Registration No. 333-25763
As filed with the Securities and Exchange Commission on June 24, 1997
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DATA SYSTEMS NETWORK CORPORATION
(Exact name of Registrant as specified in its charter)
Michigan 38-2649874
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34705 W. Twelve Mile Road
Suite 300
Farmington Hills, Michigan 48331
(248) 489-7117
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Michael W. Grieves, Chairman, President
and Chief Executive Officer
34705 W. Twelve Mile Road, Suite 300
Farmington Hills, Michigan 48331
(248) 489-7117
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
copy to:
Marguerite M. Gritenas
Dykema Gossett PLLC
400 Renaissance Center
Detroit, MI 48243-1668
Approximate date of commencement of proposed sale to public: From
time to time after this Registration Statement is declared effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or investment 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 reinvestment plans, please 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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CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of each class of Amount to maximum maximum Amount of
securities to be registered be offering aggregate registration
registered price per offering fee**
share* price*
- --------------------------- ---------- --------- --------- ------------
Common Stock 240,000 $9.16 $2,198,400 $666.18***
* Estimated solely for purposes of computing the registration fee.
** Calculated on the basis of the average of the high and low reported
sale prices of the Common Stock on the Nasdaq SmallCap Market on
June 20, 1997.
*** Of the $666.18 registration fee, $454.55 was transmitted with the
initial filing of this registration statement.
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>
PROSPECTUS
DATA SYSTEMS NETWORK CORPORATION
240,000 shares of Common Stock
This Prospectus relates to the resale of 240,000 shares of Common
Stock of Data Systems Network Corporation (the "Company") from time to time
for the account of H. J. Meyers & Co., Inc. (as successor to Thomas James
Associates, Inc.) (the "Representative" or the "Selling Securityholder"),
the Representative of the several underwriters in the Company's initial
public offering in November 1994 ("IPO"). Such shares are issuable upon the
exercise of certain warrants and unit purchase options issued to the Selling
Securityholder.
The distribution of the Common Stock by the Selling Securityholder
may be effected from time to time in one or more transactions for its own
account (which may include block transactions) on the Nasdaq SmallCap Market
("Nasdaq"), or on any exchange on which the Common Stock may then be listed
in negotiated transactions, through the writing of options on shares
(whether such options are listed on an options exchange or otherwise), or a
combination of such methods of sale, at fixed prices which may be changed,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling
Securityholder may effect such transactions by selling Common Stock to or
through broker-dealers, including broker-dealers who may act as
underwriters, and such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Securityholder or
the purchasers of Common Stock for whom such broker-dealers may act as agent
or to whom they sell as principal, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). The
Selling Securityholder may also sell Common Stock pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act"), or may
pledge Common Stock as collateral for margin accounts and such shares of
Common Stock could be resold pursuant to the terms of such accounts. The
Selling Securityholder may be deemed to be an "underwriter" as defined in
the Act. See "Selling Securityholder" and "Plan of Distribution."
SEE "RISK FACTORS" ON PAGE 4 FOR CERTAIN INFORMATION WHICH SHOULD
BE CAREFULLY CONSIDERED BEFORE PURCHASING SHARES OF COMMON STOCK OFFERED
HEREBY.
The shares of Common Stock offered hereby by the Selling
Securityholder will be sold at market prices prevailing from time to time or
otherwise at prices then obtainable. The Company will not receive any of
the proceeds from the sale of the Common Stock offered hereby. The Company
will pay estimated expenses relating to this offering of approximately
$20,700. This offering is not being underwritten.
The Company's Common Stock is traded on the Nasdaq Stock Market's
SmallCap Market ("Nasdaq") under the symbol "DSYS" and on the Pacific Stock
Exchange under the symbol "DSY". On June 20, 1997, the last reported sale
price of the Company's Common Stock on Nasdaq was $9.31 per share.
The Company's principal executive offices are located at 34705 West
Twelve Mile Road, Suite 300, Farmington Hills, Michigan 48331 (telephone
number: (248) 489-7117).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE DISTRIBUTING SHAREHOLDER. THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities
and Exchange Commission (the "Commission") and the Pacific Stock Exchange,
Inc. (the "PSE"). Such reports, proxy statements and other information may
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following regional offices of the Commission: New York Regional Office, 7
World Trade Center, 13th Floor, New York, New York 10048; and Chicago
Regional Office, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661-2511, and may be inspected at the PSE at 301 Pine Street, San
Francisco, California 94104. In addition, copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also maintains a Web site (http://www.sec.gov) that contains reports, proxy
and information statements and other information regarding the Company.
This Prospectus is a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus omits certain of the information
included in such Registration Statement. The Registration Statement may be
inspected by anyone at the office of the Commission without charge, and
copies of all or any part of it may be obtained upon payment of the
Commission's charge for copying. For further information about the Company
and its securities, reference is hereby made to such Registration Statement,
and to the exhibits filed as part thereof or otherwise incorporated herein.
Each summary herein of additional information included in the Registration
Statement or any exhibit thereto is qualified in its entirety by reference
to such information or exhibit.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents (and the amendments thereto) filed by the
Company (Commission File No. 1-13424) with the Commission are hereby
incorporated by reference and made a part hereof:
(a) The description of the Company's Common Stock contained in
the Prospectus forming a part of the Company's Registration
Statement on Form S-1 (No. 33-81350) (incorporated by
reference into the Company's Exchange Act Registration
Statement on Form 8-A, filed on October 25, 1994);
(b) Annual Report on Form 10-K for the year ended December 31,
1996; and
(c) Quarterly Report on Form 10-Q for the quarter ended March
31, 1997.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Securities covered by this Prospectus shall be deemed to be incorporated
herein by reference and to be a part hereof from the respective date of
filing of each such document. Any statement contained in a document
incorporated by reference or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
To the extent the foregoing documents are incorporated by reference
herein, copies may be obtained without charge (other than for exhibits to
such documents) upon written request directed to: Shareholder Relations,
34705 West Twelve Mile Road, Suite 300, Farmington Hills, Michigan 48331
(telephone number: (248) 489-7117).
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following
factors before purchasing the securities offered hereby.
RECENT OPERATING LOSSES
Although the Company reported a profit of $321,000 for the year
ended December 31, 1996 primarily as a result of certain business
acquisitions occurring during 1996, it reported losses of $613,000 and
$291,000 for the years ended December 31, 1995 and 1994, respectively. The
results for the year ended December 31, 1995 include a $620,000 increase in
the Company's inventory reserves to cover the likely risk of future
inventory obsolescence and a gain of $320,000 on the extinguishment of
certain debt. The losses have also been affected by the fact that the
Company's revenue mix has not optimized gross profits. The Company's
service revenues historically have been associated with significantly higher
profit margins than have its net sales. As a result, the Company's strategy
is to maximize service revenues as a percentage of total revenues to the
extent practicable. During 1996, the Company made two strategic
acquisitions, began several new projects and took other internal measures to
increase the level of service revenue as a component of total revenue. As a
result of these measures, service revenues improved from 7.5% and 11.7% of
total revenues in 1995 and 1994, respectively, to 18.8% in 1996. There can
be no assurance, however, that service revenues and profit margins can be
maintained at a level sufficient to cover the operating expense increases
resulting from the recent acquisitions and geographic expansion. A
significant portion of the increase was attributable to a contract with the
State of Michigan which was acquired in connection with the acquisition of
SofTech, Inc.'s Network Systems Group ("NSG"). The State of Michigan
contract expires in August 1997. There can be no assurance that the Company
will be awarded a new contract with the State of Michigan or that the terms
of any such new contract would be as favorable to the Company as the current
terms. While the Company believes that any loss of revenues from the loss
of the State of Michigan relationship would be offset by revenue increases
from other customers, the loss of the State of Michigan contract could have
a material adverse effect on the Company's results of operations and
financial condition.
FUTURE CAPITAL NEEDS
The Company had working capital of $2.0 million at December 31, 1995
and a working capital deficit of $1.5 million at December 31, 1996. The
deficit in 1996 is primarily the result of the cash used in connection with
the NSG acquisition and investments made in the Company's general
infrastructure and new network management center. The Company's principal
credit facility is a bank line of credit. As of December 31, 1996, the
Company was indebted under the line of credit in the amount of approximately
$9.2 million, all of which is due on demand. There can be no assurance that
the bank will not demand payment at a time at which the Company is unable to
repay or refinance such indebtedness.
In February 1997, the Company called for redemption of all of its
outstanding redeemable common stock purchase warrants. As a result of
exercises of such warrants on or prior to the March 10, 1997 redemption
date, the Company issued a total of 1,256,000 shares of its Common Stock,
received net proceeds of $7.4 million and significantly improved its working
capital position.
The Company's future capital requirements will depend on many
factors, including cash flow from operations, competing market developments
and future expansion plans, and may require the Company to raise additional
funds through equity or debt financings. Any equity financings could result
in dilution to the Company's shareholders, and any financing, if available
at all, may be on terms unfavorable to the Company. If adequate funds are
not available, the Company may be required to curtail its activities
significantly.
<PAGE>
POTENTIAL INABILITY TO MANAGE GROWTH
The Company is experiencing rapid and significant growth which has
placed, and may continue to place, a strain on the Company's management and
resources. From August 1996 through November 1996, the number of the
Company's employees increased from approximately 80 to 245 and further
increases are anticipated during 1997. Approximately one-half of the
increase is directly attributable to the NSG acquisition with the remainder
due to the geographic expansions made possible by the acquisition. The
Company's future performance and profitability will depend, in large part,
on its ability to manage this growth, particularly with respect to its now
decentralized workforce, which will require the Company to continue to
improve its operational, financial and other internal systems. The
Company's success in managing this growth will depend largely on its ability
to minimize the initial inefficiencies and lack of productivity which occur
as the new employees become accustomed to new work environments and
operating procedures. The Company's ability to train these new employees
effectively and efficiently in the Company's operating procedures and to
overcome corporate culture differences will be critical in this regard. If
the Company is unable to manage growth effectively or perform its services
at anticipated levels, the Company's business, financial condition and
results of operations may be materially adversely affected.
VARIABILITY OF OPERATING RESULTS
The Company's quarterly and annual operating results have been
subject to variation, and will continue to be subject to variation, from
period to period depending upon factors such as the Company's revenue mix;
the cost of materials, labor and technology; the costs associated with
initiating new contracts or opening new offices; the economic condition of
the Company's target markets; and the costs of acquiring and integrating new
businesses. As a result of these factors and others, there can be no
assurance that the Company will be profitable in the future on a quarterly
or annual basis. It is possible that in some future quarter the Company's
operating results will be below the expectations of public market analysts
and investors. In such event, or in the event that adverse conditions
prevail or are perceived to prevail generally or with respect to the
Company's business, the price of the Common Stock may be materially
adversely affected.
DEPENDENCE ON MAJOR VENDORS
In general, the Company must be directly authorized by a
manufacturer in order to sell that manufacturer's products. The Company is
an authorized dealer for the microcomputer and related products of over 30
manufacturers. Sales by the Company of products manufactured by Compaq,
Hewlett-Packard, Dell and IBM together accounted for between 45% and 55% of
the Company's total revenues during each of the years ended December 31,
1996, 1995 and 1994. The Company's authorized dealer agreements with
manufacturers are typically subject to periodic renewal and to termination
on short notice. The Company's authorized dealer agreements, including
those with Compaq, Hewlett-Packard, Dell and IBM, may be terminated by the
manufacturer without cause on 30 to 90 days' notice or immediately upon the
occurrence of certain events. The loss of a major manufacturer or the
deterioration of the Company's relationship with a major manufacturer could
have a material adverse effect on the Company's business. There can be no
assurance that the Company will continue as an authorized dealer for any
manufacturer, or that the current terms of its dealer agreements and other
manufacturer arrangements, including pricing terms, will not be changed.
The Company determines whether to purchase products from
distributors or directly from manufacturers by surveying prices and product
availability among the manufacturers and the distributors with whom it has
contractual relationships. Distributors, which purchase products in large
quantities, often are able to offer a better price on products due to volume
discounts granted by manufacturers. The Company's contract with Inacom
Corp., through which it purchased 20% of its product purchases in 1996,
<PAGE>
provides competitive pricing and inventory management terms and conditions
allowing for ninety day returns of excess salable product, and limited
returns on opened product and defective returns, subject to the policies of
the product manufacturers. Like the other distributor agreements to which
it is a party, the Inacom agreement is terminable by the Company or the
distributor. The loss of all of the Company's relationships with
distributors could result in higher product prices to the Company and
potentially reduce the Company's profit margins, which in turn may have a
material adverse effect on the Company's results of operations and financial
condition.
COMPETITION
The network integration and management market is highly competitive.
The Company competes with local, regional and national computer retail
chains, network integration specialist companies and manufacturers.
Depending on the customer, the Company competes on the basis of
technological capability, price, breadth of product offerings and quality of
service. Many of the Company's competitors are larger and have greater
financial, marketing and human resources and geographic coverage than the
Company. There can be no assurance that the Company will be able to compete
successfully against existing companies or new entrants to the marketplace.
TECHNOLOGICAL CHANGE
The network integration and management market is characterized by
rapid technological change and frequent introduction of new products and
product enhancements. Although technological change generally increases
demand for the Company's services, there can be no assurance that the
Company's current manufacturers and suppliers will be able to achieve the
technological advances necessary to remain competitive, or that the Company
will be able to obtain authorizations from new manufacturers or for new
products that gain market acceptance. In addition, technological change may
effect the valuation of inventory and spare parts. The Company's reserves
for obsolete inventory were $1,174,000, $978,000 and $281,000 as of December
31, 1996, 1995 and 1994, respectively. The increase in the reserve in 1995
had a material adverse effect on the Company's results of operations and
financial condition for 1995. While the Company believes its allowance for
obsolescence is adequate, there can be no assurance that further material
adjustments will not be necessary. In the event material adjustments are
necessary, such adjustments are likely to have a material adverse effect on
the Company's results of operations and financial condition.
DEPENDENCE ON KEY MANAGEMENT AND SERVICE PERSONNEL
The success of the Company has been largely dependent on the skills,
experience and efforts of its senior management and especially its President
and Chief Executive Officer, Michael Grieves. The loss of the services of
Mr. Grieves or other members of the Company's senior management could have a
material adverse effect on the Company's business and prospects. The
Company maintains a key man life insurance policy on Mr. Grieves in the
amount of $1,000,000.
The Company's business is service-oriented and labor-intensive. The
Company believes that its future success will also depend, to a large
extent, on the continued service of its key technical employees and client
and project managers and on its ability to continue to attract and retain
such personnel. Competition for such personnel is intense, particularly for
highly skilled and experienced technical personnel. Such personnel are in
great demand and are likely to remain a limited resource for the
foreseeable future. There can be no assurance that the Company will be able
to attract, retain and motivate such personnel in the future, and the
inability to do so may have a material adverse effect upon the Company's
business, financial condition and results of operations.
<PAGE>
POTENTIAL CLAIMS BY PRE-BANKRUPTCY CREDITORS
The order confirming the Company's bankruptcy plan of reorganization
was entered on May 22, 1992. The Plan provided for certain distributions to
holders of claims against the Company which arose prior to the bankruptcy
petition filing and which have been allowed by the bankruptcy court. These
claims were settled, and the settlement was approved by the bankruptcy court
on October 3, 1996. The settlement requires the payment of certain amounts
and the distribution of certain warrants to such claim holders. Amounts due
pursuant to the settlement have been accrued by the Company but have not yet
been paid. The bankruptcy was discharged by the bankruptcy court on January
16, 1997.
Some persons who may have had prepetition claims against the Company
did not receive distributions because no proper proof of claim was filed or
because the claim was disallowed based on the Company's objection. Those
persons could file a motion in the bankruptcy court asserting that they did
not receive proper notice of (i) the bankruptcy, (ii) the requirement that
they file a claim or (iii) the objection to their claim. The Company
believes that all required notices were given to all known prepetition
creditors of the Company in connection with the bankruptcy. If one of those
assertions could be proved, however, such a person may have the right to
have their prepetition claim allowed and to receive distributions under the
plan of reorganization. The aggregate amount of claims of such creditors is
not readily quantifiable. Other than a claim raised by one creditor in 1994
and settled in early 1995, the Company has not received any communications
from prepetition creditors asserting such a claim.
CONTROL OF THE COMPANY
The Company's executive officers and directors beneficially own
approximately 29% of the outstanding shares of Common Stock. Since there
are no cumulative voting rights provided for in the Company's Articles of
Incorporation, these persons, if they act in concert, may be in a position
to effectively control the election of the members of the Board of Directors
and to control most corporate actions requiring shareholder approval.
POSSIBLE DELISTING OF COMMON STOCK
If the Company's Common Stock is subsequently delisted from the
Nasdaq and the PSE, it may become subject to the so-called "penny stock"
rule that imposes additional sales practice requirements on broker-dealers
who sell such securities to persons other than established customers and
accredited investors if the market price per share (as defined) falls below
$5.00. For transactions covered by this rule, the broker-dealer must make a
special suitability determination for the purchaser and must have received
the purchaser's written consent to the transaction prior to sale.
Consequently, delisting, if it occurred, may affect the ability of
broker-dealers to sell the Company's securities and the ability of
shareholders to sell their securities in the secondary market.
In addition, for any non-exempt transaction involving a "penny
stock," the rules require the delivery, prior to the transaction, of a
disclosure schedule relating to the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities.
Finally, monthly statements must be sent disclosing recent price information
for the penny stock held in the account and information on the limited
market in penny stock. Generally, transactions with respect to stock of
issuers having at least $2,000,000 in tangible assets, transactions in which
the customer is an institutional accredited investor and transactions that
are not recommended by the broker-dealer are exempt from the disclosure
rule.
POSSIBLE ISSUANCE OF PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of
Preferred Stock. Preferred Stock may be issued in one or more series, the
terms of which may be determined at the time of issuance by the Board of
<PAGE>
Directors, without further action by shareholders, and may include voting
rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion and redemption
rights and sinking fund provisions. No Preferred Stock is currently
outstanding and the Company has no present plans for the issuance thereof.
The issuance of any Preferred Stock could affect the rights of the holders
of Common Stock, and therefore, reduce the value of the Common Stock and
make it less likely that holders of Common Stock would receive a premium for
the sale of their shares of Common Stock. In particular, specific rights
granted to future holders of Preferred Stock could be issued to restrict the
Company's ability to merge with or sell its assets to a third party, thereby
preserving control of the Company by its present owners.
SALES PURSUANT TO RULE 144
Approximately 1.3 million shares of Common Stock are "restricted
securities" within the meaning of Rule 144 promulgated under the Securities
Act. Except for 300,000 shares which are held in escrow through no later
than October 28, 1999, these "restricted securities" are eligible for sale,
subject to the volume limitation and other conditions imposed by Rule 144.
Under Rule 144, a person holding restricted securities for a period of two
years may, every three months, sell in ordinary brokerage transactions or in
transactions directly with a market maker an amount equal to the greater of
one percent of the Company's then outstanding Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale.
Future sales of such shares and sales of shares underlying outstanding
warrants or options could have an adverse effect on the market price of the
Common Stock.
SELLING SECURITYHOLDER
The following table sets forth as of June 1, 1997 the number of
shares of Common Stock owned beneficially or of record by the Selling
Securityholder and the number of shares of Common Stock offered by such
Selling Securityholder hereunder. The Selling Securityholder will not
beneficially own more than one percent of the outstanding Common Stock upon
consummation of the offering contemplated hereby.
Number of Shares Number of Shares
of Common Stock of Common Stock
Selling Securityholder Beneficially Owned Offered Hereby
- ---------------------- ------------------ ----------------
H. J. Meyers & Co., Inc. 240,000 (1) 240,000
______________________
(1) Represents shares of Common Stock issuable upon the exercise of
certain warrants and unit purchase options.
H. J. Meyers & Co.'s predecessor, Thomas James Associates, Inc.,
served as the Representative of the several representatives for the
Company's IPO in 1994. In connection with the IPO, Thomas James Associates,
Inc. received a Representative's Warrant to purchase 60,000 Units at an
initial exercise price of $16.50 per Unit, which passed to H.J. Meyers &
Co. by succession. Each Unit was comprised of two shares of Common Stock
and two redeemable common stock purchase warrants which were initially
exercisable at a price of $10.3125 per share until October 27, 1997 at
$12.375 per share thereafter until expiration on October 27, 1999. Through
independent negotiations between the Company and the Representative, the
exercise price of the Representative's Warrant was reduced to $12.50 per
Unit, and the exercise price of the Purchase Warrants comprising such Units
was reduced to $6.25 per share.
In addition, H.J. Meyers & Co. and the Company entered into a
Financial Consulting Contract on December 22, 1996 for a one-year term.
Under the Financial Consulting Contract, H.J. Meyers & Co. agreed to assist
the Company in its public equity marketing efforts, provide access to its
retail sales force and advise with regard to shareholder relations and
public relations matters for a fee of $75,000.
<PAGE>
PLAN OF DISTRIBUTION
The distribution of the Common Stock by the Selling Securityholder
may be effected from time to time in one or more transactions for its own
account (which may include block transactions) on Nasdaq or any exchange on
which the Common Stock may then be listed, in negotiated transactions,
through the writing of options on shares (whether such options are listed on
an options exchange or otherwise), or a combination of such methods of sale,
at fixed prices which may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Securityholder may effect such transactions
by selling shares of Common Stock to or through broker-dealers, including
broker-dealers who may act as underwriters, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions
from the Selling Securityholder and/or the purchasers of shares of Common
Stock for whom such broker-dealers may act as agent or to whom they sell as
principal, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). The Selling Securityholder
may also sell Common Stock pursuant to Rule 144 promulgated under the Act or
through a pledge of shares of Common Stock as collateral for margin
accounts, and such shares of Common Stock could be resold pursuant to the
terms of such accounts. The Selling Securityholder and any participating
broker-dealer and dealers may be deemed to be "underwriters" as defined in
the Securities Act.
In order to comply with certain state securities laws, if
applicable, the Common Stock will not be sold in a particular state unless
such securities have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and complied
with.
The Company has agreed to bear all expenses, other than selling
commissions and fees, in connection with the registration and sale of the
shares of Common Stock being offered by the Selling Securityholder.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of
Common Stock offered hereby.
TRANSFER AGENT
The Transfer Agent for the Common Stock is American Stock Transfer
and Trust Company, 40 Wall Street, New York, New York 10005.
LEGAL MATTERS
The validity under Michigan law of the authorization and issuance of
the shares offered hereby will be passed upon for the Company by Dykema
Gossett PLLC, Detroit, Michigan.
EXPERTS
The balance sheets, as of December 31, 1996 and 1995, and the
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1996 and 1995, included in the Form 10-K which is
incorporated by reference in this Prospectus, have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, as indicated by their
report with respect thereto, and are incorporated herein upon the authority
of said firm as experts in accounting and auditing.
The statements of operations, stockholders' equity and cash flows
for the year ended December 31, 1994, included in the Form 10-K which is
incorporated by reference in this Prospectus, have been audited by Deloitte
& Touche LLP, independent certified public accountants, as stated in their
report with respect thereto, and are incorporated herein in reliance upon
the report of such firm given upon their authority as experts in accounting
and auditing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following statement sets forth the estimated amounts of
expenses, all of which will be borne by the Company:
SEC Registration Fee.............................. $ 700
NASDAQ Listing Fee................................ $2,400
Pacific Stock Exchange Listing Fee................ $ 600
Accounting Fees and Expenses...................... $5,000
Legal Fees and Expenses........................... $6,000
Blue Sky Fees and Expenses ....................... $1,000
Miscellaneous Expenses ........................... $5,000
------
Total Expenses. ..................................$20,700
Item 15. Indemnification of Directors and Officers
Sections 561 through 571 of the Michigan Business Corporation Act
set forth the conditions and limitations governing the indemnification of
officers, directors and other persons.
The Company's Articles of Incorporation and Bylaws require the
Company to indemnify its directors and officers to the fullest extent
permitted by law, and permit the Company to indemnify employees and agents,
for expenses, judgments, penalties, fines and amounts paid in settlement in
connection with any pending, threatened or completed action, suit or
proceeding (other than by or in the right of the Company), to which any such
person was made a party by reason of the fact that he or she was acting in
such capacity for the Company or was serving as such for another corporation
or enterprise at the Company's request, if such persons acted in good faith
and in a manner they reasonably believed to be in or not opposed to the best
interests of the Company or its shareholders or, in respect to a criminal
proceeding, had no reasonable cause to believe such conduct was unlawful.
In actions by or in the right of the Company, indemnification is limited to
expenses and amounts paid in settlement. Reference is made to Article V of
the Company's Articles of Incorporation, a copy of which is filed as Exhibit
3.1 to the Company's Registration Statement on Form S-1 (No. 33-81350), and
to Article XI of the Company's Bylaws, a copy of which is filed as Exhibit
3.2 to the Company's Registration Statement on Form S-1 (No. 33-81350),
which provide for indemnification of directors and officers of the Company.
Article 11 of the Bylaws also authorizes the Company to purchase and
maintain insurance on behalf of any officer, director, employee or agent of
the Company against any liability asserted against or incurred by them in
such capacity or arising out of their status as such whether or not the
Company would have the power to indemnify such officer, director, employee
or agent against such liability under the provisions of such Article or
Michigan law. The Company currently has an insurance policy covering
directors and officers acting in their capacity as such.
The Michigan Business Corporation Act permits Michigan corporations
to limit the personal liability of directors for a breach of their fiduciary
duty. The Company's Articles of Incorporation limit liability to the
maximum extent permitted by law. The Company's Articles of Incorporation
provide that a director of the Company shall not be personally liable to the
Company or its shareholders for monetary damages for breach of the
director's fiduciary duty. However, they do not eliminate or limit the
liability of a director for any of the following: (i) a breach of the
director's duty of loyalty to the Company or its shareholders; (ii) acts or
omissions not in good faith or that involve intentional misconduct or a
knowing violation of law; (iii) declaring an unlawful dividend or
distribution to shareholders; (iv) a transaction from which the director
derives an improper personal benefit; and (v) an act or omission occurring
prior to September 4, 1987, the effective date of the pertinent article. As
a result of the inclusion of such a provision, shareholders of the Company
may be unable to recover monetary damages against directors for actions
taken by them which constitute negligence or gross negligence or which are
in violation of their fiduciary duties, although it may be possible to
obtain injunctive or other equitable relief with respect to such actions.
<PAGE>
Item 16. Exhibits
A list of exhibits included as part of this Registration Statement
is set forth in the Exhibit Index which immediately precedes such exhibits
and is incorporated herein by reference.
Item 17. Undertakings
1. Except to the extent that the information is contained in
periodic reports filed by the Company pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 and incorporated by reference into this
registration statement, the undersigned registrant hereby undertakes to
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933 and
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective registration
statement.
2. The undersigned registrant hereby undertakes: (a) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement to 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, (b) that, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof, and (c) to
remove from registration by means of a post-effective amendment any of the
securities which remain unsold at the termination of the offering.
3. The undersigned registrant hereby undertakes that for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
4. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing this Amendment No. 1 to 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 Farmington Hills,
State of Michigan on the 20th day of June, 1997.
DATA SYSTEMS NETWORK CORPORATION
By: /s/ Michael W. Grieves
Michael W. Grieves,
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on June 20, 1997.
<PAGE>
Signature
/s/ Michael W. Grieves
Michael W. Grieves
Chairman of the Board, President,
Chief Executive Officer and
Director (Principal Executive Officer)
/s/ Philip M. Goy
Philip M. Goy
Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
/s/ Julie A. Vitale-Johnston
Julie A. Vitale-Johnston
Controller (Principal
Accounting Officer)
*
Walter J. Aspatore
Director
*
Richard R. Burkhart
Director
*
Jerry A. Dusa
Director
* By:/s/ Michael W. Grieves
Michael W. Grieves
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibits
5.1 Opinion of Dykema Gossett PLLC
4.1 * Warrant Agreement between the Company and American Stock
Transfer and Trust Company filed as Exhibit 10.5 to the
Registrant's Post-Effective Amendment No.1 on Form S-3 to
Form S-1 Registration Statement (No. 33-81350) and
incorporated herein by reference
4.2 * Representative's Warrant filed as Exhibit 4.3 to
Amendment No. 3 to the Registrant's Registration Statement
on Form S-1 (No. 33-81350) and incorporated herein by
reference
4.3 * Financial Consulting Contract and Amendment of
Representative's Warrant dated December 22, 1996
4.4 * Warrant Redemption Agreement dated January 27, 1997
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Deloitte & Touche LLP
23.4 * Consent of Dykema Gossett PLLC (included in Exhibit 5.1)
24.1 * Power of Attorney of Walter J. Aspatore
24.2 * Power of Attorney of Richard R. Burkhart
24.3 * Power of Attorney of Jerry A. Dusa
________________________
* Previously filed.
EXHIBIT 5.1
DYKEMA GOSSETT PLLC
400 Renaissance Center
Detroit, Michigan 48243-1668
Marguerite M. Gritenas
Direct Dial
(313) 568-6503
June 24, 1997
Data Systems Network Corporation
34705 W. Twelve Mile Road
Suite 300
Farmington Hills, Michigan 48331
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel for Data Systems Network Corporation, a
Michigan corporation (the "Company"), in connection with the preparation and
filing with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, of a Registration Statement on Form S-3 (the
"Registration Statement") registering for distribution, in the manner
described in the Registration Statement, 240,000 shares of Common Stock.
We have examined and relied upon the originals, or copies certified
or otherwise identified to our satisfaction, of such corporate records,
documents, certificates and other instruments as in our judgment are
necessary or appropriate to enable us to render the opinion expressed below.
Based upon the foregoing, we are of the opinion that (1) the Company
has been duly incorporated and is in good standing under the laws of the
State of Michigan, and (2) the Common Stock to which the Registration
Statement relates, when issued to the Selling Securityholder upon exercise
of certain unit purchase options and warrants in accordance with their
terms, will be legally and validly issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement. We further consent to the reference to our firm
under the heading "Legal Matters" in the Registration Statement. In giving
such opinion, we do not concede that we are experts within the meaning of
the Act or the rules or regulations thereunder or that this consent is
required by Section 7 of the Act.
Very truly yours,
DYKEMA GOSSETT PLLC
/s/ Marguerite M. Gritenas
Marguerite M. Gritenas
Exhibit 23.1
The Board of Directors
Data Systems Network Corporation:
We consent to incorporation by reference in this Amendment No. 1 to
Registration Statement, No. 333-25763, on Form S-3 of Data Systems Network
Corporation of our reports dated March 4, 1997, relating to the balance
sheets of Data Systems Network Corporation as of December 31, 1996 and 1995
and the related statements of operations, stockholders' equity, and cash
flows for the years then ended, and our report on the accompanying financial
statement schedules which reports appear in the December 31, 1996 annual
report on Form 10-K of Data Systems Network Corporation and to the reference
to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Detroit, Michigan
June 13, 1997
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement, No. 333-25763, on Form S-3 of Data Systems Network
Corporation of our report dated March 10, 1995, relating to the financial
statements of Data Systems Network Corporation for the year ended December
31, 1994, appearing in the Annual Report on Form 10-K of Data Systems
Network Corporation for the year ended December 31, 1996, and to the
reference to us under the heading "EXPERTS" in the Prospectus, which is a
part of this Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Detroit, Michigan
June 13, 1997
