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As filed with the Securities and Exchange Commission on January 28, 1997
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
(810) 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
(810) 489-7117
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
copy to:
Mark A. Metz, Esq.
Dykema Gossett PLLC
400 Renaissance Center
Detroit, MI 48243
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. [ ]
CALCULATION OF REGISTRATION FEE
Proposed
Maximum Proposed
Aggregate Maximum
Title Of Amount Offering Aggregate Amount of
Shares To Be To Be Price Offering Registration
Registered Registered Per Unit* Price* Fee**
Common Stock 540,000 $8.1875 $4,421,250 $1,340
$.01 par value shares
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* 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 January 22,
1997.
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.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 28, 1997
PROSPECTUS
DATA SYSTEMS NETWORK CORPORATION
540,000 SHARES
COMMON STOCK, $.01 PAR VALUE
This Prospectus relates to 540,000 shares of Common Stock, $.01 par
value (the "Common Stock"), of Data Systems Network Corporation (the
"Company") which are beneficially owned by SofTech, Inc. (the "Distributing
Shareholder") and will be distributed to the shareholders of the
Distributing Shareholder. The 540,000 shares of Common Stock offered hereby
(the "Securities") were issued to the Distributing Shareholder in connection
with the acquisition by the Company of the assets of the Network Systems
Group Division of the Distributing Shareholder. The Company is registering
the Securities pursuant to the terms of a Registration Rights Agreement
dated September 12, 1996 (the "Registration Agreement"), between the Company
and the Distributing Shareholder in order to provide the Distributing
Shareholder with the opportunity to distribute the securities to its
shareholders so as to provide those shareholders with freely tradeable
securities.
The Company will not receive any proceeds from the distribution of
the Securities. The expenses incurred by the Company in connection with the
preparation of this Prospectus and the registration statement of which this
Prospectus is a part, the listing of shares and related matters will be paid
as follows: the Distributing Shareholder will pay the first $20,000 of such
expenses and the Company and the Distributing Shareholder will divide any
further expenses equally. Such expenses are estimated to be approximately
$32,000. The Distributing Shareholder will pay the costs, if any,
associated with the distribution of the Securities. This offering is not
being underwritten.
The Company's principal executive offices are located at 34705 West
Twelve Mile Road, Suite 300, Farmington Hills, Michigan 48331 (telephone
number: (810) 489-7117).
The Common Stock is traded on the Nasdaq Stock Market's SmallCap
Market (the "Nasdaq") and listed for trading on the Pacific Stock Exchange.
The last sale price reported for the Common Stock on January 22, 1997 on the
Nasdaq was $8.38.
SEE "RISK FACTORS" ON PAGE 3 FOR CERTAIN INFORMATION WHICH SHOULD BE
CAREFULLY CONSIDERED WITH RESPECT TO THE COMMON STOCK OFFERED HEREBY.
-------------------------
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.
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The date of this Prospectus is , 1997
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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.
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 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,
1995;
(c) Quarterly Reports on Form 10-Q for the Quarters Ended March
31, 1996, June 30, 1996 and September 30, 1996; and
(d) Current Report on Form 8-K filed September 27, 1996.
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
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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: (810) 489-7117).
RISK FACTORS
Prospective investors should consider carefully the following
factors before purchasing the securities offered hereby.
RECENT OPERATING LOSSES
The Company reported losses of $160,000, $613,000 and $291,000 for
the nine months ended September 30, 1996 and the years ended December 31,
1995 and 1994, respectively. The results for the nine months ended
September 30, 1996 include a $165,000 extraordinary loss relating to the
settlement of the Company's 1992 bankruptcy plan of reorganization and a
$75,000 extraordinary gain relating to the extinguishment of debt, while 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 obsolesence and a gain of $320,000 on the extinguishment of debt.
The recent losses have also been affected by the fact that the Company's
revenue mix has not optimized gross profits. In each period, lower margin
equipment sales comprised a higher percentage of total revenue than desired
by the Company. Although the Company during 1996 has made two strategic
acquisitions, begun several new projects and taken other internal measures
to increase the level of service revenue as a component of total revenue,
there can be no assurance that profit margins will improve to a level
sufficient to cover the operating expense increases anticipated as a result
of the recent acquisitions and geographic expansion.
FUTURE CAPITAL NEEDS
The Company had working capital of $2.0 million at December 31, 1995
and a working capital deficit of $1.8 million at September 30, 1996. The
Company's principal credit facility is a bank line of credit. As of
September 30, 1996, the Company was indebted under the line of credit in the
amount of approximately $5.4 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 addition, 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. The Company may seek to raise capital by
calling for redemption the Redeemable Common Stock Purchase Warrants (the
"Purchase Warrants") issued by the Company to investors in the Company's
initial public offering in November 1994, which would likely influence the
holders of the Purchase Warrants to exercise them prior to the date of
redemption. The Company is not permitted to redeem the Purchase Warrants
except on 30 days prior written notice (i) with the prior written consent of
the Representative or (ii) if the average closing bid price of the Common
Stock for a period of 30 consecutive trading days exceeds $12.00 per share.
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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. The Company's future performance and
profitability will depend, in large part, on its ability to manage this
growth, particularly with respect to its decentralized workforce, which will
require the Company to continue to improve its operational, financial and
other internal systems. In addition, the Company will need to train,
motivate and integrate its new employees. 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, NetFrame and IBM together accounted for more than 50%
of the Company's total revenues during the nine months ended September 30,
1996 and during each of the years ended December 31, 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, NetFrame 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.
Some of these major manufacturers have responded to increasing competition
in the microcomputer industry by discounting prices, which could adversely
affect the profitability of the Company.
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.
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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 value of inventory and spare parts. While the Company maintains
an allowance for obsolescence which it believes is adequate, there can be no
assurance that material adjustments will not be necessary.
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.
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.
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.
CONTROL OF THE COMPANY
The Company's executive officers and directors beneficially own
approximately 39% 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, are likely to 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.
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POSSIBLE DELISTING OF SECURITIES
If the Company's securities are subsequently delisted from the
Nasdaq and the PSE, they 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
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" will be eligible for
sale, subject to the volume limitation and other conditions imposed by Rule
144, on February 5, 1997 upon the expiration of an agreement among certain
shareholders and warrant holders prohibiting sales of such shares until such
date. 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.
USE OF PROCEEDS
The Company will not receive any proceeds from the distribution of
the Securities by the Distributing Shareholder.
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DISTRIBUTING SHAREHOLDER
The Distributing Shareholder received the Securities in connection
with the acquisition by the Company of the assets of the Network Systems
Group Division of the Distributing Shareholder. The Securities represent
approximately 16.6% of the total number of shares of Common Stock
outstanding on the date hereof. As part of such acquisition and pursuant to
the terms of the Registration Agreement, the Company agreed to use its
reasonable best efforts to register the Securities issued to the
Distributing Shareholder for distribution by the Distributing Shareholder to
its shareholders and the Distributing Shareholder agreed to distribute all
of the Securities to its shareholders promptly after registration of the
Securities. When the distribution is completed, the Distributing
Shareholder will not own any shares of the Common Stock.
PLAN OF DISTRIBUTION
In the Registration Agreement, the Distributing Shareholder agreed
to distribute the Securities to its shareholders promptly after registration
of the Securities. The Distributing Shareholder will pay for any expenses
incurred in the distribution of the securities. The expenses incurred by
the Company in connection with the preparation of this Prospectus and the
registration statement of which this Prospectus is a part, the listing of
the shares and related matters will be paid as follows: the Distributing
Shareholder will pay the first $20,000 of such expenses and the Company and
the Distributing Shareholder will divide any further expenses equally.
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 sheet as of December 31, 1995, and the statements of
operations, stockholders' equity and cash flows for the year ended December
31, 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 balance sheet as of December 31, 1994, and the statements of
operations, stockholders' equity and cash flows for the years ended December
31, 1994 and 1993, 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.
The balance sheets of the Network Systems Group Division of Softech,
Inc. as of May 31, 1996 and 1995 and the statements of operations and cash
flows for each of the three years in the period ended May 31, 1996,
incorporated by reference in this Prospectus, have been incorporated herein
in reliance on the report, which includes an emphasis of a matter paragraph
regarding allocated costs, of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm 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
in connection with the issuance and distribution of the Common Stock offered
hereby:
Securities and Exchange Commission Registration Fee .. $ 1,340
Accounting Fees and Expenses ......................... 4,000
Legal Fees and Expenses .............................. 12,000
Blue Sky Fees and Expenses ........................... 500
Printing Expenses .................................... 10,000
Miscellaneous Expenses ............................... 4,160
--------
Total Expenses ....................................... $32,000
All amounts in the table above are estimated, other than the
Securities and Exchange Commission Registration Fee. The expenses incurred
by the Company in connection with the preparation of this registration
statement, the listing of the shares and related matters will be paid as
follows: the Distributing Shareholder will pay the first $20,000 of such
expenses and the Company and the Distributing Shareholder will divide any
further expenses equally.
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
<PAGE>
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.
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
<PAGE>
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 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 Farmington Hills, State of
Michigan on the 24th day of January, 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 January 24, 1997.
Signature
/S/Michael W. Grieves
- --------------------------------
Michael W. Grieves
Chairman of the Board, President,
Chief Executive Officer and
Director (Principal Executive
Officer)
- --------------------------------*
Philip M. Goy
Vice President-Finance and
Chief Financial Officer
(Principal Financial Officer)
- --------------------------------*
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
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Coopers & Lybrand L.L.P.
23.4 Consent of Dykema Gossett PLLC (included in Exhibit 5.1)
24.1 Power of Attorney of Philip M. Goy
24.2 Power of Attorney of Julie A. Vitale-Johnston
24.3 Power of Attorney of Walter J. Aspatore
24.4 Power of Attorney of Richard R. Burkhart
24.5 Power of Attorney of Jerry A. Dusa
Exhibit 5.1
January 23, 1997
Data Systems Network Corporation
34705 West Twelve Mile Road
Suite 300
Farmington Hills, Michigan 48331
Re: Registration Statement on Form S-3
Gentlemen:
We have acted as counsel for Data Systems Network Corporation, a
Michigan corporation (the "Company"), in connection with the preparation of
the Registration Statement on Form S-3 (the "Registration Statement") filed
by the Company with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act"), registering for distribution
in the manner described in the Registration Statement up to 540,000 shares
of the Company's Common Stock (the "Common Stock") on behalf of SofTech,
Inc.
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 opinions expressed
below.
Based upon the foregoing, it is our 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 has been legally issued, and is fully
paid and nonassessable.
We consent to the filing 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 consent, 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/ Mark A. Metz
Mark A. Metz
Exhibit 23.1
The Board of Directors
Data Systems Network Corporation
We consent to the incorporation by reference in this Form S-3 registration
statement of Data Systems Network Corporation of our report dated March 20,
1996, relating to the balance sheet of Data Systems Network Corporation as
of December 31, 1995 and the related statements of operations, stockholders'
equity and cash flows for the year then ended, which report appears in the
December 31, 1995 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
Detroit, Michigan
January 27, 1997
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Data Systems Network Corporation on Form S-3 of our report dated March
10, 1995 (relating to the financial statements of Data Systems Network
Corporation as of December 31, 1994 and the two years in the period ended
December 31, 1994) appearing in the Annual Report on Form 10-K of Data
Systems Network Corporation for the year ended December 31, 1995, 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
Detroit, Michigan
January 23, 1997
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement on Form S-3 of Data Systems Network Corporation, of our report,
which includes an emphasis of a matter concerning certain costs and expenses
presented in the financial statements which represent allocations and
management's estimates of the costs of services provided by Softech, Inc.
dated November 21, 1996, on our audits of the financial statements of the
Network Systems Group Division of Softech, Inc. as of May 31, 1996 and 1995
and the statements of operations and cash flows for each of the three years
in the period ended May 31, 1996, appearing in the Form 8-K (as amended),
for the event occurring September 12, 1996, of Data Systems Network
Corporation. We also consent to the reference to our firm under the caption
"Experts."
/S/ Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 23, 1997
Exhibit 24.1
DATA SYSTEMS CORPORATION
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned
constitutes and appoints Michael W. Grieves and Philip M. Goy, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution, and resubstitution for him and in his name, place and stead,
in any and all capacities, to sign a certain Registration Statement on Form
S-3 to be filed by Data Systems Network Corporation and any and all
amendments thereto, and any registration statement for registering
additional shares of Data Systems Network Corporation's Common Stock
comprising the same offering for which the Form S-3 will be filed and any
and all amendments thereto, and to file the same with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in any about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact and agents, or any
of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: December 13, 1996 /S/ Philip M. Goy,
-----------------------------
Vice President - Finance and
Chief Financial Officer
Exhibit 24.2
DATA SYSTEMS CORPORATION
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned
constitutes and appoints Michael W. Grieves and Philip M. Goy, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution, and resubstitution for him and in his name, place and stead,
in any and all capacities, to sign a certain Registration Statement on Form
S-3 to be filed by Data Systems Network Corporation and any and all
amendments thereto, and any registration statement for registering
additional shares of Data Systems Network Corporation's Common Stock
comprising the same offering for which the Form S-3 will be filed and any
and all amendments thereto, and to file the same with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in any about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact and agents, or any
of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: December 13, 1996 /S/ Julie A. Vitale-Johnston
-----------------------------
Julie A. Vitale-Johnston
Vice President-Finance and
Chief Financial Officer
Exhibit 24.3
DATA SYSTEMS CORPORATION
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned
constitutes and appoints Michael W. Grieves and Philip M. Goy, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution, and resubstitution for him and in his name, place and stead,
in any and all capacities, to sign a certain Registration Statement on Form
S-3 to be filed by Data Systems Network Corporation and any and all
amendments thereto, and any registration statement for registering
additional shares of Data Systems Network Corporation's Common Stock
comprising the same offering for which the Form S-3 will be filed and any
and all amendments thereto, and to file the same with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in any about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact and agents, or any
of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: December 13, 1996 /S/ Walter J. Aspatore
--------------------------------
Walter J. Aspatore
Vice President - Finance and
Chief Financial Officer
DATA SYSTEMS CORPORATION
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned
constitutes and appoints Michael W. Grieves and Philip M. Goy, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution, and resubstitution for him and in his name, place and stead,
in any and all capacities, to sign a certain Registration Statement on Form
S-3 to be filed by Data Systems Network Corporation and any and all
amendments thereto, and any registration statement for registering
additional shares of Data Systems Network Corporation's Common Stock
comprising the same offering for which the Form S-3 will be filed and any
and all amendments thereto, and to file the same with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in any about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact and agents, or any
of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: December 13, 1996 /S/ Richard R. Burkhart
----------------------------------
Richard R. Burkhart
Vice President - Finance and
Chief Financial Officer
Exhibit 24.5
DATA SYSTEMS CORPORATION
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned
constitutes and appoints Michael W. Grieves and Philip M. Goy, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution, and resubstitution for him and in his name, place and stead,
in any and all capacities, to sign a certain Registration Statement on Form
S-3 to be filed by Data Systems Network Corporation and any and all
amendments thereto, and any registration statement for registering
additional shares of Data Systems Network Corporation's Common Stock
comprising the same offering for which the Form S-3 will be filed and any
and all amendments thereto, and to file the same with the Securities and
Exchange Commission, granting unto such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in any about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact and agents, or any
of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Dated: December 13, 1996 /S/ Jerry A. Dusa
------------------------------
Jerry S. Dusa
Vice President - Finance and
Chief Financial Officer
