Registration No. ____________
SECURITIES AND EXCHANGE COMMISSION
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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VIZACOM INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3270045
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Glenpointe Centre East, 300 Frank W. Burr Boulevard, 7th Floor,
Teaneck, New Jersey 07666
(201) 928-1001
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Mark E. Leininger
President and Chief Executive Officer
Vizacom Inc.
Glenpointe Centre East
300 Frank W. Burr Boulevard
7th Floor
Teaneck, New Jersey 07666
(201) 928-1001
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Neil M. Kaufman, Esq.
Kaufman & Moomjian, LLC
50 Charles Lindbergh Boulevard - Suite 206
Mitchel Field, New York 11553
(516) 222-5100
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, 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]
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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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Amount to maximum maximum Amount of
Title of each class be offering price aggregage registration
securities to be registered registered per unit offering price fee
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share
per share (the "Common Stock") . . . . . 1,359,090 $3.5625 (1) $4,841,758.12 (1) $1,278.22
Common Stock issuable upon exercise of
Advisor Warrants (2) . . . . . . . . . . 100,000 $1.125 (3) $112,500.00 (3) $29.70
Common Stock issuable upon exercise of
YG Warrants (2). . . . . . . . . . . . . 25,000 $2.00 (3) $50,000.00 (3) $13.20
Common Stock issuable upon exercise of
Sinclaire Warrants (2) . . . . . . . . . 100,000 $2.00 (3) $200,000.00 (3) $52.80
Common Stock issuable upon exercise of
Consultant Warrants (2) . . . . . . . . 225,000 $2.00 (3) $450,000.00 (3) $118.80
Common Stock issuable upon exercise of
Placement Warrants (2) . . . . . . . . . 129,101 $2.75 (3) $355,027.75 (3) $93.73
TOTAL. . . . . . . . . . . . . . . . . . $1,586.45
<FN>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) promulgated under the Securities Act of 1933,
based upon a per share last sale price for the Common Stock on
December 13, 1999.
(2) Pursuant to Rule 416, there are also being registered such
indeterminable number of additional shares of Common Stock as may become
issuable pursuant to anti-dilution provisions contained in the Advisor
Warrants, YG Warrants, Sinclaire Warrants, Consultant Warrants and
Placement Warrants.
(3) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(g) promulgated under the Securities Act.
</FN>
</TABLE>
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The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
The information contained in this preliminary prospectus is not complete and may
be changed. We may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is declared effective. This
preliminary prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
SUBJECT TO COMPLETION, DATED ______________ ___, 1999
PRELIMINARY PROSPECTUS
VIZACOM INC.
1,938,191 Shares of Common Stock
This prospectus is part of a registration statement filed by Vizacom Inc.
with the SEC using the "shelf" registration process. The registration statement
covers 1,938,191 Shares of our common stock, par value $.001 per share. The
Shares include 1,359,090 shares of common stock that are currently outstanding
and 579,101 shares of common stock underlying outstanding Derivative Securities,
which are options and warrants. The Shares may be offered and sold from time to
time by Selling Securityholders and any pledgees and donees of the Shares and
Derivative Securities. Information regarding the identities of the Selling
Securityholders, the manner in which they acquired their Shares and Derivative
Securities and the manner in which the Shares are being offered and sold is
provided in the "Selling Securityholders" and "Plan of Distribution" sections of
this prospectus.
We will not receive any of the proceeds from the sale of the Shares and
Derivative Securities, other than the exercise price, if any, to be received
upon exercise of the Derivative Securities. We have agreed to bear all of the
expenses in connection with the registration and sale (other than commissions)
of the Shares, which expenses we estimate to be $50,000.00.
Our common stock is currently traded on the Nasdaq SmallCap Market under
the symbol "VIZY" and listed on the Boston Stock Exchange under the symbol
"VZM." On December 13, 1999, the last sales price for our common stock, as
reported by Nasdaq, was $3-9/16 per share.
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The securities offered in this prospectus involve a high degree of risk.
You should carefully read and consider the "Risk Factors," commencing on page 6
for information that should be considered in determining whether to purchase any
of the securities.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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The date of this prospectus is ___________, 1999
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND IN ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. NO
ONE HAS BEEN AUTHORIZED TO PROVIDE YOU WITH DIFFERENT INFORMATION.
THE SECURITIES ARE NOT BEING OFFERED IN ANY JURISDICTION WHERE THE OFFER IS
NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF SUCH DOCUMENTS.
WHERE YOU CAN FIND MORE INFORMATION
Government Filings. We are subject to the information reporting
requirements of the Securities Exchange Act of 1934. As such, we file
annual, quarterly and special reports, proxy statements and other documents
with the SEC. These reports, proxy statements and other documents may be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549, and at
the SEC's regional offices located at Seven World Trade Center, Suite 1300, New
York, New York 10048, and at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601-2511. You may also obtain copies of such material by mail from
the public reference facilities of the SEC's Washington, D.C. offices, at
prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information
on their public reference facilities. In addition, the SEC maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding companies, including us, that file electronically
with the SEC at the address "http://www.sec.gov."
Stock Market. Our common stock is listed on The Nasdaq SmallCap Market
and the Boston Stock Exchange. Material filed by us can also be inspected
and copied at the offices of Nasdaq at 1735 K Street, N.W., Washington, D.C.
20006, and the Boston Stock Exchange, at One Boston Place, Boston, Massachusetts
02108.
Vizacom. Most of our SEC filings are also available to you at our web site
at "http://www.vizacom.com." Further, we will provide you without charge, upon
your request, with a copy of any or all reports, proxy statements and other
documents we file with the SEC, as well as any or all of the documents
incorporated by reference in this Prospectus or the Registration Statement
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into such documents). Requests for such copies should
be directed to:
Vizacom Inc.
Attention: Investor Relations Department
Glenpointe Centre East
300 Frank W. Burr Boulevard
Box 18, 7th Floor
Teaneck, New Jersey 07666
Telephone number: (201) 928-1001
Information Incorporated by Reference. The SEC allows us to "incorporate
by reference" the information we file with the SEC, which means that:
- incorporated documents are considered part of this prospectus,
- we can disclose important information to you by referring you to
those documents, and
- information that we file after the date of this prospectus
with the SEC will automatically update and supersede information
contained in this prospectus and the registration statement.
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<PAGE>
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act until this offering has been completed:
1. Our Annual Report on Form 10-KSB, for the fiscal year ended December
31, 1998,
2. Our Quarterly Report on Form 10-QSB, for the quarter ended March
31, 1999,
3. Our Current Report on Form 8-K (Date of Report: June 8, 1999),
4. Our Current Report on Form 8-K (Date of Report: July 1, 1999),
5. Our Quarterly Report on Form 10-QSB, for the quarter ended
June 30, 1999,
6. Our Quarterly Report on Form 10-QSB, for the quarter ended
September 30, 1999, and
7. The description of the Common Stock contained in our
Registration Statement on Form 8-A, declared effective on December 6,
1995, including any amendment(s) or report(s) filed for the purpose of
updating such description.
THE COMPANY
We make and sell computer software products for both the United States
domestic and international markets and have entered into the e-commerce and
Internet services business initially through our Internet web site
VisualCities.com. and by offering e-commerce services through our call centers.
Most of our software products are visual communication tools, comprised of:
- desktop publishing,
- presentation graphics, and
- graphics/drawing
software for the corporate, SOHO and consumer markets. Our web site,
VisualCities.com, focuses on content and e-commerce associated with these visual
communication tools.
Our software products are intended to allow the user to improve the visual
and graphical appeal as well as the overall effectiveness of documents and
digital images produced by either our or third parties' desktop publishing, web
publishing, presentation graphics, e-mail, word processing and other similar
applications and products. We currently offer twenty-eight products that operate
on:
- Windows(R)98,
- Windows 95,
- Windows NT(R),
- Windows 3.1, and
- DOS
operating systems for IBM personal computers and compatibles.
We also sell software products together with certain computer hardware,
such as:
- "mouse pens,"
- new personal computers, and
- digital cameras.
We have established a multi-channel distribution system utilizing:
- direct mail,
- telemarketing,
- retail,
- corporate,
- original equipment manufacturer (OEM), and
- the Internet
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<PAGE>
sales channels.
We currently derive substantially all of our sales from software and
hardware products sold directly to end-users by our direct mail and
telemarketing centers, and to retailers, distributors and corporate purchasers
by our internal sales force and independent sales representatives. We estimate
that approximately 91% of our net sales for the nine months ended September 30,
1999 were generated through our direct sales and telemarketing efforts, compared
to 83% of our net sales for the period ended September 30, 1998.
North America and international net sales for the three and nine months
ended September 30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------------- --------------------------------------
1999 1998 1999 1998
------------------- ------------------- ------------------- ----------------
Amount % Amount % Amount % Amount %
------ --- ------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America. . . . . . $ 1,584,050 36 $ 2,013,761 48 $ 5,073,298 37 $ 5,844,355 48
International. . . . . . 2,786,186 64 2,209,564 52 8,594,653 63 6,381,949 52
----------- --- ----------- --- ----------- --- ----------- ---
Net sales . . . . . . . $ 4,370,236 100 $ 4,223,325 100 $13,667,951 100 $12,226,304 100
=========== === =========== === =========== === =========== ===
</TABLE>
We believe that end users are continuing to migrate from the Windows 3.1
and Windows 95 environments to the Windows NT and Windows 98 platforms and to
Internet computing. We expect increased competition, including price
competition, in the computer software and hardware markets in the future.
Several of our competitors sell suites of products which include products that
directly compete with our software products. We believe that these offerings of
product suites have and will continue to adversely affect sales of our products
as the individual products within the suites continue to gain increased levels
of inter-operability and functionality. We currently do not offer a suite of
general purpose office software products; however, we currently offer one
product suite, Serif Publishing Power Suite, as well as products that complement
competitive suite products.
We are currently substantially dependent upon sales of our Serif line of
software programs. Microsoft Corporation, Corel Corporation, Adobe Systems and
others sell products targeted for substantially the same market as the Serif
product line, some of which are included in product suites.
Our VisualCities.com web site is a niche Internet commerce network which
provides targeted information, content, goods and services to visual
communication users. We intend to utilize this web site to sell our products and
create a gathering place or community for individuals with interest in visual
communication products.
We believe that in order to increase net revenues, we must:
- continue to internally develop and introduce new technologies and
products,
- obtain additional technologies and products through strategic
alliances and acquisitions, and
- introduce new marketing strategies, to include strengthening our
marketing through e-commerce and the Internet.
Any inability or delay in executing these strategies, difficulties
encountered in introducing new products or marketing programs, or failures of
our current and future products to compete successfully with products offered by
other vendors, could adversely affect our performance.
Our growth is expected to require:
- increases in the number of employees,
- expansion of our e-commerce and Internet sites,
- expenditures for new product development,
- the acquisition of product rights,
- the acquisition of e-commerce service providers,
- sales and marketing expenses, and
- increased general and administrative expenses.
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<PAGE>
Business Strategy
We have begun implementing a strategy that includes becoming a fully
integrated provider of e-commerce services by capitalizing on our core
competencies, as well as through complementary acquisitions. This strategy is
summarized below.
VisualCities.com
We recently launched our VisualCities.com Internet commerce network. We
hope to leverage our:
- large installed base of customers,
- direct marketing capabilities, and
- international brand recognition
to draw users to this web site and to promote commercial transactions.
We intend to ultimately offer the VisualCities.com user focused content
within a studio-based format reflecting seven visual communications markets:
- digital imaging,
- animation,
- art gallery,
- drawing,
- presentation graphics,
- desktop publishing, and
- web publishing.
Four of these studios are currently included in the web site. We expect this web
site to achieve full functionality by January 2001.
We envision that our VisualCities.com web site will generate revenue from a
number of sources, including:
- links to other web sites,
- sale of our own and third party products,
- brokerage of images, including photos, digital art, clip-art
and traditional media art, as well as other content,
- advertising, and
- other ancillary services related to the visual communication toolset.
E-Commerce Services
We believe there is an accelerating need for companies to provide e-
commerce services to Internet business owners. These services include the
ability to cure the customer service frustrations that presently exist on the
Internet by providing a human interface between the Internet business and its
customers. We further believe that we can become a major back office customer
and technical service provider, as well as a provider of other necessary
services, to Internet e-commerce businesses by leveraging our international
brand recognition and core competencies, which include:
- International Call Centers and Warehouse Fulfillment Capabilities:
We have call centers and fulfillment operations in the United States
and Europe which can be used to provide multi-lingual customer
services to our customers and third parties;
- Provider of Call Center Technology Services: We are becoming
a provider of click-through technology services that provides a web
user access to a live person for assistance on the web through
on-line chat or real time audio and/or video; and
- Direct Marketing Services: Our core software and direct
marketing business utilizes in-house expertise to elicit responses
to our international call centers from our direct
marketing advertisements.
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<PAGE>
In addition to the above, we intend to market our core competencies in:
- direct marketing,
- telemarketing,
- sales,
- customer and technical service, and
- fulfillment capabilities
to the e-commerce community.
We believe that, by providing a greater spectrum of web capabilities, we
will broaden our appeal to become a leading web service provider. In connection
with that strategy, we have expanded our multi-lingual call center in Aachen,
Germany and intend to make strategic acquisitions, both domestically and
internationally, including the acquisition of one or more companies engaged in
the businesses of:
- building Internet web sites and digital businesses through the use of
new media,
- designing and integrating of Internet, intranet and extranet systems
and networks, and
- designing and implementing Internet backbones.
On a combined basis, we expect to be able to provide a fully integrated
range of e-commerce services, including:
- web site design,
- e-business building and incubation,
- Internet backbone design and implementation,
- direct marketing services,
- customer and technical support services, and
- fulfillment.
Proposed Acquisitions
We have entered into a letter of intent, dated October 29, 1999, to acquire
Renaissance Computer Art Center Inc., d/b/a Renaissance Multimedia, a New York
City-based digital communication company focusing on building Internet web sites
and digital businesses through the use of new media. We expect to engage in a
merger transaction with Renaissance Multimedia, pursuant to which the current
stockholders of Renaissance Multimedia will receive an aggregate of $250,000 in
cash and a number of shares of our common stock equal in value to $1,750,000,
based on the value of our common stock for the twenty trading days immediately
prior to the closing of such transaction. The closing of this proposed merger
transaction is subject to the completion of due diligence by each of the parties
to the transaction, the negotiation and execution of a definitive merger
agreement (and all ancillary documents, instruments and agreements contemplated
thereby), and the parties' compliance with customary conditions to the closing.
We also have signed a non-binding letter of intent to acquire a designer
and integrator of Internet, intranet and extranet systems and networks. This
letter of intent constitutes a statement of intention only, and is not a binding
commitment. The closing of this proposed merger is subject to the completion of
due diligence by each of the parties to the transaction, the negotiation and
execution of a definitive merger agreement (and all ancillary documents,
instruments and agreements contemplated thereby), and the parties' compliance
with customary conditions to the closing. During the period of due diligence and
prior to the execution and delivery of such a merger agreement, either party may
unilaterally terminate the negotiations for any reason whatsoever, or without
reason.
Formation; Historical Background
Our company was incorporated in Delaware on December 23, 1993, and
succeeded to the business of our predecessor New Jersey corporation, which was
formed on July 20, 1992. In July 1996, we acquired Serif Inc. and Serif (Europe)
Limited, which significantly expanded our product line to include desktop
publishing and drawing titles Serif PagePlus and Serif DrawPlus, among others.
In December 1996, we acquired all of the outstanding capital stock of Software
Publishing Corporation, as a result of which our product line expanded further
to include
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<PAGE>
SPC's presentation graphics and other visual communications and
business productivity software products, including Harvard Graphics. We continue
to operate the Serif companies and SPC as wholly-owned subsidiaries. Since
January 1998, the operations of SPC have been significantly reduced.
Principal Offices
Our principal executive offices are located at Glenpointe Centre East, 300
Frank W. Burr Boulevard, 7th Floor, Teaneck, New Jersey 07666; telephone (201)
928-1001. The Company maintains websites at www.vizacom.com, www.serif.com,
www.harvardgraphics.com and www.visualcities.com.
RISK FACTORS
The securities offered in this Prospectus are speculative and involve a
high degree of risk. Only those persons able to lose their entire investment
should purchase any of the securities. Prior to making an investment decision,
you should carefully read this Prospectus and consider, along with other matters
referred to herein, the following risk factors.
We have incurred losses to date and there is no assurance that we will become
profitable.
We have been unprofitable since inception in July 1992 and may continue to
incur operating losses in the future. For the year ended December 31, 1998, we
had a net loss of approximately $2,407,000 and, for the nine months ended
September 30, 1999, we had a net loss attributable to common stockholders of
$3,093,000. Our operating losses may increase as we:
- develop our e-commerce services business,
- develop, produce and distribute additional products and services,
- de-emphasize other products and services,
- implement our growth strategy, which will include the investment
required to accelerate the growth of acquired companies,
- develop our Internet commerce network, and
- continue to develop our business.
We may not be able to become profitable or, if we obtain profitability, we
may thereafter not be able to maintain profitability.
We have limited experience in e-commerce which could adversely affect our
ability to compete.
We have a limited operating history in e-commerce. Our company has only
recently focused its resources on competing in the e-commerce market.
Accordingly, there is little information on which you can base an evaluation of
our new businesses and prospects. As an online commerce company, we face
increased risks, uncertainties, expenses and difficulties. You should consider
an investment in our company in light of these risks, uncertainties, expenses
and difficulties. To address these risks and uncertainties, we must do the
following:
- maintain and increase our number of users,
- maintain and grow our web sites and customer operations,
- continue to make transacting business through our web sites and
services safer for users,
- maintain and enhance our brands,
- successfully execute our business and marketing strategy,
- continue to develop and upgrade our technology and information
processing systems,
- continue to enhance our web sites and services to meet the needs of
a changing market,
- provide superior customer service,
- respond to competitive developments,
- attract, integrate, retain and motivate qualified personnel, and
- raise working capital to be able to compete effectively in the
e-commerce market with well-funded competition.
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<PAGE>
We may be unable to accomplish one or more of these things, which could
cause our business to suffer. In addition, accomplishing one or more of these
things might be very expensive, which could adversely affect our ability to
obtain profitability and thereafter operate profitably.
Our failure to manage growth could harm us.
We may experience a period of significant expansion in our headcount,
facilities and infrastructure to address potential growth in our business
operations and market opportunities and executing our strategies. We expect this
expansion will continue to place a significant strain on our management,
operational and financial resources. The areas that are put under severe strain
by our rate of growth include the following:
- VisualCities.com. and our other web sites. We may need to
add new hardware, update software and add new engineering personnel
to accommodate the anticipated increased use of our web sites. If we
are unable to increase the capacity of our systems at least as fast
as the growth in demand for this capacity, our web site may become
unstable and may cease to operate for periods of time. Any unscheduled
downtime could harm our business and also could anger users of our
web site and reduce future revenues.
- Customer Support. We must expand our customer support
operations to accommodate the anticipated increased number of
users and transactions on our web sites and to support our
e-services products. If we are unable to hire and successfully train
sufficient employees or contractors in this area, users of our web
sites may have negative experiences and current and future revenues
could suffer.
- Customer Accounts. Our revenues are dependent on prompt and
accurate billing processes. If we are unable to grow our
transaction processing abilities to accommodate the anticipated
increasing number of transactions that must be billed, our
ability to collect revenue will be harmed.
Competition for Internet professional services is intense with low barriers to
entry which may affect our business operations.
The market for Internet professional services is relatively new, intensely
competitive, rapidly evolving and subject to rapid technological change. While
relatively new, the market is already highly competitive and characterized by an
increasing number of entrants who have introduced or developed products and
services similar to those presently and anticipated to be offered by us. We
expect competition not only to persist, but to increase. Increased competition
may result in price reductions, reduced margins and loss of market share. The
barriers to entry into certain of the fields in which we presently and intend to
operate are also relatively low. As a result, we expect to face additional
competition from new market entrants in the future. The market for our goods and
services is rapidly evolving and is subject to continuous technological change.
As a result, our competitors may be better positioned to address these
developments or may react more favorably to these changes. Existing or future
competitors may develop or offer strategic Internet services that provide
significant technological, creative, performance, price or other advantages over
the services offered by us.
The inability to expand our systems may limit our growth.
We seek to generate a high volume of traffic and transactions on our web
sites and through our e-commerce service centers. The satisfactory performance,
reliability and availability of our web sites, processing systems and network
infrastructure are critical to our reputation and our ability to attract and
retain large numbers of users and to service our consumers. If the volume of
traffic on our web sites increases, we will need to expand and upgrade our
technology, transaction processing systems and network infrastructure. We may be
unable to accurately project the rate or timing of increases, if any, in the use
of our web sites or service centers or to timely expand and upgrade our systems
and infrastructure to accommodate any increases. We must continually improve
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<PAGE>
these systems in order to accommodate the anticipated level of use of our web
sites or service centers. In addition, we may add new features and functionality
to our web sites or service centers that would result in the need to develop or
license additional technologies. Our inability to add additional software and
hardware or to upgrade our technology, transaction processing systems or network
infrastructure to accommodate increased traffic or transaction volume could have
adverse consequences. These consequences include:
- unanticipated systems disruptions,
- slower response times,
- degradation in levels of customer support,
- impaired quality of the users' experience and delays in reporting
accurate transaction information.
Our failure to provide new features or functionality also could result in
these consequences. We may be unable to effectively upgrade and expand our
systems in a timely manner or to integrate smoothly any newly developed or
purchased technologies with our existing systems. These difficulties could harm
or limit our ability to expand our business.
We are dependent on the continued growth of the Internet and e-commerce market.
The market for the sale of goods over the Internet and e-commerce services
are new and emerging markets. Our future revenues and growth will be
substantially dependent upon the widespread acceptance of the Internet as a
medium for commerce by consumers and e-commerce services. Rapid growth in the
use of and interest in the World Wide Web, the Internet and online services is a
recent phenomenon. This acceptance and use may not continue. Even if the
Internet is accepted, concerns about fraud, privacy and other problems may mean
that a sufficiently broad base of consumers will not adopt the Internet as a
medium of commerce. These concerns may increase as additional publicity over
privacy issues over the Internet increases. Market acceptance for recently
introduced services and products over the Internet is highly uncertain, and
there are few proven services and products. In order to expand our user base, we
must appeal to and acquire consumers who historically have used traditional
means of commerce to purchase goods.
Our business is dependent on the development and maintenance of the World Wide
Web and service center infrastructures.
The success of our Internet-related businesses will depend largely on the
development and maintenance of the World Wide Web and service center
infrastructures. This includes maintenance of a reliable network backbone with
the necessary speed, data capacity and security, as well timely development of
complementary products such as high speed modems, for providing reliable Web
access and services. Because global commerce and the online exchange of
information is new and evolving, we cannot predict whether the Web will prove to
be a viable commercial marketplace in the long term. The Web has experienced,
and is likely to continue to experience, significant growth in the numbers of
users and amount of traffic. If the Web continues to experience increased
numbers of users, increased frequency of use or increased bandwidth
requirements, the Web infrastructure may be unable to support the demands placed
on it. In addition, the performance of the Web may be harmed by increased users'
or bandwidth requirements. The Web has experienced a variety of outages and
other delays as a result of damage to portions of its infrastructure, and it
could face outages and delays in the future. These outages and delays could
reduce the level of Web usage as well as the level of traffic and the processing
of transactions on our web sites and through our service centers. In addition,
the Web could lose its viability due to delays in the development or adoption of
new standards and protocols to handle increased levels of activity or due to
increased governmental regulation. The infrastructure and complementary products
or services necessary to make the Web a viable commercial marketplace for the
long term may not be developed successfully or in a timely manner. Even if these
products or services are developed, the Web may not become a viable commercial
marketplace for the goods and services such as those that we offer.
Our business is subject to e-commerce security risks.
A significant barrier to e-commerce and communications over the Internet is
the secure transmission of confidential information over public networks. Our
security measures may not be able to prevent all types of
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security breaches. Our failure to prevent security breaches could harm our
business. We rely on encryption and authentication technology licensed from
third parties to provide the security and authentication technology to effect
secure transmission of confidential information, including customer credit card
numbers. Advances in computer capabilities, new discoveries in the field of
cryptography or other developments may result in a compromise or breach of the
technology used by us to protect customer transaction data. Any such compromise
of our security could harm our reputation and, therefore, our business. In
addition, a party who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our operations.
We may need to expend significant resources to protect against security breaches
or to address problems caused by breaches. Security breaches could damage our
reputation and expose us to a risk of loss or litigation and possible liability.
Our insurance policies carry low coverage limits, which may not be adequate to
reimburse us for losses caused by security breaches.
Competition within the market for software products may adversely affect our
results of operations.
The market for our software products is characterized by:
- ongoing technological developments,
- evolving industry standards,
- licensing of technology between companies,
- cross and collateral marketing of products by two or more
companies,
- alliances between companies,
- joint marketing campaigns,
- rapid changes in customer requirements and increasing customer
demands, and
- changes in operating systems.
We believe that the principal competitive factors in the corporate, SOHO
and consumer software markets include:
- pricing (which includes individual product pricing, standard and
competitive upgrade pricing, licensing and volume discounting),
- product functionality,
- ease-of-use,
- bundling in suites of related products which could render
competitive products to be considered "free,"
- distribution through existing and new channels, and
- brand name recognition.
As a result, we believe that our success in this market depends upon our
ability to continue to:
- provide continued enhancement of our existing and future products,
- correctly identify and enter new markets,
- effectively market and sell our current and future products,
- expand our existing distribution channels while also developing new
distribution channels, including e-commerce,
- timely and efficiently acquire, license or develop and introduce new
products that take advantage of technological advances, and
- respond to new requirements and demands of the market.
To the extent one or more of our competitors introduce products that better
address market requirements, our business could be adversely affected. We may
not be successful in developing and marketing enhancements to our existing
products or new products incorporating new technology on a timely basis. Also,
our existing and new products may not adequately address the changing needs of
the marketplace. If we are unable to timely develop and introduce new products
or enhance existing products, our business and results of operations could be
materially and adversely affected.
The dominant position of Microsoft in the personal computer operating
system and application program marketplace provides Microsoft with a range of
competitive advantages, including its ability to determine
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the direction of future operating systems and to leverage its strength in
one or more product areas to achieve a dominant position in new markets. This
position may enable Microsoft to increase its market position even with respect
to products having superior performance, price and ease-of-use features.
Microsoft's ability to:
- offer corporate and SOHO operating systems combined with its own
productivity software,
- bundle software,
- provide incentives to customers to purchase certain products in order
to obtain favorable sales terms or necessary compatibility or
information with respect to other products,
- pre-load such bundled software on new computers, and
- purchase advantageous product positioning and presentations in various
distribution channels,
may significantly inhibit our ability to maintain or expand our business.
In addition, as Microsoft or other companies create new operating systems
and applications, we may not be able to re-work our products in order for the
products to remain compatible with these new systems and applications on a
timely or economical basis. The introduction of upgrades to operating systems or
the introduction of new operating systems and standardized software by Microsoft
and others, over which we have no control, may adversely affect our ability to
upgrade our own products and may cause a reduction in sales of our products.
We believe that competition will continue to intensify in the future and
that new product introductions, as well as potential price reductions, strategic
alliances and other actions by competitors could materially and adversely affect
our competitive position.
The shortened product life cycles of competitive software products may adversely
affect our product life cycles and development costs, as well as our revenues.
From time to time we or our competitors may announce new products,
capabilities or technologies that have the potential to replace or shorten the
life cycles of our existing products. Such announcements of currently planned or
other new products may cause customers to defer purchasing our existing
products.
Seasonality is expected to cause fluctuations in our revenues and operating
results.
The computer software market is characterized by significant seasonal
swings in demand, which typically peak in the fourth quarter of each calendar
year. The seasonal pattern is due primarily to the increased demand for software
during the year-end holiday buying season and reduced retail and corporate
demand for our software principally during the Easter and summer vacation
periods. We expect our net sales and operating results to reflect this
seasonality.
Fluctuations in quarterly results and the uncertainty of future operating
results may cause significant fluctuations in our stock price.
Our quarterly operating results have and, in the future, may fluctuate
significantly, depending on a variety of factors, many of which are outside of
our control. Factors that may affect our quarterly results include:
- demand for our products,
- the size, timing and timely fulfilment of orders,
- the number, timing and significance of new product announcements by
us and our competitors,
- our ability to develop, introduce and market new products, as well
as enhanced versions of our current products on a timely basis,
- the level of product and price competition,
- changes in operating expenses,
- changes in average selling prices and product mix, which could also
affect our profit margins,
- changes in our sales incentive strategy, as well as sales personnel
changes,
- the mix of direct and indirect sales, product returns and
rebates,
- changes in technology,
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- our ability to retain an active user base, attract new users and
maintain customer satisfaction for our VisualCities.com and other web
sites,
- our ability to keep our web sites operational,
- federal, state or local government regulation,
- the introduction of new sites, services and products by us or our
competitors,
- volume, size, timing and completion of transactions on our web
sites,
- consumer confidence in the security of transactions on our web
sites,
- our ability to upgrade and develop our systems and infrastructure to
accommodate growth,
- technical difficulties or service interruptions,
- the amount and timing of operating costs and capital expenditures
relating to expansion of our business, operations and
infrastructure,
- our ability to attract new personnel in a timely and effective
manner,
- our ability to retain key employees in both our software, services
and online businesses and our new acquisitions,
- the timing, cost and availability of advertising in
traditional media and on other web sites and online services,
- the timing of marketing expenses,
- consumer trends,
- the success of our brand building and marketing campaigns,
- the level of use of the Internet and online services,
- increasing consumer acceptance of the Internet and other online
services for commerce,
- increasing corporate acceptance of Internet services and other
services for e-commerce,
- general economic conditions and economic conditions specific to the
Internet and e-commerce industries, and
- seasonality.
Our expense levels, however, are expected to be based in large part on our
expectations of future revenues and the expected costs associated with growing
our new e-services business and acquired companies. Therefore, if revenue levels
are below expectations, operating results are likely to be adversely affected.
Net income may be disproportionately affected by an unanticipated decline in
revenue for a particular quarter because a relatively small amount of our
expenses will vary with our revenue in the short term. As a result, we believe
that period-to-period comparisons of our results of operations are not and
will not necessarily be meaningful and should not be relied upon as any
indication of future performance. Due to all of the foregoing factors, it is
likely that in some future quarter our operating results will be below
expectations. In such event, the market price of our common stock could be
materially adversely affected.
There is significant volatility of in our stock prices.
The market for our common stock is highly volatile. The trading price of
our common stock could be subject to wide fluctuations in response to, among
other things:
- quarterly variations in operating and financial results,
- announcements of technological innovations or new products by us or
our competitors,
- changes in prices of our products or our competitors' products and
services,
- changes in product mix,
- changes in our revenue and revenue growth rates as a whole
or for individual geographic areas, business units, products or
product categories,
- responses to our strategies concerning e-commerce and the
Internet,
- unscheduled web site downtime,
- additions or departures of key personnel,
- announcements of technological innovations or new services by us or
our competitors,
- changes in financial estimates by securities analysts,
- conditions or trends in the Internet and online commerce
industries,
- the emergence of online securities trading,
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- changes in the market valuations of other Internet or online
service companies,
- developments in Internet regulations,
- announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments,
- sales of our common stock or other securities in the open market,
and
- other events or factors that may be beyond our control.
Statements or changes in opinions, ratings, or earnings estimates made by
brokerage firms or industry analysts relating to the market in which we do
business or relating to us could result in an immediate and adverse effect on
the market price of the Common Stock. In addition, the stock market has from
time to time experienced extreme price and volume fluctuations which have
particularly affected the market price for the securities of many software and
Internet companies and which often have been unrelated to the operating
performance of these companies. These broad market fluctuations may adversely
affect the market price of the Common Stock.
Rapid technological changes could cause delay in new product introductions and
these delays may cause reduced revenues.
The software market is characterized by:
- ongoing technological developments,
- evolving industry standards,
- frequent new product introductions, and
- rapid changes in customer requirements and preferences.
The introduction of products embodying new technologies and the emergence
of new industry standards and practices can rapidly render existing products
obsolete and unmarketable. In the past, we have experienced delays in software
development and may experience delays in connection with current product
developments or future development activities. Such delays may prevent the
successful introduction or marketing of these products. Further, our new
products and product enhancements may not adequately meet the requirements of
the marketplace and achieve market acceptance. Delays in the commencement of
commercial shipments of new products or enhancements may also result in customer
dissatisfaction and delay or loss of product revenues.
Product defects could delay or prevent market acceptance of new or upgraded
products.
Software products as complex as those offered by us may contain undetected
errors or failures when first introduced or as new versions are released.
Despite testing internally or by current or potential customers, errors may be
found in new products after commencement of commercial shipments, resulting in
loss of or delay in market acceptance.
Although we have a number of ongoing development projects, the following
risks still exist:
- development may not be completed successfully on time or within our
projected cost,
- projects may not include the features required to achieve market
acceptance, and
- enhancements to our products may not keep pace with broadening
market requirements.
Product returns and difficulties in the collection of accounts receivable could
result in reductions in our cash flows.
Some of our sales are made on credit terms which may vary substantially. We
do not hold collateral to secure payment. Therefore, a default in payment on a
significant scale could materially adversely affect our business, results of
operations and financial condition. In addition, it is difficult for us to
ascertain future demand for our existing products and anticipated demand for
newly introduced products. Consistent with industry practices, we may accept
product returns or provide other credits in the event that a retailer or
distributor holds excess inventory of our products, even when we are not legally
required to do so. Accordingly, we are exposed to the risk of product returns
from retailers, distributors and direct sales customers. While we believe that
we have established appropriate allowances for collection problems and
anticipated returns based on our historical experience and
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industry norms, actual returns and uncollectible receivables may exceed such
allowances. Defective products also may result in higher customer support costs
and product returns.
We are dependent on key personnel.
Significant historical growth from acquisitions and operational
restructurings have placed strain upon our personnel, management systems and
resources. In the future, we expect to continue to improve our financial and
management controls, reporting systems and procedures on a timely basis and
train and manage our employee work force. An inability to do so may inhibit our
ability to grow. Competition for qualified sales, technical and other personnel,
including expert Windows-environment programmers, is intense, and we may not be
able to attract or retain highly qualified employees in the future. Our future
success depends in significant part upon the continued service of our current
key technical, sales and senior management personnel. The loss of the services
of one or more of these key employees could have a material adverse effect on
our business, operating results and financial condition. Additions of new and
departures of existing personnel, particularly in key positions, can be
disruptive, which could have a material adverse effect upon us.
International sales and operations and currency fluctuations could have an
adverse effect on our business, financial condition and results of operations.
International sales are a significant source of our revenue. International
sales represented approximately 63% of our net sales for the nine months ended
September 30, 1999 and 52% of our net sales for the year ended December 31,
1998. We believe that achieving profitability will require, among other matters,
additional expansion of sales in foreign markets. In order to increase
international sales, we may be required to establish additional foreign
operations, hire additional personnel and recruit additional international
resellers. Currently, our international sales are denominated in either U.S.
dollars, the Euro or local currency and we do not anticipate engaging in any
hedging activities. The Euro may have an impact on currency fluctuations.
Although exposure to currency fluctuations to date has not been significant,
fluctuations in currency exchange rates in the future could have a material
adverse impact on us. Additional risks inherent in our international business
activities include:
- unexpected changes in regulatory requirements,
- tariffs and other trade barriers,
- costs of localizing products for foreign countries,
- lack of acceptance of localized products in foreign countries,
- longer accounts receivable payment cycles,
- difficulties in collecting payment,
- difficulties in managing international operations,
- potentially adverse tax consequences including limitations on the
repatriation of earnings,
- reduced protection for intellectual property,
- the burdens of complying with a wide variety of foreign laws, and
- the effects of potentially high local wage scales, employment
customs and other expenses.
Any of these factors or others not presently contemplated by us could have
a material adverse effect on our future international operations.
We are dependent on manufacturers and suppliers of hardware.
In the third quarter of 1998, we began selling our Go Digital Camera Pak,
which consists of a digital camera and digital imaging software licensed from a
third party, as well as certain accessories. In the current fiscal year, we
began to experience delays in shipments of digital cameras from the cameras'
respective manufacturers and suppliers, which delays have continued. As of
September 30, 1999, we had a backlog of approximately $300,000 relating to this
product. While we believe that these delays are only temporary, we are presently
investigating alternative manufacturer/suppliers for hardware similar in quality
to the digital cameras presently included in the Go Digital Camera Pak and those
offered as upgrade cameras. No assurance can be given that we will, in the
future, not experience delays in receipt of these digital cameras or other
hardware sold by us from our
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manufacturers/suppliers, or identify alternative suppliers and acquire the
alternative hardware on terms as beneficial to us as our present hardware
purchase terms.
Changes in our product mix may cause lower gross margins, which could have a
material adverse effect on our operating results.
Since our introduction of our Go Digital Photo Pak, our hardware sales,
which generally have lower gross margins than software sales, have increased as
a percentage of our total net sales. We anticipate that this trend may continue.
In addition, competition within the hardware market may cause a further erosion
of margins for hardware sales. These trends could have a material adverse effect
on us. Accordingly, any further increase in hardware sales as a percentage of
our total sales or lower margins for hardware sales may result in reduced
margins, which could have a material adverse effect on our operating results.
We expect to need to continue to hire, train and manage new employees to support
future growth.
Our current and planned personnel, systems, procedures and controls may not
be adequate to support our future operations. If our new hires are not good
employees, or if we are unsuccessful in training and integrating these new
employees, our business may be harmed. To manage the expected growth of our
operations and personnel, we will need to improve our transaction processing,
operational and financial systems, procedures and controls. We may be unable to
hire, train, retain and manage required personnel or to identify and take
advantage of existing and potential strategic relationships and market
opportunities.
We may not obtain or, thereafter, maintain profitability.
We believe that our ability to become profitable, and thereafter maintain
profitability and grow, will depend in large part on our success in the
following:
- managing the costs of our business, including the costs
associated with maintaining and developing our web sites, customer
support and international operations,
- increasing our brand name awareness,
- providing our customers with superior service, and
- successfully integrating the operations of acquired companies into a
unified operation.
We may be unable to implement our acquisition growth strategy, which could harm
our business and competitive position in the industry.
Our business strategy includes making strategic acquisitions of other
companies or businesses, including visual communications solutions providers and
web site design or other firms. Our continued growth will depend on our ability
to identify and acquire, on acceptable terms, companies that complement or
enhance our business. We may not be able to complete or identify future
acquisitions or realize the anticipated results of future acquisitions. Some of
the risks that we may encounter in implementing our acquisition growth strategy
include:
- expenses and difficulties in identifying potential targets and the
costs associated with incomplete acquisitions,
- higher prices for acquired companies because of greater competition
for attractive acquisition targets,
- expenses, delays and difficulties of integrating the acquired
companies into our existing organization,
- greater impact of the goodwill of acquired companies on our
statement of income when pooling accounting for acquisitions is not
used,
- dilution of the interest of existing stockholders if we sell stock
to the public to raise cash for acquisitions,
- diversion of management's attention,
- expenses of amortizing the acquired companies' intangible assets,
- increase in our expenses in order to advertise and promote the
acquired companies,
- impact on our financial condition due to the timing of the
acquisition, and
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- expense of any undisclosed or potential legal liabilities of the
acquired company.
If realized, any of these risks could have a material adverse effect on our
business, results of operations and financial condition.
Acquisitions could result in dilution, operating difficulties and other harmful
consequences.
If appropriate opportunities present themselves, we intend to acquire
businesses, technologies, services or products that we believe are strategic. We
recently entered into a letter of intent to acquire Renaissance Multimedia and
intend to make further acquisitions. The process of integrating any acquisition
may create unforeseen operating difficulties and expenditures and is itself
risky. The areas where we may face difficulties include:
- diversion of management time (both ours and at the acquired
companies) during the period of negotiation through closing and
further diversion of such time after closing from focus on operating
the businesses to issues of integration and future products,
- decline in employee morale and retention issues resulting
from changes in compensation, reporting relationships, future
prospects, or the direction of the business,
- the need to integrate each company's accounting, management
information, human resource and other administrative systems to permit
effective management and the lack of control if such integration is
delayed or not implemented, and
- the need to implement controls, procedures and policies
appropriate for a larger public company at companies that prior to
acquisition had been smaller, private companies.
Moreover, the anticipated benefits of any or all of these acquisitions may
not be realized. Future acquisitions could result in potentially dilutive
issuances of equity securities, the incurrence of debt, contingent liabilities
or amortization expenses related to goodwill and other intangible assets, any of
which could harm our business. Future acquisitions may require us to obtain
additional equity or debt financing, which may not be available on favorable
terms or at all. Even if available, this financing may be dilutive.
Our continued growth may further strain our resources, which could hurt our
business and results of operations.
A key part of our strategy is to grow, both by acquiring companies and by
hiring more personnel, which may continue to strain our managerial and
operational resources. We cannot assure you that our management will be able to
manage our growth effectively. To manage future growth, our management must
continue to improve our operational and financial systems, procedures and
controls, as well as expand, train, retain and manage our employees. If our
systems, procedures and controls are inadequate to support our operations, our
expansion could falter and we could lose our opportunity to gain significant
market share. Any inability to manage growth effectively could materially harm
our business, results of operations and financial condition.
We may have difficulty managing our international operations and expansion,
which could adversely affect our business and results of operations.
We anticipate expansion outside of the United States, initially in the
United Kingdom and elsewhere in Europe. While we presently have operations in
the United Kingdom and Germany, our management may have difficulty managing and
expanding our international operations because of distance, as well as language
and cultural differences.
Other risks related to our international operations include:
- difficulties arising from staffing and managing foreign
operations,
- foreign currency exchange fluctuations,
- legal and regulatory requirements of different countries, such as
differing tax or labor laws, and
- potential political and economic instability.
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If any of these risks materialize, our international businesses, results of
operations and financial condition could be materially and adversely affected.
Our acquisition strategy may not produce the desired results.
A key component of our growth strategy is to acquire Internet-related
businesses that complement or enhance our business, on acceptable terms. The
competition for acquisition candidates is intense and we expect this competition
to increase. There is no assurance that we will identify and successfully
compete for attractive acquisition candidates or complete acquisitions at
reasonable purchase prices, in a timely manner or at all.
To the extent we have to use cash consideration for acquisitions in the
future, we may need to obtain additional financing. To the extent our management
must devote significant time and attention to the integration of technology,
operations, businesses and personnel as a result of these acquisitions, our
ability to service current customers and win new customers may suffer. In
addition, our senior management faces the difficult and potentially time
consuming challenge of implementing uniform standards, controls, procedures and
policies throughout our current and future acquisitions. We could also
experience financial or other setbacks if any of the acquired businesses
experience unanticipated problems. Further, we may experience disputes with the
sellers of acquired businesses and may fail to retain key acquired personnel.
System failures could harm our business.
We have experienced system failures from time to time. In addition to
placing increased burdens on our engineering staff, these outages could create a
flood of user questions and complaints that must be responded to by our customer
support personnel. Any unscheduled interruption in our systems could result in
an immediate loss of revenues that can be substantial and may cause some users
to switch to our competitors. If we experience frequent or persistent system
failures, our reputation and brand could be permanently harmed. We are currently
taking steps to increase the reliability and redundancy of our system. These
steps are expensive and may not be successful in reducing the frequency or
duration of unscheduled downtime. Substantially all of our computer hardware for
operating our web sites and service centers currently is located at our Nashua,
New Hampshire, Nottingham, England, and Aachen, Germany facilities and at the
offices of one of our vendors. These systems and operations may be vulnerable to
damage or interruption from floods, fires, power loss, telecommunication
failures and similar events. They are also subject to break-ins, sabotage,
intentional acts of vandalism and similar misconduct. Although we have fully
redundant systems, we do not have, at this time, a formal disaster recovery plan
or alternative providers of hosting services, and we do not carry business
interruption insurance to compensate us for losses that may occur. Despite any
precautions we may take, the occurrence of a natural disaster or other
unanticipated problems at these facilities could result in interruptions in our
web sites or service centers. Any damage to or failure of our systems could
result in interruptions in our web sites or service centers. Interruptions in
our web sites would reduce our revenues, and our future revenues will be harmed
if our users believe that our systems are unreliable.
Fixed-price contracts involve financial risks.
We anticipate that certain of our e-business contracts may be on a
fixed-price basis, rather than on a time and materials basis. Further, as the
average size of our e-business contracts increases, our exposure to the
financial risks of fixed price contracts could increase. We may assume greater
financial risk on fixed-price contracts than on time and materials engagements.
We do not have a history of estimating costs for our engagements, particularly
for larger projects. We may have to commit unanticipated resources to complete
some of our projects, resulting in lower gross margins on such contracts. In
addition, we may assume the fixed-price contracts of the companies we acquire.
If we or our acquired businesses fail to estimate accurately the resources and
time required for an engagement, to manage client expectations effectively or to
complete fixed-price engagements within budget, on time and to our clients'
satisfaction, we would be exposed to cost overruns, potentially leading to
losses on these engagements.
In addition, we expect to be required to recognize revenues from fixed-fee
contracts based on our estimate of the percentage of each project completed in a
reporting period. To the extent our estimates are inaccurate, the
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revenues and operating profits, if any, we report for periods during which
we are working on a project may not accurately reflect the final results of the
project and we would be required to make adjustments to such estimates in a
subsequent period.
We generally do not expect to have long-term contracts and the need to establish
relationships with new clients creates an uncertain revenue stream.
We anticipate that our e-business clients generally will retain us on a
project by project basis, rather than under long-term contracts, although our e-
commerce support services may be rendered under one-year or other long-term
service contracts. As a result, a client may or may not engage us for further
services once a project is completed. We expect that establishment and
development of relationships with additional companies and other corporate users
of information technology will be an important component of our business
operations. The absence of long-term contracts and the need for new clients
create an uncertain revenue stream. A client which accounts for a significant
portion of our revenues in a given period may not generate a similar amount of
revenues, if any, in subsequent periods. There is no assurance that we will be
able to add new major clients or to secure new engagements with existing
clients. In addition, some of our existing clients may unilaterally reduce the
scope of, or terminate, existing projects.
Unauthorized break-ins to our systems could harm our business.
Our servers are vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions, which could lead to interruptions, delays,
loss of data or the inability to complete user transactions. In addition,
unauthorized persons may improperly access our data. We may experience an
unauthorized break-in by a "hacker" who could cause damage to or change our
system or take confidential information. Any actions like these could harm us.
Actions like these may be very expensive to remedy and could damage our
reputation and discourage new and existing users from visiting our web sites.
The law relating to the liability of web site operators for the activities of
their users on their web sites is currently unsettled.
We may be unable to prevent unlawful activities by users of our web sites,
and we may be subject to civil or criminal liability for unlawful activities
carried out by users through our web sites. In order to reduce our exposure to
this liability, we may prohibit certain activities. We may in the future
implement other protective measures that could require us to spend substantial
resources and/or to reduce revenues by discontinuing certain service offerings.
Any costs incurred as a result of liability or asserted liability relating to
unlawful activities could harm our business.
We are subject to risks associated with information disseminated through our web
sites.
The law relating to the liability of web site operators for information
carried on or disseminated through their services is currently unsettled. Claims
could be made against web site providers under both United States and foreign
law for defamation, libel, invasion of privacy, negligence, copyright or
trademark infringement, or other theories based on the nature and content of the
materials disseminated through their web sites. Several private lawsuits seeking
to impose liability upon other web site providers currently are pending. In
addition, federal, state and foreign legislation has been proposed that imposes
liability for or prohibits the transmission over the Internet of certain types
of information. Our web sites feature chat rooms/forums, which include
information from users regarding other users and other persons and entities.
Although all such discussions are generated by users and not by us, it is
possible that a claim of defamation or other injury could be made against us for
content posted on our web sites. Claims like these become more likely and have a
higher probability of success as we continue to expand internationally. If we
become liable for information provided by our users and carried on our web
sites, we could be directly harmed and we may be forced to implement new
measures to reduce our exposure to this liability. This may require us to expend
substantial resources and/or to discontinue certain service offerings. In
addition, the increased attention focused upon liability issues as a result of
these lawsuits and legislative proposals could harm our reputation or otherwise
impact the growth of our business. We carry liability insurance, but it may not
be adequate
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to fully compensate us if we become liable for information carried on or
through our web sites. Any costs incurred as a result of this liability or
asserted liability could harm our business.
We may be subject to legal liability to our clients.
Many of our e-business engagements will involve the development and
implementation of Internet solutions that are important to our clients'
businesses. Our failure or inability to meet a client's expectations in the
performance of services could injure our business reputation or result in a
claim for substantial damages against us regardless of our responsibility for
such failure. In addition, the services we provide for our clients may include
confidential or proprietary client information. Although we have implemented
policies to prevent such client information from being disclosed to unauthorized
parties or used inappropriately, any such unauthorized disclosure or use could
result in a claim against us for substantial damages. Our contractual provisions
attempting to limit such damages may not be enforceable in all instances or may
otherwise fail to protect us from liability for damages.
New and existing regulations could harm our business.
We are subject to the same federal, state and local laws as other companies
conducting business on the Internet. Today there are relatively few laws
specifically directed towards web site providers. However, due to the increasing
popularity and use of the Internet, it is possible that laws and regulations
will be adopted with respect to the Internet and web site providers. These laws
and regulations could cover issues such as:
- user privacy,
- freedom of expression,
- pricing,
- fraud,
- content,
- quality of products and services,
- taxation,
- advertising,
- intellectual property rights, and
- information security.
Applicability to the Internet of existing laws governing issues such as:
- property ownership,
- copyrights and other intellectual property issues,
- taxation,
- libel,
- obscenity, and
- personal privacy
is uncertain. The vast majority of these laws were adopted prior to the advent
of the Internet and related technologies and, as a result, do not contemplate or
address the unique issues of the Internet and related technologies. Those laws
that do reference the Internet, such as the Digital Millennium Copyright Act,
have not yet been interpreted by the courts and their applicability and reach
are therefore uncertain.
Several states have proposed legislation that would limit the uses of
personal user information gathered online or require web site providers to
establish privacy policies. The Federal Trade Commission also has recently
settled a proceeding with one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues could directly affect the way we do business or could create uncertainty
in the marketplace. This could reduce demand for our services, increase the cost
of doing business as a result of litigation costs or increased service delivery
costs, or otherwise harm our business. In addition, because our web sites are
accessible worldwide, foreign jurisdictions may claim that we are required to
comply with their laws. As we continue to expand our international activities,
we will become obligated to comply with these laws. Compliance may be more
costly or may require us to change our business practices or restrict our
service offerings relative to those in the United States. Our failure to
19
<PAGE>
comply with foreign laws could subject us to penalties ranging from fines
to bans on our ability to conduct business on our web sites.
In the United States, companies are required to qualify as foreign
corporations in states where they are conducting business. As an Internet
company, it is unclear in which states we are actually conducting business. Our
failure to qualify as a foreign corporation in a jurisdiction where we are
required to do so could subject us to taxes and penalties for the failure to
qualify and could result in our inability to enforce contracts in those
jurisdictions. Any new legislation or regulation, or the application of laws or
regulations from jurisdictions whose laws do not currently apply to our
business, could harm our business.
Our growth will depend on our ability to continue to develop our brands.
We believe that strengthening our brands will be critical to achieving
widespread acceptance of our goods and services. Promoting and positioning our
brands will depend largely on the success of our marketing efforts and our
ability to provide high quality content, goods and services. In order to promote
our brands, we will need to increase our marketing budget and otherwise increase
our financial commitment to creating and maintaining brand loyalty among users.
Brand promotion activities may not yield increased revenues and, even if they
do, any increased revenues may not offset the expenses we incurred in building
our brands. If we do attract new users to our web sites or services, they may
not conduct transactions over our web sites or utilize our services service on a
regular basis. If we fail to promote and maintain our brands or incur
substantial expenses in an unsuccessful attempt to promote and maintain our
brands, our business would be harmed.
If we are unable to successfully implement our growth strategy, it could have a
material adverse effect on our business, financial condition and results of
operations.
The success of our growth strategy will depend in large part on whether we
are able to:
- expand through strategic acquisitions of companies in new and
complementary businesses,
- obtain adequate financing on favorable terms to fund this growth
strategy,
- develop and expand our customer base,
- hire, train and retain skilled employees,
- strengthen brand identity and successfully implement marketing
campaigns, and
- continue to expand in the face of increasing competition.
Our inability to implement any or all of these strategies could have a
material adverse effect on our results of operations and financial condition.
Our growth strategy includes acquisitions and, if we are unable to make
acquisitions or if those acquisitions are not successful, it could have a
material adverse effect on our business, financial condition and results of
operations.
As part of our growth strategy, we plan to make acquisitions of other
companies. We may not be able to make acquisitions in the future. In addition,
any acquisition that we make could have a material adverse effect on our
business, financial condition and results of operations. Future acquisitions are
subject to many risks, including the risks that:
- we may not be able to identify suitable companies to buy,
- we may not be able to purchase companies at favorable prices, or at
all,
- we may not be able to obtain financing on favorable terms, or at all,
to pay for future acquisitions, and
- we may not be able to effectively integrate the acquired businesses
or technologies into our operations.
In addition, in order to consummate future acquisitions, we may be required
to borrow money or incur other liabilities, which could have a material adverse
effect on our liquidity and capital resources. We may also be required to issue
additional shares of stock, which could result in dilution to our stockholders.
20
<PAGE>
Litigation and potential litigation may be costly and/or time-consuming.
Our competitors and potential competitors may resort to litigation as a
means of competition. Any litigation involving us, whether as plaintiff or
defendant, regardless of the outcome, may result in substantial costs and
expenses to us and significant diversion of effort by our management and
technical personnel. In the event of an adverse result in any such litigation,
we could be required to:
- expend significant resources to develop non-infringing technology,
- obtain licenses to the technology which is the subject of the
litigation on terms not advantageous to us,
- pay damages, and/or
- cease the use of any infringing technology.
There can be no assurance that we would be successful in such development,
that any such licenses would be available and/or that we would have available
funds sufficient to satisfy any cash awards.
In the first quarter of 1998, we and certain of our current and former
executive officers and directors were named as defendants in an action claiming
that such defendants made intentional misrepresentations of material facts in
connection with such plaintiffs' purchases of an aggregate 296,333 shares of
Common Stock for $919,495. While we believe this action to be without merit, the
ultimate outcome of such lawsuit is unknown at this time. We believe that any
adverse decision resulting from this action will not have a materially adverse
effect on us; however, no assurance can be given in this regard.
We are also a defendant in a litigation involving a dispute with a landlord
and, in the past, have been involved in other legal actions with certain of our
vendors. These types of litigation generally arise out of our ordinary course
of business, and we believe that any adverse decision resulting from any of such
types of litigations will not have a material adverse effect on us; however, no
assurance can be given in this regard.
Software piracy and intellectual property infringement may adversely affect our
revenues.
We believe that our success depends significantly upon our proprietary
technology. We currently rely on a combination of copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions and other
written materials under trade secret, patent and copyright laws to protect our
proprietary technology; however, these methods generally afford only limited
protection. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or services or to obtain and
use information that we regard as proprietary. In addition, the laws of some
foreign countries do not protect proprietary rights to as great an extent as do
the laws of the United States. Monitoring and identifying unauthorized use of
personal computer software is difficult. We expect software piracy to be a
continuing problem resulting in a reduction of our potential revenues.
Our dependence on third party licenses could have adverse affects.
We rely on certain software, technology and content that we license or have
licensed from third parties, including software, technology and content that is
integrated with internally developed software and used in our products to
perform key functions. These third-party software licenses may not continue to
be available to us on commercially reasonable terms. Also, such software may not
be appropriately supported, maintained or enhanced by the licensors such that
the licensed software would not continue to provide the necessary commercial
benefits to our products. In addition, we may not be able to license such
software, technology and content on terms advantageous to us. The loss of or
inability to obtain or replace licenses to, or inability to support, maintain
and enhance, any of such licensed software, could result in increased costs,
including the expense of internally developing the required software, technology
and/or content, as well as delays or reductions in product shipments.
21
<PAGE>
Our dependence on retailers, distributors and sales representatives may
adversely affect sales and cash flows.
Our customers are not contractually required to make future purchases of
our products and could discontinue carrying or purchasing our products, at any
time and for any reason. Retailers and distributors generally are in a strong
position to negotiate favorable terms of sale, including price discounts and
product return policies. Retailers also often require software publishers to pay
fees in exchange for preferred shelf space. Further, resellers may give higher
priority to products other than ours, thus reducing their efforts to sell our
products. We may not be able to increase or sustain the current amount of our
retail shelf space and, as a result, our operating results could be adversely
affected.
Our use of net operating loss carryforwards is limited.
We estimate our consolidated tax net operating loss carryforwards to be
approximately $84 million at December 31, 1998, which expire in years 2002
through 2018, and our general business credit carryover to be approximately $1.5
million, which expires in years 2005 and 2006. These carryforwards are subject
to certain limitations described below. Under Section 382 of the Code, changes
in the ownership or the business of a corporation that has net operating loss
carryforwards can result in the inability to use or the imposition of
significant restrictions on the use of such net operating loss carryforwards to
offset future income and tax liability of such corporation. An "ownership
change" may be deemed to have occurred under Section 382 of the Code and the
regulations thereunder with respect to both us and our wholly-owned subsidiary,
SPC, which we acquired in December 1996, and our use of these net operating loss
carryforwards will be limited. Utilization of the net operating loss
carryforwards of SPC may be further limited by reason of the consolidated
return/separate return limitation year rules. In addition, the SPC net operating
loss carry forwards are also subject to the additional limitation that such
losses can only be utilized to offset the separate taxable income of SPC. We
estimate the maximum utilization of such net operating loss carryforwards to be
approximately $1,200,000 per year for losses through December 31, 1996; losses
incurred thereafter can be fully utilized until expired under present
circumstances. There can be no assurance that we will be able to utilize all of
our net operating loss carryforwards. In addition, the foreign losses incurred
by SPC may decrease or otherwise restrict our ability to claim U.S. tax credits
for foreign income taxes.
Failure to obtain IRS closing agreement could result in large tax payment.
In September 1997, we applied for a closing agreement with the IRS pursuant
to which we would become jointly and severally liable for SPC's tax obligations
upon occurrence of a "triggering event" requiring recapture of dual consolidated
losses previously utilized by SPC. We acquired SPC in December 1996. Such
closing agreement would avoid SPC's being required to recognize a tax of
approximately $8 million on approximately $24.5 million of SPC's pre-acquisition
dual consolidated losses. We received notification from the IRS that the IRS has
determined not to act on our application until such time as SPC submits certain
filings pertaining to pre-acquisition filings made by SPC. Such additional
filings require SPC to obtain IRS relief so as to permit SPC to appropriately
make the election allowing SPC to utilize the dual consolidated losses. We have
recently submitted these filings in an application for relief. We believe that,
should the IRS accept the application for relief, and once the re-application
for a closing agreement is made, the IRS should agree to such a closing
agreement. However, no assurance can be given that the IRS will do so, and any
failure to do so could result in the recognition of this tax liability. Should
such a closing agreement be obtained, in certain circumstances, a future
acquirer of us may also be required to agree to a similar closing agreement in
order to avoid the same tax liability, to the extent it is able to do so. This
could have a material adverse effect on our future ability to sell SPC. The
report of our auditors covering the December 31, 1998 consolidated financial
statements contains a paragraph emphasizing these dual consolidated losses.
We have Year 2000 compliance issues
We are in the process of completing a re-review of issues related to our
Year 2000 compliance. In connection with this evaluation, we have reviewed, and
currently are re-reviewing for Year 2000 compliance, all of our products which
are currently being sold and we have also reviewed our vendors and suppliers for
Year 2000
22
<PAGE>
compliance. We expect to be able to conduct our review within our current
resources and anticipate that this review will be complete by December 31, 1999.
We estimate that the total costs we will incur to conduct the review process and
to implement any necessary corrections is approximately $100,000, including
costs incurred through the date of this prospectus. At this time, we do not know
of any of our products or processes, which, if found to be non-Year 2000
compliant, would have any significant impact on us. We believe that all of our
current products are Year 2000 compliant. We are currently finalizing our
contingency plans to address the failure of our products, vendors or information
technology systems to be Year 2000 compliant.
We have evaluated and determined that our direct mail telemarketing
operation systems would have a significant impact on us if it failed to operate
properly in the year 2000. Based on a cost-benefit analysis, management has
instituted a contingency plan whereby either our Europe or United States
telemarketing operations would support the other operation in the event that it
failed. Management believes that it is unlikely that both systems would fail
simultaneously, and has no contingency plans for such an event.
A change in product strategy may not be successful.
We acquired Software Publishing Corporation in December 1996. In SPC's
fiscal year ended September 30, 1996, approximately 70% of SPC's net revenue was
derived from the Harvard Graphics line of products. However, net revenues for
that line of products declined substantially over the previous few years and has
continued to decline. While we believe that the market for the Harvard Graphics
product line has matured, we also believe that our Harvard and Serif brands have
attracted significant customer bases. Accordingly, we intend to utilize these
brand strengths for our current and certain anticipated new products, including
our VisualCities.com Internet commerce network. This product line and brand
transition, and the development of the VisualCities.com Internet commerce
network, may not be accomplished in a timely or efficient manner and may not be
successful.
Potential anti-takeover effects of Delaware law, our certificate of
incorporation, our stockholder rights plan and possible issuances of our
preferred stock could impede a takeover of our company.
Certain provisions of Delaware law and our Certificate of Incorporation
could make it more difficult to complete a merger, tender offer or proxy contest
involving us, even if such events could be beneficial to the interests of our
stockholders. These provisions include:
- Section 203 of the Delaware General Corporation Law,
- the classification of our Board of Directors into three classes,
- the requirement that 66-2/3% of our stockholders are needed
to request a special meeting of stockholders (other than a special
meeting called by the Board of Directors or the President),
- the "golden parachute" provisions of our agreement with our
President,
- the requirement that 66-2/3% of our stockholders entitled to
vote thereon approve transactions such as a merger, consolidation or
sale of assets with or to an entity controlling 15% or more of the
voting power of our capital stock, unless approved by the Board of
Directors prior to such entity's acquisition of 15% or more of such
voting power,
- the existence of "blank check" preferred stock that may be
issued by our Board of Directors without stockholder approval on such
terms as the Board may determine, and
- the existence of a "poison pill."
Under the poison pill, we have declared a dividend of one Preferred Share
Purchase Right on each outstanding share of our common stock. Each Right becomes
exercisable only if a person or group acquires 20% or more of our outstanding
common stock or announces a tender offer the consummation of which would result
in ownership by a person or group of 20% or more of our common stock. If we are
acquired in a merger or other business combination transaction after a person or
group has acquired 20% or more of our outstanding common stock, each Right will
entitle its holder to purchase, at the Right's then current exercise price
(currently, $1,000), a number of the acquiring company's common shares having a
market value of twice such price. In addition, if a person or group acquires 20%
or more of our outstanding common stock, each Right will entitle its holder
(other than such person or members of such group) to purchase, at the Right's
then current exercise price, a number of shares of our common stock having a
market value of twice such price.
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<PAGE>
The rights of the holders of our common stock also will be subject to, and
may be adversely affected by, the rights of the holders of additional or other
classes of preferred stock that may be issued in the future, including the blank
check preferred stock. Such issuance may make it more difficult for a third
party to acquire, or may discourage a third party from acquiring, a majority of
our voting stock. These provisions could limit the price that certain investors
might be willing to pay in the future for shares of our common stock.
Limited directors' liability could prevent stockholders from holding directors
responsible for a lack of care.
Our Certificate of Incorporation provides that our directors (but not our
officers) will not be held liable to us or our stockholders for monetary damages
upon breach of a director's fiduciary duty, except to the extent otherwise
required by law.
We have no history of paying dividends.
We have never paid any cash dividends on our common stock and we do not
anticipate paying any dividends in the foreseeable future.
The possible issuance of substantial amounts of additional shares without
stockholder approval could dilute stockholders.
As of the date of this prospectus, we have an aggregate of 7,215,431 shares
of our common stock outstanding. In addition, as of the date of this prospectus,
we have 1,939,480 shares of Serial Preferred Stock authorized but unissued, of
which, 1,836,980 shares are not reserved for specific purposes, and an
additional (a) aggregate of 6,302,450 shares of our common stock issuable upon
the exercise of stock options granted or availablefor grant under our various
stock plans and (b) aggregate of approximately 3,100,000 shares of our common
stock issuable upon exercise of other stock options or warrants previously
granted and outstanding. All of such shares may be issued without any action or
approval by our stockholders. Other than as contemplated by this offering, there
are no other material present plans, agreements, commitments or undertakings
with respect to the issuance of additional shares of our common stock or
securities convertible into any such shares, other than in connection with the
exercise of outstanding stock options and warrants, any shares issued would
further dilute the percentage ownership of us held by our stockholders.
Any delisting of securities from Nasdaq system could precipitate risks
associated with low-priced stocks.
Our common stock is listed on the Nasdaq SmallCap Market and the Boston
Stock Exchange. To remain eligible for listing on the Nasdaq SmallCap Market, we
must comply with the following:
- Our common stock must have a minimum bid price of $1.00,
- we must have either minimum tangible net assets of $2,000,000, a
market capitalization of $35,000,000 or net income of $500,000 in
two of the three prior fiscal years and
- we must have a public float of at least 500,000 shares with
a market value of at least $1,000,000, at least 300 stockholders must
hold shares of our common stock and at least two market makers must
make a market in our common stock.
These maintenance standards may be changed by Nasdaq. While we presently
comply with the Nasdaq listing maintenance requirements, the failure to maintain
these requirements or other requirements of Nasdaq could result in de-listing of
our securities from Nasdaq. In the event our securities are de-listed from
Nasdaq, you may be affected in any one or more of the following ways:
- our securities will have to trade on a non-NASDAQ, and possibly less
efficient, "over-the-counter" market,
- fewer brokerage firms and dealers may make a market in our
securities which may cause a decline in the trading price of our
securities,
- you may also find it more difficult to dispose of, or obtain
accurate quotations, as to the market value of our securities,
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<PAGE>
- our securities may no longer be eligible for sale in certain
jurisdictions without additional compliance with such jurisdictions'
laws and regulations, and
- the market for our securities may become illiquid.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into this
Prospectus include "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking
statements involve known and unknown risks, uncertainties and other factors
which could cause our actual results, performance (financial or operating) or
achievements expressed or implied by such forward-looking statements not to
occur or be realized. Such forward-looking statements generally are based upon
our best estimates of future results, performance or achievement, based upon
current conditions and the most recent results of operations. Forward-looking
statements may be identified by the use of forward-looking terminology such as
"may," "will," "expect," "believe," "estimate," "anticipate," "continue," or
similar terms, variations of those terms or the negative of those terms.
Potential risks and uncertainties include, among other things, such factors as:
- the overall level of business and consumer spending for computer
software,
- the market acceptance and amount of sales of our products,
- the extent that our direct mail programs achieve satisfactory
response rates,
- our ability to obtain sufficient supplies of successful
products,
- the efficiency of our telemarketing operations,
- the competitive environment within the digital communications and
e-commerce solutions provider, computer software and hardware and
direct mail industries,
- our ability to consummate our proposed acquisitions and our ability
to integrate these acquired businesses,
- our ability to raise additional capital,
- unforeseen operational difficulties and financial losses due to year
2000 computer problems,
- the cost-effectiveness of our product development activities,
- the extent to which we are successful in developing, acquiring or
licensing products which are accepted by the market,
- the success of our VisualCities.com Internet commerce network and
other Internet-related endeavors,
- the success of our expansion into Internet service offerings,
- the extent to which we generate e-commerce revenues from our
VisualCities.com Internet commerce network,
- our ability to build membership in VisualCities.com,
- VisualCities.com's ability to develop relationships with third
parties,
- the cost and extent to which we are able to implement technological
enhancements to our VisualCities.com and other web sites,
- our ability to obtain from the Internal Revenue Service
relief to make the appropriate election under the Internal Revenue
Code of 1986, as amended, which would permit reporting dual
consolidated losses by Software Publishing Corporation; approval by
the IRS of our application for a closing agreement; and approval by
the IRS of a similar application for a closing agreement in the event
the Company chooses to sell SPC in the future, and
- the other factors and information disclosed and discussed
under "Risk Factors" and in other sections of this prospectus.
Investors should carefully consider such risks, uncertainties and other
information, disclosures and discussions which contain cautionary statements
identifying important factors that could cause actual results to differ
materially from those provided in the forward-looking statements. We undertake
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
25
<PAGE>
USE OF PROCEEDS
The proceeds from the sale of the Shares by the Selling Stockholders will
belong to the individual Selling Securityholders. The Company will not receive
any of the proceeds from the sale of the Shares and Derivative Securities,
except with respect to the exercise price of the Derivative Securities. We
expect to utilize any such exercise price received upon exercise of the
Derivative Securities for general corporate and working capital purposes.
PRICE RANGE OF COMMON STOCK
The Common Stock has traded on the Nasdaq SmallCap Market under the symbol
"VIZY" since August 2, 1999. The Common Stock was traded on the Nasdaq SmallCap
Market under the symbol "ANMI" from December 6, 1995 through December 27, 1996,
under the symbol "SPCOD" from December 28, 1996 through January 27, 1997 and
from May 28, 1998 through June 24, 1998, under the symbol "SPCOC" from October
23, 1998 through January 14, 1999, and otherwise from January 28, 1997 through
July 30, 1999 under the symbol "SPCO." The Common Stock also has traded on the
Boston Stock Exchange under the symbol "VZM" since August 2, 1999. The Common
Stock traded on the Boston Stock Exchange under the symbol "APO" from December
6, 1995 through January 20, 1997 and under the symbol "SPO" from January 20,
1997 through July 30, 1999. The following table sets forth the range of high and
low bid prices for the Common Stock for the periods indicated as derived from
reports furnished by Nasdaq, adjusted to reflect our one-for-three reverse stock
split made effective as of May 27, 1998 (the "Reverse Stock Split"). Such
adjustment has been made by multiplying the closing prices by three and does not
necessarily reflect the prices for the Common Stock had the Reverse Stock Split
occurred prior to the periods indicated. The information reflects inter-dealer
prices, without retail mark-ups, mark-downs or commissions and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
High Bid Low Bid
-------- -------
Fiscal 1997
- -----------
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . $ 14-1/4 $ 8-13/16
Second Quarter. . . . . . . . . . . . . . . . . 9-9/16 5-5/8
Third Quarter . . . . . . . . . . . . . . . . . 7-1/8 3
Fourth Quarter. . . . . . . . . . . . . . . . . 6-15/16 2-5/32
Fiscal 1998
- -----------
First Quarter . . . . . . . . . . . . . . . . . 2-13/16 1-1/2
Second Quarter . . . . . . . . . . . . . . . . 3 1-3/8
Third Quarter . . . . . . . . . . . . . . . . . 1-5/8 5/8
Fourth Quarter. . . . . . . . . . . . . . . . . 1-1/8 9/16
Fiscal 1999
- -----------
First Quarter . . . . . . . . . . . . . . . . . 1-31/32 15/16
Second Quarter. . . . . . . . . . . . . . . . . 4-7/16 1-21/32
Third Quarter . . . . . . . . . . . . . . . . . 4-1/4 2-1/4
Fourth Quarter (through December 13, 1999). . . 4 2-1/8
</TABLE>
As of December 13, 1999, the closing price for the Common Stock as reported
on Nasdaq was $3-9/16. As of the close of business on December 13, 1999, we had
720 stockholders of record. We estimate, based upon surveys conducted by our
transfer agent in connection with our 1999 Annual Meeting of Stockholders, that
we have approximately 5,000 beneficial stockholders.
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<PAGE>
DIVIDEND POLICY
We have never paid cash dividends on our capital stock and do not
anticipate paying cash dividends in the foreseeable future. We currently intend
to retain any future earnings for reinvestment in our business. Any future
determination to pay cash dividends will be at the discretion of the Board of
Directors and will be dependent upon our financial condition, results of
operations, capital requirements and other relevant factors.
SELLING SECURITYHOLDERS
An aggregate of 1,938,191 Shares, including 579,101 Shares issuable upon
exercise of the Derivative Securities, may be offered for sale and sold pursuant
to this Prospectus by the Selling Securityholders. The Shares are to be offered
by and for the respective accounts of the Selling Securityholders and any
pledgees or donees of the Selling Securityholders. We have agreed to register
all of the Shares under the Securities Act and to pay all of the expenses in
connection with such registration and sale of the Shares (other than
underwriting discounts and selling commissions and the fees and expenses of
counsel and other advisors to the Selling Securityholders). We will not receive
any proceeds from the sale of the Shares by the Selling Securityholders, except
for the exercise price, if any, paid in connection with the exercise of the
Derivative Securities.
Certain information with respect to the Selling Securityholders and the
Shares is set forth in the following table. None of the Selling Securityholders
has had any material relationship with us within the past three years, except as
noted in the following table.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial
Shares Number Ownership of
Owned of Shares Common Stock
Prior Offered After Sale of
to Sale Hereby the Securities
------------- ---------- --------------------
Selling Securityholder Number Percent
- ----------------------
<S> <C> <C> <C> <C>
Norman B. Antin and Gail B. Antin (1) . . . . . . . . 50,506 50,506 -0- -0-
Eric Austein (2) . . . . . . . . . . . . . . . . . . 37,500 (3) 37,500 (3) -0- -0-
Thomas Axmacher and Susanne
Axmacher TEN ENT (4) . . . . . . . . . . . . . . 25,253 25,253 -0- -0-
Mark Berg (5) . . . . . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Boymelgreen Foundation (6) . . . . . . . . . . . . . 187,500 (7) 187,500 (7) -0- -0-
Martin Braun (8) . . . . . . . . . . . . . . . . . . 15,000 (9) 15,000 (9) -0- -0-
Anthony Broy and Sylvia Biggerstaff (10). . . . . . . 119,706 (11) 14,706 (12) 105,000 (13) -0-
Brent D. Butcher (5) . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Harry Datys (5) . . . . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Murray Englard (8) . . . . . . . . . . . . . . . . . 15,000 (9) 15,000 (9) -0- -0-
Essex Printing Company, Inc. (14) . . . . . . . . . . 27,571 27,571 -0- -0-
George Feussner (5) . . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Neil Fink (IRA) (5) . . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Ari Friedman (10) . . . . . . . . . . . . . . . . . . 14,706 (12) 14,706 (12) -0- -0-
Globus Development, Inc. (5). . . . . . . . . . . . . 12,627 12,627 -0- -0-
Morton Gordon (4) . . . . . . . . . . . . . . . . . . 25,253 25,253 -0- -0-
Ira Scott Greenspan (15). . . . . . . . . . . . . . . 10,000 (16) 10,000 (17) -0- -0-
Yitz Grossman (18). . . . . . . . . . . . . . . . . . 285,000 (19) 25,000 (20) 260,000 (21) 3.5
Celeste Grynberg (22) . . . . . . . . . . . . . . . . 37,879 37,879 -0- -0-
Stephen Mark Grynberg (5) . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
John W. Hardy (5) . . . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
HD Brous & Co., Inc (23). . . . . . . . . . . . . . . -0- (24) 80,000 (25) -0- -0-
Gerald F. Heupel (4) . . . . . . . . . . . . . . . . 25,253 25,253 -0- -0-
27
<PAGE>
Richard A. Hoefer and Donna C.
Hoefer TEN COM (5) . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Kevin M. Houlihan (26) . . . . . . . . . . . . . . . 6,314 6,314 -0- -0-
Rex D. Houlihan (26) . . . . . . . . . . . . . . . . 6,314 6,314 -0- -0-
Imageline, Inc. (27) . . . . . . . . . . . . . . . . 9,756 9,756 -0- -0-
K. David Isaacs (28) . . . . . . . . . . . . . . . . 31,250 (29) 31,250 (29) -0- -0-
IXLA USA Ltd. (30). . . . . . . . . . . . . . . . . . 26,000 26,000 -0- -0-
Sam Jacob (5) . . . . . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Richard R. Kahn (5) . . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
David Kornblau and Amy Kornblau (31). . . . . . . . . 5,051 5,051 -0- -0-
Jerome Kossoff and Maxine Kossoff (28). . . . . . . . 31,250 (29) 31,250 (29) -0- -0-
Charlotte Liechtung (32). . . . . . . . . . . . . . . 45,000 (33) 45,000 (33) -0- -0-
Steven Liechtung (34) . . . . . . . . . . . . . . . . 60,000 (35) 60,000 (35) -0- -0-
Steven Markowitz (5) . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Mark Mazzer (5) . . . . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Charles M. Merkel (5) . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Christine Metsch (IRA) (36) . . . . . . . . . . . . . 7,576 7,576 -0- -0-
Joan Metsch (31) . . . . . . . . . . . . . . . . . . 5,051 5,051 -0- -0-
Richard Metsch (36) . . . . . . . . . . . . . . . . . 7,576 7,576 -0- -0-
Miriam Zela Grynberg 1986 Trust (22). . . . . . . . . 37,879 37,879 -0- -0-
Robert S. Paget and Barbara N. Paget (26) . . . . . . 6,314 6,314 -0- -0-
Richard Pawliger (4). . . . . . . . . . . . . . . . . 25,253 25,253 -0- -0-
Pentagon Investors (37) . . . . . . . . . . . . . . . 225,000 (38) 225,000 (38) -0- -0-
David Ptolemy and Regina P. Ptolemy JT TEN (5). . . . 12,627 12,627 -0- -0-
Rachel Susan Grynberg 1982 Trust (22) . . . . . . . . 37,879 37,879 -0- -0-
Reiter Marketing Group, Inc. (39) . . . . . . . . . . 16,697 16,697 -0- -0-
Kalmen Renov and Alan Stahler (40). . . . . . . . . . 29,411 (41) 29,411 (41) -0- -0-
Marvin Rosenblatt (42). . . . . . . . . . . . . . . . 15,152 15,152 -0- -0-
Marvin Rosenblatt and David Rosenblatt (31) . . . . . 5,051 5,051 -0- -0-
Steven Rothstein and Lorie Rothstein
TEN ENT (5). . . . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Marianne Ryan (Keogh) (31). . . . . . . . . . . . . . 5,051 5,051 -0- -0-
Steven R. Safran (26) . . . . . . . . . . . . . . . . 6,314 6,314 -0- -0-
Leo Schachter (43) . . . . . . . . . . . . . . . . . 30,000 (44) 30,000 (44) -0- -0-
Phillip Schaefer (5) . . . . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Leonard M. Schiller (4) . . . . . . . . . . . . . . . 25,253 25,253 -0- -0-
Steven D. Shaffer (15). . . . . . . . . . . . . . . . -0- (15) 10,000 (16) -0- -0-
Sinclaire International (45) . . . . . . . . . . . . 100,000 (46) 100,000 (46) -0- -0-
Simon Sinnreich (28). . . . . . . . . . . . . . . . . 31,250 (29) 31,250 (29) -0- -0-
Joseph Sorbara and Patricia Sorbara JT TEN (5). . . . 12,627 12,627 -0- -0-
Esther Stahler, as Custodian for Daniel Stahler (47). 14,706 (12) 14,706 (12) -0- -0-
Esther Stahler, as Custodian for Jamie Stahler (47) . 14,706 (12) 14,706 (12) -0- -0-
Stephen Mark Grynberg 1983 Trust (22) . . . . . . . . 37,879 37,879 -0- -0-
Joel A. Stone (22). . . . . . . . . . . . . . . . . . 37,879 37,879 -0- -0-
Walter J. Sullivan, III (5) . . . . . . . . . . . . . 12,627 12,627 -0- -0-
Salvatore Trovato (4) . . . . . . . . . . . . . . . . 25,253 25,253 -0- -0-
Jerold Weinger (4). . . . . . . . . . . . . . . . . . 25,253 25,253 -0- -0-
Robert I. Wertheimer (31) . . . . . . . . . . . . . . 5,051 5,051 -0- -0-
Wolcott Capital Money Purchase Plan (10). . . . . . . 119,706 (12) 14,706 (12) 105,000 1.5
Yitz Grossman Charitable Trust (48) . . . . . . . . . 58,823 (49) 58,823 (49) -0- -0-
Kal Zeff (4) . . . . . . . . . . . . . . . . . . . . 25,253 25,253 (50) -0- -0-
- ----------
<FN>
* Less than 1%.
28
<PAGE>
(1) Acquired the Shares so listed for the aggregate purchase price of
$100,000.00.
(2) Purchased 30,000 units for the aggregate purchase price of $63,750.00.
Each such unit consisted of one Share and one-quarter warrant to purchase
our common stock, with one full warrant entitling the holder to purchase one
Share at $2.75 per Share and expiring on October 13, 2002.
(3) Includes 7,500 Shares issuable upon exercise of warrants held by this
Selling Securityholder.
(4) Acquired the Shares so listed for the aggregate purchase price of
$50,000.00.
(5) Acquired the Shares so listed for the aggregate purchase price of
$25,000.00.
(6) Purchased 150,000 units for the aggregate purchase price of
$318,750.00. Each such unit consisted of one Share and one-quarter warrant
to purchase our common stock, with one full warrant entitling the holder
to purchase one Share at $2.75 per Share and expiring on October 13, 2002.
(7) Includes 37,500 Shares issuable upon exercise of warrants held by this
Selling Securityholder.
(8) Purchased 12,000 units for the aggregate purchase price of $25,500.00.
Each such unit consisted of one Share and one-quarter warrant to purchase
our common stock, with one full warrant entitling the holder to purchase
one Share at $2.75 per Share and expiring on October 13, 2002.
(9) Includes 3,000 Shares issuable upon exercise of warrants held by this
Selling Securityholder.
(10) Purchased 11,765 units for the aggregate purchase price of $25,000.00.
Each such unit consisted of one Share and one-quarter warrant to purchase
our common stock, with one full warrant entitling the holder to purchase
one Share at $2.75 per Share and expiring on September 14, 2002.
(11) Includes (a) 2,941 Shares issuable upon exercise of warrants held by
these Selling Securityholders and (b) 105,000 shares of our common stock
owned by an affiliate of Anthony Broy.
(12) Includes 2,941 Shares issuable upon exercise of warrants held by this
Selling Securityholder.
(13) Represents 105,000 shares of our common stock owned by an affiliate of
Anthony Broy.
(14) Acquired 27,571 Shares in payment of $75,820.18 for goods and services
provided by this Selling Securityholder.
(15) Acquired warrants to purchase 10,000 Shares as an assignee of HD Brous
& Co., Inc. (See note (23) below.)
(16) Does not include any of the 10,000 Shares issuable upon exercise of
the warrants held by this Selling Securityholder, which 10,000 Shares
are not exercisable within the next 60 days.
(17) Represents all 10,000 Shares issuable upon exercise of the
warrants held by this Selling Securityholder.
(18) Acquired warrants to purchase 25,000 Shares for services rendered.
These warrants are exercisable immediately, expire on October 19, 2002
and have an exercise price of $2.00 per Share.
(19) Represents (a) 25,000 Shares issuable upon exercise of the warrants
held by this Selling Securityholder and (b) 260,000 shares of common stock
issuable upon exercise of other warrants held by a company of which
this Selling Securityholder is President and controlling stockholder.
(20) Represents all 25,000 Shares issuable upon exercise of the warrants
held by this Selling Securityholder.
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<PAGE>
(21) Represents 260,000 shares of our common stock issuable upon exercise of
other warrants held by a company of which this Selling Securityholder is
President and controlling stockholder.
(22) Acquired the Shares so listed for the aggregate purchase price of
$75,000.00.
(23) Acquired warrants to purchase 100,000 shares pursuant to a Financial
Advisory and Investment Banking Agreement, dated April 7, 1999, between
us and HD Brous & Co., Inc., pursuant to which we retained Brous to
provide investment banking services for a one year period. Brous has
assigned warrants to purchase 10,000 Shares to each of Ira Scott Greenspan
and Steven D. Schaffer. (See note (15) above.) In addition to such
warrants, we are to pay Brous an aggregate $30,000 as consideration
for the services to be rendered by Brous under our agreement with Brous.
The warrants are exercisable at any time, in whole or part, commencing
April 7, 2000 and through April 6, 2004, at an exercise price of $1.50 per
share.
(24) Does not include any of the 80,000 Shares issuable upon exercise of
the warrants held by this Selling Securityholder, which 80,000 Shares are
not exercisable within the next 60 days.
(25) Represents all 80,000 Shares issuable upon exercise of the
warrants held by this Selling Securityholder.
(26) Acquired the Shares so listed for the aggregate purchase price of
$12,500.00.
(27) Acquired 9,756 Shares pursuant to a Settlement Agreement, Mutual
Release and License, between us and this Selling Securityholder.
(28) Purchased 25,000 units for the aggregate purchase price of $53,125.00.
Each such unit consisted of one Share and one-quarter warrant to purchase
our common stock, with one full warrant entitling the holder to purchase
one Share at $2.75 per Share and expiring on October 13, 2002.
(29) Includes 6,250 Shares issuable upon exercise of warrants held by this
Selling Securityholder.
(30) Acquired 26,000 Shares in payment of $69,680.00 for goods and services
provided by this Selling Securityholder.
(31) Acquired the Shares so listed for the aggregate purchase price of
$10,000.00.
(32) Purchased 36,000 units for the aggregate purchase price of $76,500.00.
Each such unit consisted of one Share and one-quarter warrant to purchase
our common stock, with one full warrant entitling the holder to purchase
one Share at $2.75 per Share and expiring on October 13, 2002.
(33) Includes 9,000 Shares issuable upon exercise of warrants held by this
Selling Securityholder.
(34) Purchased 48,000 units for the aggregate purchase price of
$102,000.00. Each such unit consisted of one Share and one-quarter warrant
to purchase our common stock, with one full warrant entitling the holder
to purchase one Share at $2.75 per Share and expiring on October 13, 2002.
(35) Includes 12,000 Shares issuable upon exercise of warrants held by this
Selling Securityholder.
(36) Acquired the Shares so listed for the aggregate purchase price of
$15,000.00.
(37) Acquired warrants to purchase 225,000 Shares pursuant to a Consulting
Agreement, dated as of June 29, 1999, between us and Pentagon Investors,
pursuant to which we retained Pentagon to provide consulting
services for a five year period. These warrants are exercisable
immediately, expire on June 28, 2004 and have an exercise price of $2.00
per Share.
(38) Represents all 225,000 Shares issuable upon exercise of the warrants owned
by Pentagon.
30
<PAGE>
(39) Acquired 16,697 Shares in payment of $45,917.75 for goods and services
provided by this Selling Securityholder.
(40) Purchased 23,529 units for the aggregate purchase price of $50,000.00.
Each such unit consisted of one Share and one-quarter warrant to purchase
our common stock, with one full warrant entitling the holder to purchase
one Share at $2.75 per Share and expiring on September 24, 2002.
(41) Includes 5,882 Shares issuable upon exercise of warrants held by this
Selling Securityholder.
(42) Acquired the Shares so listed for the aggregate purchase price of
$30,000.00.
(43) Purchased 24,000 units for the aggregate purchase price of $51,000.00.
Each such unit consisted of one Share and one-quarter warrant to
purchase our common stock, with one full warrant entitling the holder to
purchase one Share at $2.75 per Share and expiring on October 13, 2002.
(44) Includes 6,000 Shares issuable upon exercise of warrants held by this
Selling Securityholder.
(45) Acquired warrants to purchase 100,000 Shares pursuant to a Consulting
Agreement, dated as of October 20, 1999, between us and Sinclaire
International, pursuant to which we retained Sinclaire to provide
consulting services for a five year period. These warrants are
exercisable immediately, expire on October 19, 2004 and have an exercise
price of $2.00 per Share.
(46) Represents all 100,000 Shares issuable upon exercise of the warrants owned
by this Selling Securityholder.
(47) Purchased 11,765 units for the aggregate purchase price of $25,000.00.
Each such unit consisted of one Share and one-quarter warrant to
purchase our common stock, with one full warrant entitling the holder to
purchase one Share at $2.75 per Share and expiring on September 24, 2002.
(48) Purchased 47,059 units for the aggregate purchase price of
$100,000.00. Each such unit consisted of one Share and one-quarter
warrant to purchase our common stock, with one full warrant entitling the
holder to purchase one Share at $2.75 per Share and expiring on October 13,
2002. The Trustee of this Selling Securityholder, Yitz Grossman, and a
company of which he is the President and controlling stockholder, Target
Capital Corp. entered into a five-year Consulting Agreement with us,
effective December 17, 1998. Pursuant to this Consulting Agreement,
we issued to Target Capital Corp. seven-year warrants to purchase
520,000 shares of Common Stock at $.75 per share and issued to a third
party seven-year warrants to purchase 120,000 shares of Common Stock
at $.75 per share. In addition, during the term of this Consulting
Agreement, we are to pay Target Capital Corp. an annual fee of between
$125,000 and $250,000, depending on our annual net revenues, and a fee
equal to 5% of the net proceeds of any sale of our equity securities of
$2,500,000 or more where the placement agent for such sale was introduced
to us by Target Capital Corp. or Mr. Grossman.
(49) Includes 11,764 Shares issuable upon exercise of warrants held by this
Selling Securityholder.
(50) Mr. Zeff shares the power to dispose of these Shares with Nathan Behan.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
The Shares offered hereby may be sold from time to time by the Selling
Securityholders for their respective own accounts. We will receive none of the
proceeds from this offering. The Selling Securityholders will pay or assume
brokerage commissions or other charges and expenses incurred in the sale of the
Shares.
The distribution of the Shares by the Selling Securityholders is not
subject to any underwriting agreement. The Shares covered by this Prospectus may
be sold by the Selling Securityholders or by pledgees and donees of the
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<PAGE>
Selling Securityholders. The Shares offered by the Selling Securityholders
may be sold from time to time at market prices prevailing at the time of sale,
at prices relating to such prevailing market prices or at negotiated prices. The
Selling Securityholders may sell their Shares covered by this Prospectus through
customary brokerage channels, either through broker-dealers acting as agents or
brokers, or through broker-dealers acting as principals, who may then resell the
Shares, or at private sale or otherwise, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices or at negotiated
prices. The Selling Securityholders may effect such transactions by selling the
Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions, commissions, or
fees from the Selling Securityholders and/or purchasers of the Shares for whom
such broker-dealers may act as agent or to whom they sell as principal, or both
(which compensation to a particular broker-dealer might be in excess of
customary commissions). Any broker dealers that participate with the Selling
Securityholders in the distribution of the Shares may be deemed to be
underwriters and any commissions received by them and any profit on the resale
of the Shares positioned by them might be deemed to be underwriting discounts
and commissions within the meaning of the Securities Act, in connection with
such sales.
Any Shares covered by the Prospectus that qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than pursuant to
this Prospectus.
The 579,101 Shares offered hereby upon the exercise of the Derivative
Securities will be issuable in accordance with the terms of the Derivative
Securities. Among other things, the Derivative Securities provide that, upon
surrender at the Company's principal offices of a certificate evidencing any of
the Derivative Securities, with the annexed form to exercise the Warrant duly
executed, together with payment of the exercise price of the Derivative
Securities so exercised, the registered holder of a Warrant (or assignee) will
be entitled to receive a certificate for the Shares so purchased.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock currently consists of 60,000,000 shares of
common stock, $.001 par value per share, 1,939,480 shares of Serial Preferred
Stock, $.001 par value per share, of which 1,500 shares have been designated
Class A Preferred Stock, 1,000 shares have been designated as Class C Preferred
Stock and 100,000 shares have been designated Junior Participating Preferred
Stock, and 60,520 shares of Class B Voting Preferred Stock, Series A, par value
$.001 per share.
Common Stock
As of the date of this prospectus, there were 7,215,431 shares of our
common stock outstanding held of record by approximately 5,000 beneficial
stockholders of our common stock. The common stock is currently listed on Nasdaq
under the trading symbol "VIZY" and also traded on the BSE under the symbol
"VZM." Holders of our common stock do not have subscription, redemption,
conversion or preemptive rights. Each share of our common stock is entitled to
participate pro rata in any distribution upon liquidation, subject to the rights
of holders of preferred stock, and to one vote on all matters submitted to a
vote of stockholders. The holders of our common stock may receive cash dividends
as declared by the Board of Directors out of funds legally available therefor,
subject to the rights of any holders of preferred stock.
Holders of our common stock are entitled to elect all of our directors. Our
Board of Directors consists of three classes, each of which serves for a term of
three years. At each annual meeting of the stockholders the directors in only
one class will be elected. The holders of our common stock do not have
cumulative voting rights, which means that the holders of more than half of the
shares voting for the election of a class of directors can elect all of the
directors of such class and in such event the holders of the remaining shares
will not be able to elect any of such directors.
32
<PAGE>
Class A 14% Cumulative Non-Convertible Redeemable Preferred Stock, Series A
We have 1,500 shares of Class A Preferred Stock authorized for issuance.
Holders of shares of Class A Preferred Stock are entitled to (a) cumulative
dividends of $140 per share per annum, payable semi-annually on June 30 and
December 31 of each calendar year, commencing on June 30, 1999, (b) a
liquidation preference of $1,000 per share and (c) the right to elect one
director in the event we fail to tender in full three consecutive semi-annual
dividend payments. In addition, we have the right to redeem the Class A
Preferred Stock, in part or whole, at any time, upon payment of $1,300 per share
of Class A Preferred Stock plus any accrued and unpaid dividends on the Class A
Preferred Stock so redeemed. We currently have no shares of Class A Preferred
Stock outstanding.
Class B Voting Preferred Stock
We have 60,520 shares of Class B Voting Preferred Stock authorized for
issuance. The Class B Preferred Stock votes together with our common stock other
than, pursuant to the Delaware General Corporation Law, with respect to
proposals to increase the number of authorized shares of our common stock and
certain other specified matters. Each share of Class B Preferred Stock entitles
the holder thereof to ten votes on each matter subject to stockholder approval.
Shares of Class B Preferred Stock have no right to dividends and have a
liquidation preference of $.001 per share. We currently have no shares of Class
B Voting Preferred Stock issued and outstanding.
Class C 11% Cumulative Non-Convertible Redeemable Preferred Stock, Series A
We have 1,000 shares of Class C Preferred Stock authorized for issuance.
Holders of shares of Class C Preferred Stock are entitled to (a) cumulative
dividends of $110 per share per annum, payable semi-annually on June 30 and
December 31 of each calendar year, commencing on June 30, 1999, (b) a
liquidation preference of $1,000 per share and (c) the right to elect one
director in the event we fail to tender in full three consecutive semi-annual
dividend payments. In addition, we have the right to redeem the Class C
Preferred Stock, in part or whole, at any time, upon payment of $1,000 per share
of Class C Preferred Stock plus any accrued and unpaid dividends on the Class C
Preferred Stock so redeemed. We currently have no shares of Class C Preferred
Stock outstanding.
Junior Participating Preferred Stock
We have 100,000 shares of Junior Participating Preferred Stock, Series A,
par value $.001 per share authorized for issuance. The Junior Preferred Stock
has preferential voting, dividend and liquidation rights over our common stock.
On March 31, 1998, we declared a dividend distribution, payable April 30, 1998,
of one Preferred Share Purchase Right on each share of our common stock.
Each Right, when exercisable, entitles the registered holder thereof to purchase
from us one one-thousandth of a share of Junior Preferred Stock at a
price of $1.00 per one one-thousandth of a share (subject to adjustment). The
one one-thousandth of a share is intended to be the functional equivalent of one
share of our common stock. The Rights will not be exercisable or transferable
apart from our common stock until an Acquiring Person, as defined in the Rights
Agreement, dated as of March 31, 1998, between us and American Stock Transfer &
Trust Company, without the prior consent of our Board of Directors, acquires 20%
or more of the voting power of our common stock or announces a tender offer that
would result in 20% ownership. We are entitled to redeem the Rights, at
$.001 per Right, any time before a 20% position has been acquired or in
connection with certain transactions thereafter announced. Under certain
circumstances, including the acquisition of 20% of our common stock, each Right
not owned by a potential Acquiring Person will entitle its holder to purchase,
at the Right's then-current exercise price, shares of our common stock having a
market value of twice the Right's exercise price. Holders of a Right will be
entitled to buy stock of an Acquiring Person at a similar discount if, after the
acquisition of 20% or more of our voting power, we are involved in a merger or
other business combination transaction with another person in which its common
shares are changed or converted, or we sell 50% or more of our assets or earning
power to another person. The Rights expire on April 20, 2008. We currently have
no shares of Junior Preferred Stock outstanding.
33
<PAGE>
Serial Preferred Stock
Our Board of Directors is authorized by our Certificate of Incorporation to
issue up to 1,939,480 shares of one or more series of Serial Preferred Stock,
including the 1,500 authorized shares of Class A Preferred Stock,
1,000 authorized shares of Class C Preferred Stock and 100,000 authorized
shares of Junior Preferred Stock. Except for the Class A Preferred Stock, Class
C Preferred Stock and Junior Preferred Stock, no shares of Serial Preferred
Stock have been authorized for future issuance by the Board. In addition, we
have no present plans to issue any such shares, except with respect to the
issuance of 100,000 shares of Junior Preferred Stock upon the occurrence, if
ever, of events requiring their issuance. In the event that our Board does issue
additional shares of Serial Preferred Stock, it may exercise its discretion in
establishing the terms of such Serial Preferred Stock. In the exercise of such
discretion, the Board may determine the voting rights, if any, of the series of
Serial Preferred Stock being issued, which could include the right to vote
separately or as a single class with the Common Stock and/or other series of
Serial Preferred Stock; to have more or less voting power per share than that
possessed by the Common Stock or other series of Serial Preferred Stock; and to
vote on certain specified matters presented to the stockholders or on all of
such matters or upon the occurrence of any specified event or condition. On our
liquidation, dissolution or winding up, the holders of Serial Preferred Stock
may be entitled to receive preferential cash distributions fixed by the Board of
Directors when creating the particular series thereof before the holders of the
Common Stock are entitled to receive anything. Serial Preferred Stock authorized
by the Board could be redeemable or convertible into shares of any other class
or series of our stock
The issuance of Serial Preferred Stock by the Board could adversely affect
the rights of holders of the Common Stock by, among other things, establishing
preferential dividends, liquidation rights or voting powers. The issuance of
Serial Preferred Stock could be used to discourage or prevent efforts to acquire
control of us through the acquisition of shares of Common Stock.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer and Trust Company, 40 Wall Street, New York, NY 10005, telephone
number: (212) 936-5100.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1998, and for the two years then ended, included in our Annual Report on Form
10-KSB for the year ended December 31, 1998, have been incorporated by
reference in this prospectus and in the registration statement in reliance upon
the report of Richard A. Eisner & Company, LLP, independent auditors, and, in
part, on the report of Ernst & Young, independent auditors of the financial
statements of a wholly-owned subsidiary of the Company, Serif (Europe) Limited,
as of December 31, 1998 and for the two years then ended, incorporated by
reference herein, given upon the authority of said firms as experts in
accounting and auditing. The report of Richard A. Eisner & Company, LLP covering
the December 31, 1998 consolidated financial statements also contains an
emphasis paragraph discussing a federal income tax contingency.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for us
and the Selling Securityholders by Kaufman & Moomjian, LLC, Mitchel Field, New
York. Neil M. Kaufman, Esq., one of our directors and a member of Kaufman &
Moomjian, LLC, owns 56,737 shares of our common stock and options to purchase
205,000 shares of our common stock. In addition, another member of Kaufman &
Moomjian, LLC owns 12,500 shares of our common stock and options to purchase
25,000 shares of our common stock.
34
<PAGE>
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Prospective investors may rely only on the information contained in this
prospectus. We have not authorized anyone to provide prospective investors with
different or additional information. This prospectus is not an offer to sell nor
is it seeking an offer to buy in any jurisdiction where such offer, or sale is
not permitted. The information contained in this prospectus is correct only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of these shares.
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TABLE OF CONTENTS
Where You Can Find More Information. . . . . . . . . . . . . . . . . . . . . 2
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . .25
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Price Range of Common Stock. . . . . . . . . . . . . . . . . . . . . . . . .26
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Selling Securityholders. . . . . . . . . . . . . . . . . . . . . . . . . . .27
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . .32
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
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<PAGE>
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1,938,191 SHARES
VIZACOM INC.
-------------
PROSPECTUS
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___________, 1999
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses of the distribution, all of which are to be borne by
the Registrant, are as follows:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee . . . . . . . . . . . . . . . . . . . . . $ 1,586.45
Blue Sky Fees and Expenses . . . . . . . . . . . . . . . . . . 5,000.00 *
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . 5,000.00 *
Legal Fees and Expenses. . . . . . . . . . . . . . . . . . . . 20,000.00 *
Printing and Engraving . . . . . . . . . . . . . . . . . . . . 10,000.00 *
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 8,413.55 *
-------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000.00 *
- ----------
<FN>
* Estimated
</FN>
</TABLE>
Item 15. Indemnification of Directors and Officers.
Under the provisions of the Certificate of Incorporation and By-Laws of the
Registrant, each person who is or was a director or officer of Registrant shall
be indemnified by the Registrant as of right to the full extent permitted or
authorized by the General Corporation Law of Delaware. Under such law, to the
extent that such person is successful on the merits of defense of a suit or
proceeding brought against such person by reason of the fact that such person is
a director or officer of the Registrant, such person shall be indemnified
against expenses (including attorneys' fees) reasonably incurred in connection
with such action. If unsuccessful in defense of a third-party civil suit or a
criminal suit is settled, such a person shall be indemnified under such law
against both (1) expenses (including attorneys' fees) and (2) judgments, fines
and amounts paid in settlement if such person acted in good faith and in a
manner such person reasonably believed to be in, or not opposed to, the best
interests of the Registrant, and with respect to any criminal action, had no
reasonable cause to believe such person's conduct was unlawful. If unsuccessful
in defense of a suit brought by or in the right of the Registrant, or if such
suit is settled, such a person shall be indemnified under such law only against
expenses (including attorneys' fees) incurred in the defense or settlement of
such suit if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
Registrant except that if such a person is adjudicated to be liable in such suit
for negligence or misconduct in the performance of such person's duty to the
Registrant, such person cannot be made whole even for expenses unless the court
determines that such person is fairly and reasonably entitled to be indemnified
for such expenses.
The officers and directors of the Registrant are covered by officers' and
directors' liability insurance. The policy coverage is $3,000,000, which
includes reimbursement for costs and fees. There is a maximum aggregate
deductible for each loss under the policy of $200,000. The Registrant has
entered into Indemnification Agreements with each of its executive officers and
directors. The Agreements provide for reimbursement for all direct and indirect
costs of any type or nature whatsoever (including attorneys' fees and related
disbursements) actually and reasonably incurred in connection with either the
investigation, defense or appeal of a Proceeding, as defined, including amounts
paid in settlement by or on behalf of an Indemnitee, as defined.
II-1
<PAGE>
Item 16. Exhibits.
Number Description
- ------ -----------
4 Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-KSB (Commission
File Number: 1-14076), for the year ended December 31, 1997, filed
with the Commission on April 15, 1998.)
5 Opinion and consent of Kaufman & Moomjian, LLC.
23.1 Consent of Ernst & Young.
23.2 Consent of Richard A. Eisner & Company, LLP.
23.3 Consent of Kaufman & Moomjian, LLC. (Included in legal opinion filed
as Exhibit 5.)
24 Powers of Attorney (set forth on the signature page of this
Registration Statement on Form S-3).
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to any of the provisions
described under Item 15 above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission (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 of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
The Registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(a) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; 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
prospectus 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
(c) Include any 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, the undertakings set forth in clauses (1)(a) and (1)(b)
above shall not apply if the information required to be included in a
post-effective amendment by such clauses is contained in periodic reports
filed with or furnished to the Commission by the Registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that are incorporated by reference in the Registration
Statement.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering; and
II-2
<PAGE>
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the termination of the offering.
The Registrant hereby further undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act as part of this Registration
Statement as of the time the Commission declared it effective; and
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a
new registration statement for the securities offered in the
Registration Statement, and that offering of such securities at that time
as the initial bona fide offering of those securities.
The Registrant hereby further undertakes that, for purposes of determining
liability under the Securities Act, each of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Exchange Act) that is incorporated by reference in 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.
The Registrant hereby further undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Fairfield, State of New Jersey, this 20th day of
December, 1999.
VIZACOM INC.
By: /s/ Mark E. Leininger
---------------------------------
Mark E. Leininger
President and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on December 20, 1999 by the
following persons in the capacities indicated. Each person whose signature
appears below constitutes and appoints Mark E. Leininger with full power of
substitution, his/her true and lawful attorney-in-fact and agent to do any and
all acts and things in his/her name and on his/her behalf in his/her capacities
indicated below which he may deem necessary or advisable to enable Vizacom Inc.
to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement including specifically, but not
limited to, power and authority to sign for him/her in his/her name in the
capacities stated below, any and all amendments (including post-effective
amendments) thereto, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in such connection, as fully to all intents and purposes as
we might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue thereof.
/s/ Mark E. Leininger President, Chief Executive Officer and
- -------------------------------- Director (Principal Executive Officer)
Mark E. Leininger
/s/ Alan W. Schoenbart Vice President - Finance, Chief Financial
- -------------------------------- Officer (Principal Accounting and Financial
Alan W. Schoenbart Officer)
/s/ Marc E. Jaffe Chairman of the Board, Secretary and Director
- --------------------------------
Marc E. Jaffe
/s/ Norman W. Alexander Director
- --------------------------------
Norman W. Alexander
- --------------------------------- Director
Werner G. Haase
/s/ Neil M. Kaufman Director
- ---------------------------------
Neil M. Kaufman
II-4
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
4 Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-KSB (Commission
File Number: 1-14076), for the year ended December 31, 1997, filed
with the Commission on April 15, 1998.)
5 Opinion and consent of Kaufman & Moomjian, LLC.
23.1 Consent of Ernst & Young.
23.2 Consent of Richard A. Eisner & Company, LLP.
23.3 Consent of Kaufman & Moomjian, LLC. (Included in legal opinion filed
as Exhibit 5.)
24 Powers of Attorney (set forth on the signature page of this
Registration Statement on Form S-3).*
II-5
KAUFMAN & MOOMJIAN, LLC
50 Charles Lindbergh Boulevard
Suite 206
Mitchel Field, New York 11553
December 14, 1999
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel for Vizacom Inc., a Delaware corporation (the
"Company"), in connection with the registration under the Securities Act of
1933, as amended, of an aggregate 1,938,191 shares (the "Shares") of the common
stock, par value $.001 per share (the "Common Stock"), of the Company to be
offered and sold by certain securityholders of the Company (the "Selling
Securityholders"). In this regard, we have participated in the preparation of a
Registration Statement on Form S-3 (the "Registration Statement") relating to
the Shares. The Shares include an aggregate 579,101 shares (the "Underlying
Shares") of Common Stock issuable upon exercise of outstanding options and
warrants (the "Derivative Securities") of the Company.
We are of the opinion that (a) the Derivative Securities are valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, (b) the Shares issued and outstanding on the date hereof are
duly authorized, legally issued, fully paid and non-assessable and (c) the
Underlying Shares, upon issuance in accordance with the terms of the respective
Derivative Securities, will be duly authorized, legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Registration Statement and in the Prospectus included therein.
Very truly yours,
/s/ Kaufman & Moomjian, LLC
Kaufman & Moomjian, LLC
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-3) and related Prospectus of Vizacom Inc. of our report dated April 1, 1999
with respect to the financial statements of Serif (Europe) Limited included in
the Annual Report (Form 10-KSB) of Vizacom Inc. for the year ended December 31,
1998 filed with the Securities and Exchange Commission.
/s/ Ernst & Young
ERNST & YOUNG
Registered Auditor
Nottingham, England
December 15, 1999
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of our report dated April 8, 1999 on our audit of the consolidated
financial statements of Vizacom Inc. (formerly known as Software Publishing
Corporation Holdings, Inc.) which appears in the Company's annual report on Form
10-KSB for the year ended December 31, 1998 and to the reference to our firm
under the heading "Experts" in the prospectus.
Our report, which was based in part upon the report of other independent
auditors, contains an emphasis paragraph regarding a federal income tax
contingency.
/s/ Richard A. Eisner & Company, LLP.
New York, New York
December 16, 1999
