As filed with the Securities and Exchange Commission on October 22, 1999
Registration No. 333
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------------
CORNERSTONE INTERNET
SOLUTIONS COMPANY
(Exact Name of Registrant as it Appears in its Charter)
New York 22-3272662
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
584 Broadway, Suite 509 10012
New York, New York (Zip Code)
(Address of principal executive offices)
1994 Incentive and Nonqualified Stock Option Plan of Cornerstone Internet
Solutions Company and Options to Consultants
(Full title of the plan)
Edward Schroeder
President and Chief Executive Officer
Cornerstone Internet Solutions Company
584 Broadway, Suite 509
New York, New York
(Name and address of agent for service)
(Telephone number, including area code, of agent for service)
With a copy to:
Steven Wolosky, Esq.
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue, New York, New York 10022
(212) 753-7200
Approximate date of proposed sales pursuant to the
plan: From time to time after the effective date of this
registration statement.
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
maximum maximum
Title of Amount offering aggregate Amount of
securities to be price offering registration
to be registered registered(1) per share price fee
<S> <C> <C> <C> <C>
Common Stock
par value, $.01 per
share.................... 2,150,000(2)(3) $2.22720 $4,788,500 $1,331.20
</TABLE>
(1) Pursuant to Rule 416, the registration statement also covers such
indeterminate additional shares of Common Stock as may become issuable
as a result of any future anti-dilution adjustment in accordance with
the terms of the 1994 Incentive and Non-Qualified Stock Option Plan
(the "1994 Plan") and the consultants' options.
(2) The number of shares available for the grant of options under the 1994
Plan has been increased from 1,500,000 to 3,250,000. The shares
underlying the options to purchase 1,500,000 shares were previously
registered.
(3) Includes an aggregate of approximately 900,000 shares with respect to
which options were granted under the 1994 Plan at an average exercise
price of $2.14 per share and an aggregate of 400,000 shares with
respect to which options were granted to the consultants at an exercise
price of $2.375 per share. An additional approximately 850,000 shares
of Common Stock may be offered under the 1994 Plan. Pursuant to Rule
457(g) and (h), the offering price for the shares which may be issued
under the 1994 Plan is estimated solely for the purpose of determining
the registration fee and is based on the closing price of the Company's
Common Stock of $2.25 as reported by the Nasdaq Stock Market on October
19, 1999.
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<PAGE>
EXPLANATORY NOTES
Cornerstone Internet Solutions Company has prepared this registration
statement in accordance with the requirements of Form S-8 under the Securities
Act of 1933, to register shares of our common stock, $.01 par value per share,
issuable pursuant to the 1994 Plan and a consulting agreement (the "Consultant's
Option"). The shares issued pursuant to the Consultant's Option were issued to
the principals of a consulting partnership.
This Form S-8 includes a reoffer prospectus prepared in accordance with
Part I of Form S-3 under the Securities Act. The reoffer prospectus may be
utilized for reofferings and resales of shares of Common Stock acquired pursuant
to the 1994 Plan , the Consultant's Options, the 1994 Consultant's Option Plan
and the 1995 Directors Stock Option Plan by selling stockholders who may be
deemed an "affiliate" (as such term is defined in Rule 405 under the Securities
Act) of the Company. Some of these shares were previously registered.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The Company will provide documents containing the information specified
in Part 1 of Form S-8 to employees as specified by Rule 428(b)(1) under the
Securities Act. Pursuant to the instructions to Form S-8, the Company is not
required to file these documents either as part of this registration statement
or as prospectuses or prospectus supplements pursuant to Rule 424 under the
Securities Act.
-iii-
<PAGE>
PROSPECTUS
2,270,000 SHARES
CORNERSTONE INTERNET SOLUTIONS COMPANY
Common Stock ($.01 par value)
This prospectus relates to the reoffer and resale by certain selling
stockholders of shares of our common stock that may be issued by us to the
selling stockholders upon the exercise of stock options granted under our (i)
1994 Incentive and Non-Qualified Stock Option Plan, (ii) consulting agreements,
(iii) our 1994 Consultant Stock Option Plan or (iv) our 1995 Stock Option Plan
for Outside Directors. We previously registered the offer and sale of the shares
to the selling stockholders. This prospectus also relates to certain underlying
options that have not as of this date been granted. If and when such options are
granted to persons required to use the prospectus to reoffer and resell the
shares underlying such options, we will distribute a prospectus supplement. The
shares are being reoffered and resold for the account of the selling
stockholders and we will not receive any of the proceeds from the resale of the
shares.
The selling stockholders have advised us that the resale of their
shares may be effected from time to time in one or more transactions on the
Nasdaq SmallCap Market, in negotiated transactions or otherwise, at market
prices prevailing at the time of the sale or at prices otherwise negotiated. See
"Plan of Distribution." We will bear all expenses in connection with the
preparation of this prospectus.
Our common stock is traded on the Nasdaq SmallCap Market under the
symbol "CNRS". On October 19, 1999, the closing price for the Common Stock, as
reported by the Nasdaq SmallCap Market, was $2.25.
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This investment involves risk. See "Risk Factors" beginning at page 5.
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NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS DETERMINED
WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. THEY HAVE NOT MADE, NOR WILL
THEY MAKE, ANY DETERMINATION AS TO WHETHER ANYONE SHOULD BUY THESE SECURITIES.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is October 22, 1999.
-1-
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC"). You
may read and copy any document we file at the SEC's public reference room
located at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You
may obtain further information on the operation of the public reference room by
calling the SEC at 1- 800-SEC-0330. Our SEC filings are also available to the
public over the Internet at the SEC's web site at http://www.sec.gov. You may
also request copies of such documents, upon payment of a duplicating fee, by
writing to the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Our common
stock is listed on the Nasdaq SmallCap Market and such reports and other
information may also be inspected at the offices of Nasdaq at 1735 "K" Street,
N.W., Washington, D.C. 20006-1500.
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<PAGE>
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION........................................2
INCORPORATION BY REFERENCE.................................................4
ABOUT THIS PROSPECTUS......................................................4
RISK FACTORS...............................................................5
USE OF PROCEEDS...........................................................10
FORWARD LOOKING STATEMENTS................................................10
SELLING STOCKHOLDERS......................................................11
PLAN OF DISTRIBUTION......................................................13
LEGAL MATTERS.............................................................14
EXPERTS .................................................................14
ADDITIONAL INFORMATION....................................................14
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<PAGE>
INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
considered to be a part of this prospectus and information that we file later
with the SEC will automatically update and replace this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended:
(1) Our Annual Report on Form 10-KSB for the year ended May 31,
1999;
(2) Our Quarterly Report on Form 10-QSB for the quarter ended
August 31, 1999; and
(3) Our Application for Registration of our common stock on Form
8-A dated September 28, 1994.
You may request a copy of these filings, excluding the exhibits to such
filings which we have not specifically incorporated by reference in such
filings, at no cost, by writing or telephoning us at the following address:
Cornerstone Internet Solutions Corp.
584 Broadway, Suite 509
New York, New York 10012
Attention: Chief Financial Officer
(212) 343-3920
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information provided or incorporated by
reference in this prospectus or any related supplement. We have not authorized
anyone else to provide you with different information. The selling stockholders
will not make an offer of these shares in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
supplement is accurate as of any other date than the date on the front of those
documents.
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<PAGE>
RISK FACTORS
We have two synergistic businesses. Our wholly owned subsidiary,
USWeb/CKS Cornerstone, is in the Internet based professional services business,
and our majority owned subsidiary, B2Bgalaxy.com, Inc. owns and operates
industry specific portals for business to business e-commerce. The first of
these portals was launched in May 1999 and is called FOODgalaxy.com.
There are a variety of risks and factors that may affect our results.
Many of these are beyond our control. All of these should be considered and
taken into account when considering an investment in our securities.
WE HAVE INCURRED SUBSTANTIAL OPERATING LOSSES AND MAY NEVER BECOME
PROFITABLE.
At August 31, 1999, our accumulated deficit was $34,357,752. For the
fiscal year ended May 31, 1999 and the three months ended August 31, 1999, we
incurred net losses of $3,645,350 and $1,035,031, respectively. We have incurred
a net loss in each year of our existence, and have financed our operations
primarily through sales of equity and debt securities. Our expense levels are
high and our revenues are difficult to predict. The independent auditors' report
on our financial statements for the year ended May 31, 1999 states that our
recurring losses from operations raise substantial doubt about our ability to
continue as a going concern.
We expect to incur net losses for the foreseeable future. We may never
achieve or sustain significant revenues or profitability on a quarterly or
annual basis in the future. Our future operating results will depend on many
factors, including:
o reduction of our operating expenses
o expanding our customer base and engagement size
o product and price competition in our industry
o our ability to develop and market our services and control costs
WE HAVE LIMITED WORKING CAPITAL AND MAY BE UNABLE TO OBTAIN THE
NECESSARY FUNDING TO EXPAND AND IMPROVE OUR BUSINESS.
As of August 31, 1999, we had working capital of $1,812,186. We believe
that our existing resources will be adequate for our cash needs through February
2000. Beyond such period, we may need to raise substantial additional capital to
pay for our operations and support more rapid expansion, develop new or enhanced
services and products, respond to competitive pressures, or take advantage of
unanticipated opportunities. We are uncertain whether additional financing will
be available on acceptable terms or at all. If we raise additional funds by
issuing equity securities, our stockholders will be further diluted. If adequate
funds are unavailable, we may delay, curtail, reduce the scope of or eliminate
the expansion of our operations and/or our marketing and sales efforts which
could have a material adverse effect on our financial condition and business
operations.
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<PAGE>
THE TIMING OF OUR REVENUES AND THE INTRODUCTION AND MARKET ACCEPTANCE
OF OUR PRODUCTS MAY VARY RESULTING IN SIGNIFICANT VARIATIONS IN OUR OPERATING
RESULTS.
Our revenues and operating results may vary due to:
o the number and dollar value of client engagements commenced
and completed during a quarter
o our ability to complete client assignments on time and as
scheduled
o technical difficulties with respect to the use of the Internet
o the number of working days in a quarter
o employee hiring and utilization rates
o capital expenditures and other costs relating to the expansion
of operations
o acceptance of our e-commerce application by a large number of
users
The timing of revenues is difficult to forecast because our sales cycle
is relatively long and may depend on the size and scope of assignments and
general economic conditions. Because a high percentage of our expenses are
relatively fixed, a change in the timing of the beginning or end of client
assignments, particularly at or near the end of any quarter, could cause
operating results to significantly vary from quarter to quarter and result in
reported losses for that quarter. In addition, clients can terminate our
engagement earlier than expected resulting in a higher than expected number of
unassigned persons or higher severance expenses.
While we adjust professional staffs to reflect active projects, our
past history is of limited value. We have to staff to the level of our
projections. If our projections are inaccurate, we may be unable to adjust our
staff so that it corresponds to our revenues. Finally, because we perform work
on a fixed-price basis, we also bear the risk of cost overruns and inflation.
New product introductions and market acceptance of new and enhanced versions of
our products or the products of third parties may also significantly affect our
operating results.
THE FUTURE SUCCESS OF OUR BUSINESS DEPENDS ON OUR ABILITY TO ATTRACT
AND RETAIN CONSULTING PROFESSIONALS AND TECHNICAL AND SALES PERSONNEL.
Our success depends in large part upon our ability to attract and
retain qualified consulting professionals and information technology personnel.
We believe we need to hire additional consulting professionals and technical
personnel to improve existing products and services and to develop new products
and services and new sales personnel to sell our products and services. The
inability to attract new personnel could have a material adverse effect on our
results of operations. It is difficult to locate consulting professionals and
technical and sales personnel with the combination of skills and attributes
required to execute our strategy. Although we have attracted and retained
qualified employees, qualified consulting professionals are in particularly
great demand and will remain a limited resource for the foreseeable future.
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<PAGE>
Our consulting professionals and employees can terminate their employment at any
time. Accordingly, we may be unable to continue to retain and attract qualified
consulting professionals and employees.
WE HAVE HAD A LIMITED OPERATING HISTORY
While our internet services revenue increased from $1,182,600 in the
fiscal year ended May 31, 1998 to $3,205,869 in the fiscal year ended May 31,
1999, we have a limited operating history with our Internet professional
services and business to business e-commerce businesses. As a result, we must
overcome the challenges that start-up companies in such businesses face such as
strengthening and growing our operations, attracting, retaining and motivating
qualified employees, securing and executing client assignments and obtaining
users of our e-commerce application.
OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO MANAGE THE GROWTH OF
OUR BUSINESS
Because our business is in an early development stage, its ultimate
success depends on our ability to manage its growth. In the future, we will have
to increase staff rapidly and integrate new personnel into our operations
without affecting productivity. We will have to ensure that our administrative
systems and procedures are adequate to handle such growth. In addition, our
current management is devoting significant time to developing B2Bgalaxy. It is
unclear whether our systems, procedures or controls will be adequate to support
our operations or that our management will be able to achieve the rapid
execution necessary to exploit our business plan. If our systems, procedures or
controls are inadequate, our operations and financial condition will suffer.
OUR FUTURE SUCCESS WILL DEPEND ON THE CONTINUING GROWTH OF THE INTERNET
AND THE ACCEPTANCE OF E-COMMERCE
A substantial portion of our revenues is expected to be derived from
services that depend upon the adoption of Internet solutions and the continued
development of the Internet and e-commerce. Many critical issues related to the
Internet, its use, and the use of e-commerce remain unresolved and may, when
resolved, affect the growth and use of the Internet and e-commerce. Should the
use of the Internet and e-commerce stop growing as currently predicted, our
revenues and margins will suffer significantly. In addition, as the Internet
economy evolves, companies may decide to use their own staff to develop Internet
related solutions or may decide to use packaged applications software either of
which would reduce the demand for professional services and make it difficult
for us to increase revenues and maintain adequate margins.
WE NEED TO ADAPT TO RAPID TECHNOLOGICAL CHANGE
The market for Internet professional services and business to business
e-commerce is characterized by rapid technological changes, frequent new
products and service introductions and evolving industry standards. The
introduction of services embodying new processes and technologies and the
emergence of new industry standards can rapidly render existing services
obsolete and unmarketable. Our success in adjusting to rapid technological
change will depend on our ability to:
o develop and introduce new services that keep pace with
technological developments and emerging industry standards
o address the increasingly sophisticated and varied needs of
customers
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<PAGE>
Due to inadequate technical expertise, insufficient finances or other
reasons, we may be unable to accomplish these tasks. Such failure would have a
material adverse effect on our operating results and financial condition.
OUR PROFITABILITY WILL BE ADVERSELY AFFECTED IF THE COSTS OF OUR
SERVICES EXCEEDS THE FIXED PRICE
A large portion of our professional services revenues are and will
continue to come from fixed-price contracts, as distinguished from billing on a
time and materials basis. We assume greater financial risk from fixed price
contracts. If the pricing is incorrect or there are delays in our projects, our
costs may exceed the related revenues, and we may be required to pay penalties,
any of which could have a material adverse effect on our results of operation
and financial condition.
WE MAY BE LIABLE IF OUR CUSTOMERS ARE DISSATISFIED WITH OUR PERFORMANCE
OR FOR LEGAL VIOLATIONS COMMITTED BY OUR EMPLOYEES OR CONSULTANTS
Many of our professional services engagements as well as the use of our
e-commerce application, involve applications that are critical to the operations
of our clients and subscribers. If our customers are dissatisfied, our
reputation may suffer or we may be subject to claims of substantial damages. We
also often use and are aware of client information that is confidential or
proprietary. We have implemented procedures to ensure against the unauthorized
use or dissemination of such information and attempt to negotiate contracts with
our customers to limit our liability. We also have general liability insurance
but we lack any insurance for damages from our errors. If we are unable to
prevail in a lawsuit relating to our errors or are otherwise subject to any
claim which exceeds our insurance, our operations, financial condition and
prospects will be negatively affected.
A SUBSTANTIAL PORTION OF OUR PROFESSIONAL SERVICE REVENUE WAS DERIVED
FROM A FEW SIGNIFICANT CUSTOMERS
For the year ended May 31, 1999, two customers accounted for 48% of our
revenues. We are unsure if we will realize significant future revenues from any
of these customers, particularly since we only have agreements for current work.
We also expect that for the foreseeable future a relatively small number of
customers will account for a significant percentage of our revenues. The loss of
any such customer would have a material adverse effect on our operating results
and financial condition.
WE HAVE A SIGNIFICANT AMOUNT OF OUTSTANDING WARRANTS, OPTIONS AND
PREFERRED STOCK WHICH COULD ADVERSELY IMPACT THE PRICE OF OUR COMMON STOCK AND
OUR ABILITY TO OBTAIN ADDITIONAL FUNDING; FUTURE SALES OF RESTRICTED SHARES
COULD DECREASE THE MARKET PRICE OF OUR COMMON STOCK AND IMPAIR OUR ABILITY TO
RAISE CAPITAL.
We have a substantial amount of outstanding warrants, options and
preferred stock. The exercise of all of the outstanding warrants, options and/or
conversion of the outstanding convertible preferred stock would dilute the
then-existing shareholders' percentage ownership of our common stock, and any
sales in the public market could adversely affect prevailing market prices for
our common stock. Moreover, our ability to obtain additional equity capital
could be adversely affected since the holders of outstanding warrants, options
and preferred stock will likely exercise or convert these securities when we
probably could obtain any needed capital on terms more favorable than those
provided by these securities. We lack control over the timing of any exercise or
the number of shares issued or sold if exercises or conversions occur.
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<PAGE>
In addition, future sales of common stock by existing stockholders
under exemptions from registration or through the exercise of outstanding
registration rights could materially adversely affect the market price of our
common stock and could materially impair our future ability to raise capital
through an offering of equity securities. A substantial number of shares of
common stock are, or will be in the near future, available for sale under
exemptions from registration or are being registered pursuant to registration
rights and we are unable to predict the effect, if any, that market sales of
these shares or the availability of these shares for future sale will have on
the market price of the common stock prevailing from time to time.
THE VOLATILITY OF OUR SECURITIES PRICES MAY INCREASE
The market price of our common stock has in the past been, and may in
the future continue to be, volatile. A variety of events may cause the market
price of the common stock to fluctuate significantly, including:
o quarter to quarter variations in operating results
o adverse news announcements
o the introduction of new products and services
o market conditions in the Internet based professional services
business and business to business e-commerce
In addition, the stock market in recent years has experienced
significant price and volume fluctuations that have particularly affected the
market prices of equity securities of many companies in our business and that
often have been unrelated to the operating performance of such companies. These
market fluctuations may adversely affect the price of our common stock.
WE COULD BE ADVERSELY AFFECTED IF YEAR 2000 PROBLEMS ARE SIGNIFICANT
Many currently installed computer systems and software products are
coded to accept only two-digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
from 20th century dates. As a result, in less than one year, computer systems
and software used by many companies, including our customers and potential
customers may need to be upgraded to comply with such "Year 2000" requirements.
We are closely monitoring the progress the developers of the software we utilize
in many of our customer projects, i.e. Microsoft Corporation, as well as the
developers of the software utilized in internal systems are making towards
ensuring that the products we utilize are Year 2000 compliant. Failure to
provide Year 2000 compliant business solutions and software to our customers
could have a material adverse effect on our business, results of operations and
financial condition. Our costs to ensure that internal systems and software
acquired for integration into client business solutions are Year 2000 compliant
has not been and is not expected to become significant. We have not implemented
any contingency plans if our systems fail to become Year 2000 compliant.
Further, we believe that the purchasing patterns of customers and
potential customers may be affected by Year 2000 issues as companies expend
significant resources to correct or patch their current software systems for
Year 2000 compliance. These expenditures may result in reduced funds available
to purchase products and services such as those offered by us.
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<PAGE>
USE OF PROCEEDS
The shares of common stock offered hereby are being registered for the
account of the selling stockholders identified in this prospectus. See "Selling
Stockholders." All net proceeds from the sale of the common stock will go to the
stockholders who offer and sell their shares. We will not receive any part of
the proceeds from such sales of common stock. We will, however, receive the
exercise price of the options at the time of their exercise. Such proceeds will
be contributed to working capital and will be used for general corporate
purposes.
FORWARD-LOOKING STATEMENTS
Certain forward-looking statements, including statements regarding our
expected financial position, business and financing plans are contained in this
Prospectus or are incorporated in documents that are incorporated by reference
to this Prospectus. These forward-looking statements reflect our views with
respect to future events and financial performance. The words, "believe,"
"expect," "plans" and "anticipate" and similar expressions identify
forward-looking statements. Although we believe that the expectations reflected
in such forward-looking statements are reasonable, we can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from such expectations are disclosed
in the risk-factors set forth above. All subsequent written and oral
forward-looking statements attributable to us are expressly qualified in their
entirety by the cautionary statements. Investors are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of their
dates. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
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<PAGE>
SELLING STOCKHOLDERS
This prospectus relates to the reoffer and resale of shares issued or
that may be issued to the selling shareholders under our 1994 Incentive and
Non-Qualified Plan, our 1995 Stock Option Plan for Outside Directors, our 1994
Consultants Stock Option Plan or under options issued to consultants.
The following table sets forth (i) the number of shares of common stock
beneficially owned by each selling shareholder at October 1, 1999, (ii) the
number of shares to be offered for resale by each selling shareholder and (iii)
the number and percentage of shares of our common stock to be held by each
selling shareholder after completion of the offering.
<TABLE>
<CAPTION>
Number of Shares of
Common Stock/
Number of Shares of Number of Percentage of Class
Common Stock Owned Shares to be to be Owned After
Name at Offered for Completion of the
October 1, 1999 Resale Offering
------------------------ ----------------- ---------------------
<S> <C> <C> <C>
Barry Rubenstein
68 Wheatley Road
Brookville, NY 11545 12,600,486(2) 375,000(2) 12,225,486/47.4%
Eli Oxenhorn
56 The Intervale
Roslyn Estates, NY 11576 825,000(3) 375,000(3) 450,000/3.3%
Andrew Gyenes 874,167(4) 900,000 20,000/*
Harrison Weaver 47,500(5) 45,000 2,500/*
Rino Bergonzi 30,000(6) 25,000 5,000/*
Peter Gyenes 38,000(7) 25,000 13,000/*
Edward Schroeder 185,000(8) 525,000(9) 10,000/*
</TABLE>
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* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes any person who, directly or indirectly,
through any contract, arrangement, understanding or otherwise, has or
shares voting or investment power with respect to securities. Shares of
common stock issuable upon the exercise of options, warrants and
convertible notes currently exercisable or convertible, or exercisable
or convertible within 60 days are deemed outstanding for computing the
percentage ownership of the person holding such options or warrants or
convertible notes but are not deemed outstanding for computing the
percentage ownership of any other person.
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<PAGE>
(2) Includes 175,000 shares of common stock underlying presently
exercisable options. Mr. Rubenstein may also be deemed to share
beneficial ownership of 12,127,486 shares of Common Stock (including
9,450,000 shares of Common Stock underlying Class D Preferred Stock and
400,000 shares of Common Stock underlying the exercise of a Warrant) by
virtue of being: (i) a stockholder, officer and director of InfoMedia
Associates, Ltd. ("InfoMedia") which is a general partner of 21st
Century Communications Partners, L.P., 21st Century Communications T-E
Partners, L.P. and 21st Century Communications Foreign Partners, L.P.;
(ii) a trustee of the Marilyn and Barry Rubenstein Family Foundation;
and (iii) a general partner of each of Wheatley Partners II, L.P.,
Seneca Ventures, the Woodland Venture Fund, Woodland Partners and
Rev-Wood Partners ("Rev-Wood"). Mr. Rubenstein disclaims beneficial
ownership of these securities, except to the extent of his equity
interest therein. The information relating to the resale of shares
assumes that Rev-Wood has distributed its right to exercise the option
to Mr. Rubenstein in proportion to his interest in Rev- Wood.
(3) Includes (i) 175,000 shares underlying presently exercisable options
and (ii) shares underlying options held by Rev-Wood as to which Mr.
Oxenhorn disclaims beneficial ownership except to the extent of his
equity interest therein. The information relating to the resale of the
shares assumes that Rev-Wood has distributed its right to exercise the
option to Mr. Oxenhorn in proportion to his interest in Rev-Wood.
(4) Consists of 854,167 shares of common stock issuable upon exercise of
presently exercisable options, 10,000 shares owned by the AnnMar
Manufacturing Inc. Employee Pension Plan as trustee and 10,000 shares
owned jointly by Mr. Gyenes and his wife.
(5) Consists of 2,500 shares of Common Stock owned by Mr. Weaver, 20,000
shares of common stock issuable upon exercise of presently exercisable
options and 25,000 shares of common stock issuable upon exercise of
presently exercisable options granted pursuant to the 1995 Stock Option
Plan for Outside Directors. Excludes 50,000 presently exercisable
options held by The Continuum Group, Inc., which options Mr. Weaver
disclaims beneficial ownership of.
(6) Consists of 5,000 shares of Common Stock owned by Mr. Bergonzi and
25,000 shares of Common Stock issuable upon exercise of presently
exercisable options granted pursuant to the Outside Directors' Plan.
(7) Consists of 3,000 shares of Common Stock owned by Mr. Peter Gyenes,
25,000 shares of Common Stock issuable upon exercise of presently
exercisable options granted pursuant to the 1995 Outside Directors'
Plan, and 10,000 shares owned by the AnnMar Manufacturing Inc. Employee
Pension Plan as trustee.
(8) Consists of shares underlying currently exercisable options for 175,000
shares and 10,000 shares owned by Mr. Schroeder.
(9) Consists of shares underlying all options held by Mr. Schroeder.
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<PAGE>
PLAN OF DISTRIBUTION
This offering is self-underwritten; neither we nor the selling
stockholders have employed an underwriter for the sale of common stock by the
selling stockholders. We will bear all expenses in connection with the
preparation of this prospectus. The selling stockholders will bear all expenses
associated with the sale of the common stock.
The selling stockholders may offer their shares of common stock
directly or through pledgees, donees, transferees or other successors in
interest in one or more of the following transactions:
o On any stock exchange on which the shares of common stock may
be listed at the time of sale
o In negotiated transactions
o In the over-the-counter market
o In a combination of any of the above transactions
The selling stockholders may offer their shares of common stock at any
of the following prices:
o Fixed prices which may be changed
o Market prices prevailing at the time of sale
o Prices related to such prevailing market prices
o At negotiated prices
The selling stockholders may effect such transactions by selling shares
to or through broker-dealers, and all such broker-dealers may receive
compensation in the form of discounts, concessions, or commissions from the
selling stockholders and/or the purchasers of shares of common stock for whom
such broker-dealers may act as agents or to whom they sell as principals, or
both (which compensation as to a particular broker-dealer might be in excess of
customary commissions).
Any broker-dealer acquiring common stock from the selling stockholders
may sell the shares either directly, in its normal market-making activities,
through or to other brokers on a principal or agency basis or to its customers.
Any such sales may be at prices then prevailing on Nasdaq or at prices related
to such prevailing market prices or at negotiated prices to its customers or a
combination of such methods. The selling stockholders and any broker-dealers
that act in connection with the sale of the common stock hereunder might be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act; any commissions received by them and any profit on the resale of
shares as principal might be deemed to be underwriting discounts and commissions
under the Securities Act. Any such commissions, as well as other expenses
incurred by the selling stockholders and applicable transfer taxes, are payable
by the selling stockholders.
The selling stockholders reserve the right to accept, and together with
any agent of the selling stockholder, to reject in whole or in part any proposed
purchase of the shares of common stock. The selling stockholders will pay any
sales commissions or other seller's compensation applicable to such
transactions.
We have not registered or qualified offers and sales of shares of the
common stock under the laws of any country, other than the United States. To
comply with certain states' securities laws, if applicable, the
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selling stockholders will offer and sell their shares of common stock in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the selling stockholders may not offer or sell
shares of common stock unless we have registered or qualified such shares for
sale in such states or we have complied with an available exemption from
registration or qualification.
The selling shareholders have represented to us that any purchase or
sale of shares of common stock by them will comply with Regulation M promulgated
under the Securities Exchange Act of 1934, as amended. In general, Rule 102
under Regulation M prohibits any person connected with a distribution of our
common stock (a "Distribution") from directly or indirectly bidding for, or
purchasing for any account in which he or she has a beneficial interest, any of
our common stock or any right to purchase our common stock, for a period of one
business day before and after completion of his or her participation in the
distribution (we refer to that time period as the "Distribution Period").
During the Distribution Period, Rule 104 under Regulation M prohibits
the selling shareholders and any other persons engaged in the Distribution from
engaging in any stabilizing bid or purchasing our common stock except for the
purpose of preventing or retarding a decline in the open market price of our
common stock. No such person may effect any stabilizing transaction to
facilitate any offering at the market. Inasmuch as the selling shareholders will
be reoffering and reselling our common stock at the market, Rule 104 prohibits
them from effecting any stabilizing transaction in contravention of Rule 104
with respect to our common stock.
There can be no assurance that the selling shareholders will sell any
or all of the shares offered by them hereunder or otherwise.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the shares
offered hereby have been passed upon for the Company by Olshan Grundman Frome
Rosenzweig & Wolosky LLP, 505 Park Avenue, New York, New York 10022.
EXPERTS
The consolidated financial statements of Cornerstone Internet Solutions
Company as of May 31, 1999 and 1998, and for the years then ended, have been
incorporated by reference herein and in the registration statement in reliance
upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference herein and, upon the authority of said firm as experts
in accounting and auditing. The report of KPMG LLP covering the May 31, 1999
financial statements contains an explanatory paragraph that states that the
Company's recurring losses from operations raise substantial doubt about the
entity's ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
that uncertainty.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-8 under
the Securities Act with respect to the shares offered hereby. For further
information with respect to the Company and the securities offered hereby,
reference is made to the registration statement. Statements contained in this
prospectus as
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to the contents of any contract or other document are not necessarily complete,
and in each instance, reference is made to the copy of such contract or document
filed as an exhibit to the registration statement, each such statement being
qualified in all respects by such reference.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
The SEC allows us to "incorporate by reference" the
information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information we
incorporate by reference is considered to be a part of this prospectus and
information that we file later with the SEC will automatically update and
replace this information. We incorporate by reference the documents listed below
and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended:
(1) Our Annual Report on Form 10-KSB for the year ended May 31,
1999;
(2) Our Quarterly Report on Form 10-QSB for the quarter ended
August 31, 1999; and
(3) Our Application for Registration of our common stock on Form
8-A dated September 28, 1994.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13, 14 and 15(d) of the Securities Exchange Act of 1934, as
amended, prior to the filing of a post-effective amendment which indicates that
all securities offered hereby have been sold or which de-registers all
securities remaining unsold, shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of the filing of such reports and
documents.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 6. INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by the Delaware General Corporation Law ("DGCL"), the
Company's Certificate of Incorporation, as amended, limits the personal
liability of a director or officer to the Company for monetary damages for
breach of fiduciary duty of care as a director. Liability is not eliminated for
(i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payment of
dividends or stock purchase or redemptions pursuant to Section 174 of the DGCL,
or (iv) any transaction from which the director derived an improper personal
benefit.
The Company has also entered into indemnification agreements with each
of its directors and executive officers. The indemnification agreements provide
that the directors and executive officers will be indemnified to the fullest
extent permitted by applicable law against all expenses (including attorneys'
fees), judgments, fines and amounts reasonably paid or incurred by them for
settlement in any threatened, pending or completed action, suit or proceeding,
including any derivative action, on account of their services as a director or
officer of the Company or of any subsidiary of the Company or of any other
company or enterprise in which they are serving at the request of the Company.
No indemnification will be provided under the
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indemnification agreements, however, to any director or executive officer in
certain limited circumstances, including on account of knowingly fraudulent,
deliberately dishonest or willful misconduct. To the extent the provisions of
the indemnification agreements exceed the indemnification permitted by
applicable law, such provision may be unenforceable or may be limited to the
extent they are found by a court of competent jurisdiction to be contrary to
pubic policy.
DELAWARE LAW
The Company is subject to Section 203 of the DGCL, which prevents an
"interested stockholder" (defined in Section 203, generally, as a person owning
15% or more of a corporation's outstanding voting stock) from engaging in a
"business combination" with a publicly-held Delaware corporation for three years
following the date such person became an interested stockholder, unless: (i)
before such person became an interested stockholder, the board of directors of
the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owns at least 85%
of the voting stock of the corporation outstanding at the time the transaction
commenced (subject to certain exceptions), or (iii) following the transaction in
which such person became an interested stockholder, the business combination is
approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of 66% of the
outstanding voting stock of the corporation not owned by the interested
stockholder. A "business combination" includes mergers, stock or asset sales and
other transactions resulting in a financial benefit to the interested
stockholder.
The provisions of Section 203 of the DGCL could have the effect of
delaying, deferring or preventing a change in the control of the Company.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
*4.1 1994 Incentive and Non-Qualified Stock Option Plan.
*4.13 1994 Consultant Stock Option Plan.
*4.14 1995 Stock Option Plan for Outside Directors.
**4.15 Option Agreement to Consultant.
***5 Opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP.
***23.1 Consent of KPMG LLP.
***23.2 Consent of Olshan Grundman Frome Rosenzweig & Wolosky LLP.
- -------------
* Incorporated herein by reference to such Exhibit to the Registration
Statement on Form SB-2 of the Registrant ( Registration No. 333-22454) Filed in
March 1996, as amended.
** Incorporated herein by reference to such Exhibit to the Registration
Statement on Form SB-2 of the Registrant (Registration No. 33-83694) filed on
September 6, 1994.
***Filed herewith.
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ITEM 9. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) 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;
(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;
(iii) 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;
Provided, however, that paragraphs (i) and
(ii) above do not apply if the information
required to be included in a post-effective
amendment by those paragraphs is contained
in periodic reports filed by the registrant
pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are
incorporated by reference in the
Registration Statement;
(2) That, for the purposes 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 therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered that remain unsold at the termination of
the offering.
B. The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to 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.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 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
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<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 a 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.
D. The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, a copy of the
registrant's latest annual report to stockholders that is
incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the
prospectus, to deliver, or cause to be delivered to each
person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial
information.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of New York, State of New York on this 22nd day of
October, 1999.
CORNERSTONE INTERNET SOLUTIONS COMPANY
By: /s/ Edward Schroeder
----------------------------------------------
Name: Edward Schroeder
Title: President and Chief Executive Officer
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Andrew Gyenes and Edward
Schroeder his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, for and in his or her name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his or her substitute, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/ Andrew Gyenes Chairman of the Board October 22, 1999
- -----------------------
Andrew Gyenes
/s/ Edward Schroeder Director, President and Chief October 22, 1999
- ----------------------- Executive Officer
Edward Schroeder (Principal Financial Officer)
/s/ Rino Bergonzi Director October 22, 1999
- -----------------------
Rino Bergonzi
/s/ Peter Gyenes Director October 22, 1999
- -----------------------
Peter Gyenes
/s/ Harrison Weaver Director October 22, 1999
- -----------------------
Harrison Weaver
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<PAGE>
Amended and Restated 1994 Incentive and Non-Qualified Stock Option Plan.
Pursuant to the requirements of the Securities Act of 1933, the trustees (or
other persons who administer the 1994 Incentive and NonQualified Stock Option
Plan) have duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, State of
New York on October 22, 1999.
/s/ Harrison Weaver
--------------------------
Harrison Weaver
/s/ Rino Bergonzi
--------------------------
Rino Bergonzi
II-6
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
505 PARK AVENUE
NEW YORK, NEW YOKK 10022
(212) 753-7200
October 22, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Cornerstone Internet Internet Solutions Company
Registration Statement on Form S-8
-----------------------------------------------
Gentlemen:
Reference is made to the Registration Statement on Form S-8
dated October 22, 1999 (the "Registration Statement"), filed with the Securities
and Exchange Commission by Cornerstone Internet Solutions Company, a Delaware
corporation (the "Company"). The Registration Statement relates to an aggregate
of 2,150,000 shares (the "Shares") of common stock, par value $.001 per share
(the "Common Stock"). The Shares will be issued and sold by the Company in
accordance with the Company's 1994 Incentive and Non-Qualified Stock Option
Plan, as amended (the "Plan") and the exercise of Stock Options held by
Consultants.
We advise you that we have examined originals or copies
certified or otherwise identified to our satisfaction of the Certificate of
Incorporation and By-laws of the Company, minutes of meetings of the Board of
Directors and stockholders of the Company, the Plan, the option agreement
relating to the Consultant Stock Option, a Prospectus relating to the resale of
Common Stock underlying options held by affiliates of the Company (the
"Prospectus"), and such other documents, instruments and certificates of
officers and representatives of the Company and public officials, and we have
made such examination of the law, as we have deemed appropriate as the basis for
the opinion hereinafter expressed. In making such examination, we have assumed
the genuineness of all signatures, the authenticity of all
<PAGE>
Securities and Exchange Commission
October 22, 1999
Page 2
documents submitted to us as originals, and the conformity to original documents
of documents submitted to us as certified or photostatic copies.
Based upon the foregoing, we are of the opinion that the
Shares, when issued and paid for in accordance with the terms and conditions set
forth in the Plan, and the option agreement for the Consultants, will be duly
and validly issued, fully paid and non-assessable.
We consent to the reference to this firm under the caption
"Legal Opinion" in the Prospectus.
Very truly yours,
/s/ OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
--------------------------------------------------
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Cornerstone Internet Solutions Company
We consent to the use of our report dated August 26, 1999 incorporated by
reference herein and to the reference to our firm under the heading "Experts" in
the prospectus. Our report contains an explanatory paragraph that states that
the Company's recurring losses from operations raise substantial doubt about its
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments that might result from the outcome of that
uncertainty.
KPMG LLP
Melville, New York
October 20, 1999
