of the Series A Preferred Stock.
The Company has agreed to use its best efforts to have the Registration
Statement declared effective within 100 days following the First Closing. If the
Registration Statement has not been declared effective 100 days after the First
Closing, the Company has agreed to issue to each Unit holder 10,000 shares
(100,000 shares, in aggregate) of Common Stock for each Unit owned thereby.
Thereafter the Company has agreed to issue to each Unit holder 10,000 shares of
Common Stock for each Unit owned thereby for each additional thirty days of
delay on the effectiveness of such Registration Statement. The Company is
obligated to keep the Registration Statement effective for at least nine months.
During the twelve (12) month period following the First Closing, the
Company has agreed to grant the Placement Agent a fifteen (15) day right of
first refusal to obtain equity financing on behalf of the Company on the same
terms as are offered by a bona fide third party or third party agent for such
financing. The Company had also granted the Placement Agent the option during
the ninety (90) day period following the Second Closing to have its investors
purchase on a private placement basis one (1) million non-registered shares of
Common Stock for an aggregate purchase price of $1.75 million less commissions
and expenses estimated at $262,500 payable to the Placement Agent. On December
30, 1997, the Company and the placement agent amended the option reducing the
option exercise period to the ten (10) days following the effective date of the
Registration Statement of which the Prospectus is a part and reducing the
aggregate purchase price to $750,000 less commissions and expenses estimated of
$50,000 payable to the Placement Agent.
In accordance with the Emerging Issues Task Force (EITF) Topic D-60
"Accounting for the Issuance of Convertible Preferred Stock and Debt Securities
with a Nondetachable Conversion Feature," the Company has accounted for the One
for One Conversion Rate as a beneficial conversion feature. Such beneficial
conversion feature has been computed as the product of (i) the difference
between the quoted market price for the Common Stock at the date of the First
Closing ($3.48) and (ii) the price paid for the Series A Preferred Stock issued
at the First Closing ($1.75) and the number of shares of such Series A Preferred
Stock issued at the First Closing. The aggregate value, amounting to $1,688,000,
of such beneficial conversion feature has been recorded on the books of the
Company as a charge to income available to holders of Common Stock and as an
increase in additional paid-in capital. The Series A Preferred Stock issued at
the Second Closing (which occurred on December 11, 1997) was immediately
convertible into 1,098,732 shares of Common Stock based on the Conversion
Formula. Had such shares of Series A Preferred Stock been converted at the
Second Closing, the value of the Common Stock obtained by the holders of the
Series A Preferred Stock upon conversion would have been $1,202,000, based on
the closing market price for the Common Stock as reported on the National
Association of Securities Dealers' Automated Quotation System on the date of the
Second Closing ($1.09 per share), which is less than the price paid by the
holders of the Series A Preferred Stock for the Series A Preferred Stock of
$1,750,000. Accordingly, the nondetachable conversion feature associated with
the Series A Preferred Stock issued at the Second Closing was not "in the money"
and no value has been attributed to such nondetachable conversion feature.
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Placement agency fees of $525,000 have been charged against the gross
proceeds of the offering in accordance with Securities and Exchange Commission
Staff Accounting Bulletin Topic 5-A, "Expenses of Offering."
Financial Public Relations Agreement
The Company has entered into a one year agreement (the "MDC Consulting
Agreement") with Marketing Direct Concepts, Inc. ("MDC") in connection with
services related to the Private Placement and ongoing services of MDC from the
completion thereof. Under the MDC Consulting Agreement, the Company will receive
a range of services including the establishment of contact with a number of
brokers, the preparation of certain reports the establishment of a Web site and
the arrangement of broker teleconferences.
In consideration of the services to be provided by MDC, the Company will
provide MDC or its designees with the following compensation:
(i) A payment of $75,000, on or before November 3, 1997;
(ii) 40,000 shares of non-registered Common Stock on or before the Second
Closing, which shares of Common Stock were issued in November 1997;
(iii) Delivery on October 27, 1997 of 150,000 three year warrants to
purchase Common Stock with exercise prices as follows:
(A) 75,000 at $3.4688;
(B) 25,000 at $4.3438;
(C) 25,000 at $4.8438; and
(D) 25,000 at $5.3438;
(iv) Following the Second Closing, 600,000 warrants at $3.4688
exercisable for three (3) years from the Second Closing; and
(v) A fee of $10,000 per month commencing on November 1, 1997.
The warrants described in (iii) and (iv) above are referred to herein as the
"MDC Warrants". See "Description of Securities-MDC Warrants."
The Shares being offered hereby include those underlying the Series A
Preferred Stock, the MDC Warrants issued by the Company in connection with the
Private Placement and 20,000 warrants issued to a consultant to the Company, as
well as 55,000 shares issuable to attorneys for the Company in payment for
outstanding legal fees of $96,250, in aggregate. The issuance of shares of
Common Stock by reason of conversions of the Series A Preferred Stock, the
exercise of MDC Warrants, the exercise of the warrants issued to the consultant
and/or to attorneys to the Company may have a depressive effect upon the market
in that there may not exist sufficient depth or breadth in the market for the
Common Stock to absorb the sale of additional shares that may come to the
marketplace by reason of such conversions, exercises and issuances. See
"Prospectus Summary-Recent Developments-October 1997 Private Placement" and
"-Financial Public Relations Agreement," "Description of Securities-MDC
Warrants," "Selling Stockholders" and "Legal Matters."
Reincorporation in Delaware
On September 26, 1997, the Company reincorporated under the laws of the
state of Delaware by merging into its wholly-owned Delaware subsidiary (the
"Merger"). The Company was originally incorporated in New York in September 1993
and received stockholder approval for the Merger prior to the Company's initial
public offering of its Common Stock. The Merger could not be completed until
clearance was received from the New York State Department of Taxation and
Finance, which clearance was granted on September 25, 1997.
Settlement of Konopelski Litigation
The Company had been engaged in a dispute with Theodore Konopelski a
former director, officer and employee of the Company regarding his termination
for cause. An arbitration proceeding had been instituted by Mr. Konopelski in
Syracuse, New York challenging his termination under his employment contract.
Mr. Konopelski sought damages in the aggregate of $500,000.
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On December 1, 1997 the Company and Mr. Konopelski settled all outstanding
disputes. Pursuant to the settlement, the Company paid $140,000 to Mr.
Konopelski without acknowledgment of any fault or further liability, and Mr.
Konopelski in addition to settling all claims, agreed to maintain confidential
any business information regarding the Company and to remain bound by his
fiduciary duties as a former director, officer and employee of the Company.
Resolution of this litigation did not have a material adverse impact on
the Company's results of operations or financial condition.
Voting Proxy
Holders of 2,356,405 shares of Common Stock have granted Dr. Geoffrey T.
Burnham an irrevocable proxy to vote their shares as long as such shares are
owned by such holders and so long as Dr. Burnham continues as the Chief
Executive Officer of the Company. See "Selling Stockholders."
THE OFFERING
Common Stock Outstanding on the date of
this Offering(1)(2)........................ 9,159,552 shares
Risk Factors............................... This offering involves a high degree
of risk. See "Risk Factors."
Use of Proceeds............................ All of the proceeds of this offering
will be paid to the respective
Selling Stockholders and none of the
proceeds will be received by the
Company. See "Use of Proceeds."
Nasdaq SmallCap Symbol
Common Stock........................... SLIC
Registered Warrants.................... SLICW
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(1) Does not include (i) 250,000 shares of Common Stock reserved for issuance
under the Company's 1995 Stock Option Plan (the "Plan"), of which 86,500
shares have been reserved for currently outstanding options, (ii) 107,589
shares issuable upon exercise of options and warrants issued outside of
the Plan to certain executive officers, non-employee directors and
consultants, and (iii) 2,118,000 shares issuable in connection with the
issued and outstanding Registered Warrants.
(2) Includes (i) 4,712,810 shares of Common Stock issued upon conversion of
2,000,000 shares of Series A Preferred Stock, (ii) 55,000 shares issued to
attorneys for the Company as payment for outstanding legal fees of
$96,250, in aggregate, (iii) 750,000 shares of Common Stock issuable upon
the exercise of the MDC Warrant, and (iv) 20,000 shares of Common Stock
issuable upon exercise of warrants issued to another consultant to the
Company. See "Prospectus Summary-Recent Developments-October 1997 Private
Placement" and "-Financial Public Relations Agreement," "Description of
Securities--MDC Warrants," "Selling Stockholders" and "Legal Matters."
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RISK FACTORS
An investment in the Shares offered hereby involves a high degree of risk.
The following factors, in addition to those discussed elsewhere in this
Prospectus should be considered carefully in evaluating the Company and its
business. An investment in the Shares is suitable only for those investors who
can bear the risk of loss of their entire investment.
Special Note Regarding Forward-Looking Statements and Risk Factors
Certain statements in this Prospectus, including information set forth in
the Company's report to the Commission filed under the Exchange Act which are
incorporated by reference herein, constitute or may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Litigation Reform Act"). The Company desires to avail itself of
certain "safe harbor" provisions of the Litigation Reform Act and is therefore
including this special note to enable the Company to do so. Forward-looking
statements included in this Prospectus or hereafter included in other publicly
available documents filed with the Commission, reports to the Company's
stockholders and other publicly available statements issued or released by the
Company involve known and unknown risks, uncertainties, and other factors which
could cause the Company's actual results, performance (financial or operating)
or achievements to differ from the future results, performance (financial or
operating) achievements expressed or implied by such forward looking statements.
Such future results are based upon management's best estimates based upon
current conditions and the most recent results of operations. These risks
include, but are not limited to, need for additional capital, certain patent and
technology considerations, competition and technological changes, governmental
regulations, dependence upon key personnel and other risks detailed in the
Company's Commission filings, each of which could adversely affect the Company's
business and the accuracy of the forward-looking statements contained herein.
Risk factors and investment considerations which may materially affect the
Company, impact upon any forward looking statements, and which otherwise should
carefully be considered, include the following:
History of Significant Losses; Accumulated Deficit; Shareholders' Deficit;
Anticipated Future Losses. Through March 31, 1997, the Company was classified as
a development-stage company for financial accounting purposes by reason of the
fact it has not generated significant revenues from operations prior to such
date. Since that date, the Company has continued to incur significant losses.
The Company has incurred operating losses in each period since its inception,
resulting in an accumulated deficit at September 30, 1997 of $8,509,917 and has
continued to incur losses through the date hereof. It is anticipated that the
Company will continue to incur losses for the immediate future until it is able
to generate sales levels sufficient to support its operations. There can be no
assurance that the Company will be able to achieve profitable operations.
Need for Additional Capital. The proceeds from the sale of the Series A
Preferred Stock will not be sufficient to meet the future capital needs of the
Company. The Company intends to seek additional financing, from financial and
banking institutions as well as further equity financing. In the event that the
Company's plans change or its assumptions change or prove to be inaccurate, the
Company could be required to obtain additional financing sooner than currently
anticipated. In connection with the development of its business, the Company
will be required to buy substantial additional equipment as well as increase the
size of its manufacturing facility and expand its operating personnel. Such
expansion will require substantial additional capital beyond that currently
available to the Company. Such capital will have to be raised from the sale of
additional equity and/or from bank or institutional financing. There can be no
assurance the Company will be able to obtain additional financing including any
institutional financing, when needed, on commercially reasonable terms or at
all. Any inability to obtain additional financing when needed would have a
material adverse effect on the Company, including requiring the Company to
curtail its manufacturing plans and possibly cease its operations. In addition,
any additional equity financing may involve substantial dilution to the
Company's then existing shareholders.
Under certain bank loans described in Note 8 of the Company's audited
financial statements the Company is obligated to maintain certain financial
ratios and indicators. As of the date of this Prospectus, the Company is in
compliance with such financial ratios and indicators. The Company believes that,
in the event it failed to comply with such financial ratios and indicators and
the bank loans were called, that the Company's financial condition and results
of operations would not be materially adversely affected and that it could
obtain alternative financing on substantially the same terms as the bank loans
based upon the equity in the assets securing such loans. There can, however, be
no assurance that the Company would be able to secure such additional financing
or that the terms of such alternative financing would be an equivalent cost
basis.
Risk Associated with the Manufacturing Process. The Company is currently
engaged in the manufacturing process of HPDLs. The manufacture of HPDLs is a
highly complex and precise process, requiring production in a highly controlled
and clean environment. Even inadvertent or slight changes in the Company's
manufacturing process or use of defective or contaminated
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materials by the Company could adversely affect the Company's ability to achieve
acceptable manufacturing yields and product reliability. Furthermore, the
Company will have a limited number of employees dedicated to the operation and
maintenance of its equipment and the loss of any of their services could affect
the Company's ability to effectively operate and service such equipment. There
can be no assurance that the Company will be able to maintain acceptable
manufacturing yields or ship products on time. Product shipment delays or the
failure to achieve acceptable manufacturing yields would have a material adverse
effect on the Company's business and operations. As additional manufacturing
capacity is required, problems may be experienced in establishing such capacity.
Competition; Rapid and Fundamental Technological Change. The HPDL market
is highly competitive. Many of the Company's competitors have substantially
greater financial, manufacturing, personnel, technological, marketing,
distribution, operating, administrative and other resources than the Company and
have established reputations for success in the development, licensing, sale and
servicing of their products and technology. In addition, the Company believes
that all current competitors of the Company utilize MOCVD production methods and
can be expected to vigorously assert the claim that the MOCVD technology is
superior to that of the Company's DMS/MBE technology. The Company faces intense
competitive pressure and may be unsuccessful even if its products and
manufacturing process are superior to those of its competitors. Moreover,
although the Company believes that current MOCVD methodology will be vulnerable
to competition from the DMS/MBE process, competitors have been striving to
improve yields under the MOCVD process and may, in the future, develop a means
of making such process more cost effective. 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 those being
developed by the Company. There can be no assurance that the Company will be
able to compete successfully with these companies or other competitors. As the
market for the Company's products grows, new competitors are likely to emerge.
Additional competition could adversely affect the Company's operations.
Moreover, the HPDL market is characterized by extensive research and rapid
technological change. The development by others of new or improved products,
processes or technologies may make the Company's current or future products
obsolete or less competitive than currently anticipated. There can be no
assurance that advances in other or alternative technologies will not make the
Company's products obsolete or less competitive.
Dependence on Third Party Suppliers of Raw Materials and Components. The
Company's proposed products will require high quality raw materials and
components which the Company intends to purchase from others. The Company's
ability to manufacture its products will depend upon its ability to establish
commercial relationships with at least some of such suppliers. The Company does
not maintain, and does not intend to maintain, supply agreements with any of its
suppliers (intending instead to purchase needed raw materials and components
pursuant to purchase orders in the ordinary course of business). The Company's
production will also be dependent upon its suppliers satisfying the Company's
performance and quality specifications and dedicating sufficient production
capacity to meet the Company's scheduled delivery, times. There can be no
assurance that the Company will be able to establish any commercial
relationships with suppliers or, if it is able to do so, that such suppliers
will be able to satisfy the Company's scheduled delivery or performance
requirements or have sufficient production capacity to satisfy such requirements
during any period of sustained demand. Failure or delay by the Company's
suppliers in supplying the Company with needed raw materials and components
would adversely affect the Company's operating margins and the Company's ability
to manufacture and deliver products on a timely and competitive basis, which
could, in turn, have a material adverse effect on the Company.
Dependence Upon Exclusive Rights to the DMS Technology and Aluminum Free
Technology; Uncertainty of Intellectual Proprietary Rights; No Assurance of
Enforceability or Significant Competitive Advantage. The Company's rights to the
DMS technology are governed by the Company's License Agreement with the Air
Force. The Company's rights to aluminum free technology are governed by the
Northwestern License. The Company's success and potential competitive advantage
are dependent upon its ability to exploit the technology under both such
agreements and to do so, if possible, on an exclusive basis. Accordingly, the
Company considers patent protection for such DMS technology, and its trade
secrets relating thereto, to be critical to the Company's business prospects.
While both licenses are based on patents received by the Air Force and
Northwestern University, respectively, there can be no assurance, however, that
the patents will not be invalidated, circumvented or challenged. Moreover, no
applications for patent protection in foreign countries have yet been made.
There can also be no assurance that others will not independently develop, or
have not already developed, similar or more advanced technologies than the
Company's technology; that others will not design around or have not already
designed around aspects of the technology and/or the Company's trade secrets
developed therefrom; or that the steps taken by the Company and the Air Force,
to date, will prevent misappropriation of the DMS technology. In addition, to
the extent that consultants, key employees or third parties apply technological
information independently developed by them or others to Company projects,
disputes may arise as to the proprietary rights to such information. The laser
industry is characterized by frequent litigation regarding patent and other
intellectual property rights. Litigation may be necessary in the future to
enforce the intellectual property rights of the Company or to determine the
validity and scope of the proprietary rights of others. There can be no
assurance that the Company will have the financial or other resources necessary
to enforce or defend a
14
<PAGE>
patent infringement or proprietary rights violation action. If the Company's
products or proposed products are deemed to infringe upon the patents or
proprietary rights of others, the Company could, under certain circumstances,
become liable for damages which could also have a material adverse effect on the
Company.
The Company has been advised by another company that it believes that the
Northwestern License does not cover the production of aluminum free HPDLs under
manufacturing methods other than MOCVD. At this time, no litigation has been
instituted by the Company, Northwestern or any third party with respect to the
scope of the patent rights under the Northwestern License.
Potential Product Liability Claims. The products that the Company will
market are intended for use by commercial end users and OEMs in their end
products. Some of the Company's products when and if produced may become
critical components in medical and surgical devices or in printing, data storage
and data transmission and communications systems. The use of HPDLs is regulated
by the Center for Disease and Radiological Health because the misuse or
mishandling of such products could result in injury from exposure to the laser
light emissions. A malfunction of the Company's products in any application
could result in tort lawsuits based on injuries resulting from such
malfunctions, or in contract damages lawsuits resulting from the high costs of
repairing or replacing the Company's HPDLs in applications such as satellites or
fiber cables or due to lost profits for data transmission down time. There can
be no assurance that the Company's warranty disclaimers and liability
limitations and adherence to safety standards will be effective in limiting the
Company's liability for any such damages. Moreover, while the Company maintains
product liability insurance in the amount of $1,000,000 per occurrence with a
$2,000,000 aggregate limit, there can be no assurance that this insurance will
be sufficient to cover potential claims or that adequate levels of coverage will
be available in the future at reasonable cost. A partially insured or a
completely uninsured claim against the Company could have a material adverse
effect on the Company.
Potential Adverse Impact of Environmental Regulations. The Company is, and
will be, subject to a variety of federal, state and local governmental
regulations related to the storage, use, discharge and disposal of toxic,
volatile or otherwise hazardous or regulated chemicals used in its manufacturing
processes. There can be no assurance that changes in environmental regulations
will not impose the need for additional capital equipment or other requirements.
Further, such regulations could restrict expansion of the Company's operations.
Any failure by the Company to obtain required permits for, control the use of,
or adequately restrict the discharge of, hazardous or regulated substances under
present or future regulations could subject the Company to substantial
liability, require costly changes in the Company's manufacturing processes or
facilities, or cause its manufacturing operations to be suspended. Such
liability or suspension of manufacturing operations could have a material
adverse effect on the Company's results of operations or financial condition.
The Company would also be forced to eliminate certain substances from its
manufacturing processes. Failure to obtain adequate replacements could result in
decreased manufacturing yield, impairment of product reliability, inability to
fabricate certain products, and increased manufacturing costs.
Dependence Upon, and Need for, Additional Key Personnel. The success of
the Company will be largely dependent on the abilities and continued personal
efforts of Dr. Geoffrey T. Burnham, its Chairman, President and Chief Executive
Officer whose employment agreement expires in October 1998. Any incapacity or
inability of Dr. Burnham to perform his services would have a material adverse
effect on the Company. Moreover, other than key man life insurance on the life
of Dr. Burnham in the amount of $1 million, the Company does not intend to have
key man life insurance on the lives of its officers or employees. The success of
the Company will also be dependent upon its ability to attract and retain
experienced HPDL production, marketing and manufacturing personnel with the
specific executive skills necessary to assist the Company. The Company faces
competition for personnel from other companies, academic institutions,
government entities and other organizations, many of which have significantly
greater resources than the Company. There can be no assurance that the Company
will be able to attract and retain personnel, and the inability to do so could
have a material adverse affect on the Company.
No Dividends. Since its inception, the Company has not paid any dividends
on its Common Stock. The Company intends to retain future earnings, if any, to
finance its business operations and, accordingly, although the Company is not
restricted from doing so by virtue of its Certificate of Incorporation, By-laws
or any agreement, does not anticipate paying any cash dividends on its Common
Stock in the reasonably foreseeable future.
Tax Loss Carryforward. The Company's net operating loss carryforwards
("NOLs") expire in the years 2008 to 2010. Under Section 382 of the Internal
Revenue Code of 1986, as amended, utilization of prior NOLs is limited after an
ownership change, as defined in Section 382, to an annual amount equal to the
value of the loss corporation's outstanding stock immediately before the date of
the ownership change multiplied by the federal long-term exempt tax rate. The
additional equity financing obtained by the Company since its inception may have
resulted in an ownership change and, thus, in a limitation on the Company's use
of its prior NOLs. In the event the Company achieves profitable operations, any
significant limitation on the utilization of its NOLs would have the effect of
increasing the Company's tax liability and reducing net income and available
cash resources.
15
<PAGE>
Impact of Nasdaq Listing on Marketability of Securities. The Common Stock
and Registered Warrants are quoted on the Nasdaq as of the date of this
Prospectus. The National Association of Securities Dealers, Inc. ("NASD") has
rules which establish criteria for the continued listing of securities on
Nasdaq. For continued listing on Nasdaq, a company must maintain at least
$2,000,000 in net tangible assets, $35,000,000 in market capitalization or
$500,000 in net income (in the latest fiscal year or two of the last three
fiscal years), a public float of at least 500,000 shares and a $1,000,000 market
value, at least 300 shareholders, a minimum bid price of $1.00 per share and at
least two market. The Company may not be able to maintain the standards for
continued listing in the future and the listed securities could, at such time,
become subject to delisting from Nasdaq. If the shares or warrants are not
listed or are delisted in the future, trading in the securities could be
conducted on the OTC Bulletin Board or in the over-the-counter market in what is
commonly referred to as the "pink sheets." If this occurs, an investor will find
it more difficult to dispose of the securities or to obtain accurate quotations
as to the price of the securities and it could have an adverse effect on the
news coverage of the Company.
Disclosures Relating to Low Priced Stocks; Possible Restriction on Resales
of Low Priced Stocks and on Broker Dealer Sales; Possible Adverse Effect of
Penny Stock Rules on Liquidity of the Company's Securities. If the Company's
securities were delisted from Nasdaq, they may become subject to Rule 15g-9
under the Exchange Act, which imposes additional sales practice requirements on
broker-dealers which sell such securities to persons other than established
customers and accredited investors (generally, individuals with net worths in
excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together
with their spouses). For transactions covered by this Rule, a 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. Consequently, such
Rule may affect the ability of broker-dealers to sell the Company's securities
and may affect the ability of purchasers in this offering to sell any of the
securities acquired hereby in the secondary market.
In addition, if the Company's securities were to become delisted from
trading on Nasdaq and the trading price of the Common Stock was to fall below
$5.00 per share, trading in the Common Stock would also be subject to the
requirements of certain rules promulgated under the Exchange Act, which require
additional disclosure by broker-dealers in connection with any trades involving
a stock defined as a penny stock (generally, any non-Nasdaq equity security that
has a market price (as therein defined) of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions). For
any transaction by broker-dealers involving a penny stock, unless exempt, the
rules require delivery, prior to a transaction in a penny stock, of a risk
disclosure document relating to the penny stock market. Disclosure is also
required to be made about compensation payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stocks. The additional burdens imposed upon broker-dealers similar to
those enumerated in the preceding paragraph and these requirements may
discourage broker-dealers from effecting transactions in the Company's
securities, which could severely limit the market liquidity of the Company's
securities and the ability of purchasers in this offering to sell the Company's
securities in the secondary market.
Certain Anti-Takeover Provisions. The Board of Directors of the Company
has the authority to issue up to 20,000,000 shares of Preferred Stock and to
determine the price, rights, preferences and privileges of those shares without
any further vote or action by the stockholders. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. The
issuance of shares of Preferred Stock 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. Other than the issuance of the shares of Series A
Preferred Stock in connection with the Private Placement, the Company has no
present intention to issue additional shares of Preferred Stock. Additionally,
the Company is subject to anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which will prohibit the Company from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. The application of Section 203 also could have the effect of
delaying or preventing a change-in-control of the Company. This provision may
also reduce the likelihood of an acquisition of the Company at a premium price
by another person or entity.
USE OF PROCEEDS
The Company will receive no proceeds from any sales of Shares by the
Selling Stockholders. The net proceeds of the Private Placement are projected to
be used to broaden the Company's presence in additional market applications, as
well as those currently being pursued by the Company, including the Digital
Video Disc (DVD) industry, and for working capital and general corporate
purposes. There can, however, be no assurance that the Company will use such
proceeds to broaden the Company's presence in any particular market application.
16
<PAGE>
DESCRIPTION OF SECURITIES
General
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock and 5,000,000 shares of $0.01 par value Preferred Stock
("Preferred Stock"), of which 2,000,000 shares have been designated "Series A 8%
Convertible Preferred Stock." As of December 30, 1997, 9,108,052 shares of
Common Stock and no shares of Series A Preferred Stock are issued and
outstanding. All of the issued and outstanding shares of Common Stock are
validly issued, fully paid and non-assessable. See "Selling Stockholders."
Common Stock
Holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders, including the election of
directors. There is no cumulative voting with respect to the election of
directors, with the result that the holders of more than 50% of the shares
voting for the election of directors can elect all of the directors. Holders of
Common Stock will be entitled to receive dividends when, as and if declared by
the Board of Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities. The holders of shares of
Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
Preferred Stock
In connection with the Company's reincorporation in Delaware, the Company
included within its Delaware Certificate of Incorporation, a provision
authorizing the Company to issue "blank check" Preferred Stock, from time to
time, in one or more series, upon authorization by the Company's Board of
Directors. The Board of Directors, without further approval of the stockholders,
will be authorized to fix the dividend rights and terms, conversion rights,
voting rights, redemption rights and terms, liquidation preferences, and any
other rights, preferences, privileges and restrictions applicable to each series
of preferred stock. The issuance of Preferred Stock, while providing flexibility
in connection with possible acquisitions and other corporate purposes, could,
among other things, adversely affect the voting power of the holders of the
Common Stock and, under certain circumstances, make it more difficult for a
third party to gain control of the Company, discourage bids for the Common Stock
at a premium or otherwise adversely affect the market price of the Common Stock
and Registered Warrants.
Registered Warrants
In connection with the Company's initial public offering, the Company
issued Registered Warrants to purchase an aggregate of 2,118,000 shares of
Common Stock at an exercise price of $5.00 per share. The Registered Warrants
are exercisable on or prior to March 19, 2000.
The Registered Warrants are redeemable by the Company, upon the consent of
the underwriter in the Company's initial public offering (the "Underwriter")
upon notice of not less than 30 days, at a price of $.10 per Registered Warrant,
provided that the closing bid quotation of the Common Stock for a period of 30
consecutive trading days ending on the third day prior to the day on which the
Company gives notice has been at least 150% (currently $7.50, subject to
adjustment) of the then effective exercise price of the Registered Warrants. The
holders of the Registered Warrants will have the right to exercise their
warrants until the close of business on the date fixed for redemption.
MDC Warrants
Pursuant to the MDC Agreement, the Company issued the MDC Warrants to MDC
to purchase an aggregate of 750,000 shares of Common Stock with unlimited
piggyback registration rights. Such MDC Warrants include (a) warrants
exercisable at any time for three (3) years from October 27, 1997, to purchase
the following number of shares of Common Stock at the exercise prices indicated:
(i) 75,000 shares of Common Stock at $3.4688; (ii) 25,000 shares of Common Stock
at $4.3438; (iii) 25,000 shares of Common Stock at $4.8438; and (iv) 25,000
shares of Common Stock at $5.3438, and (b) a warrant to purchase 600,000 shares
of Common Stock which will be issued following the Second Closing, and will be
exercisable at any time for three (3) years from the
17
<PAGE>
Second Closing at an exercise price of $3.4688. See "Prospectus Summary-Recent
Developments-Financial Public Relations Agreement."
Transfer Agent and Registrar
The Company's Transfer Agent and Registrar is American Stock Transfer &
Trust Company, 40 Wall Street, 46th Floor, New York, New York 10005.
Reports to Stockholders
The Company furnishes its stockholders with annual reports containing
audited financial statements and such other periodic reports as the Company may
determine to be appropriate or as may be required by law.
18
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each of the Selling Stockholders as of December 30, 1997,
the number of Shares owned thereby covered by this Prospectus and the amount and
percentage ownership of each Selling Stockholder after the offering of the
Shares offered hereby assuming all the Shares covered by this Prospectus are
sold by the Selling Stockholders. Except as otherwise indicated by footnotes
below, none of the Selling Shareholders has had any position, office or other
material relationship with the Company within the past three years other than as
a result of the ownership of the Shares or other securities of the Company.
<TABLE>
<CAPTION>
Shares of Common
Stock Owned Percentage Of
Beneficially Shares Owned Shares Owned
Name of Security Holder and of Record Shares Offered After Offering After Offering
- ----------------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Marketing Direct Concepts, Inc. 750,000(1) 750,000(1) 0 0
Jacob Abramsky 471,281(2)(3) 471,281(2)(3) 0 0
Dafico Investment Corp. 785,468(2) 785,468(2) 0 0
Econor Investment Corporation 471,281(2)(3) 471,281(2)(3) 0 0
Firstimpex, Inc. 785,468(2) 785,468(2) 0 0
Maslo Fund L.td. 471,281(2)(3) 471,281(2)(3) 0 0
Mercacorp Inc. 785,469(2) 785,469(2) 0 0
Isaac Plucki 471,281(2)(3) 471,281(2)(3) 0 0
Joseph Yud 471,281(2)(3) 471,281(2)(3) 0 0
Rubin Baum Levin Constant &
Friedman 24,000(4) 24,000(4) 0 0
Hugh D. Jaeger, Esq. 10,000(5) 10,000(5) 0 0
Hancock & Estabrook 21,000(6) 21,000(6) 0 0
World Capital Funding, Inc. 20,000(7) 20,000(7) 0 0
</TABLE>
- ----------
(1) Includes 750,000 shares of Common Stock issuable upon exercise of the MDC
Warrants. 600,000 shares of the shares listed underlie MDC Warrants which
are deliverable on the Second Closing. See "Prospectus Summary-Recent
Developments-Financial Public Relations Agreement," and "Description of
Securities -MDC Warrants."
(2) Includes shares issued upon conversion of Series A Preferred Stock. See
"Prospectus Summary-Recent Developments-October 1997 Private
Placement."
(3) The holders of these shares have granted Dr. Burnham an irrevocable proxy
to vote their shares so long as such shares are held by such holders and
so long as Dr. Burnham continues as Chief Executive Officer of the
Company. See "Prospectus Summary-Recent Developments-Voting Proxy."
(4) Rubin Baum Levin Constant & Friedman ("Rubin Baum") is counsel to the
Company and has passed on the validity of the Shares being offered hereby.
The shares listed are issuable to Rubin Baum as payment for $42,000 in
outstanding legal fees. See "Legal Matters."
(5) Hugh D. Jaeger, Esq. is counsel to the Company and the shares listed are
issuable as payment for $17,500 in outstanding legal fees.
(6) Hancock & Estabrook is counsel to the Company and the shares listed are
issuable as payment for $36,750 in outstanding legal fees.
(7) Includes 20,000 shares issuable upon exercise of warrants.
19
<PAGE>
PLAN OF DISTRIBUTION
The Shares may be offered and sold from time to time by the Selling
Stockholders as market conditions permit in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices relating to the
then-current market price, or in negotiated transactions. The Shares may be sold
by one or more of the following methods, without limitation: (a) a block trade
in which a broker or dealer so engaged will attempt to sell the Shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) face-to-face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the Selling
Stockholder may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from the Selling
Stockholders in amounts to be negotiated immediately prior to the sale. The
Selling Stockholders and such brokers and dealers and any other participating
brokers or dealers may be deemed to be "underwriters" within the meaning of the
Securities Act, in connection with such sales.
There is no assurance that the Selling Stockholders will sell any or all
of the Shares offered hereby. The Company will receive no proceeds from any
sales of the Shares offered hereby by the Selling Stockholders.
The Company has agreed to pay the filing fees, costs and expenses
associated with the Registration Statement, including compliance with any state
blue sky requirements, commissions and discounts of underwriters, dealers or
agents, if any, and any stock transfer taxes. The Company has also agreed to
indemnify the Selling Stockholders and any underwriters for certain civil
liabilities in connection with the Registration Statement and the securities
offered thereby and hereby, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Shares offered hereby is being passed upon for the
Company by Rubin Baum Levin Constant & Friedman ("Rubin Baum"), New York, New
York. Walter M. Epstein, a partner of Rubin Baum, beneficially owns 5,000 shares
of Common Stock and 35,000 Registered Warrants. In addition, Rubin Baum acquired
24,000 shares of Common Stock in payment of $42,000 of outstanding legal fees
and has been included as a Selling Stockholder herein in respect of such shares.
See "Selling Stockholders."
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996
have been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
20
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the securities offered hereby to any person in
any state or other jurisdiction in which such offer or solicitation is unlawful.
The delivery of this Prospectus at any time does not imply that information
contained herein is correct as of any time subsequent to its date.
------------------
TABLE OF CONTENTS
Page
----
Available Information..........................................................2
Incorporation of Certain Documents by Reference................................2
Prospectus Summary.............................................................3
The Company....................................................................3
Recent Developments...........................................................10
The Offering..................................................................12
Risk Factors..................................................................13
Use of Proceeds...............................................................17
Description of Securities.....................................................17
Selling Stockholders..........................................................19
Plan of Distribution..........................................................20
Legal Matters.................................................................20
Experts.......................................................................20
------------------
================================================================================
================================================================================
5,537,810 Shares of Common Stock
SEMICONDUCTOR
LASER
INTERNATIONAL
CORPORATION
Common Stock
------------------
PROSPECTUS
------------------
January 12, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14.Other Expenses of Issuance and Distribution.
SEC registration fee .................................... $ 3,661.57*
Accounting fees and expenses ............................ $15,000.00**
Legal fees and expenses ................................. $35,000.00**
Printing and Miscellaneous .............................. $ 5,000.00**
TOTAL ................................................... $58,661.57**
==========
* Actual
** Estimated
Item 15. Indemnification of Directors and Officers.
Under Section 145 of the Delaware General Corporation Law ("DGCL"), the
Registrant has broad powers to indemnify its directors, officers and other
employees. This section (i) provides that the statutory indemnification and
advancement of expenses provisions of the DGCL are not exclusive, provided that
no indemnification may be made to or on behalf of any director or officer if a
judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled, (ii) establishes procedures for
indemnification and advancement of expenses that may be contained in the
certificate of incorporation or by-laws, or, when authorized by either of the
foregoing, set forth in a resolution of the stockholders or directors or an
agreement providing for indemnification and advancement of expenses, (iii)
applies a single standard for statutory indemnification for third-party and
derivative suits by providing that indemnification is available if the director
or officer acted in good faith, for a purpose which he reasonably believed to be
in the best interests of the corporation, and, in criminal actions, had no
reasonable cause to believe that his conduct was unlawful, and (iv) permits the
advancement of litigation expenses upon receipt of an undertaking to repay such
advance if the director or officer is ultimately determined not to be entitled
to indemnification or to the extent the expenses advanced exceed the
indemnification to which the director or officer is entitled. Section 145(g) the
DGCL permits the purchase of insurance to indemnify a corporation or its
officers and directors to the extent permitted.
The Registrant's Certificate of Incorporation provides that the Registrant
shall indemnify its officers and directors, as such, to the fullest extent
permitted by applicable law. The Registrant's By-laws provide that expenses
reasonably incurred by any such officer or director in connection with a
threatened or actual action or proceeding shall be advanced or promptly
reimbursed by the Registrant in advance of the final disposition of such action
or proceeding upon receipt of an undertaking by or on behalf of such officer or
director to repay such amount if and to the extent that it is ultimately
determined that such officer or director is not entitled to indemnification
thereafter.
Article Seventh of the Registrant's Certificate of Incorporation provides
that a director of the Registrant shall not be held personally liable to the
Registrant or its stockholders for monetary damages for breaches of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the Registrant or its stockholders (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from
which the director derived an improper personal benefit.
Item 16. Exhibits.
4.1 Form of Underwriter's Warrant Agreement, dated as of March 19, 1996,
between the Registrant and Whale Securities., L.P.(1)
4.2 Form of Warrant Agreement, dated as of March 19, 1996, among the
Registrant, Whale Securities Co., L.P. and American Stock Transfer & Trust
Company(1)
II-1
<PAGE>
4.3 Warrant, dated January 3, 1997 between the Registrant and Finova
Technology Finance, Inc.(1)
4.4 Corrected Certificate of Designations of Series A 8% Convertible Preferred
Stock(2)
4.5 Certificate of Correction of Certificate of Designations of Series A 8%
Convertible Preferred Stock, filed with the Secretary of State of Delaware
on November 4, 1997 (2)
4.6 Certificate of Correction of Certificate of Designations of Series A 8%
Convertible Preferred Stock, filed with the Secretary of State of Delaware
on December 15, 1997 (2)
4.7 Specimen Certificate of Registrant's Series A 8% Convertible Preferred
Stock(2)
4.8 Specimen Certificate of Registrant's Common Stock(1)
4.9 Warrant dated October 23, 1997 between the Registrant and World Capital
Funding, Inc. (2)
4.10 Form of Warrant between the Registrant and Marketing Design Concepts,
Inc(2)
4.11 Form of Subscription Agreement between the Registrant and each purchaser
of the Registrant's Series A 8% Convertible Preferred Stock(2)
4.12 Option Agreement dated October 27, 1997 between the Registrant and State
Street Securities, Inc.(2)
4.13 Amendment to Option Agreement dated December 30, 1997 between the
Registrant and State Street Securities, Inc.(2)
4.14 Form of Voting Proxy(2)
5.1 Opinion of Rubin Baum Levin Constant & Friedman regarding legality(2)
23.1 Consent of Rubin Baum Levin Constant & Friedman included in Exhibit 5.1(2)
23.2 Consent of Price Waterhouse LLP(2)
24.1 Power of Attorney (included on signature page hereto)
- ----------
(1) Incorporated by reference to Registrant's Registration Statement on Form
S-1 (Reg. No. 333-754) which was declared effective by the Securities and
Exchange Commission on March 19, 1996.
(2) Previously filed.
II-2
<PAGE>
Item 17. Undertakings.
The Company hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to: (i) include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, as
amended (the "Securities Act"); (ii) reflect in the prospectus any acts or
events which, individually or together, represent a fundamental change in the
information in the registration statement; and notwithstanding the forgoing, 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 prospects filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the 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) include any additional or changed material information with respect to
the plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement;
provided, however, that clauses (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effect amendment 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; and
(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 Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Securities 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 that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
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 Pre-Effective
Amendment No. 3 to Registration Statement No. 333-39879 on Form S-3 to be signed
on its behalf by the undersigned, thereunto duly authorized, in Binghamton, New
York, on January 12, 1998.
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
By: /s/ Geoffrey T. Burnham
-----------------------------------------------------
Geoffrey T. Burnham, Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 3 to Registration Statement No. 333-39879 on Form
S-3 has been signed by the following persons in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------------------- ----------------------------------------------- ---------------
<S> <C> <C>
/s/ Geoffrey T. Burnham Chairman of the Board, President and Chief January 12, 1998
- --------------------------------------- Executive Officer (principal executive officer)
Geoffrey T. Burnham
* Vice President, Treasurer and Director January 12, 1998
- ---------------------------------------
Susan M. Burnham
/s/ Nicholas L. Prioletti, Jr. Chief Financial Officer and Secretary January 12, 1998
- --------------------------------------- (principal financial and accounting officer)
Nicholas L. Prioletti, Jr.
* January 12, 1998
George W. Barrett
- --------------------------------------- Director
* January 12, 1998
- --------------------------------------- Director
Brian J. Thompson
* By: /s/ Geoffrey T. Burnham
--------------------------------
Geoffrey T. Burnham,
Attorney-In-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
4.1 Form of Underwriter's Warrant Agreement, dated as of March 19, 1996,
between the Registrant and Whale Securities., L.P.(1)
4.2 Form of Warrant Agreement, dated as of March 19, 1996, among the
Registrant, Whale Securities Co., L.P. and American Stock Transfer & Trust
Company(1)
4.3 Warrant, dated January 3, 1997 between the Registrant and Finova
Technology Finance, Inc.(1)
4.4 Corrected Certificate of Designations of Series A 8% Convertible Preferred
Stock(2)
4.5 Certificate of Correction of Certificate of Designations of Series A 8%
Convertible Preferred Stock, filed with the Secretary of State of Delaware
on November 4, 1997 (2)
4.6 Certificate of Correction of Certificate of Designations of Series A 8%
Convertible Preferred Stock, filed with the Secretary of State of Delaware
on December 15, 1997 (2)
4.7 Specimen Certificate of Registrant's Series A 8% Convertible Preferred
Stock(2)
4.8 Specimen Certificate of Registrant's Common Stock(1)
4.9 Warrant dated October 23, 1997 between the Registrant and World Capital
Funding, Inc. (2)
4.10 Form of Warrant, between the Registrant and Marketing Design Concepts,
Inc(2)
4.11 Form of Subscription Agreement between the Registrant and each purchaser
of the Registrant's Series A 8% Convertible Preferred Stock(2)
4.12 Option Agreement dated October 27, 1997 between the Registrant and State
Street Securities, Inc.(2)
4.13 Amendment to Option Agreement dated December 30, 1997 between the
Registrant and State Street Securities, Inc.(2)
4.14 Form of Voting Proxy(2)
5.1 Opinion of Rubin Baum Levin Constant & Friedman regarding legality(2)
23.1 Consent of Rubin Baum Levin Constant & Friedman included in Exhibit 5.1(2)
23.2 Consent of Price Waterhouse LLP(2)
24.1 Power of Attorney (included on signature page hereto)
- ----------
(1) Incorporated by reference to Registrant's Registration Statement on Form
S-1 (Reg. No. 333-754) which was declared effective by the Securities and
Exchange Commission on March 19, 1996.
(2) Previously filed.
II-5
