As filed with the Securities and Exchange Commission on December __, 1997
Registration No. 333-36107
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________
AMERICAN BINGO & GAMING CORP.
(Name of Issuer in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
7990
----
(Primary Standard Industrial Classification Code Number)
74-2723809
----------
(I.R.S. Employee Identification No.)
____________________
515 Congress Avenue, Suite 1200
Austin, Texas 78701
(512) 472-2041
(Address and telephone number of principal executive offices and principal
place of business)
____________________
John Orton, Chief Financial Officer
American Bingo & Gaming Corp.
515 Congress Avenue, Suite 1200
Austin, Texas 78701
(512) 472-2041
(Name, address and telephone number of agent for service)
Copies of all communications to:
Michael H. Freedman, Esq.
Silverman, Collura, Chernis & Balzano, P.C.
381 Park Avenue South, Suite 1601
New York, New York 10016
(212) 779-8600
Approximate date of proposed sale to the public: From time to time or at
one time after the effective date of this Registration Statement as determined
by the Selling Securityholders.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended ("Securities Act"), other than securities offered only in
connection with dividend or reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [X] File No. 333-36107
------------------
If this form is a post-effective amendment filed pursuant to 462(c) under
the Securities Act, check the following box and list the Securities Act
registration 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. [ ]
==============================================================================
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered Be Registered(1)(2) Per Share(3) Offering Price Registration Fee
============================ =================== ================ =============== =================
<S> <C> <C> <C> <C>
Common Stock(4) 26,000 $ 5.25 $ 136,500 $ 41.36
TOTAL 26,000 $ 136,500 $ 41.36
============================ =================== ================ =============== =================
<FN>
(1) Pursuant to Rule 416 of the Securities Act of 1933, as amended, there are also being registered
such indeterminate number of additional shares of Common Stock as may become issuable to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
(2) Pursuant to Rule 429, this Registration Statement also incorporates the following securities
which were originally registered on Form SB-2, File No. 333-85300, declared effective on December 14,
1994: (i) 100,000 shares of Common Stock underlying an Underwriter's Option ("Option"); (ii) 150,000
Redeemable Common Stock Purchase Warrants ("Warrants") underlying the Option; and (iii) 150,000 shares
of Common Stock issuable upon exercise of the Warrants underlying the Option. The Company previously
paid a registration fee of $471.69 to register the aforesaid securities.
Pursuant to Rule 429, this Registration Statement also incorporates the following securities which
were originally registered on Form SB-2, File No. 333-08171, declared effective on July 29, 1996:
414,750 shares of Common Stock registered on behalf of Selling Securityholders. The Company previously
paid a registration fee of $638.75 to register the aforesaid securities.
(3) Common Stock price per share calculated in accordance with Rule 457(c) of the Securities Act
using the last sale price for the Common Stock on December 22, 1997.
(4) Common Stock held by Selling Securityholders.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary
to delay its effective date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in accordance with Section
8(a) of the Securities Act of 1933, as amended ("Securities Act"), or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
</TABLE>
[TO BE INSERTED ALONG LEFTHAND SIDE OF PROSPECTUS COVER PAGE]
[RED HERRING LEGEND]
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 any 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 State.
DATED DECEMBER 24, 1997 SUBJECT TO COMPLETION
AMERICAN BINGO & GAMING CORP.
417,469 SHARES OF COMMON STOCK
133,000 SHARES OF COMMON STOCK UNDERLYING WARRANTS ("B WARRANTS")
85,000 SHARES OF COMMON STOCK UNDERLYING A STOCK OPTION
700,000 SHARES OF COMMON STOCK UNDERLYING
SERIES A CONVERTIBLE PREFERRED STOCK
This Prospectus relates to the offer and sale from time to time by
certain selling securityholders ("Selling Securityholders") of up to (i)
417,469 shares of the Common Stock, $.001 par value ("Common Stock"),
of American Bingo & Gaming Corp. ("Company"); (ii) 218,000 shares of
Common Stock to be issued from time to time upon exercise of (a) a stock
option ("Stock Option"), and (b) warrants for the purchase of 133,000 shares
of Common Stock ("B Warrants"). The B Warrants were issued by the Company in
connection with the private placement of its Series A Convertible Preferred
Stock, $.01 par value ("Preferred Stock"); and (iii) up to 700,000 shares of
Common Stock to be issued from time to time upon conversion of the Company's
Preferred Stock. This Prospectus also relates to such presently indeterminate
number of additional shares of Common Stock as may be issuable upon conversion
or exercise of the Preferred Stock, B Warrants or Stock Option, or payment of
dividends on the Preferred Stock, based upon fluctuations in the conversion
price of the Preferred Stock, stock splits, stock dividends or similar
transactions, in accordance with Rule 416 under the Securities Act of 1933, as
amended (the "Securities Act"). The Preferred Stock and the shares of Common
Stock issuable upon conversion thereof have been and will be issued in
transactions exempt from the registration requirements of the Securities Act.
See "Selling Securityholders" and "Plan of Distribution". This Prospectus
also relates to other securities as follows: (i) 414,750 shares of Common
Stock which were registered on behalf of Selling Securityholders in the
Company's registration statement declared effective July 29, 1996; (ii)
100,000 shares of Common Stock underlying the Underwriter's Option ("Option")
which were registered in the Company's registration statement declared
effective on December 14, 1994 ("December Registration Statement"); (iii)
150,000 Redeemable Common Stock Purchase Warrants ("Warrants") underlying the
Option which were registered in the December Registration Statement; and (iv)
150,000 shares of Common Stock issuable upon exercise of the Warrants
underlying the Option which were registered in the December Registration
Statement. The Common Stock and the Common Stock underlying each of the
Preferred Stock, B Warrants and Stock Option are collectively referred to
herein as "Securities".
The Company will not receive any proceeds from possible resales by the
Selling Securityholders of their respective shares of Common Stock of the
Company. The Company has agreed to indemnify certain of the Selling
Securityholders against certain liabilities, including certain liabilities
under the Securities Act, or contribute to payments which such Selling
Securityholders may be required to make in respect thereof. The Company will
receive gross proceeds of up to $986,500 upon exercise of the B
Warrants and the Stock Option. There can be no assurance that any such
securities will be exercised.
The Selling Securityholders or pledgees, donees, transferees or other
successors in interest that receive such shares as a gift, partnership
distribution or other non-sale related transfer, may sell their shares of
Common Stock from time to time, in market transactions, in negotiated
transactions, through the writing of options, or a combination of such methods
of sale, at fixed prices which may be changed, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Securityholders may effect such transactions
by selling their shares of Common Stock to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions
or commissions from the Selling Securityholders and/or the purchasers of such
shares of Common Stock for whom such broker-dealer may act as agents or to
whom they may sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions.) The
Company has agreed to bear all expenses in connection with the registration of
the shares of Common Stock to which this Prospectus relates.
The Common Stock is quoted on the NASDAQ SmallCap Market System
("Nasdaq") under the symbol "BNGO", as well as on the Boston Stock Exchange
under the symbol "ABA". On December 22 , 1997 the last sale price of
the Common Stock as reported on Nasdaq was $5.25.
THESE SECURITIES ARE HIGHLY SPECULATIVE. THEY INVOLVE A HIGH DEGREE OF RISK.
THEY SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO SUSTAIN A TOTAL
LOSS OF THEIR ENTIRE INVESTMENT (SEE "RISK FACTORS" - PAGE 7)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is December ___ , 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at Room 1204, Everett McKinley
Dirksen Building, 219 South Dearborn Street, Chicago, Illinois 60604; and 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
This Prospectus does not contain all of the information set forth in the
Registration Statements of which this Prospectus is a part and which the
Company has filed with the Commission. For further information with respect
to the Company and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits filed as a part thereof, copies
of which can be inspected at, or obtained at prescribed rates from the Public
Reference Section of the Commission at the address set forth above.
Additional updating information with respect to the Company may be provided in
the future by means of appendices or supplements to the Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus is delivered, upon written or oral request of
such person, a copy of any and all of the information that has been or may be
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to American Bingo & Gaming Corp., 515 Congress
Avenue, Suite 1200, Austin, Texas 78701 (512) 472-2041.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission and are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB and Form 10-KSB/A for its
fiscal year ended December 31, 1996;
(b) The Company's Quarterly Report on Form 10-QSB and Form 10-QSB/A for
the three month period ended March 31, 1997;
(c) The Company's Quarterly Report on Form 10-QSB and Form 10-QSB/A for
the six month period ended June 30, 1997;
(d) The Company's Current Reports on Forms 8-K (i) dated March 18, 1997,
filed with the Commission on March 18, 1997 and referencing events dated March
2, 1997; (ii) dated August 15, 1997, filed with the Commission on August 15,
1997 and referencing events dated August 14, 1997 and August 4, 1997; (iii)
dated October 23, 1997, filed with the Commission on October 24, 1997 and
referencing events dated on or about October 9, 1997; (iv) dated October 31,
1997, filed with the Commission on November 5, 1997 and referencing events
dated April 21, 1997; (v) dated November 17, 1997, filed with the
Commission on November 17, 1997 and referencing an event dated November 13,
1997; (vi) dated December 19, 1997, filed with the Commission on December 19,
1997 and referencing an event dated November 12, 1997 and ( vi ) Form
8-K/A dated August 15, 1997, filed with the Commission on November 5, 1997 and
referencing events dated August 14, 1997 and August 4, 1997.
(e) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form SB-2, Registration No. 33-85300; and
(f) All other reports filed by the Company pursuant to Section 13(a) and
15(d) of the Exchange Act since the Company's fiscal year ended December 31,
1996.
All documents filed by the Company with the Commission pursuant to
sections 13, 14 or 15(d) of the Exchange Act subsequent hereto, but prior to
the termination of the offering of securities made by this Prospectus shall be
deemed to be incorporated by reference herein and to be part hereof from their
respective dates of filing.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus,
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is 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.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere or incorporated by reference elsewhere in this Prospectus,
including information under "Risk Factors".
THE COMPANY
American Bingo & Gaming Corp. (the "Company") was incorporated under the
laws of the State of Delaware in 1994. The Company was formed to consummate
the acquisition of entities engaged in the operation of charity bingo
entertainment centers. The Company subsequently completed its initial public
offering in December 1994, from which approximately $5.2 million was raised
through the sale of 1,000,000 shares of Common Stock and 1,725,000 Warrants.
The Company, through its subsidiaries, provides facilities, maintenance
and management support for charities which utilize bingo events as a means of
fund raising. The Company collects rental revenues from participating
charities through the leasing of its bingo center facilities. Revenues are
also derived from the sale of bingo supplies and the operation and/or lease of
vending and concession outlets at the bingo centers. The Company also derives
a rapidly increasing portion of revenues from its South Carolina video gaming
centers.
As of December 22 , 1997, the Company operated eighteen bingo
centers in Texas, Alabama and South Carolina. The Company recently closed two
bingo centers in Texas due to poor profitability, but has five additional
centers under construction in South Carolina which are expected to open in the
fourth quarter of 1997. This will give the Company 23 bingo centers at
yearend. The Company's original goal for 1997 was 25-30 bingo centers, but
the Company will not meet this goal due to an increased focus on its video
gaming business. As a result of this increased gaming focus, the Company has
seen an increase from 4 to 60 video gaming centers in South Carolina from the
beginning of 1997 through October 31, 1997. Gaming revenues comprised
approximately 30.6% of the Company's total 1997 revenues in the first half of
fiscal 1997; management expects gaming revenues to comprise over 50% of its
quarterly revenues by the end of 1997.
The Company has designed an aggressive expansion plan focused on the
acquisition and development of bingo and video gaming centers (collectively,
the "Centers"). The Company's goal is to establish itself as a major force in
the estimated multi-billion dollar per year charity bingo and gaming market.
No assurances may be given that the Company's goals will be achieved.
The Company is knowledgeable with respect to states whose legislation
permits charity bingo and gaming events. The Company identifies and analyzes
desirable bingo markets that offer favorable population and income
demographics. Where viable, the Company currently plans to establish Centers
in each of these markets. This can be accomplished either by building a new
bingo center or by acquiring an existing center.
The Company's principal executive offices are located at 515 Congress
Avenue, Suite 1200, Austin, Texas, 78701 and the telephone number of the
principal executive offices is (512) 472-2041.
RECENT DEVELOPMENTS
In July 1997, the Company sold 200 shares of Preferred Stock and B
Warrants for the purchase of an aggregate of 133,000 shares of Common Stock to
four investors, thereby raising $2,000,000, pursuant to Regulation D of the
Securities Act, and Rule 506 promulgated thereunder. The Preferred Stock is
convertible in accordance with the terms of the Certificate of Designations.
The Company is obligated to register, and is registering herein, the shares of
Common Stock underlying the Preferred Stock and the B Warrants. The Company
enlisted MG Securities as the placement agent and paid $160,000 as
commissions, along with the Stock Option for the purchase of 85,000 shares of
Common Stock.
On November 14, 1997, the Company delivered a Notice of Redemption of the
Company's outstanding Redeemable Common Stock Purchase Warrants ("Warrants")
to all Warrantholders ("Warrant Redemption"). The Warrant Redemption set
December 22, 1997 as the redemption date ("Redemption Date"). All
Warrantholders could elect to exercise their Warrants prior to the close of
business on the Redemption Date. On December 22, 1997, the Company redeemed
its outstanding Warrants at a price of $.001 per warrant pursuant to the
Warrant Agreement between the Company and American Stock Transfer & Trust Co.,
the Company's transfer agent. Such agreement provides for redemption should
the price of the Common Stock exceed $8.00 per share for twenty consecutive
trading days. The Warrants are exercisable at $5.00 per share. Subsequent to
the Redemption Date, Warrantholders will no longer be able to exercise the
Warrants. If all the outstanding Warrants were exercised, the Company would
have received proceeds of approximately $16,500,000. As of December 22, 1997,
the Company, based on information received from its transfer agent, expects to
receive approximately $12,000,000 in proceeds from Warrant exercises.
<PAGE>
RISK FACTORS
The following factors should be considered carefully in evaluating the
Company's business and before making any investment in the Company.
1. Relatively New Venture, Need for Further Acquisitions.
-----------------------------------------------------------
The Company's future success depends upon its ability to continue to
expand its existing operations through the acquisition of bingo and gaming
centers, and the establishment of new centers. There can be no assurance that
the Company will be successful in making such acquisitions or establishing new
centers. The Company is subject to all the risks inherent in attempting to
expand a relatively new business venture. These risks include the potential
inability of the Company to efficiently operate additional centers, the
existence of undisclosed actual or contingent liabilities, the inability to
fund the working capital requirements of additional Centers and the inability
to locate and/or establish Centers which have a positive effect on the
Company's operations. There can be no assurance that the Company will
continue to achieve a level of profitability that will provide a return on
invested capital or will result in an increase in the market value of the
Company's securities.
2. Need for Additional Financing.
--------------------------------
The Company's business plan includes an aggressive program to identify
acquisition candidates that meet certain demographic and other criteria, and
to seek to acquire them. Growth to date has been funded initially with cash
advanced by shareholders and from operations, and since December 1994 with the
proceeds of the Company's initial public offering. The Company believes it
will have resources to enable it to make significant acquisitions. However,
there can be no assurance that the remaining cash, coupled with the Company's
available credit lines and Common Stock, which has been used as currency to
facilitate certain acquisitions, will enable the Company to finance all of its
acquisition plans. Moreover, additional funds may be needed to fund the
working capital requirements of newly acquired Centers. No assurance can be
given that additional needed financing will be available to the Company, or if
available, on terms acceptable to the Company. If further financing is
needed, but not available, the Company will be required to scale down its
acquisition plans.
3. Competition.
-----------
The Company competes with other Centers located in the general area where
the Company's subsidiaries presently operate. Competition is based on such
factors as location, comfort, cleanliness, personal relationships and other
amenities. The Company continues to seek to maximize the competitive
advantages of its facilities. The Company does expect to encounter increased
competition as it seeks to acquire additional Centers. Other forms of gaming,
principally non-charity operations also represent additional competitive
threats to the Company. There can be no assurance that additional competing
Centers will not be opened by parties not affiliated with the Company or that
existing Centers will not be refurbished to the extent that they are more
amenable to the charity bingo players and gaming players who presently
frequent the Company's Centers.
4. Dependence Upon Key Personnel.
--------------------------------
The Company is substantially dependent upon the continued services of
Gregory Wilson, its Chief Executive Officer, who is the Company's most
experienced person in the operation of charity bingo centers. In September
1996, Mr. Wilson entered into a three-year employment agreement with the
Company. The loss of the services of Mr. Wilson through incapacity or
otherwise could have a material adverse effect upon the Company's business and
prospects. To the extent that his services become unavailable, the Company
will be required to retain other qualified personnel, and there can be no
assurance that it will be able to recruit and hire qualified persons upon
acceptable terms. The Company maintains key person life and disability
insurance in the amount of $1,000,000 on the life of Mr. Wilson, with the
Company as beneficiary. However, in the event of loss, there can be no
assurance that the insurance proceeds will adequately compensate the Company.
5. Government Regulation.
----------------------
The Company believes that forty-five (45) states and the District of
Columbia have enacted laws permitting and controlling the operation of the
bingo centers. In some states the Company is required to obtain and maintain
permits and/or licenses from state and local regulatory agencies. State
regulations often limit the amount of revenues which the Company can generate
by limiting the number of sessions, revenues per session, number of locations
which may be operated, or other matters. Certain states may also restrict
bingo operators to locally formed entities or may restrict ownership to
private investors who are active in management. The Company believes it
currently complies with all regulations affecting its operations. However,
there can be no assurance that current laws and regulations will not be
changed or interpreted in such a way as to require the Company to alter its
present activities, further restrict profit margins or obtain additional
capital equipment in order to obtain or maintain licenses and permits.
In 1995, the Company encountered a hostile regulatory environment in
Florida and found it necessary to dispose of its four centers there. The
Company is currently monitoring the actions of the State of South Carolina in
connection with the Company's video gaming operations. The Company believes
South Carolina may impose greater regulations on, or even possibly abolish,
the video gaming business in that state. The Company currently receives over
50% of its revenues from its South Carolina video gaming operations.
6. No Assurance as to Future Acquisitions.
-------------------------------------------
The Company's business has grown solely through acquisitions and the
opening of new Centers. The Company's business plan calls for the acquisition
of entities engaged in the operation of charity bingo centers, and gaming
centers. The Company's ability to achieve its expansion plans depends in
large part on its sound business judgment relative to quality targets and its
negotiating strength. Acquisitions to date have been based on a multiple of
pre-tax income. Since the Company has become a public company, it has
acquired properties for a combination of cash, seller-financed notes and
stock, and hopes to continue to do so. If potential sellers are receptive to
accepting equity in the Company as part of the purchase price, the Company's
ability to expand will be enhanced. There can be no assurance, however, that
the Company's acquisition targets will continue to be receptive to such
proposals. Nor can there be assurance that the Company will succeed in
effecting future acquisitions of additional Centers that meet management's
criteria of profitability, physical attributes and demographics in the
targeted states and locales. Moreover there can be no assurance that once
acquisitions are made they will have a positive effect on the Company's
operations.
7. General Economic Risks.
------------------------
The Company's current and future business plans are dependent, in large
part, on the state of the general economy. Adverse changes in general and
local economic conditions may adversely impact on investment in the Company.
These conditions and other factors beyond the Company's control include, among
other factors,: (i) competition from other hospitality and entertainment
properties; (ii) changes in regional and local population and disposable
income composition; (iii) the need for renovations, refurbishment and
improvements; (iv) unanticipated increases in operating costs; (v) changes in
federal, state, local laws, rules and regulations including laws regulating
the environment, signage and the like; (vi) the inability to secure property
and liability insurance to fully protect against all losses, or to obtain such
insurance at reasonable cost; (vii) seasonality, and (viii) changes or
cancellation in local tourist, athletic or cultural events.
8. Possible Volatility of Stock Price.
--------------------------------------
There can be no assurance that a public market price for the Common Stock
will continue. The market prices of the Common Stock may be significantly
affected by factors such as announcements by the Company or its competitors,
as well as variations in the Company's results of operations and market
conditions in the gaming industry in general. The market prices may also be
affected by movements in prices of stocks in general. The relatively limited
amount of publicly trading shares (the "float") renders the Company's
securities especially susceptible to sharp price fluctuations.
9. Shares Eligible for Future Sale.
-----------------------------------
A large number of shares of Common Stock presently outstanding are
currently eligible for public sale under the Securities Act. Possible or
actual sales of Common Stock in the future by existing shareholders may have a
depressive effect on the price of the Common Stock in the open market.
10. Possible Effects of Certain Articles of Incorporation and Bylaw
------------------------------------------------------------------
Provisions.
- - ----------
The Company's Articles of Incorporation and Bylaws contain provisions
that may discourage acquisition bids for the Company. The Company has
substantial authorized but unissued capital stock available for issuance. The
Company's Articles of Incorporation contain provisions which authorize the
Board of Directors, without the consent of stockholders, to issue additional
shares of Common Stock and issue shares of Preferred Stock in series,
including establishment of the voting powers, designation, preferences,
limitations, restrictions and relative rights of each series of Preferred
Stock.
11. Absence of Cash Dividends.
----------------------------
The Board of Directors does not anticipate paying cash dividends on the
Common Stock for the foreseeable future and intends to retain any future
earnings to finance the growth of the Company's business. Payment of
dividends, if any, will depend, among other factors, on earnings, capital
requirements and the general operating and financial conditions of the
Company.
12 Penny Stock Regulation.
------------------------
The trading of the Common Stock may be subject to Rule 15g-9 promulgated
under the Exchange Act for non-Nasdaq and non-exchange listed securities.
Under such rule, brokers-dealers who recommend such securities to persons
other than established customers and accredited investors must make a special
written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities are
exempt from this rule if the market price is at least $5.00 per share.
The Commission has adopted regulations that generally define a "penny
stock" to be an equity security that has a market price of less than $5.00 per
share or an exercise price of less than $5.00 per share subject to certain
exceptions. Such exceptions include equity securities listed on Nasdaq and
equity securities issued by an issuer that has (i) net tangible assets of at
least $2,000,000, if such issuer has been in continuous operation for more
than three years, or (ii) net tangible assets of at least $5,000,000, if such
issuer has been in continuous operation for less than three years, or (iii)
average revenue of at least $6,000,000 for the preceding three years. Unless
an exception is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a risk of disclosure schedule
explaining the penny stock market and the risks associated therewith.
<PAGE>
USE OF PROCEEDS
The Company will not receive proceeds from any sale of the Selling
Securityholder Securities. The proceeds to be received by the Company from
the exercise of the B Warrants and the Stock Option (assuming all of such
securities are exercised), will be $986,500 . The Company intends to
use such proceeds for general corporate purposes. Pending use of the
proceeds, they will be invested in short term, interest bearing securities or
money market funds.
<PAGE>
DILUTION
The following discussion assumes that all of the B Warrants and the Stock
Option are exercised, and includes the proceeds received by the Company
from its Warrant Redemption:
As of September 30, 1997, the net tangible book value of the
Common Stock, based on the balance sheet at September 30, 1997, was
$ 4,860,794 or $. 83 per share. Net tangible book value per share
represents the amount of the tangible assets, $ 7,119,423 , less the
amount of its liabilities, $ 2,258,629 , divided by the number of shares
of Common Stock outstanding 5,867,888 . Without taking into account any
changes in the net tangible book value of the Company after September
30, 1997, other than giving effect to the (i) actual exercise of approximately
2,400,000 Warrants in connection with the Company's Warrant Redemption
(approximately $12,000,000), and (ii) the possible exercise of all B Warrants
(133,000 B Warrants exercisable at $5.50 ($731,500)) and the Stock Option
(85,000 options exercisable at $3.00 ($255,000)), and the receipt of the net
proceeds therefrom, the pro forma net tangible book value of the Common Stock,
would be $ 17,847,294 . Upon dividing the pro forma net tangible book
value by the pro forma amount of Common Stock outstanding ( 8,485,888 ),
the pro forma net tangible book value per share is $2.10 per share,
representing an immediate increase in the net tangible book value of
$1.27 per share to the present shareholders. Any discussion of
dilution to new investors would be misleading since new investors will
purchase shares at varying and fluctuating prices. Dilution per share
represents the difference between the market price of the Common Stock and
the pro forma net tangible book value per share after the issuance of all the
shares of Common Stock issuable upon exercise of the Warrants, B Warrants and
the Stock Option.
RESALES BY SELLING SECURITYHOLDERS
This Prospectus relates to the proposed resale by the Selling
Securityholders of up to (i) 417,469 shares of Common Stock; (ii)
700,000 shares of Common Stock underlying the Preferred Stock; and (iii)
218,000 shares of Common Stock underlying B Warrants and Stock Option. The
following table sets forth as of December 22, 1997 certain information
regarding the beneficial ownership of the Common Stock of each Selling
Securityholder and as adjusted to give effect to the sale of the Common Stock
offered hereby. The Common Stock is being registered to permit public
secondary trading of the Common Stock, and the Selling Securityholders may
offer the Common Stock for resale from time to time. See "Plan of
Distribution." The Company will not receive any of the proceeds from the sale
of the Common Stock. If the B Warrants and Stock Option are exercised, the
Company would receive $986,500.
<TABLE>
<CAPTION>
Common Stock Common Stock Percentage
Names of Selling Beneficially Owned Offered By Owned After
Security Holders Prior to Offering(1) Beneficial Owner Offering(%)(2)
- - ----------------------------- -------------------- ----------------- --------------
<S> <C> <C> <C>
Roy Stevens 25,000 25,000 0
Focus Tech Investments, Inc. 123,500 10,000 1.5%
Harold Dukes 9,969 9,969 0
Tom Vo 64,000 5,000 **
Joe Thuan 64,000 5,000 **
David Heller 216,580 216,580(3)(8) 0
Plazacorp Investments Limited 33,320 33,320(4)(8) 0
P.R.I.F. #4 478,975 478,975(5)(8) 0
Sam Reisman 104,125 104,125(6)(8) 0
MG Securities 85,000 85,000(7) 0
George M. Harrison, Jr. 33,333 50,000 3.9%
Thomas M. Harrison 33,334 50,000 3.9%
William J. Harrison 33,333 50,000 3.9%
Al Ramroth 5,000 5,000 0
Y. Van Nguyen 25,000 5,000 **
<FN>
** Less than 1%
</TABLE>
(1) For purposes of this table, a person or group of persons is deemed to
have "beneficial ownership" of any shares of Common Stock which such person
has the right to acquire within 60 days of December 19 , 1997. For
purposes of computing the percentage of outstanding shares of Common Stock
held by each person or group of persons named above, any security which such
person or persons has or have the right to acquire within such date is deemed
to be outstanding but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. Except as indicated in
the footnotes to this table and pursuant to applicable community property
laws, the Company believes based on information supplied by such persons, that
the persons named in this table have sole voting and investment power with
respect to all shares of Common Stock which they beneficially own.
(2) Assumes the sale of all Securities offered hereby.
(3) Represents (i) 182,000 shares of Common Stock underlying the Preferred
Stock; and (ii) 34,580 shares of Common Stock underlying B Warrants.
(4) Represents (i) 28,000 shares of Common Stock underlying the Preferred
Stock; and (ii) 5,320 shares of Common Stock underlying B Warrants.
(5) Represents (i) 402,500 shares of Common Stock underlying the Preferred
Stock; and (ii) 76,475 shares of Common Stock underlying B Warrants.
(6) Represents (i) 87,500 shares of Common Stock underlying the Preferred
Stock; and (ii) 16,625 shares of Common Stock underlying B Warrants.
(7) Represents 85,000 shares of Common Stock underlying a Stock Option.
(8) The Certificate of Designations for the Preferred Stock and the B
Warrants issued in connection therewith provide that certain Selling
Securityholders may not convert their Preferred Stock or exercise their B
Warrants at any time to acquire a number of shares of Common Stock in excess
of that number which would result in beneficial ownership of more than 4.9% of
the Company's outstanding Common Stock at any time.
The Common Stock being offered hereby by certain of the Selling
Securityholders may be acquired, from time to time, upon (i) the conversion of
the Series A Convertible Preferred Stock which were acquired by them in a
private placement transaction pursuant to a Subscription Agreement, dated as
of August 1, 1997, (ii) the payment by the Company of dividends on the
Preferred Stock in the form of Common Stock in lieu of cash interest, and
(iii) the exercise of B Warrants to purchase 133,000 shares of Common Stock,
which were acquired by certain of the Selling Securityholders from the Company
in connection with the sale of the Preferred Stock. This Prospectus also
relates to such presently indeterminate number of additional Shares as may be
issuable upon conversion of the Preferred Stock or payment of dividends on the
Preferred Stock, based upon fluctuations in the conversion price of the Series
A Preferred Stock in accordance with Rule 416 under the Securities Act.
In recognition of the fact that Selling Securityholders may wish to be
legally permitted to sell their shares of Common Stock when they deem
appropriate, the Company has filed with the Commission, under the Securities
Act, a Registration Statement on Form S-3, of which this Prospectus forms a
part, with respect to the resale of the shares of Common Stock from time to
time on the Nasdaq or in privately negotiated transactions and has agreed to
prepare and file such amendments and supplements to the Registration Statement
as may be necessary to keep the Registration Statement effective until the
shares of Common Stock are no longer required to be registered for the sale
thereof by the Selling Securityholders. The Company has agreed to register a
specified number of shares of Common Stock for resale by the Selling
Securityholders.
PLAN OF DISTRIBUTION
The Selling Securityholders may offer and sell shares of Common Stock
from time to time in the discretion of the Selling Securityholders on Nasdaq
or the Boston Stock Exchange or in the over-the-counter market or otherwise at
prices and at terms then prevailing or at prices related to the then current
market price, or at negotiated prices. The distribution of the shares of
Common Stock may be effected from time to time in one or more transactions
including, without limitation: (a) a block trade in which the broker-dealer so
engaged will attempt to sell the Common Stock as agent, but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; (c) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (d)
face-to-face or other direct transactions between the Selling Securityholders
and purchasers without a broker-dealer or other intermediary. In effecting
sales, broker-dealers or agents engaged by the Selling Securityholders may
arrange for other broker-dealers or agents to participate. From time to time,
one or more of the Selling Securityholders may pledge, hypothecate or grant a
security interest in some or all of the common Stock owned by them, and the
pledgees, secured parties or persons to whom such securities have been
hypothecated shall, upon foreclosure in the event of default, be deemed to be
Selling Securityholders hereunder. In addition, the Selling Securityholders
may from time to time sell short the Common Stock of the Company, and in such
instances, this Prospectus may be delivered in connection with such short sale
and the Common Stock offered hereby may be used to cover such short sale.
Sales of Selling Securityholders' Common Stock may also be made pursuant
to Rule 144 under the Securities Act, where applicable. The Selling
Securityholders' shares may also be offered in one or more underwritten
offerings, on a firm commitment or best efforts basis. The Company will
receive no proceeds from the sale of Common Stock by the Selling
Securityholders.
To the extent required under the Securities Act, the aggregate amount of
Selling Securityholders' Common Stock being offered and the terms of the
offering, the names of any such agents, brokers, dealers or underwriters and
any applicable commission with respect to a particular offer will be set forth
in an accompanying Prospectus supplement. Any underwriters, dealers, brokers
or agents participating in the distribution of the Common Stock may receive
compensation in the form of underwriting discounts, concessions, commissions
or fees from a Selling Securityholder and/or purchasers of Selling
Securityholders' shares of Common Stock, for whom they may act. In addition,
sellers of Selling Securityholders' shares of Common Stock may be deemed to be
underwriters under the Securities Act and any profits on the sale of Selling
Securityholders' shares of Common Stock by them may be deemed to be discounts
or commissions under the Securities Act. Selling Securityholders may have
other business relationships with the Company and its subsidiaries or
affiliates in the ordinary course of business.
From time to time each of the Selling Securityholders may transfer,
pledge, donate or assign Selling Securityholders' shares of Common Stock to
lenders, family members and others and each of such persons will be deemed to
be a "Selling Securityholder" for purposes of this Prospectus. The number of
Selling Securityholders' shares of Common Stock beneficially owned by those
Selling Securityholders who so transfer, pledge, donate or assign Selling
Securityholders' shares of Common Stock will decrease as and when they take
such actions. The plan of distribution for Selling Securityholders' shares of
Common Stock sold hereunder will otherwise remain unchanged, except that the
transferees, pledgees, donees or other successors will be Selling
Securityholders hereunder.
Including, and without limiting the foregoing, in connection with
distributions of the Common Stock, a Selling Securityholder may enter into
hedging transactions with broker-dealers and the broker-dealers may engage in
short sales of the Common Stock in the course of hedging the positions they
assume with such Selling Securityholder. A Selling Securityholder may also
enter into option or other transactions with broker-dealers that involve the
delivery of the Common Stock to the broker-dealers, who may then resell or
otherwise transfer such Common Stock. A Selling Securityholder may also loan
or pledge the Common Stock to a broker-dealer and the broker-dealer may sell
the Common Stock so loaned or upon default may sell or otherwise transfer the
pledged Common Stock.
Under applicable rule and regulations under the Exchange Act, any person
engaged in the distribution of the Common Stock may not bid for or purchase
shares of Common Stock during a period which commences one business day (5
business days, if the Company's public float is less than $25 million or its
average daily trading volume is less than $100,000) prior to such person's
participation in the distribution, subject to exceptions for certain passive
market making activities. In addition and without limiting the foregoing,
each Selling Securityholder will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M which provisions may limit the timing of purchases
and sales of shares of the Company's Common Stock by such Selling
Securityholder.
The Company is bearing all costs relating to the registration of the
shares of Common Stock (other than fees and expenses, if any, of counsel or
other advisors to the Selling Securityholders). Any commissions, discounts or
other fees payable to broker-dealers in connection with any sale of the shares
of Common Stock will be borne by the Selling Securityholder selling such
shares of Common Stock.
The Company has agreed to indemnify the Selling Securityholders in
certain circumstances, against certain liabilities, including liabilities
arising under the Securities Act.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock of the Company is
American Stock Transfer & Trust Co., 40 Wall Street, New York, New York 10005.
LEGAL MATTERS
The legality of the shares offered hereby has been passed upon for the
Company by Silverman, Collura, Chernis & Balzano, P.C., 381 Park Avenue South,
Suite 1601, New York, New York 10016.
EXPERTS
The Company's consolidated financial statements incorporated by reference
in this Registration Statement, have been incorporated herein in reliance on
the reports of Weinick Sanders Leventhal & Co., LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company, the Company has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expense incurred or paid by a director, officer, or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person of the
Company in connection with the securities being registered, the Company 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 and will be governed by the final adjudication
of such issues.
<PAGE>
==============================================================================
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company. Neither the delivery of this Prospectus nor
any sale made hereunder shall under any circumstances create any implication
that there has been no change in the affairs of the Company since the date
hereof. This Prospectus does not constitute an offer or solicitation by anyone
in any jurisdiction in which such offer or solicitation is not authorized or
in which the person making such offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to make such offer or solicitation.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Available Information 3
Prospectus Summary 5
Risk Factors 7
Use of Proceeds 12
Dilution 13
Resales by Selling Securityholders 14
Plan of Distribution 17
Transfer Agent 19
Legal Matters 19
Experts 19
Disclosure of Commission Position on Indemnification 19
</TABLE>
____________________
Until , 1997 all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a Prospectus. This delivery requirement is in addition to the
obligation of dealers to deliver a Prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
