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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 7, 1999
REGISTRATION NO. 333-
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
IJNT INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 33-0611753
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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2800 LAFAYETTE
SUITE D
NEWPORT BEACH, CALIFORNIA 92663
TELEPHONE (949) 723-2183
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
COPIES TO:
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BRANDON B. POWELL CHRISTOPHER A. WILSON, ESQ.
GENERAL COUNSEL JEFFERS, WILSON, SHAFF & FALK, LLP
IJNT INTERNATIONAL, INC. SUITE 1400
2030 MAIN STREET, SUITE 620 18881 VON KARMAN AVENUE
IRVINE, CALIFORNIA 92614 IRVINE, CALIFORNIA 92612
(949) 798-1120 (949) 660-7700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date 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 being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
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Common Stock, $0.001 par value per share
reserved for conversion of Preferred
Stock...................................... 2,000,000(2) $2.6875 $ 5,375,000 $1,494.25
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Common Stock reserved for issuance upon
exercise of the Put Option................. 1,500,000(3) $2.6875 $ 4,031,250 $1,120.69
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Common Stock................................. 500,000(4) $2.6875 $ 1,343,750 $ 373.56
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Total............................... 4,000,000 $10,750,000 $2,988.50
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(1) Estimated solely for the purpose of computing the amount of the registration
fee in accordance with Rule 457(c) under the Securities Act of 1933, as
amended (the "Securities Act"), based on the average of the bid and asked
price for the Common Stock, $0.001 par value per share (the "Common Stock"),
as reported on the OTC Bulletin Board at December 30, 1998.
(2) Includes a presently indeterminable number of shares of Common Stock,
estimated to be not more than 2,000,000, to be offered and sold by the
purchasers (the "Selling Shareholders") of Series A Convertible Preferred
Stock (the "Series A Preferred Stock") upon conversion of the Series A
Preferred Stock into Common Stock.
(3) To be offered and sold by the Selling Shareholders upon the exercise of one
or more puts by the Company of shares of its Common Stock to the Selling
Shareholders at a price equal to 80% of the market price at the date of such
put.
(4) To be offered and sold by the Selling Shareholders as a result of adjustment
of the number of shares of Common Stock to be issued as additional shares as
a result of certain events which may cause a delay or suspension of the
sales of shares of Common Stock by the Selling Shareholders.
Pursuant to Rule 416 under the Securities Act of 1933, there are also being
registered such additional number of shares as may be issuable as a result of
the anti-dilution provisions of the Preferred Stock.
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
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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
JANUARY 7, 1999
SELLING SHAREHOLDER OFFERING PROSPECTUS
IJNT INTERNATIONAL, INC.
4,000,000 SHARES OF COMMON STOCK
OFFERED AT MARKET PRICE
IJNT International, Inc. has sold shares of Series A Preferred Stock
convertible into not more than approximately 2,000,000 shares of
Common Stock and has the right to sell to Selling Shareholders
at various times and prices up to approximately
1,500,000 shares of Common Stock.
The Selling Shareholders may then sell
the following securities:
Approximately 2,000,000 shares upon conversion
of the Series A Preferred Stock;
1,500,000 shares from the exercise of the Put;
500,000 shares if penalties occur.
OTC Bulletin Board Symbol: IJNT
Recent Price: $2.6875 at December 30, 1998
-------------------------
IJNT International, Inc. provides wireless Internet
access through microwave technology
-------------------------
This investment involves a high degree of risk. You should purchase shares only
if you can afford a complete loss. See "High Risk Factors" beginning on page 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-------------------------
January 7, 1999
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SOME TERMS OF THE SALE
We have sold 2,000 shares of Series A Preferred Stock to the Selling
Shareholders for $1,000.00 per share. The Series A Preferred Stock is
convertible into Common Stock at any time at a conversion price of 80% of the
average closing bid price as reported by Bloomberg L.P. ("Closing Bid Price") of
our Common Stock for the five trading days prior to the conversion. Currently,
if the holders converted they would receive approximately 897,000 shares.
We can also sell shares of Common Stock to the Selling Shareholders at 80%
of the average Closing Bid Price of our Common Stock for the ten trading days
prior to the date of sale. The number of shares we can sell depends upon the
price and trading volume of the Common Stock. We estimate that the maximum
number of shares we may sell is 1,500,000.
As a result, the actual number of shares to be issued to the Selling
Shareholders and sold by this prospectus will depend upon the market price of
our Common Stock at various times. You should look at the discussion under
"Selling Shareholders" for more details as to these terms.
In any event, the number of shares which this prospectus covers will be the
maximum number of shares that may be issued to the Selling Shareholders and sold
by this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy any document we file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on public reference rooms. Our SEC
filings are also available to the public from the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and replace this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the Selling Shareholder sells all the shares. This
prospectus is part of a registration statement we filed with the SEC
(Registration No. 333- ).
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
- Annual Report on Form 10-KSB for the year ended March 31, 1998.
- Quarterly Reports on Form 10-QSB for the quarters ended June 30, 1998 and
September 30, 1998.
- Form 8-K/A filed with the SEC on November 25, 1997.
- Future Filings
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<PAGE> 4
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
General Counsel
IJNT International, Inc.
2030 Main Street, Suite 620
Irvine, California 92614
Telephone No.: (949) 798-1120
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The Selling Shareholders will
not make any offer of these shares in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
supplement is accurate as of any date other than the date on the front of those
documents.
3
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TABLE OF CONTENTS
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SOME TERMS OF THE SALE...................................... 2
WHERE YOU CAN FIND MORE INFORMATION......................... 2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE........... 2
HIGH RISK FACTORS........................................... 6
Limited History of Business Operations.................... 6
Sufficiency of Funds...................................... 6
Potential Fluctuations in Quarterly Operating Results..... 7
Unproven Network Scalability and Speed.................... 7
Competition............................................... 8
Management of Expanded Operations; Dependence on Key
Personnel.............................................. 10
Risk of System Failure.................................... 11
Risks of Technological Change............................. 11
Dependence on Modems; Minimum Hardware Requirements....... 11
Dependence on the Internet................................ 12
Security Risks............................................ 12
Government Regulation..................................... 13
Potential Liability for Defamatory or Indecent Content.... 13
Control by Officers and Directors......................... 14
Active Public Market May Not Develop; Possible Volatility
of Stock Price......................................... 14
General Economic and Market Conditions.................... 14
Shares Eligible for Future Sale........................... 14
No Cash Dividends......................................... 15
Possible Failure to Qualify for Exchange Listing on The
Nasdaq SmallCap Market(SM)............................. 15
Risk of Low-Priced Shares................................. 15
Anti-takeover Effect of Preferred Stock and Delaware
Corporate Law.......................................... 17
THE COMPANY................................................. 18
SELLING SHAREHOLDERS........................................ 19
Regulation D Preferred Stock and Private Equity Line of
Credit Agreement Overview.............................. 19
Series A Preferred Stock.................................. 19
Put Rights................................................ 19
Limitations and Conditions to Company's Put Rights........ 20
Termination of Obligations to Purchase Put Shares and
Damages................................................ 20
Short Sales............................................... 21
Right of First Refusal.................................... 21
Placement Agent........................................... 21
Escrow Agent.............................................. 21
Subscribers Right of Indemnification...................... 22
Stock Ownership........................................... 22
PLAN OF DISTRIBUTION........................................ 23
DESCRIPTION OF SECURITIES................................... 23
Common Stock.............................................. 24
Preferred Stock........................................... 24
Series A Preferred Stock.................................. 24
Over-the-Counter Market................................... 25
Transfer Agent............................................ 25
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LEGAL MATTERS............................................... 25
EXPERTS..................................................... 25
INDEMNIFICATION............................................. 25
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IJNT International, Inc. will not receive any proceeds from the sale of
Common Stock from the accounts of the Selling Shareholders.
IJNT International, Inc. has informed the Selling Shareholders that the
anti-manipulative rules under the Exchange Act of 1934, including Regulation M,
may apply to their sales in the market. We have furnished the Selling
Shareholders with a copy of these rules. We have also informed the Selling
Shareholders that they must deliver a copy of this prospectus with any sale of
their shares.
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<PAGE> 7
HIGH RISK FACTORS
An investment in our Common Stock is very risky. You should be aware you
could lose the entire amount of your investment. Prior to making an investment
decision, you should carefully read this entire prospectus and consider the
following risk factors:
LIMITED HISTORY OF We commenced operations in January, 1997 and
BUSINESS OPERATIONS therefore have a limited operating history. Our
operations have been limited to obtaining spectrum
You should not rely licenses, opening our first five market areas and
on our operating history obtaining financing. We cannot assure you that we
as an indicator of our will be able to open additional markets, acquire
future performance. additional licenses, achieve a significant level of
Our ability to attract sales or attain profitability at any time in the
new subscribers is future. We only recently launched our service and we
influenced by several cannot assure you that our services will achieve
factors. broad consumer or commercial acceptance. The success
of our service will depend upon the willingness of
subscribers to pay the monthly fees and installation
costs associated with our service, which are
currently priced at a premium to many other online
services. We cannot guarantee that large numbers of
subscribers will be willing to pay this premium for
our service. If we are unable to achieve or sustain
broad market acceptance of our pricing levels, our
business, operating results and financial condition
will be materially adversely affected. Our ability to
increase the number of subscribers to our service
will be dependent on several factors, such as our
ability to coordinate marketing campaigns with the
availability of installations, the rate that we can
establish new markets and obtain financing for such
expansion, our ability to properly price our service
and installation, and our ability to complete the
installations required to initiate service for new
subscribers. Our business may also be affected
significantly by economic and market conditions over
which we have no control, such as the continued
popularity of the Internet. Consequently, an
investment in our Common Stock is highly speculative.
We do not guarantee any return on an investment in
our Common Stock nor that you will be able to recover
your investment.
SUFFICIENCY OF FUNDS Our business is capital intensive. Because we intend
to continue our expansion efforts into additional
We may be required to markets, we may be required to seek additional
raise additional capital capital in the future through equity or debt
in order to continue our financings or credit facilities in order to fund such
expansion efforts. growth. We have no commitments for such additional
financing other than the Put described below under
"Selling Shareholders." We cannot guarantee that we
will be successful in obtaining such financing or
that it will be available on satisfactory terms when
needed.
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POTENTIAL FLUCTUATIONS Our quarterly operating results may fluctuate
IN QUARTERLY significantly in the future due to several factors,
OPERATING RESULTS many of which are beyond our control. These factors
include the rate at which customers subscribe to our
Several market and services, the prices subscribers pay for such
economic factors may services, subscriber turnover rates and the demand
influence our future for Internet services. Additional factors that may
operating results. affect our quarterly operating results generally
include the amount and timing of capital expenditures
and other costs relating to the expansion of our
business, our or our competitors' introduction of new
Internet and telecommuting services, price
competition or pricing changes in the Internet, cable
and telecommuting industries, technical difficulties
or network downtime, general economic conditions and
economic conditions specific to the Internet,
Internet media and corporate intranet. Because we
rely on revenue forecasts when committing to a
significant portion of our future expenditures, we
may not be able to adjust our spending in the event
of revenue shortfalls. Consequently, such shortfalls
could have an immediate material adverse affect on
our business and financial condition and operating
results. We also plan on increasing our operating
expenditures to fund increased sales and marketing
efforts, general and administrative activities and to
strengthen our infrastructure. To the extent that
these expenditures are not accompanied by a
commensurate increase in revenues, our business,
operating results and financial condition could be
materially adversely effected.
UNPROVEN NETWORK Because we only recently initiated our services, we
SCALABILITY AND SPEED do not know whether we will be able to connect and
manage a substantial number of online subscribers at
Our network's viability high transmission speeds. If we achieve our expected
has not been tested at subscriber levels, we may not be able to maintain our
full capacity. system's superior performance. While peak downstream
data transmission speeds approach 10 megabits per
second ("Mbps"), the actual downstream data
transmission speeds over our system could be
significantly slower due to several factors,
including the type and location of content, Internet
traffic, the number of active subscribers at the time
and the capability of modems used by such
subscribers. As subscriber penetration increases, we
may need to augment our equipment in order to
maintain adequate downstream data transmission
speeds. A subscriber's actual data delivery speed
also may be significantly lower than peak data
transmission speeds due to the subscriber's hardware,
operating system and software configurations. To
access our service, a subscriber needs a personal
computer with at least a 486 or equivalent
microprocessor, 16 megabytes of main memory and the
ability to support an ethernet connection. Due to the
foregoing factors, as the number of subscribers to
our system increases, we cannot guarantee that we
will be able to achieve or maintain high-speed data
transmission. Our failure to achieve or maintain
high-speed data transmission
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could significantly reduce consumer demand for our
services and have a material adverse effect on our
business, operating results and financial condition.
COMPETITION The markets for consumer and business Internet
services are extremely competitive, and we expect
We are in an extremely that competition will intensify in the future. Our
competitive industry that most direct competitors in these markets are Internet
is dominated by several Service Providers ("ISPs"), national long distance
companies which have carriers and local exchange carriers, cable
significantly greater operators, other wireless service providers, Online
financial, technical, and Service Providers ("OSPs") and Internet content
marketing resources than aggregators. Many of these competitors are offering
we have. (or may soon offer) technologies that will attempt to
compete with some or all of our high-speed data
service offerings. Such technologies include
Integrated Services Digital Network ("ISDN") and
Digital Subscriber Linc ("DSL"). We also compete with
other wireless, telephone or cable-based data
services. The bases of competition include
transmission speed, reliability of service, case of
access, price/performance, ease-of-use, content
quality, quality of presentation, timeliness of
content, customer support, brand recognition and
operating experience. ISPs, such as BBN Corporation
("BBN"), Earthlink Network, Inc. ("Earthlink"),
MindSpring Enterprises, Inc. ("MindSpring"), Netcom
On-Line Communications Services, Inc. ("Netcom") and
PSInet Inc. ("PSInet"), provide basic Internet access
to residential consumers and business, generally
using existing telephone network infrastructures.
This method is widely available and inexpensive.
Barriers to entry are low, resulting in a highly
competitive and fragmented market. Long distance
inter-exchange carriers, such as AT&T Corp. ("AT&T"),
MCI Communications Corporation ("MCI"), Sprint
Corporation ("Sprint") and WorldCom, Inc.
("WorldCom"), have deployed large-scale Internet
access networks and sell connectivity to business and
residential customers. The regional Bell operating
companies ("RBOCs") and other local exchange carriers
have also entered this field and are providing price
competitive services, and cable television companies
are also offering Internet access. Many of such
carriers are offering diversified packages of
telecommunications services, including Internet
access service, to residential customers and could
bundle such services together, which could place us
at a competitive disadvantage.
Wireless service providers, including AT&T and Hughes
Network Systems, are also developing wireless
Internet connectivity, such are multichannel
multipoint distribution service, local multipoint
distribution service and digital broadcast satellite.
OSPs include companies such as America Online, Inc.
("America Online"), CompuServe Corporation
("CompuServe"), Microsoft's Microsoft Network
("MSN"),
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Prodigy, Inc. ("Prodigy") and WebTV Networks Inc.
("WebTV") (which was acquired by Microsoft) that
provide, over the Internet and on proprietary online
services, content and applications ranging from news
and sports to consumer video conferencing. These
services are designed for broad consumer access over
telecommunications-based transmission media, which
enables the provision of data services to the large
group of consumers who have personal computers with
modems. In addition, they provide basic Internet
connectivity, ease-of-use and consistency of
environment. In addition to developing their own
content or supporting proprietary third-party content
developers, online services often establish
relationships with traditional broadcast and print
media outlets to bundle their content into the
service, such as the relationship of Microsoft with
NBC to provide multimedia news and information
programming over both cable television and MSN.
Content aggregators seek to provide a "one-stop" shop
for Internet and online users. Their success depends
on capturing audience flow, providing ease-of-use and
offering a range of content that appeals to a broad
audience. Their business models are predicated on
attracting and retaining an audience for their set of
offerings. Leading companies in this area include
America Online, CompuServe, Excite, Inc. ("Excite"),
Microsoft and Yahoo! Inc. ("Yahoo!"). In this market,
competition occurs in acquiring both content
providers and subscribers. The principal bases of
competition in attracting subscribers include
richness and variety of content and ease of access to
the desired content. The proprietary online services
such as America Online, CompuServe and MSN have the
advantage of a large customer base, industry
experience, many content partnerships and significant
resources.
Many cable companies have developed their own
cable-based services and market those services to
unaffiliated cable system operators that are planning
to deploy data services. Several cable system
operators, including Time Warner Inc. ("Time Warner")
and the Continental Cablevision subsidiary of U.S.
WEST, Inc. ("US West"), have deployed high-speed
Internet access services over their existing local
HFC cable networks. Specifically, Time Warner, which
is the second largest cable company in the United
States, has established its own cable-based ISP with
proprietary content, called Road Runner, which
features a variety of Time Warner publications and
services. Time Warner plans to market the Road Runner
service through Time Warner's own cable systems as
well as to other cable system operators nationwide.
Continental Cablevision has developed another service
called Highway One, which offers high-speed Internet
services to its existing
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customers. At Home has developed a strategic
partnership with several large cable companies to
deliver Internet services. Others that have publicly
announced limited-area trials for their own
cable-based Internet services include Adelphia,
BellSouth Corporation ("BellSouth") and Jones
Intercable, Inc. ("Jones Intercable"). Some of these
companies such as Time Warner have their own
substantial libraries of multimedia content and the
other competitors could establish strategic
relationships with content providers, which could
provide them with a significant competitive
advantage.
Many of our competitors and potential competitors
have substantially greater financial, technical and
marketing resources, larger subscriber bases, longer
operating histories, greater name recognition and
more established relationships with advertisers and
content and application providers than we do. Such
competitors may be able to undertake more extensive
marketing campaigns, adopt more aggressive pricing
policies and devote substantially more resources to
developing Internet services or online content than
we can. There can be no assurance that we will be
able to compete successfully against current or
future competitors or that competitive pressure we
face will not materially adversely affect our
business, operating results or financial condition.
Further, as a strategic response to changes in the
competitive environment, we may make certain pricing,
service or marketing decisions or enter into
acquisitions or new ventures that could have a
material adverse effect on our business, operating
results or financial condition.
MANAGEMENT OF EXPANDED Rapid growth or expansion of our services will place
OPERATIONS; DEPENDENCE a significant strain on the Company's managerial,
ON KEY PERSONNEL operating, financial and other resources which we may
not be equipped to successfully manage. We are highly
Our success will depend dependent upon the efforts of management, and our
on our ability to future performance will depend, in part, on
effectively manage our management's ability to manage growth effectively.
growth and attract and This will require us to implement financial controls
retain key personnel. systems and management information systems
capabilities, to develop our operating,
administrative, financial and accounting systems and
controls, to maintain close coordination among
engineering, accounting, finance, marketing, sales
and operations, and to hire and train additional
technical and marketing personnel. There is intense
competition for management, technical and marketing
personnel in our industry and our success will depend
upon our ability to attract and hire such qualified
personnel. An inability to retain our current
management and attract additional key employees could
have a material adverse effect on our business,
operating results and financial condition. We do not
maintain key-man life insurance on any of our
personnel.
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RISK OF SYSTEM FAILURE Our operations are dependent upon our ability to
support our highly complex network infrastructure and
Natural disasters and avoid damage from fires, earthquakes, floods, power
similar events could losses, telecommunications failures and similar
cause interruptions in events which could cause interruptions in our
our system. services. Such interruptions could have a material
adverse effect on our business, operating results and
financial condition.
RISKS OF TECHNOLOGICAL The markets for consumer and business Internet access
CHANGE services and online content are characterized by
rapid technological developments, frequent new
We must respond quickly product introductions and evolving industry
to technological standards. In order to remain competitive in the
developments and rapidly evolving markets, we must continually improve
evolving industry the performance, features and reliability of our
standards in order to network, Internet content and consumer and business
remain competitive. services, particularly in response to competitive
offerings. There can be no assurance that we will be
successful in responding quickly, cost effectively
and sufficiently to these developments. There may be
a time-limited market opportunity for our wireless-
based consumer and business Internet services, and we
cannot guarantee that we will successfully achieve
widespread acceptance of our services before
competitors offer products and services with speed
and performance similar to our current offerings. In
addition, the widespread adoption of new Internet or
telecommuting technologies or standards, wireless-
based or otherwise, could require us to expend
substantial funds to modify or adapt our network,
products and services and could fundamentally affect
the character, viability and frequency of
Internet-based advertising, either of which could
have a material adverse effect on our business,
operating results and financial condition. In
addition, our business, operating results and
financial condition could be materially adversely
affected if we offer new Internet or telecommuting
services or enhancements that contain design flaws or
other defects.
DEPENDENCE ON MODEMS; Each of our subscribers (except for subscribers to
MINIMUM HARDWARE our Houston system, which currently uses conventional
REQUIREMENTS technology) currently must obtain a Hybrid Networks,
Inc. ("Hybrid") modem to access our service. Our
Subscribers must ability to expand could be delayed or impaired if
purchase specialized Hybrid or an alternative vendor is unable to supply a
equipment from third sufficient quantity of such modems at acceptable
party vendors in order price and performance levels. Generally, subscribers
to access our service. need a personal computer with at least a 486 or
equivalent microprocessor, 16 megabytes of main
memory and the ability to support an ethernet
connection in order to access our services. In
addition, certain wireless subscribers, depending on
the geographic market, must purchase approximately
$1,200 of additional capital equipment in order to
access our service.
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DEPENDENCE ON THE Market acceptance of our services is substantially
INTERNET dependent upon the adoption of the Internet for
commerce, entertainment and communications. As is
The continued growth in typical in the case of an emerging industry
Internet usage is a characterized by rapidly changing technology,
substantial factor evolving industry standards and frequent new product
affecting our business. and service introductions, demand for and market
acceptance of recently introduced Internet products
and services are subject to a high level of
uncertainty. In addition, critical issues concerning
the commercial use of the Internet remain unresolved
and may affect the growth of Internet use, especially
in the business and consumer markets we have
targeted. Despite growing interest in the commercial
possibilities for the Internet, inconsistent quality
of service, the unavailability of cost-effective,
high-speed service, and a limited number of local
access points for corporate users, has deterred many
consumers from purchasing Internet access services.
In addition, the inability to integrate business
applications on the Internet, and inadequate security
to protect confidential information have deterred
consumers. The adoption of the Internet for commerce
and communications, particularly by those individuals
and enterprises that have historically relied upon
alternative means of commerce and communications,
generally requires an understanding and acceptance of
a new way of conducting business and exchanging
information. In particular, enterprises that have
already invested substantial resources in other means
of conducting commerce and exchanging information, or
in relationships with other ISPs, may be reluctant
and slow to adopt a new strategy that may make their
existing personnel, infrastructure and ISP
relationships obsolete. If the market fails to
develop or develops more slowly than expected, or if
market competition increases, our business, operating
results and financial condition may be materially
adversely affected.
SECURITY RISKS Although we have implemented security measures, our
networks may be vulnerable to unauthorized access,
We may be unable to computer viruses and other disruptive problems. ISPs
protect confidential and OSPs in the past have experienced, and in the
information stored on a future may experience, interruptions in service as a
subscriber's computer result of the accidental or intentional actions of
system from Internet users, current and former employees or
unauthorized access. others. Unauthorized access could also potentially
jeopardize the security of confidential information
stored in our or our subscribers' computer systems.
This may result in our becoming liable to our
subscribers and also might deter potential
subscribers. Although we intend to continue to
implement evolving industry-standard security
measures, prior measures have been susceptible to
circumvention. As such, we cannot guarantee that new
industry-standard security measures employed by us
will not be circumvented. Eliminating computer
viruses and alleviating other security problems may
require interruptions, delays or cessation of
12
<PAGE> 14
service to our subscribers, which could have a
material adverse effect on our business, operating
results and financial condition.
GOVERNMENT REGULATION Our services are subject to current regulations of
the Federal Communications Commission (the "FCC")
Our business may be with respect to the use of our wireless access. In
adversely affected by addition, changes in the regulatory environment
future changes in relating to the Internet connectivity market,
governmental including regulatory changes that, directly or
regulations relating to indirectly, affect telecommunications costs, limit
telecommunications and usage of subscriber-related information or increase
the Internet. the likelihood or scope of competition from the RBOCs
or other telecommunications companies, could affect
the prices at which we may sell our services. For
example, regulations recently adopted by the FCC are
intended to subsidize Internet connectivity rates for
schools and libraries, which could affect demand for
our services. We cannot predict the impact, if any,
that future regulation or regulatory changes might
have on our business.
POTENTIAL LIABILITY FOR The law relating to liability of ISPs and OSPs for
DEFAMATORY OR INDECENT information carried on or disseminated through their
CONTENT networks is currently unsettled. A number of lawsuits
have sought to impose liability for defamatory speech
Laws relating to and indecent materials. A recent federal statute
liability for the seeks to impose liability, in some circumstances, for
dissemination of transmission of obscene or indecent materials. In one
certain information case, a court has held that an OSP could be found
through our network are liable for defamatory matter provided through its
currently unsettled. service, on the ground that the service provider
exercised active editorial control over postings to
its service. Other courts have held that ISPs and
OSPs may, under certain circumstances, be subject to
damages for copying or distributing copyrighted
materials. The Telecommunications Act of 1996
prohibits, and imposes criminal penalties and civil
liability for using, an interactive computer service
for transmitting indecent or obscene communications.
A number of states have adopted or are currently
considering similar legislation. The anti-indecency
provisions of the Telecommunications Act of 1996 have
been declared unconstitutional by the United States
District Courts for the Eastern District of
Pennsylvania and the Southern District of New York,
which have issued preliminary injunctions against
their enforcement. The United States Supreme Court
has upheld those decisions. If liability is imposed
upon ISPs or OSPs for materials carried on or
disseminated through their systems, then we may be
required to implement costly measures to reduce our
exposure to such liability. Consequently, we may be
required to expend substantial resources or
discontinue certain product or service offerings. In
addition, our business, operating results and
financial conditions could be adversely affected if
we become liable for information carried on our
network.
13
<PAGE> 15
CONTROL BY OFFICERS AND Our officers and directors presently beneficially own
DIRECTORS 7,907,016 shares of our outstanding Common Stock or
approximately 52.39% of the outstanding Common Stock
Our officers and as of December 31, 1998. As a result, such persons
directors beneficially are able to elect a majority of the Board of
own a majority of our Directors, to dissolve, merge, or sell our assets,
Common Stock and and to direct and control our operations, policies
therefore can control and business decisions.
our operations.
ACTIVE PUBLIC MARKET Presently, a broad public market for our Common Stock
MAY NOT DEVELOP; does not exist, and there can be no assurance that a
POSSIBLE VOLATILITY OF broad public market for our Common Stock will develop
STOCK PRICE or be sustained in the near future. The Common
Stock's trading price could be subject to wide
No active public market fluctuations in response to quarterly variations in
exists for our Common operating results, our or our competitors'
Stock and one may not announcement of technological innovations or new
develop in the future. products, and other events or factors. In addition,
in recent years the stock market has experienced
extreme price and volume fluctuations that have had a
substantial effect on the market prices for many
computer, Internet and emerging growth companies,
which may be unrelated to the operating performance
of the specific companies.
GENERAL ECONOMIC AND Use of our services and the demand for personal
MARKET CONDITIONS computers are dependent upon general economic
conditions. During recent years, segments of the
The demand for our personal computer industry have experienced
services is affected by significant economic downturns characterized by
general economic and decreased product demand and price erosion. Although
market conditions. we do not believe such factors will affect us, there
can be no assurance that we will not be affected by
such factors or by future events in the industry.
SHARES ELIGIBLE FOR As of December 31, 1998, we had 15,091,766 shares of
FUTURE SALE Common Stock outstanding. Of such shares, all but
1,356,377 shares are "restricted securities" as that
The market price of our term is defined by Rule 144 under the Securities Act
Common Stock could be of 1933 (the "Securities Act"). The shares of Common
adversely affected by Stock outstanding do not include shares of Common
sales of restricted Stock that may be issued on conversion of our Series
securities. A Preferred Stock or upon exercise of various options
and warrants. Under Rule 144, a person who holds
restricted securities for a period of one year may
sell a limited number of shares to the public in
ordinary brokerage transactions. Sales under Rule 144
and sales of Common Stock covered by registration
statements filed by us could adversely affect
prevailing market price of our Common Stock.
14
<PAGE> 16
NO CASH DIVIDENDS The holders of Common Stock are entitled to receive
dividends when, and if, declared by the Board of
We do not intend to pay Directors out of funds legally available therefor. To
cash dividends on our date, we have not paid any cash dividends. The Board
Common Stock in the of Directors does not intend to declare any cash
near future. dividends in the foreseeable future, but instead
intends to retain all earnings, if any, for use in
our business operations. Since we may be required to
obtain additional financing, it is likely that the
terms of such financing will impose restrictions on
our ability to declare any dividends.
POSSIBLE FAILURE TO We intend to list our Common Stock on The Nasdaq
QUALIFY FOR EXCHANGE SmallCap Market(SM), and believe that we will be able
LISTING ON THE NASDAQ to satisfy and maintain its current and proposed
SMALLCAP MARKET(SM) entry standards following our next round of
financing. If we are unable to satisfy and maintain
If we are unable to the requirements for continued listing on The Nasdaq
qualify for exchange SmallCap Market(SM), our Common Stock will not be
listing, the liquidity traded in such market.
of our Common Stock
will be adversely If our Common Stock is not listed as intended,
affected. trading, if any, will continue to be conducted in the
over-the-counter market in the OTC Bulletin Board,
which was established for securities that do not meet
The Nasdaq SmallCap Market(SM) listing requirements.
Consequently, selling our shares would be more
difficult because small quantities of Common Stock
could be bought and sold, transactions could be
delayed, and security analysts' and news media
coverage of our company may be reduced. These factors
could result in lower prices and larger spreads in
the bid and ask prices for our Common Stock.
RISK OF LOW-PRICED Under the rules for listing in the Automated
SHARES Quotation System of the National Association of
Securities Dealers, Inc. ("NASDAQ"), a company must
If we are unable to have at least $4,000,000 in total assets, $2,000,000
qualify for exchange in capital and surplus and a minimum bid price of
listing, it may be more $3.00 per share. NASDAQ has recently increased the
difficult for you to capital and surplus requirement to $4,000,000.
sell your Common Stock.
We intend to file for listing on the NASDAQ System
upon completion of an additional offering in the
future. However, prior to that time, our Common Stock
will not be eligible for quotation on NASDAQ and
there can be no assurance that it will ever be so
eligible. Until such time as we are able to satisfy
NASDAQ's listing criteria, trading, if any, in the
Common Stock will continue to be conducted in the
over-the-counter market or the NASD's "Electronic
Bulletin Board." Consequently, an investor may find
it more difficult to dispose of, or to obtain
accurate quotations as to the price of, our
securities.
In the absence of a security being quoted on NASDAQ,
or our having $2,000,000 in net tangible assets,
trading in our Common Stock would be covered by Rule
15c2-6 promul-
15
<PAGE> 17
gated under the Securities Exchange Act of 1934 for
non-NASDAQ and non-exchange listed securities. Under
such rule, broker/dealers who recommend such
securities to persons other than established
customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or
individuals with a net worth in excess of $1,000,000
or an annual income exceeding $200,000 or $300,000,
jointly with their spouse) must make a special
written suitability determination for the purchaser
and receive the purchaser's written agreement to a
transactions prior to sale. Securities are also
exempt from this rule if the market price is at least
$5.00 per share, or for warrants, if the warrants
have an exercise price of at least $5.00 per share.
The Securities Enforcement and Penny Stock Reform Act
of 1990 requires additional disclosure related to the
market for penny stocks and for trades in any stock
defined as a penny stock. The Commission has adapted
regulations under such Act which define a penny stock
to be any NASDAQ or non-NASDAQ equity security that
has a market price or exercise price of less than
$5.00 per share and allow for the enforcement against
violators of the proposed rules. In addition, unless
exempt, the rules require the delivery, prior to any
transaction involving a penny stock, of a disclosure
schedule prepared by the Commission explaining
important concerns involving the penny stock market,
the nature of such markets, terms used in such
market, the broker/dealer's duties to the customer, a
toll-free telephone number for inquiries about the
broker/dealer's disciplinary history, and the
customer's rights and remedies in case of fraud or
abuse in the sale. Disclosure must also have to be
made about commissions payable to both the
broker/dealer and the registered representative,
current quotations for the securities, and if the
broker/dealer is the sole market-maker, the
broker/dealer must disclose this fact and its control
over the market. Finally, monthly statements must be
sent disclosing recent price information for the
penny stock held in the account and information on
the limited market in penny stocks.
While many NASDAQ stocks are covered by the proposed
definition of penny stock, transactions in NASDAQ
stock would be exempt from all but the sole
market-maker provision for (i) issuers who have
$2,000,000 in tangible assets ($5,000,000 if the
issuer has not been in continuous operation for three
years), (ii) transactions in which the customer is an
institutional accredited investor and (iii)
transactions that are not recommended by the
broker/dealer. In addition, transactions in a NASDAQ
security directly with NASDAQ market-maker for such
securities, are subject only to the sole market-maker
disclo-
16
<PAGE> 18
sure, and the disclosure with regard to commissions
to be paid to the broker/dealer and the registered
representatives.
Finally, all NASDAQ securities are exempt if NASDAQ
raised its requirements for continued listing so that
any issuer with less than $2,000,000 in net tangible
assets or stockholder's equity would be subject to
delisting. These criteria are more stringent than the
NASDAQ's maintenance requirements.
If our securities were subject to the existing rules
on penny stocks, the market liquidity for our
securities could be severely affected by limiting the
ability of broker/dealers to sell our securities.
ANTI-TAKEOVER EFFECT OF We are authorized to issue 1,000,000 shares of
PREFERRED STOCK AND Preferred Stock, par value $0.001 per share
DELAWARE CORPORATE LAW ("Preferred Stock"), of which 2,000 shares have been
designated Series A Preferred Stock. All 2,000 shares
The Board of Directors of Series A Preferred Stock are issued and
may authorize the outstanding. The Board of Directors has the authority
issuance of our to issue additional shares of Preferred Stock with
Preferred Stock without voting and other rights superior to those of the
shareholder approval. Common Stock, which could effectively deter a change
in our control. In addition, the Delaware General
Corporation Law prohibits certain mergers,
consolidations, sales of assets or similar
transactions between us on the one hand and another
company which is, or is an affiliate of, a beneficial
holder of 15% or more of our voting power (defined as
an "interested stockholder"), for three years after
the acquisition of the voting power, unless our Board
of Directors pre-approved the acquisition of the
voting power or the transaction is approved by a
majority of our stockholders (excluding the
interested stockholder). The provisions prohibiting
interested stockholder transactions could also
preserve management's control over our operations.
17
<PAGE> 19
THE COMPANY
We are engaged in the business of providing wireless Internet Access
through microwave technology. We also offer dial-up Internet access, web site
design and web hosting services. We currently offer one-way wireless, two-way
wireless, dial-up Internet access and web site design and hosting services from
our system in Salt Lake City, Utah and all of the foregoing except two-way
wireless Internet access from our system in Beaumont, Texas. From our Houston,
Texas system we currently offer dial-up Internet access and are in the process
of designing a wireless system to be installed in Houston. We recently commenced
providing [wireless/dial-up] service in San Francisco and Orange County,
California, and we intend to continue exploring opportunities in other markets.
We were incorporated in the State of Delaware on June 11, 1992 under the
name PicoMetrix, Inc. On August 8, 1997, we acquired all of the issued and
outstanding stock of InterJet Net, Inc. In connection with this acquisition, we
changed our name to Interjet Net Corporation. Subsequently, on September 24,
1998, we changed our name to IJNT International, Inc.
Our executive offices are located at 2800 Lafayette, Suite D, Newport
Beach, California 92663. Our telephone number is (949) 723-2183; our facsimile
number is (949) 723-2192.
-------------------------
Except for historical information contained herein, the matters set forth
in this prospectus are forward looking and involve a number of risks and
uncertainties. Our actual results could differ materially from those described
for a variety of factors. Such factors could include, but are not limited to,
those discussed in "RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" in our Form 10-KSB Annual Report
filed for the fiscal year ended March 31, 1998, as well as those discussed
elsewhere in our other public filings with the Securities and Exchange
Commission. Forward looking statements include our statements regarding
liquidity, anticipated cash needs and availability, and anticipated expense
levels in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS." All forward looking statements included in this document
are based on information available to us on the date hereof, and we assume no
obligation to update any such forward looking statements. It is important to
note that our actual results could differ materially from those in such forward
looking statements.
18
<PAGE> 20
SELLING SHAREHOLDERS
REGULATION D PREFERRED STOCK AND PRIVATE EQUITY LINE OF CREDIT AGREEMENT
OVERVIEW
On December 4, 1998 (the "Subscription Date"), the Company entered into a
Preferred Stock and Private Equity Line of Credit Agreement (the "Subscription
Agreement") and a Registration Rights Agreement (the "Registration Rights
Agreement") with Sovereign Partners Limited Partnership, Dominion Investment
Fund, LLC, and Dominion Capital Fund, Ltd. (collectively, the "Subscribers").
Pursuant to the Subscription Agreement, the Company sold to the Subscribers an
aggregate of 2,000 shares of Series A Preferred Stock for an aggregate purchase
price of $2,000,000. The Subscription Agreement entitles the Company to require
the Subscribers to purchase up to $8,000,000 of the Company's Common Stock (the
"Put" or "Put Right") from time to time during an eighteen-month period
beginning thirty days after the effective date of this Registration Statement.
SERIES A PREFERRED STOCK
The Series A Preferred Stock may be converted by the Subscribers into
shares of Common Stock at any time during a two-year period commencing on the
Subscription Date. See "DESCRIPTION OF SECURITIES -- Series A Preferred Stock."
PUT RIGHTS
In order to exercise a Put Right, the Company must have an effective and
current registration statement (the "Registration Statement"), registering the
shares of Common Stock for the Put Shares (as defined below) (the "Commitment
Period"). During the Commitment Period, the Company may give 30 trading days
advance notice to the Subscriber ("Put Notice") of the date on which the Company
intends to exercise a particular Put Right ("Put Date"). The Put Notice must
indicate:
(1) that the person whose signature appears on the Put Notice is a duly
elected and authorized officer of the Company;
(2) that the representations and warranties of the Company set forth in the
Subscription Agreement are true and correct in all material respects as
though made on and as of the date of the Put Notice;
(3) that the Company has performed in all material respects all of the
conditions, covenants and agreements to be performed by the Company on
or prior to the Closing Date related to the Put Notice and has complied
in all material respects with all obligations and conditions contained
in the Subscription Agreement; and
(4) the Investment Amount as defined in Section 1.19 of the Subscription
Agreement (the aggregate dollar amount to be invested by the
Subscribers to purchase Put Shares with respect to any Put Date as
notified by the Company to the Subscribers, all in accordance with
Section 2.2 of the Subscription Agreement).
The Investment Amount may not exceed an amount determined pursuant to the
Subscription Agreement, which corresponds to the average daily trading volume
for the Company's Common Stock during the 30 days immediately preceding such Put
Date and the closing bid price on such date.
19
<PAGE> 21
For each Put Share, the Subscribers will pay us (the "Put Share Price") 80%
of the average closing bid prices as reported by Bloomberg L.P. on the 10
trading days immediately preceding the Closing of a Put.
LIMITATIONS AND CONDITIONS TO COMPANY'S PUT RIGHTS
In the event the Company fails to comply with the Put provisions contained
in the Subscription Agreement on two separate occasions, it shall have waived
its right to make a Put at any time thereafter.
The Subscribers are not required to purchase any number of Put Shares (the
"20% Excess"), which, when added to the total number of Put Shares, Initial
Shares and any additional Shares acquired by the Subscribers, exceeds 20% of the
Company's Common Stock ("20% Issuance"). This limitation does not apply if the
Company receives stockholder approval under Nasdaq Rule 4460(I)(l)(d)(ii) to
complete the 20% Issuance. In the event the Company does not get stockholder
approval for any 20% Issuance, the Company will pay the Subscriber a cash amount
equal to the number of shares equal to the 20% Excess multiplied by the lowest
closing bid price of the Company's Common Stock during the applicable period.
TERMINATION OF OBLIGATIONS TO PURCHASE PUT SHARES AND DAMAGES
The obligation of the Subscribers to purchase shares shall terminate
permanently in the event that (i) there shall occur any stop order or suspension
of the effectiveness of the Registration Statement for an aggregate of 10
trading days during the Commitment Period, for any reason other than deferrals
or suspensions in accordance with the Registration Rights Agreement as a result
of corporate developments subsequent to the Subscription Date that would require
such Registration Statement to be amended to reflect such event in order to
maintain its compliance with the disclosure requirements of the Securities Act
of 1933 and any relevant regulations promulgated thereunder, or (ii) the Company
shall at any time fail to:
(A) Continue to reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling
the Company to satisfy any obligation to issue Put Shares;
(B) Maintain the listing of its Common Stock on the OTC Bulletin Board or
other Principal Market, and as soon as practicable list the Put Shares
on the OTC Bulletin Board or other Principal Market;
(C) If the Company applies to have the Common Stock traded on any other
Principal Market, include in such application the Put Shares, and take
such other action as is necessary or desirable in the opinion of the
Subscribers to cause the Common Stock to be listed on such other
Principal Market as promptly as possible;
(D) Continue the listing and trading of its Common Stock on the Principal
Market (including, without limitation, maintaining sufficient net
tangible assets) and comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of
the Principal Market;
(E) Cause its Common Stock to continue to be registered under Section
12(b) of the Securities and Exchange Act of 1934 (the "Exchange Act"),
comply in all respects with its reporting and filing obligations under
the Exchange Act, and refrain from taking any action or filing any
document (whether or not permitted
20
<PAGE> 22
by Exchange Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing
obligations under said Act;
(F) Take all steps necessary to preserve and continue the corporate
existence of the Company.
SHORT SALES
The Subscribers and their affiliates may not make short sales of the
Company's Common Stock.
RIGHT OF FIRST REFUSAL
The Subscribers have the right of first refusal for a period of 5 days
after delivery by the Company to the Subscribers of written notice (the "Right
of First Refusal Notice") of the Company's intention to offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any offer, sale, grant
any option to purchase, or other disposition) any of its equity or equity
equivalent securities or any instrument that permits the holder thereof to
acquire shares of Common Stock at any time prior to the expiration of the
Commitment Period, except (i) the granting of options or warrants to employees,
officers and directors, and the issuance of shares of Common Stock upon exercise
of options granted under any stock option plan duly adopted by the Company, (ii)
shares issued upon exercise of any currently outstanding warrants or options,
and (iii) shares issued in a bona fide public offering by the Company of its
securities. Any such Right of First Refusal Notice shall fully describe the
transaction, the gross proceeds raised thereby, the potential investor in such
transaction and a term sheet of the proposed transaction.
The Subscribers must notify the Company within five business days after
receipt of the Right of First Refusal Notice of their intention to participate
in such financing on substantially the same terms as set forth in the Right of
First Refusal Notice subject to the completion of mutually agreeable
documentation. In the event the Subscribers do not exercise their right of first
refusal (as set forth above) the Subscribers shall have the right, from then on,
to refuse any Put Notice that the Company subsequently serves upon them.
PLACEMENT AGENT
Havkit Corporation (the "Placement Agent") is acting as placement agent for
this transaction and is indirectly related to the Subscribers. In consideration
for its services, the Placement Agent is entitled to receive a cash fee of up to
8.75% for the first $2,000,000 received by the Company on the Subscription Date.
Subsequently, the Placement Agent is entitled to receive on each Closing Date
for a Put, 9.25% of the Investment Amount.
ESCROW AGENT
Goldstein, Goldstein & Reis, LLP (the "Escrow Agent") is acting as escrow
agent for this transaction and is indirectly related to the Subscribers. In
consideration for its services, the Escrow Agent is entitled to receive a cash
fee of $25,000 for its preparation of the Subscription Agreement and related
documents. Subsequently, the Escrow Agent is entitled to receive on each Closing
Date for a Put, .75% of the Investment Amount for legal, administrative and
escrow fees.
21
<PAGE> 23
SUBSCRIBERS RIGHT OF INDEMNIFICATION
The Company is obligated to indemnify the Subscribers from all liability
and losses resulting from any misrepresentations in or breaches by the Company
of the Subscription Agreement (including the Registration Rights Agreement and
other related agreements), or the Registration Statement.
STOCK OWNERSHIP
The following table sets forth as of December 31, 1998 (1) the name of the
Selling Shareholder, (2) the amount of Common Stock held directly or indirectly
to be offered by the Selling Shareholders and (3) the amount to be owned by the
Selling Shareholders following sale of such shares.
As of December 31, 1998, there were outstanding 15,091,766 shares of Common
Stock of the Company.
<TABLE>
<CAPTION>
SHARES TO BE
NAME AND ADDRESS OF NUMBER OF SHARES TO OWNED AFTER
SELLING SHAREHOLDERS SHARES OWNED BE OFFERED OFFERING
-------------------- ------------ ---------- ------------
<S> <C> <C> <C>
Sovereign Partners LP(1)................. 0 0 0
Dominion Investment Fund, LLC(2)......... 0 0 0
Dominion Capital Fund, Ltd.(3)........... 0 0 0
</TABLE>
- -------------------------
(1) Does not include up to: (i) 300,000 shares of Common Stock that could be
issued in connection with the exercise of Put Rights under the Subscription
Agreement; (ii) 400,000 shares of Common Stock that could be issued upon the
conversion of the Preferred Stock exercisable for a two-year period at a
price equal to 80% of the average closing bid price of the Company's Common
Stock during the 5 trading days preceding the applicable Conversion Date;
and (iii) an indeterminate number of shares of Common Stock that could be
issued to the Subscribers as a result of adjustment in the number of shares
to be issued as additional shares upon the occurrence of certain events
which may cause a delay or suspension of the sales of shares. Address is c/o
Southridge Capital Management, 90 Grove Street, Suite 1, Ridgefield, CT
06877.
(2) Does not include up to: (i) 75,000 shares of Common Stock that could be
issued in connection with the exercise of Put Rights under the Subscription
Agreement; (ii) 100,000 shares of Common Stock that could be issued upon the
conversion of the Preferred Shares exercisable for a two-year period at a
price equal to 80% of the average closing bid price of the Company's Common
Stock during the 5 trading days preceding the applicable Conversion Date;
and (iii) an indeterminate number of shares of Common Stock that could be
issued to the Subscribers as a result of adjustment in the number of shares
to be issued as additional shares upon the occurrence of certain events
which may cause a delay or suspension of the sales of shares. Address is c/o
Citco Fund Services, Bahamas Financial Center, 3rd Floor, Shirley &
Charlotte Streets, CB 13136, Nassau, Bahamas.
(3) Does not include up to: (i) 1,125,000 shares of Common Stock that could be
issued in connection with the exercise of Put Rights under the Subscription
Agreement; (ii) 1,500,000 shares of Common Stock that could be issued upon
the conversion of the Preferred Shares exercisable for a two-year period at
a price equal to 80% of the average closing bid price of the Company's
Common Stock during the 5 trading days preceding the applicable Conversion
Date; and (iii) an indeterminate number of
22
<PAGE> 24
shares of Common Stock that could be issued to the Subscribers as a result
of adjustment in the number of shares to be issued as additional shares upon
the occurrence of certain events which may cause a delay or suspension of
the sales of shares. Address is c/o Citco Fund Services, Bahamas Financial
Center, 3rd Floor, Shirley & Charlotte Streets, CB 13136, Nassau, Bahamas.
The Company has agreed to pay for all costs and expenses in the issuance,
offer, sale and delivery of the Shares. These include, all expenses and fees of
preparing, filing and printing the Registration Statement and mailing of these
items. The Company will not pay selling commissions and expenses for any sales
by the Selling Shareholders. The Company will indemnify the Selling Shareholders
against civil liabilities including liabilities under the Securities Act of
1933.
PLAN OF DISTRIBUTION
The Common Stock may be sold by the Selling Shareholders, or by other
successors in interest. The sales may be made on one or more exchanges or in the
over-the-counter market, or at prices related to the then current market price,
or in negotiated transactions.
The Common Stock may be sold by one or more of the following methods,
including, without limitation:
(1) a block trade in which the broker-dealer so engaged will attempt to
sell the Common Stock as agent, but may position and resell a portion
of the block as principal;
(2) purchases by a broker or dealer as principal and resale by such broker
or dealer;
(3) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
(4) face-to-face or other direct transactions between the Selling
Shareholders and purchasers without a broker-dealer or other
intermediary.
In making sales, broker-dealers, or agents engaged by the Selling
Shareholders may arrange for other broker-dealers or agents to participate. Such
broker-dealers may receive commissions or discounts from the Selling
Shareholders in amounts to be negotiated immediately prior to the sale. These
broker-dealers and agents and any other participating broker-dealers or agents,
as well as the Selling Shareholders and the placement agent, may be considered
to be "underwriters" within the meaning of the Act. In addition, any securities
covered by this prospectus that qualify for sale under Rule 144 may be sold
under Rule 144 rather than by this prospectus.
DESCRIPTION OF SECURITIES
We are authorized to issue up to 20,000,000 share of Common Stock, par
value $.001 per share, of which 15,091,766 shares were outstanding as of
December 31, 1998. We are also authorized to issue up to 1,000,000 shares of
Preferred Stock, par value $.001 per share, of which 2,000 shares have been
designated Series A Preferred Stock and were issued and outstanding as of
December 31, 1998.
23
<PAGE> 25
COMMON STOCK
Subject to the dividend rights of the holders of Preferred Stock, holders
of shares of Common Stock are to receive ratably such dividends, if any, as may
be declared by the Board of Directors out of funds legally available therefore.
Upon liquidation, dissolution, or winding up of our company, the holders of
Common Stock are entitled to share ratably in all of our assets which are
legally available for distribution, after payment of all debts and other
liabilities and the liquidation preference of any outstanding Preferred Stock.
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the shareholders. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights.
PREFERRED STOCK
Our Company is authorized to issue up to 1,000,000 shares of Preferred
Stock, par value $.001 per share. The Board of Directors has the authority
without any further action by our shareholders to issue any or all of the
authorized shares of Preferred Stock in one or more series and to establish the
rights, preferences, privileges and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences, sinking fund terms and the number of shares constituting any series
or the designation of such series. The issuance of Preferred Stock could
adversely affect the holders of Common Stock and could have the effect of
delaying, deferring or preventing a change in our control.
Presently we have authorized 2,000 shares of Series A Preferred Stock, all
of which are outstanding.
SERIES A PREFERRED STOCK
We established the Series A Preferred Stock on December 1, 1998. The Series
A Preferred Stock has a par value equal to $.01 per share. The Series A
Preferred Stock is immediately convertible into such numbers of shares of Common
Stock determined by dividing the Stated Value of the Series A Preferred Stock
(defined in the Certificate of Designation for the Series A Preferred Stock as
$1,000) by the Conversion Price. The Certificate of Designation provides that
the Conversion Price shall be equal to eighty percent (80%) of the Closing Bid
Price per share of our Common Stock over the five consecutive trading days
ending on the trading day immediately preceding the date the applicable holder
of the Series A Preferred Stock elects to have shares of Series A Preferred
Stock converted. If all outstanding shares of Series A Preferred Stock have not
been converted prior to the second anniversary of the date issuance, then the
Series A Preferred Stock shall be automatically converted on the second
anniversary date as if the holder voluntarily elected such conversion.
Holders of the Series A Preferred Stock shall be entitled to receive a
dividend, payable in cash or unrestricted shares of Series A Preferred Stock, at
our option, on each share of Series A Preferred Stock held by such holders in an
amount equal to eight percent (8%) per annum of Series A Liquidation Preference
(defined in the Certificate of Designation as $1,000) on the conversion date of
such shares of Series A Preferred Stock.
Holders of shares of the Series A Preferred Stock are not entitled to vote
on any matters presented to our shareholders for approval, except as required by
law. Holders of the Series A Preferred Stock will be entitled to receive $1,000
per share (plus accrued but
24
<PAGE> 26
unpaid dividends) upon our liquidation, dissolution or winding up. This payment
shall be prior to our payment of any amounts to the holders of Common Stock or
other shares of our stock which are junior to the Series A Preferred Stock.
OVER-THE-COUNTER MARKET
Our Common Stock is currently listed on the OTC Bulletin Board. We intend
to list our Common Stock on The Nasdaq SmallCap Market(SM), and believe that we
will be able to satisfy and maintain its current and proposed entry standards
following our next round of financing.
Prior to such future financing, or if we are unable to satisfy and maintain
the requirements for listing on The Nasdaq SmallCap Market(SM) following such
financing, trading, if any, of our shares, will continue to be conducted in the
over-the-counter market in the OTC Bulletin Board. Consequently, our shares may
be subject to Rule 15g-9 of the Exchange Act. That rule imposes additional sales
practice requirements on broker-dealers that sell low-priced securities to
persons other than established customers, "accredited investors" (generally,
individuals with a net worth in excess of $1,000,000 or annual incomes exceeding
$200,000, or $300,000 together with their spouses), or institutional accredited
investors. 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 consummating the sale.
Consequently, the rule may affect the ability of broker-dealers to sell our
shares and affect the ability of holders to sell our shares in the secondary
market.
TRANSFER AGENT
The Transfer Agent for our shares of Common Stock is Executive Registrar &
Transfer Agency, Post Office Box 56517, Phoenix, Arizona 85079-6517, and their
telephone number is (602) 415-1273.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock being offered
hereby will be passed upon by Jeffers, Wilson, Shaff & Falk, LLP, 18881 Von
Karman Avenue, Suite 1400, Irvine, California, 92612.
EXPERTS
The consolidated financial statements of IJNT International, Inc. appearing
in IJNT International, Inc.'s Annual Report (Form 10-KSB) for the year ended
March 31, 1998, have been audited by Smith & Company, independent certified
public accountants, as set forth in their report thereon included therein and
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
INDEMNIFICATION
Section 145 of the General Corporation Law of Delaware allows a corporation
to indemnify any person who was or is threatened to be made a party to any
threatened, pending or completed suit or proceeding. This applies whether the
matter is civil, criminal,
25
<PAGE> 27
administrative or investigative because he or she is or was a director, officer,
employee or agent of the corporation.
A corporation may indemnify against expenses (including attorney's fees)
and, except for an action by or in the name of the corporation, against
judgments, fines and amounts paid in settlement as part of such suit or
proceeding. This applies only if the person indemnified acted in good faith and
in a manner he or she reasonably believed to be in the best interest of the
corporation. In addition, with respect to any criminal action or proceeding, the
person had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or in the name of the corporation, no
indemnification of expenses may be made for any claim, as to which the person
has been found to be liable to the corporation. The exception is if the court in
which such action was brought determines that the person is reasonably entitled
to indemnity for expenses.
Section 145 of the General Corporation Law of Delaware further provides
that if a director, officer, employee or agent of the corporation has been
successful in the defense of any suit, claim or proceeding described above, he
or she will be indemnified for expenses (including attorneys' fees) actually and
reasonably incurred by him or her.
Insofar as indemnification for liabilities arising under the Act is
permitted as to directors, officers and controlling persons of the Company, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company in the successful defense of any action, suit or proceeding) is
asserted, the Company 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. The Company will be governed by the final adjudication of such issue.
26
<PAGE> 28
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses, all of which are
being paid by the Company, in connection with this offering.
<TABLE>
<S> <C>
Registration fee.................................... $2,988.50
Legal fees and expenses............................. *
Blue sky qualification fees and expenses............ *
Accounting fees and expenses........................ *
Printing expenses................................... *
Miscellaneous....................................... *
---------
Total..................................... $ *
=========
</TABLE>
- -------------------------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware allows a corporation
to indemnify any person who was or is, or is threatened to be made a party to
any threatened, pending or completed suit or proceeding. This applies whether
the matter is civil, criminal, administrative or investigative because he or she
is or was a director, officer, employee or agent of the corporation.
A corporation may indemnify against expenses (including attorney's fees)
and, except for an action by or in the name of the corporation, against
judgments, fines and amounts paid in settlement as part of such suit or
proceeding. This applies only if the person indemnified acted in good faith and
in a manner he or she reasonably believed to be in the best interest of the
corporation. In addition, with respect to any criminal action or proceeding, the
person had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action by or in the name of the corporation, no
indemnification of expenses may be made for any claim, as to which the person
has been found to be liable to the corporation. The exception is if the court in
which such action was brought determines that the person is reasonably entitled
to indemnity for expenses.
Section 145 of the General Corporation Law of Delaware further provides
that if a director, officer, employee or agent of the corporation has been
successful in the defense of any suit, claim or proceeding described above, he
or she will be indemnified for expenses (including attorneys' fees) actually and
reasonably incurred by him or her.
Insofar as indemnification for liabilities arising under the Act is
permitted as to directors, officers and controlling persons of the Company, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company in the successful defense of any action, suit or proceeding) is
asserted, the Company 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. The Company will be governed by the final adjudication of such issue.
II-1
<PAGE> 29
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
4(i) Certificate of Designation for Series A Convertible
Preferred Stock.*
4(ii) Specimen Certificate for Series A Convertible Preferred
Stock.*
5 Opinion of Jeffers, Wilson, Shaff & Falk, LLP, as to the
validity of the securities being registered.*
23(i) Consent of Independent Certified Public Accountants.*
23(ii) Consent of Jeffers, Wilson, Shaff & Falk, LLP.*
27(i) Financial Data Schedule.*
</TABLE>
- -------------------------
* To be filed by amendment to the registration statement.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Company hereby undertakes:
(i) to file, during any period in which it offers or sells securities,
a post-effective amendment to this Registration Statement to include any
additional or changed material information on the plan of distribution;
(ii) that, for determining any liability under the Securities Act,
treat each such post-effective amendment as a new Registration Statement of
the securities offered at that time shall be deemed to be the initial bona
fide offering thereof; and
(iii) to file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
(f) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the 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.
II-2
<PAGE> 30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine and the State of California, on the 7th day of
January, 1999.
IJNT INTERNATIONAL, INC.
By: /s/ JON H. MARPLE
-----------------------------------
Jon H. Marple
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JON H. MARPLE Chairman of the Board of January 7, 1999
- --------------------------------------------- Directors and Chief
Jon H. Marple Executive Officer
/s/ JON H. MARPLE Chief Financial Officer January 7, 1999
- ---------------------------------------------
Jon H. Marple
/s/ JON H. MARPLE Director January 7, 1999
- ---------------------------------------------
Jon H. Marple
/s/ MARY E. BLAKE Director January 7, 1999
- ---------------------------------------------
Mary E. Blake
/s/ JEFFREY R. MATSEN Director January 7, 1999
- ---------------------------------------------
Jeffrey R. Matsen
</TABLE>
II-3
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
4(i) Certificate of Designation for Series A Convertible
Preferred Stock.*
4(ii) Specimen Certificate for Series A Convertible Preferred
Stock.*
5 Opinion of Jeffers, Wilson, Shaff & Falk, LLP, as to the
validity of the securities being registered.*
23(i) Consent of Independent Certified Public Accountants.*
23(ii) Consent of Jeffers, Wilson, Shaff & Falk, LLP.*
27(i) Financial Data Schedule.*
</TABLE>
- -------------------------
* To be filed by amendment to the registration statement.
