<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 2000
REGISTRATION NO. 333-47630
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
STORAGE COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 02-0450593
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
11 RIVERSIDE STREET, NASHUA, NEW HAMPSHIRE 03062-1373
(603) 880-3005
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
THEODORE J. GOODLANDER, CHIEF EXECUTIVE OFFICER
STORAGE COMPUTER CORPORATION
11 RIVERSIDE STREET
NASHUA, NH 03062
(603) 880-3005
(NAME AND ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
copies to:
WILLIAM E. KELLY, ESQ.
PEABODY & ARNOLD LLP
50 ROWES WHARF
BOSTON, MA 02110
(617) 951-2100
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [__]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [__]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [__]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [__]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS ADDITIONAL PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF ADDITIONAL
REGISTERED REGISTERED PER SHARE (1) PRICE REGISTRATION FEE
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Common Stock, $0.001 par 2,111,601 shares $7.525 $15,889,798 $4,194.91
value per share (2)(3) (4)
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(1) The price of $7.525, the average of the high and low prices ($7.90
and $7.15, respectively) of our common stock ("Common Stock") on the
American Stock Exchange on December 8, 2000, is set forth solely for the
purpose of computing the registration fee in accordance with Rule 457(c)
under the Securities Act of 1933 as amended.
(2) The shares of Common Stock covered by this Registration Statement include
shares issuable to certain selling stockholders upon conversion of shares
of our Series A 8% Convertible Preferred Stock ("Series A Preferred
Stock"), Series B 8% Convertible Preferred Stock ("Series B Preferred
Stock"), Series C 8% Convertible Preferred Stock ("Series C Preferred
Stock") and Series D 8% Convertible Preferred Stock, which the Company may
issue, subject to certain conditions all of which are outside of the
control of the investors, pursuant to an agreement ("Series D Preferred
Stock") (collectively, "Preferred Stock") held by the selling stockholders
("Preferred Shares") and in payment of dividends on the Preferred Shares.
The rate at which the Preferred Shares may be converted into Common Stock
and the rate at which dividends payable in cash on the Preferred Shares may
be paid in shares of Common Stock varies based on the prevailing market
price for our Common Stock and, the length of time the Preferred Shares are
outstanding before conversion. We are also registering shares of Common
Stock issuable upon exercise of stock purchase warrants held by certain
selling stockholders. For purposes of estimating the number of shares of
Common Stock to be included this Registration Statement, we have assumed
that the shares of Series A Preferred Stock and Series B Preferred Stock
(together, "Series A and B Preferred Shares") will remain outstanding for a
period of three years (the maximum period before such Preferred Shares are
subject to mandatory conversion into Common Stock), that all dividends on
the Series A and B Preferred Shares will be paid in shares of Common Stock,
and that the effective price at which the Series A and B Preferred Shares
and dividends will convert to common shares will be $2.00. For purposes of
estimating the number of shares of Common Stock to be included this
Registration Statement with respect the shares of Series C Preferred Stock
and Series D Preferred Stock (together, "Series C and D Preferred Shares")
we have assumed that the effective price at which the Series C and Series D
Preferred Shares will convert will be $3.73 and that no dividends or other
accruals will be paid on the Series C and Series D Preferred Shares.
(3) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable in connection with the shares of Common
Stock registered for sale hereby as a result of any stock dividend, stock
split, recapitalization or other similar transaction effected without the
receipt of consideration which results in an increase in the number of the
Registrant's outstanding shares of Common Stock in accordance with
Rule 416.
(4) A fee of $37,238.22 with respect to 12,679,000 shares of Common Stock
covered by this Registration Statement was previously paid.
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
<PAGE> 4
SUBJECT TO COMPLETION, DATED [______________], 2000
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell the Common Stock covered by this prospectus
until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell the Common
Stock and it is not soliciting an offer to buy the Common Stock in any state
where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
14,790,601 SHARES
STORAGE COMPUTER CORPORATION
COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of 14,790,601 shares of our Common Stock by current stockholders
identified in this prospectus. Some of these shares of Common Stock are issuable
to the selling stockholders upon conversion of shares of our Preferred Stock
held by the selling stockholders, in payment of dividends on the Preferred
Stock, and upon exercise of Common Stock purchase rights under various warrants
held by the selling stockholders. For purposes of this prospectus, we have
assumed that the Preferred Stock will remain outstanding for a period of three
years (the maximum period before the Preferred Stock is subject to mandatory
conversion into Common Stock), that all dividends on the Series A Preferred
Stock and Series B Preferred Stock (together, the "Series A and B Preferred
Stock") will be paid in shares of Common Stock, and that the effective price at
which the Series A and B Preferred Stock and dividends will convert to shares of
Common Stock will be $2.00. With respect to the Series C Preferred Stock and
Series D Preferred Stock (together, the "Series C and D Preferred Stock"), we
have assumed that the effective price at which the Series C and Series D
Preferred Stock will convert to shares of Common Stock will be $3.73.
The Preferred Shares and certain warrants relating to the Preferred Shares
were issued by us to the selling stockholders pursuant to securities purchase
agreements between us and the selling stockholders, dated May 1, 2000, August
28, 2000, September 28, 2000 and October 31, 2000. We are filing the
registration statement of which this prospectus is a part pursuant to
contractual obligations incurred at the time we issued and sold the Preferred
Shares and warrants to certain of the selling stockholders.
Shares may be sold by the selling stockholders in accordance with the Plan
of Distribution described herein. We will not receive any of the proceeds from
the sale of the shares by the selling stockholders. We have agreed to indemnify
the selling stockholders and certain other persons against liabilities under the
Securities Act to the extent permitted by law, but we will not be paying any
underwriting commissions or discounts in the offering of shares by the selling
stockholders.
Our Common Stock is traded on the American Stock Exchange under the symbol
"SOS." On December 8, 2000, the average of the high and low prices for our
Common Stock was $7.53 per share.
Please see "Where You Can Find More Information" on page 5 for additional
information about us on file with the United States Securities and Exchange
Commission.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. PLEASE CONSIDER
CAREFULLY THE RISK FACTORS BEGINNING AT PAGE 7 IN THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is [__________], 2000
TABLE OF CONTENTS
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THE COMPANY.............................................................. 5
WHERE YOU CAN FIND MORE INFORMATION...................................... 5
FORWARD LOOKING STATEMENTS............................................... 6
RISK FACTORS............................................................. 6
USE OF PROCEEDS.......................................................... 12
DIVIDEND POLICY.......................................................... 12
SELLING STOCKHOLDERS..................................................... 12
DESCRIPTION OF CAPITAL STOCK............................................. 13
PLAN OF DISTRIBUTION..................................................... 15
LEGAL MATTERS............................................................ 16
EXPERTS.................................................................. 16
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THE COMPANY
Storage Computer Corporation develops and manufactures software-driven
multi-host storage solutions used to drive core business applications. We solve
our customers' business problems through our StorageSuite(TM) product line and
OmniRAID(TM) and OmniFORCE(TM) storage software. Based on an open systems,
standards-based architecture, these solutions support highly interactive
applications, many different servers accessing the same data, and multiple users
accessing data from different locations. We pioneered the RAID 7(R) technology
incorporated in our "Virtual Storage Architecture", which forms the basis for
our "StorageSuite" product family. Based upon this performance-optimized
architecture, the "StorageSuite" family combines intelligent controller, disk
drive, and memory technology with patented memory mapping techniques and a
powerful real-time operating system to deliver high-performance and data
protection across the mix of applications found in today's open system
environments.
The Company was organized as a Delaware corporation in 1991. Our principal
executive offices and manufacturing facilities are located at 11 Riverside
Street, Nashua, New Hampshire, Telephone: (603) 880-3005.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission ("SEC"). You may read
and copy any document we file with the SEC at the SEC's public reference
facilities located at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
as well as at the SEC's regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, or 7 World Trade Center, Suite 1300, New York, New York
10048. You may also obtain copies of our filed documents directly from the SEC
at prescribed rates by writing to the Public Reference Section of the SEC, 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public on the SEC's Website at
"http://www.sec.gov."
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 incorporated by reference is
considered to be part of this prospectus. Information in this prospectus
supersedes information incorporated by reference, which we filed with the SEC
prior to the date of this prospectus, while information that we file later with
the SEC will automatically update and supersede the information contained in
this prospectus. We incorporate by reference the documents listed below and any
future filings we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"):
1. Our Annual Report on Form 10-K, as amended, for the fiscal year ended
December 31, 1999;
2. Our Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2000;
3. Our Quarterly Report on Form 10-Q for the quarterly period ended June
30, 2000;
4. Our Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2000;
5. Our Current Report on Form 8-K filed August 1, 2000.
6. Our Current Report on Form 8-K filed October 6, 2000;
7. Our Current Report on Form 8-K, as amended, filed November 28, 2000;
8. The description of our Common Stock contained in our Registration
Statement on Form 8-A filed February 5, 1995;
9. The description of our Series A 8% Convertible Preferred Stock,
contained in the Amended Certificate of Designation filed as Exhibit
2.1 to our Current Report on Form 8-K filed on October 6, 2000.
10. The description of our Series B 8% Convertible Preferred Stock
contained in the Certificate of Designation filed as Exhibit 2.2 to
our Current Report on Form 8-K filed on October 6, 2000;
11. The description of our Series C 8% Convertible Preferred Stock,
contained in the Certificate of Designation filed as Exhibit 10.2 to
our Quarter Report on Form 10-Q for the quarterly period ended
September 30, 2000.
You may request a copy of these filings, at no cost to you, by writing or
telephoning us at the following address or number:
Storage Computer Corporation
Attention: Peter N. Hood, Chief Financial Officer
11 Riverside Street
Nashua, New Hampshire 03062-1373
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Telephone: (603) 880-3005
You should rely only on the information provided in this prospectus or
incorporated by reference. We have authorized no one to provide you with
different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of this
document.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in this
prospectus contain forward-looking statements. These forward-looking statements
are based on our current expectations, estimates and projections about our
industry, management's beliefs and certain assumptions made by us. Words such as
"anticipates", "expects", "intends", "believes", "seeks", "estimates" and
variations of these words or similar expressions are intended to identify
forward-looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult. Therefore, our actual results could differ materially from those
expressed or forecasted in any forward-looking statements as a result of a
variety of factors, including those set forth in "Risk Factors" below and
elsewhere in, or incorporated by reference into, this prospectus. We undertake
no obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.
RISK FACTORS
You should carefully consider the following risk factors, together with the
other information contained in this prospectus, including information
incorporated by reference, before purchasing our Common Stock. If any of the
following risks actually occur, they could seriously harm our business,
financial condition or results of operations. Because an investment in our
Common Stock involves a high degree of risk, you should be aware that you could
lose all or part of your investment.
FACTORS BEYOND OUR CONTROL COULD CAUSE OUR QUARTERLY RESULTS TO FLUCTUATE.
Our quarterly operating results have varied widely in the past. As a
result, we believe that period-to-period comparisons of our results of
operations are not necessarily meaningful and should not be relied upon as
indicators of future performance. Many of the factors that could cause our
quarterly operating results to fluctuate significantly in the future are beyond
our control and include the following:
- the level of competition in our target product markets;
- the size, timing and cancellation of significant orders;
- product configuration and mix;
- market acceptance of new products and product enhancements;
- new product announcements or introductions by us or our competitors;
- deferrals of customer orders in anticipation of new products or
product enhancements;
- changes in pricing by us or our competitors;
- our ability to timely develop, introduce and market new products and
enhancements;
- supply constraints;
- technological changes in our target product markets;
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- the levels of expenditure on research and development and expansion of
our sales and marketing programs;
- seasonality; and
- general economic trends.
In addition, sales for any future quarter may vary and accordingly be
inconsistent with our plans. We generally operate with limited order backlog
because our products are typically shipped shortly after orders are received. As
a result, product sales in any quarter are generally dependent on orders booked
and shipped in that quarter. Product sales are also difficult to forecast
because the storage server market is rapidly evolving and our sales cycle varies
substantially from customer to customer.
Due to all of the foregoing factors, it is possible that in one or more
future quarters our results may fall below the expectations of public market
analysts and investors. In such event, the trading price of our Common Stock
would likely decrease.
OUR GROSS MARGINS MAY VARY BASED ON THE CONFIGURATION OF OUR PRODUCTS.
We derive a significant portion of our sales from the resale of disk drives
as components of our storage servers, and the resale market for hard disk drives
is highly competitive and subject to intense pricing pressures. Our sales of
disk drives generate lower gross margin percentages than those of our storage
server products. As a result, as we sell more highly configured systems with
greater disk drive content, overall gross margin percentages will be negatively
affected.
Our gross margins have been and may continue to be affected by a variety of
other factors, including:
- competition;
- direct versus indirect sales;
- the mix and average selling prices of products, including software
licensing;
- new product introductions and enhancements; and
- the cost of components and manufacturing labor.
A SIGNIFICANT PERCENTAGE OF OUR EXPENSES ARE FIXED WHICH COULD AFFECT OUR NET
INCOME.
Our expense levels are based in part on our expectations as to future sales
and a significant percentage of our expenses are fixed. As a result, if sales
levels are below expectations, net income may be disproportionately affected.
OUR FUTURE FINANCIAL PERFORMANCE DEPENDS ON GROWTH IN THE STORAGE SERVER MARKET
AND ANY LACK OF GROWTH WILL HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATING
RESULTS.
Our future financial performance will depend in large part on continued
growth in the storage server market and on emerging standards in this market. We
cannot assure you that the market for storage servers will continue to grow or
that emerging standards in the storage server market will not adversely affect
the growth of UNIX and Windows NT server markets.
<PAGE> 9
IF WE FAIL TO MANAGE OUR EXPANDING BUSINESS EFFECTIVELY OUR OPERATING RESULTS
COULD BE MATERIALLY ADVERSELY AFFECTED.
Our future operating results depend to a large extent on management's
ability to successfully manage expansion and growth, including integration of
the business of our recently-acquired subsidiary, CyberStorage Systems
Corporation, our expanding international operations, forecasting revenues,
addressing new markets, controlling expenses, implementing infrastructure and
systems and managing our assets. In addition, an unexpected decline in the
growth rate of revenues without a corresponding and timely reduction in expense
growth or a failure to manage other aspects of growth could materially adversely
affect our operating results.
WE DEPEND ON ATTRACTING AND RETAINING QUALIFIED TECHNICAL AND SALES PERSONNEL.
Our continued success depends, in part, on our ability to identify,
attract, motivate and retain qualified technical and sales personnel. Because
our future success is dependent on our ability to continue to enhance and
introduce new products, we are particularly dependent on our ability to
identify, attract, motivate and retain qualified engineers with the requisite
education, backgrounds and industry experience. Competition for qualified
engineers, is intense. The loss of the services of a significant number of our
engineers or sales people could be disruptive to our development efforts or
business relationships and could materially adversely affect our operating
results.
WE RELY UPON A LIMITED NUMBER OF SUPPLIERS AND ANY DISRUPTION OR TERMINATION OF
THESE SUPPLY ARRANGEMENTS COULD DELAY SHIPMENT OF OUR PRODUCTS AND COULD
MATERIALLY ADVERSELY AFFECT OUR OPERATING RESULTS.
We rely upon a limited number of suppliers of several key components
utilized in the assembly of our products. We purchase our disk drives, computer
boards and microprocessors from a limited number of suppliers. Our reliance on a
limited number of suppliers involves several risks, including:
- a potential inability to obtain an adequate supply of required
components because we do not have long-term supply commitments;
- price increases;
- timely delivery; and
- component quality.
Component quality is particularly significant with respect to our suppliers
of disk drives. In order to meet product performance requirements, we must
obtain disk drives of extremely high quality and capacity. In addition, there
are periodic supply and demand issues for disk drives, microprocessors and for
semiconductor memory components, which could result in component shortages,
selective supply allocations and increased prices of such components. We cannot
assure you that we will be able to obtain our full requirements of such
components in the future or that prices of such components will not increase. In
addition, problems with respect to yield and quality of such components and
timeliness of deliveries could occur. Disruption or termination of the supply of
these components could delay shipments of our products and could materially
adversely affect our operating results. Such delays could also damage
relationships with current and prospective customers.
WE DEPEND UPON OUR RESEARCH AND DEVELOPMENT EFFORTS TO DEVELOP AND INTRODUCE NEW
PRODUCTS AND ANY FAILURE TO DEVELOP AND INTRODUCE NEW PRODUCTS SUCCESSFULLY
COULD MATERIALLY ADVERSELY AFFECT OUR OPERATING RESULTS.
Our future growth depends upon the successful development and introduction
of new hardware and software products. We cannot assure you that these or other
new products will be introduced on a timely basis or attain market acceptance.
Due to the complexity of storage servers, and the difficulty in gauging the
engineering
<PAGE> 10
effort required to produce new products, new products are subject to significant
technical risks. We cannot assure you that new products will be introduced on a
timely basis or at all. In the past, we have experienced delays in the shipments
of our new products, resulting in delay or loss of product sales. If new
products are delayed or do not achieve market acceptance, our operating results
will be materially adversely affected. The computer industry is changing both
dramatically and rapidly. The development of "open systems computing", the
introduction of the Internet, new fibre technologies and the increasing storage
density in disk drive technologies, have caused an increase in new product
development and shorter time to bring the new products to market. While we
believe that our Virtual Storage Architecture and StorageSuite products are
advanced when compared to competitive products, and complement many other
products utilized in total customer solutions, there can be no assurance that
this will continue in the future. The failure to remain consistently ahead of
competitive technologies would have a negative impact on our operating results
and financial condition.
WE ARE SUBJECT TO COMPETITION AND PRICING PRESSURES.
The information storage market is extremely competitive. Companies such as
EMC Corporation, IBM Corporation, Hitachi Data Systems, Storage Technology, Sun
Microsystems, and more than 100 other public and private companies provide disk
arrays for a wide variety of computer systems, workstations and PCs. Although we
are currently unaware of any other vendor offering an asynchronous transfer RAID
7 disk array, many of our competitors benefit from greater market recognition
and have greater financial, research and development, production and marketing
resources than ours. There can be no assurance that we will be able to compete
successfully against existing companies or future entrants to the marketplace.
Furthermore, reductions in the price of competitive products, changes in
discount levels or announcements by our competitors of new generations of
high-performance systems may adversely affect sales of our products.
OUR PRODUCTS HAVE LIMITED MARKET ACCEPTANCE.
Our RAID 7 and proposed products are based on designs, which have not yet
received widespread acceptance in the market for commercially available storage
systems. Prospective customers may require a longer evaluation period for these
products than for storage systems marketed by more established companies. Our
sales and marketing strategy contemplates sales of its storage systems for both
technical and commercial applications. There can be no assurance that we will be
able to penetrate either storage market, to any significant extent, or in the
time frames sufficient to assure its success. Our failure to penetrate these
storage markets on a timely basis would have a materially adverse impact upon
our operations and prospects. Large computer users may be slow to adopt new
products for use in their core applications, particularly systems that entail
significant capital investment. In addition, our products could be subject to
export controls imposed by the United States Government, which could create
delays in the sale of our systems in international markets. Any significant
delay in market acceptance of our products could result in the marketing of our
products at a time when their cost and performance characteristics are not
competitive.
UNDETECTED SOFTWARE ERRORS OR FAILURES FOUND IN NEW PRODUCTS MAY RESULT IN LOSS
OF OR DELAY IN MARKET ACCEPTANCE OF OUR PRODUCTS WHICH COULD MATERIALLY
ADVERSELY AFFECT OUR OPERATING RESULTS.
Our products may contain undetected software errors or failures when first
introduced or as new versions are released. Despite testing by us and by current
and potential customers, errors may not be found in new products after
commencement of commercial shipments, resulting in loss of or delay in market
acceptance, which could materially adversely affect our operating results.
THE MARKET PRICE FOR OUR COMMON STOCK HAS FLUCTUATED SIGNIFICANTLY IN THE PAST
AND WILL LIKELY CONTINUE TO DO SO IN THE FUTURE AND ANY BROAD MARKET
FLUCTUATIONS MAY MATERIALLY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.
The market price for our Common Stock has been volatile in the past, and
several factors could cause the price to fluctuate substantially in the future.
These factors include:
<PAGE> 11
- fluctuations in our operating results;
- fluctuations in the valuation of companies perceived by investors to
be comparable to us;
- a shortfall in revenues or earnings compared to securities analysts'
expectations;
- changes in analysts' recommendations or projections;
- announcements of new products, applications or product enhancements by
us or our competitors; and
- changes in our relationships with our suppliers or customers.
In addition, the stock market has experienced volatility that has
particularly affected the market prices of equity securities of many high
technology companies and that often has been unrelated to the operating results
of such companies. As a result, the market price of our Common Stock may
fluctuate significantly in the future and any broad market fluctuations may
adversely affect the market price of our Common Stock. Due to all of the
foregoing, the current market price of our Common Stock may not be indicative of
future market prices.
A LIMITED PUBLIC TRADING MARKET EXISTS FOR OUR COMMON STOCK.
Currently, a limited established public trading market exists for our
Common Stock. The sales of a substantial number of shares in the public market
could adversely affect the market price for our Common Stock.
COMPETITORS ARE FORMING BUSINESS ALLIANCES.
Many companies are forming business alliances with their competitors, to be
able to provide totally integrated storage solutions to their customers. One
result of these alliances is to effectively preclude competitive products from
being offered to the customers. Many of the relationships are exclusive and our
failure to develop similar relationships will effectively reduce the number of
qualified sales opportunities we will have for our products in the future. We
believe that we address this issue by our return to the reseller channel sales
model and effectively having the integrators and value added-resellers perform
the solution selling required. Our failure to open these sales channels will
have a negative effect on our operating results and financial condition.
WE REQUIRE NEAR FLAWLESS OPERATIONS.
Our products operate near the limits of electronic and physical performance
and are designed and manufactured with relatively small tolerances. If flaws in
design, production, assembly or testing were to occur by us or our suppliers, we
could experience a rate of failure in our products that would result in
substantial repair or replacement costs and potential damage to our reputation.
There can be no assurance that our efforts to monitor, develop and implement
appropriate test and manufacturing processes for its products will be sufficient
to permit us to avoid a rate of failure in its products that results in
substantial delays in shipment, significant repair or replacement costs and
potential damage to our reputation, any of which could have a material adverse
effect on our business, results of operations or financial condition.
WE HAVE SIGNIFICANT FOREIGN SALES.
Approximately, 50%, 46% and 56% of our revenues during our fiscal years
ended December 31, 1997, 1998 and 1999, respectively, were derived from sales
made outside of the United States. Our profitability and financial condition are
materially dependent on the success of our foreign sales efforts. In general,
our foreign sales are subject to certain inherent risks, including unexpected
changes in regulatory and other legal requirements, tariffs and other trade
barriers, longer accounts receivable payment cycles and the possibility of
increased difficulty in collection of accounts receivable, difficulty in the
management of foreign operations, potentially adverse tax
<PAGE> 12
consequences including restrictions on the repatriation of earnings, and the
burdens of compliance with a wide variety of foreign laws. Currency transaction
gains or losses on conversion to United States dollars from foreign sales
denominated in foreign currencies may also contribute to fluctuations in our
results of operations. There can be no assurance that these factors will not
have an adverse impact on our future foreign sales and, consequently, on our
operating results. We do not presently engage in the hedging of foreign
currencies or similar activities.
WE HAVE ISSUED PREFERRED STOCK AND HAVE THE ABILITY TO ISSUE ADDITIONAL
PREFERRED STOCK IN THE FUTURE.
We have outstanding 77,000 shares of Preferred Stock (45,000 shares of
Series A Preferred Stock, 20,000 shares of Series B Preferred Stock and 12,000
shares of Series C Preferred Stock) and may issue up to 888,000 additional
shares of preferred stock in the future without further shareholder approval and
upon such terms and conditions, and having such rights, privileges and
preferences, as our Board of Directors may determine. The rights of the holders
of the Common Stock will be subject to, and may be adversely affected by, the
rights of the holders of any shares of Preferred Stock that may be issued in the
future. The issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire us, or of discouraging a third party from
acquiring, a majority of our outstanding voting stock.
CONVERSION OF PREFERRED STOCK COULD HAVE A DILUTIVE IMPACT.
The conversion of the Preferred Stock could have a dilutive impact on the
percentage of ownership of the current holders of the Common Stock. The shares
of Common Stock issuable upon conversion of the Preferred Stock could represent
greater than 20% the total number of outstanding shares of Common Stock. Because
holders of Preferred Stock will have the opportunity to convert the Preferred
Stock into Common Stock at less than market rates each conversion will result in
a dilution of the ownership interests of the current holders of Common Stock. As
of December 8, 2000, 45,000 shares of Series A Preferred Stock are issued and
outstanding, with another 10,000 shares of Series A Preferred Stock authorized
and potentially available for dilutive issuance. As of December 8, 2000, 20,000
shares of Series B Preferred Stock and 12,000 shares of Series C Preferred Stock
were issued and outstanding. Additionally, the Company is obligated to issue
3,000 shares of Series D Preferred Stock subject to the satisfaction of certain
conditions, all of which are outside of the control of the investor. A total of
87,000 shares of Preferred Stock are therefore potentially available for
conversion as of December 8, 2000. If the conversion price with respect to
Series A and Series B Preferred Stock were to be reduced to $2.00 per share and
the conversion price with respect to Series C Preferred Stock were to be reduced
to $3.73 per share as a result of declines in the market value of the Common
Stock (and assuming conversion of all remaining 87,000 shares of authorized
Preferred Stock at such prices), the holders of Preferred Stock would receive
6,967,158 shares of Common Stock (representing approximately 31.77% of the
number of shares of Common Stock issued and outstanding following such
conversion); such number of shares of Common Stock could be further increased
(resulting in greater dilution of the current holders of Common Stock) upon
exercise of warrants associated with the Preferred Stock or as a result of
issuance of Common Stock in payment of dividends on Preferred Stock.
Because the amount of Common Stock issuable to the holders of the Preferred
Stock is based on a formula that is tied to the market price of the Common Stock
just prior to the date on which the Preferred Stock is converted into shares of
Common Stock, conversion of the Preferred Stock could result in significant
dilution of the per share value of Common Stock held by current investors. The
perceived risk of dilution may cause holders of Preferred Stock who convert
their Preferred Stock and immediately sell the shares of Common Stock issued
upon such conversion, which would be likely to contribute to a downward movement
in the market price of the Common Stock. Significant downward pressure on the
trading price of the Common Stock resulting from such sales could encourage
shareholders to engage in short sales, which would further contribute to a
decline in the market price for the Common Stock. Certain holders of Preferred
Stock have agreed to certain limitations with respect to the trading of our
Common Stock.
The terms of the Series A Preferred Stock and Series B Preferred Stock
provide that the conversion price shall never be greater than $8.6625 and
$13.41, respectively (110% of the market price of the Common Stock at the time
the Preferred Stock was first issued), but could be less, based on the average
trading price of the Common Stock just prior to the time of conversion. The
terms of the Series C Preferred Stock provide that conversion price shall be
$13.25 until July 31, 2001, after which date the conversion price will be the
lesser of $13.25 and the market price of Common Stock. Although no Series D
Preferred Stock have been issued as of the date of this Prospectus, the terms of
the Series D Preferred Stock would be established to provide that conversion
price shall be $9.24 until July 31, 2001 (assuming the Series D Preferred Stock
were issued on December 8, 2000 and taking 110% of the average of the closing
price of Common Stock on the three prior trading days), after which date the
conversion price will be the lesser of $9.24 and the market price of Common
Stock. The lower the average trading price of shares of Common Stock just prior
to the conversion date, the greater the number of shares of Common Stock that
can be issued upon conversion of the Preferred Stock, and the greater the risk
of dilution caused by this issuance. Furthermore, the longer the Series A and B
Preferred Stock are outstanding prior to conversion, the greater the discount
from the prevailing market price at which the Preferred Stock can be converted
into shares of Common Stock.
The following table is based on the conversion of the remaining 45,000
shares of issued and outstanding Series A Preferred Stock and sets forth (i) the
effective conversion price at the time of the various reductions in the
percentage of the prevailing market price at which the Preferred Stock may be
converted into shares of Common Stock (assuming, at the date of each such
reduction, that the prevailing market price for the Common Stock is equal to,
25% less than, 50% less than, and 75% less than the closing market price of the
Common Stock on December 8, 2000), (ii) the number of shares of Common Stock
issuable upon conversion of all of the Series A Preferred Stock at such
conversion price (assuming the Company does not issue any shares of Common Stock
in payment of dividends on the Preferred Stock), and (iii) the percentage of the
total number of shares of Common Stock issued and outstanding that would be
represented by the shares of Common Stock issuable at such conversion price. If
the Series A Preferred Stock is converted
<PAGE> 13
prior to January 16, 2001, the conversion price will be the lower of $8.6625 or
78.5% of the market price of the Common Stock just prior to the conversion date;
if the Series A Preferred Stock is converted on or after January 16, 2001 but
prior to April 15, 2001, the conversion price will be the lower of $8.6625 or
75% of the market price of the Common Stock just prior to the conversion date;
and if the Series A Preferred Stock is converted after April 15, 2001, the
conversion price will be the lower of $8.6625 or 65% of the market price of the
Common Stock just prior to the conversion date.
<PAGE> 14
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF 45,000 SHARES OF SERIES A
PREFERRED STOCK (ASSUMING 0%, 25%, 50% AND 75% REDUCTIONS IN MARKET PRICE FOR
COMMON STOCK)
<TABLE>
<CAPTION>
Conversion Prior to 1/16/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
<S> <C> <C> <C>
$7.63 $5.9896 751,309 5.07%
$5.73 $4.4902 1,002,183 6.76%
$3.82 $2.9987 1,500,650 10.12%
$1.91 $1.4994 3,001,301 20.24%
</TABLE>
<TABLE>
<CAPTION>
Conversion from 1/16/01 to 4/14/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
<S> <C> <C> <C>
$7.63 $5.7225 786,370 5.30%
$5.73 $4.29 1,048,951 7.08%
$3.82 $8.65 1,570,681 10.59%
$1.91 $1.4325 3,192,362 21.19%
</TABLE>
<TABLE>
<CAPTION>
Conversion from and after 4/15/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
<S> <C> <C> <C>
$7.63 $4.959 904,350 6.12%
$5.73 $3.718 1,210,328 8.16%
$3.82 $2.4835 1,812,324 12.22%
$1.91 $1.2415 3,624,648 24.45%
</TABLE>
<PAGE> 15
The following table is based on the conversion of the 20,000 shares of
Series B Preferred Stock and sets forth (i) the effective conversion price at
the time of the various reductions in the percentage of the prevailing market
price at which the Series B Preferred Stock may be converted into shares of
Common Stock (assuming, at the date of each such reduction, that the prevailing
market price for the Common Stock is equal to, 25% less than, 50% less than, and
75% less than the closing market price of the Common Stock on December 8, 2000),
(ii) the number of shares of Common Stock issuable upon conversion of all of the
Series B Preferred Stock at such conversion price (assuming the Company does not
issue any shares of Common Stock in payment of dividends on the Series B
Preferred Stock), and (iii) the percentage of the total number of shares of
Common Stock issued and outstanding that would be represented by the shares of
Common Stock issuable at such conversion price. If the Series B Preferred Stock
is converted prior to January 27, 2001, the conversion price will be the lower
of $13.41 or 82.5% of the market price of the Common Stock just prior to the
conversion date; if the Series B Preferred Stock is converted on or after
January 27, 2001 but prior to March 29, 2001, the conversion price will be the
lower of $13.41 or 78.5% of the market price of the Common Stock just prior to
the conversion date; if the Series B Preferred Stock is converted on or after
March 29, 2001 but prior to June 28, 2001, the conversion price will be the
lower of $13.41 or 75% of the market price of the Common Stock just prior to the
conversion date; and if the Series B Preferred Stock is converted after on or
after June 28, 2001, the conversion price will be the lower of $13.41 or 65% of
the market price of the Common Stock just prior to the conversion date.
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF 20,000 SHARES OF SERIES B
PREFERRED STOCK (ASSUMING 0%, 25%, 50% AND 75% REDUCTIONS IN MARKET PRICE FOR
COMMON STOCK)
<TABLE>
<CAPTION>
Conversion prior to 1/27/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
------ ---------- --------- ------------
<C> <C> <C> <C>
$7.63 $6.2948 317,725 2.14%
$5.73 $4.719 423,819 2.86%
$3.82 $3.1515 634,618 4.28%
$1.91 $1.5758 1,269,237 8.56%
</TABLE>
<TABLE>
<CAPTION>
Conversion from 1/27/01 to 3/28/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
------ ---------- --------- ------------
<C> <C> <C> <C>
$7.63 $5.9896 333,915 2.25%
$5.73 $4.4902 445,415 3.00%
$3.82 $2.9987 666,956 4.49%
$1.91 $1.4994 1,333,911 9.00%
</TABLE>
<TABLE>
<CAPTION>
Conversion from 3/29/01 to 6/27/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
------ ---------- --------- ------------
<C> <C> <C> <C>
$7.63 $5.7225 349,498 2.36%
$5.73 $4.29 466,201 3.15%
$3.82 $2.865 698,080 4.71%
$1.91 $1.4325 1,396,161 9.42%
</TABLE>
<TABLE>
<CAPTION>
Conversion after 6/27/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
------ ---------- --------- ------------
<C> <C> <C> <C>
$7.63 $4.9595 403,267 2.72%
$5.73 $3.718 537,924 3.63%
$3.82 $2.4835 805,477 5.43%
$1.91 $1.2415 1,610,954 10.87%
</TABLE>
The following table is based on the conversion of the 12,000 shares of
Series C Preferred Stock and sets forth (i) the effective conversion price at
the time of the various reductions in the percentage of the prevailing market
price at which the Series C Preferred Stock may be converted into shares of
Common Stock (assuming, at the date of each such reduction, that the prevailing
market price for the Common Stock is equal to, 25% less than, 50% less than, and
75% less than the closing market price of the Common Stock on December 8, 2000),
(ii) the number of shares of Common Stock issuable upon conversion of all of the
Series C Preferred Stock at such conversion price (assuming the Company does not
issue any shares of Common Stock in payment of dividends on the Series C
Preferred Stock), and (iii) the percentage of the total number of shares of
Common Stock issued and outstanding that would be represented by the share of
Common Stock issuable at such conversion price. If the Series C Preferred Stock
is converted prior to August 1, 2001, the conversion price will be $13.25; and
if the Series C Preferred Stock is converted on or after August 1, 2001, the
conversion price will be the lesser of $13.25 and the market price of Common
Stock. Under the terms of the Series C Preferred Stock and the related warrants,
the shares of Series C Preferred Stock are convertible and the warrants are
exercisable by any holder only to the extent that the number of shares of common
stock issuable pursuant to such securities, together with the number of shares
of common stock owned by such holder and its affiliates (but not including
shares of common stock underlying unconverted shares of Series C Preferred Stock
or unexercised portions of the warrants) would not exceed 4.9% of the then
outstanding common stock as determined in accordance with Section 13(d) of the
Exchange Act.
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF 12,000 SHARES OF SERIES
C PREFERRED STOCK (ASSUMING 0%, 25%, 50% AND 75% REDUCTIONS IN MARKET PRICE FOR
COMMON STOCK)
<TABLE>
<CAPTION>
Conversion prior to 8/1/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
------ ---------- --------- ------------
<C> <C> <C> <C>
$7.63 $13.25 905,600 6.11%
$5.73 $13.25 905,600 6.11%
$3.82 $13.25 905,600 6.11%
$1.91 $13.25 905,600 6.11%
</TABLE>
<TABLE>
<CAPTION>
Conversion from 8/1/01 onward
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
------ ---------- --------- ------------
<C> <C> <C> <C>
$7.63 $7.63 1,572,739 10.61%
$5.73 $5.73 2,097,902 14.15%
$3.82 $3.82 3,141,361 21.18%
$1.91 $1.91 6,282,723 42.38%
</TABLE>
<PAGE> 16
The following table assumes that the 3,000 shares of Series D Preferred
Stock which the Company has the option to issue, provided that certain
conditions were satisfied, all of which are outside of the control of the
investor, were issued by the Company on December 8, 2000 and sets forth (i) the
effective conversion price at the time of the various reductions in the
percentage of the prevailing market price at which the Series D Preferred Stock
may be converted into shares of Common Stock (assuming, at the date of each such
reduction, that the prevailing market price for the Common Stock is equal to,
25% less than, 50% less than, and 75% less than the closing market price of the
Common Stock on December 8, 2000), (ii) the number of shares of Common Stock
issuable upon conversion of all of the Series D Preferred Stock at such
conversion price (assuming the Company does not issue any shares of Common Stock
in payment of dividends on the Series D Preferred Stock), and (iii) the
percentage of the total number of shares of Common Stock issued and outstanding
that would be represented by the share of Common Stock issuable at such
conversion price. If the Series D Preferred Stock is converted prior to August
1, 2001, we have assumed that the conversion price will be $9.24 (based on 110%
of the average closing price of Common Stock on the three trading days prior to
December 8 2000 pursuant to the terms of the Series D); and if the Series D
Preferred Stock is converted on or after August 1, 2001, the conversion price
will be the lesser of $9.24 and the market price of Common Stock. Under the
terms of the Series D Preferred Stock and the related warrants, the shares of
Series D Preferred Stock are convertible and the warrants are exercisable by any
holder only to the extent that the number of shares of common stock issuable
pursuant to such securities, together with the number of shares of common stock
owned by such holder and its affiliates (but not including shares of common
stock underlying unconverted shares of Series D Preferred Stock or unexercised
portions of the warrants) would not exceed 4.9% of the then outstanding common
stock as determined in accordance with Section 13(d) of the Exchange Act.
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF 3,000 SHARES OF SERIES D
PREFERRED STOCK (ASSUMING 0%, 25%, 50% AND 75% REDUCTIONS IN MARKET PRICE FOR
COMMON STOCK)
<TABLE>
<CAPTION>
Conversion prior to 8/1/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
------ ---------- --------- ------------
<C> <C> <C> <C>
$7.63 $9.24 324,675 2.19%
$5.73 $9.24 324,675 2.19%
$3.82 $9.24 324,675 2.19%
$1.91 $9.24 324,675 2.19%
</TABLE>
<TABLE>
<CAPTION>
Conversion from 8/1/01 onward
------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
------ ---------- --------- ------------
<C> <C> <C> <C>
$7.63 $7.63 393,185 2.65%
$5.73 $5.73 524,476 3.54%
$3.82 $3.82 785,340 5.30%
$1.91 $1.91 1,570,681 10.59%
</TABLE>
The following table is based on the simultaneous conversion of the
remaining issued and outstanding 45,000 shares of Series A Preferred Stock,
20,000 shares of Series B Preferred Stock, and 12,000 shares of Series C
Preferred Stock and the 3,000 shares of Series D Preferred Stock (which the
Company has the option to issue, subject to the satisfaction of certain
conditions, all of which are outside of the control of the investor, but as of
the date of this Registration has not done so) at a point in time when such
conversion would have the greatest dilutive impact upon the shares of Common
Stock. The table below sets forth (i) the effective conversion price at the time
of the greatest reduction in the percentage of the prevailing market price at
which the Preferred Stock may be converted into shares of Common Stock
(assuming, at the date of each such reduction, that the prevailing market price
for the Common Stock is equal to, 25% less than, 50% less than, and 75% less
than the closing market price of the Common Stock on December 8, 2000), (ii) the
number of shares of Common Stock issuable upon conversion of all of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock at such conversion price (assuming the Company does not issue
any shares of Common Stock in payment of dividends on the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock), and (iii) the percentage of the total number of shares of Common Stock
issued and outstanding that would be represented by the shares of Common Stock
issuable at such conversion price. Under the terms of the Series C and D
Preferred Stock and the related warrants, the shares of Series C and D Preferred
Stock are convertible and the warrants are exercisable by any holder only to the
extent that the number of shares of common stock issuable pursuant to such
securities, together with the number of shares of common stock owned by such
holder and its affiliates (but not including shares of common stock underlying
unconverted shares of Series C Preferred Stock or Series D Preferred Stock or
unexercised portions of the warrants) would not exceed 4.9% of the outstanding
common stock determined in accordance with Section 13(d) of the Exchange Act.
AGGREGATE TOTAL OF SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF 45,000
SHARES OF SERIES A PREFERRED STOCK, 20,000 SHARES OF SERIES B PREFERRED STOCK,
12,000 SHARES OF SERIES C PREFERRED STOCK AND 3,000 SHARES OF SERIES D PREFERRED
STOCK (ASSUMING 0%, 25%, 50% AND 75% REDUCTIONS IN MARKET PRICE FOR COMMON
STOCK)
<TABLE>
<CAPTION>
Conversion After 07/31/01
------------------------------------------------
AGGREGATE
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
CONVERSION CONVERSION COMMON OF CONVERTED
MARKET PRICE: SERIES PRICE: SERIES STOCK PREFERRED
PRICE SERIES A AND B C AND D ISSUABLE STOCK
------ -------------- ------------- ------------ ------------
<C> <C> <C> <C> <C>
$7.63 $4.9595 $7.63 3,276,540 22.10%
$5.73 $3.718 $5.73 4,370,629 29.48
$3.82 $2.4835 $3.82 6,544,503 44.14%
$1.91 $1.2415 $1.91 13,089,005 88.29%
</TABLE>
<PAGE> 17
NO MAXIMUM NUMBER OF SHARES OF COMMON STOCK ISSUED UPON CONVERSION.
There is no minimum average trading price that fixes the maximum number of
shares of Common Stock that can be issued upon the conversion of Preferred
Stock. The terms of the Series A and B Preferred Stock, however, provide that,
should the market price for Common Stock decline to less than $4.00 per share,
the Preferred Stock may not be converted for a period of 30 days or until the
market price exceeds $4.00 (if earlier). Similarly, should the market price for
Common Stock decline to less than $2.00 per share, the Series A and B Preferred
Stock may not be converted for a 30-day period or until the market price exceeds
$2.00 (if earlier). Subject to certain conditions, if, at any time after the
issuance of the Series C Preferred Stock, the closing price of the common stock
is below $13.25 for five consecutive trading days, the Company can redeem the
Series C Preferred Stock with 20 trading days advance written notice. The
redemption price per share will equal the "Applicable Percentage" multiplied by
the sum of $1,000 plus all accrued premium thereon at the rate of 8% per annum.
The Applicable Percentage means 120% until the 12-month anniversary of the
closing and 125% thereafter.
THE OWNERSHIP AND CONTROL OF THE COMPANY IS CONCENTRATED.
At December 8, 2000 our executive officers and directors beneficially owned
approximately 31.80% of the outstanding shares of our Common Stock. Theodore J.
Goodlander, our CEO, directly owns approximately 26.99% of the outstanding
shares of our Common Stock and 10,000 shares of our Series A Preferred Stock,
which were convertible on December 8, 2000 into 158,479 shares of Common Stock.
If Mr. Goodlander were to convert his shares of Series A Preferred Stock into
shares of Common Stock at the conversion rate in effect on December 8, 2000, he
would own approximately 27.77% of the then outstanding shares of our Common
Stock. In addition, trusts established for the benefit of Mr. Goodlander's
children own approximately 22.19% of the outstanding shares of Common Stock.
Although Mr. Goodlander does not exercise any voting control over such shares,
the trustees may vote with Mr. Goodlander and effectively control the management
and affairs of the Company. Thus, any new shareholders probably will own a
number of shares of Common Stock that will be insufficient to permit them to
influence or control the management or policies of the Company.
WE HAVE ADDITIONAL FINANCING REQUIREMENTS.
We believe that we have sufficient liquidity to undertake certain
designated activities and to fund operations through December 31, 2001. However,
our long-term continued operations depend upon cash flows from operations, if
any, and the availability of additional equity or debt financing. In light of
our current cash and working capital positions, it is uncertain that we would be
able to generate sufficient cash flows from operations to sustain and continue
to fund growth and expansion without an additional equity or debt offering in
the future. There can be no assurances that we could successfully complete a
debt or equity offering in the future, on terms satisfactory to us, if at all.
THERE IS LIMITED LIABILITY OF DIRECTORS AND OFFICERS.
We, in our Certificate of Incorporation and By-laws, as amended and
restated, have adopted certain provisions of Delaware General Corporation Laws
("DGCL"), which afford our directors and officers limited liability and/or
indemnification in certain circumstances. The availability of these protections
may, in some cases, affect our response to unsolicited attempts by third parties
to take over or otherwise gain control of the Company.
THERE IS LIMITED SENIOR EXECUTIVE STAFF.
Our senior executive management is composed solely of a small core group of
individuals. Our executive management function is highly concentrated among a
limited number of key managers. Accordingly, the departure of one or more of
such executive managers could have an adverse affect on our technological
advancements or results of operations. Although we take appropriate steps to
compensate our executive management, there can be no assurances that we will be
able to attract or retain qualified senior management personnel.
OUR BUSINESS MAY SUFFER IF WE CANNOT PROTECT OUR INTELLECTUAL PROPERTY.
We generally rely upon patent, copyright, trademark and trade secret laws
and contract rights in the United States and in other countries to establish and
maintain our proprietary rights in our technology and products. However, there
can be no assurance that any of our proprietary rights will not be challenged,
invalidated or circumvented. In addition, the laws of certain countries do not
protect our proprietary rights to the same extent, as do the laws of the United
States. Therefore, there can be no assurance that we will be able to adequately
protect our
<PAGE> 18
proprietary technology against unauthorized third-party copying or use, which
could adversely affect our competitive position. Further, there can be no
assurance that we will be able to obtain licenses to any technology that we may
require to conduct our business or that, if obtainable, such technology can be
licensed at a reasonable cost.
We are aggressively pursuing the enforcement of our intellectual property
rights after an extensive patent review conducted in 1999. Subsequently, we
retained a major law firm to enforce these rights against infringing parties,
which our management believes to be extensive. Despite our legal
representatives' efforts, there can be no assurance or predictability as to any
amount of recovery, if any, or the length of time it will take us to recover any
royalties or license fees that may be recoverable. Despite our efforts to
protect our intellectual property rights, unauthorized use may still occur,
particularly in foreign countries.
CHANGES IN LAWS, REGULATIONS, OR OTHER CONDITIONS COULD ADVERSELY AFFECT OUR
CONDITION.
Our business, results of operations and financial condition could be
adversely affected if any laws, regulations or standards, both foreign and
domestic, relating to us or our products were newly implemented or changed.
LITIGATION THAT WE MAY BECOME INVOLVED IN MAY ADVERSELY AFFECT US.
Both in the ordinary course of business and in our efforts to enforce our
intellectual property rights against infringing parties, we may become involved
in litigation, administrative proceedings and governmental proceedings. Such
matters can be time-consuming, divert management's attention and resources and
cause us to incur significant expenses. Furthermore, there can be no assurance
that the results of any of these actions will not have a material adverse effect
on our business, results of operations or financial condition.
THE COMPANY HAS ACQUIRED CYBERSTORAGE SYSTEMS AS A WHOLLY OWNED SUBSIDIARY.
On September 14, 2000, the Company acquired CyberStorage Systems
Corporation as a wholly owned subsidiary. There can be no assurance that the
Company will successfully integrate the two companies' personnel, products or
operations.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares being offered
by the selling stockholders; nor will such proceeds be available for our use or
benefit.
DIVIDEND POLICY
We have never paid cash dividends on our Common Stock. We currently
anticipate retaining all available funds, if any, to finance internal growth and
product development. Payment of dividends in the future will depend upon our
earnings and financial condition and such other factors as the directors may
consider or deem appropriate at the time.
SELLING STOCKHOLDERS
We are registering all 14,790,601 shares of Common Stock covered by this
prospectus on behalf of the selling stockholders named in the table below. Some
of these shares are issuable upon the conversion of the Preferred Stock held by
certain selling shareholders listed below, and in payment of dividends on the
Preferred Stock and upon
<PAGE> 19
exercise of Warrants issued to holders of Preferred Shares. Additionally,
170,000 shares are issuable upon conversion of other warrants held by selling
stockholders. We have registered the 14,790,601 shares of Common Stock to permit
the selling stockholders to resell the shares when they deem appropriate.
We are registering shares of Common Stock on behalf of RGC International
Investors, LDC ("RGC"), The Shaar Fund, Ltd., Green Mountain Capital and
Theodore J. Goodlander, pursuant to contractual obligations between the Company
and each of such selling stockholders. The Company has no contractual
obligations to register any other shares covered by this registration statement.
In the event that the conversion price for either the Series A Preferred Shares
or Series B Preferred Shares falls below $2.00 per share, then the Company is
contractually obligated to each of The Shaar Fund, Ltd. and Theodore J.
Goodlander to register additional shares of Common Stock.
The shares offered by this prospectus may be offered from time to time by
the selling stockholders named below. We do not know how long the selling
stockholders will hold the shares before selling them and we currently have no
agreements, arrangements or understandings with any of the selling stockholders
regarding the sale of any of the shares. The stockholders are not making
representation that any shares covered by the prospectus will be offered for
sale. Notwithstanding the foregoing, Theodore J. Goodlander, beneficial owner
of 4,664,000 shares of Common Stock being registered in this registration
statement, has advised us that he has no present intention to sell any of his
shares of Common Stock. In the event that Mr. Goodlander indicates a change in
this intention, we will file an amendment to this Prospectus.
The following table sets forth the name of each of the selling
stockholders, the number of shares owned by each of the selling stockholders
prior to the offering, the number of shares that may be offered under this
prospectus, and the number and percent of shares of our Common Stock
beneficially owned by each of the selling stockholders after this offering is
completed. Except as set forth in the table below, none of the selling
stockholders has had a material relationship with us within the past three years
other than as a result of the ownership of our securities. The number of shares
in the column "Number of Shares Being Offered" represent all of the shares that
each selling stockholder may offer under this prospectus and the following table
assumes that all of the shares being registered will be sold. All information
contained in the table below is based upon their beneficial ownership as of
December 8, 2000, except as described below.
The number of shares set forth for RGC International Investors represents
an estimate of the number of shares of Common Stock to be offered by RGC
International Investors. The actual number of shares of common stock issuable
upon conversion of the Series C and D Preferred Stock and exercise of related
warrants is indeterminate, is subject to adjustment, and cannot be predicted by
us at this time, including, among other factors, the future market price of the
Common Stock. The actual number of shares of Common Stock offered in this
prospectus, and included in the registration statement of which this prospectus
is a part, includes such additional number of shares of Common Stock as may be
issued or issuable upon conversion of the Series C and D Preferred Stock and
exercise of related warrants by reason of any stock split, stock dividend or
similar transaction involving the Common Stock, in accordance with Rule 416
under the Securities Act. Under the terms the Series C and D Preferred Stock,
if the Series C and D Preferred Stock had actually been converted on December 8,
2000, the conversion would have been $7.53, the average of the lowest five
closing market prices for the twenty trading days immediately preceding such
date, at which price the Series C and D Preferred Stock would have been
converted into approximately 1,992,032 shares of Common Stock. The warrants
issued in connection with the Series C and D Preferred Stock are exercisable
into 260,813 shares of Common Stock, with warrants to purchase 181,132 shares of
Common Stock relating to Series C Preferred Stock and 79,681 Series D Preferred
Stock, at per share exercise prices of $21.71 and $12.47, respectively.
Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares listed in the table, subject to community
property laws, where applicable. For purposes of this table, a person or group
of persons is deemed to have "beneficial ownership" of any shares that such
person has the right to acquire within 60 days. The number of shares in this
table does not accurately represent the beneficial ownership of RGC
International Investors and exceeds the number of shares of Common Stock that
RGC International Investors could own beneficially at any given time through
their ownership of the Series C and D Preferred Stock and the warrants. Under
the terms of the Series C and D Preferred Stock and the related warrants, the
shares of Series C and D Preferred Stock are convertible and the warrants are
exercisable by any holder only to the extent that the number of shares of Common
Stock issuable pursuant to such securities, together with the number of shares
of Common Stock owned by such holder and its affiliates (but not including
shares of Common Stock underlying unconverted shares of Series C and D Preferred
Stock or unexercised portions of the warrants) would not exceed 4.9% of the then
outstanding Common Stock as determined in accordance with Section 13(d) of the
Exchange Act. In that regard, the beneficial ownership of the Common Stock by
RGC International Investors set forth in the table is not determined in
accordance with Rule 13d-3 under the Exchange Act. Percentage ownership is based
on 14,825,548 shares of our Common Stock outstanding on December 8, 2000. For
purposes of computing the percentage of outstanding shares held by each person
or group of persons named below, any security which such person or group of
persons has the right to acquire within 60 days is deemed to be outstanding for
the purpose of computing the percentage ownership for such person or persons,
but is not deemed to be outstanding for the purpose of computing the percentage
ownership any other person or persons. The rate at which the Preferred Shares
may be converted into Common Stock and the rate at which dividends payable in
cash on the Preferred Shares may be paid in shares of Common Stock vary based on
the prevailing market price for our Common Stock and the length of time the
Preferred Shares are outstanding before conversion. For purposes of this table,
we have assumed that the Preferred Shares will remain outstanding for a period
of three years (the maximum period before the Preferred Shares are subject to
mandatory conversion into Common Stock), that all dividends on the Preferred
Shares will be paid in shares of Common Stock, and that the effective price at
which the Preferred shares and dividends will convert to common shares will be
$8.6625 with respect to Series A Preferred Shares and $13.41 with respect to
Series B Preferred Shares, $13.25 with respect to Series C Preferred Shares and
$9.24 with respect to Series D Preferred Shares. The actual number of common
shares into which the Preferred Stock held by the selling stockholders were
convertible on December 8, 2000 was 2,709,354 shares.
<PAGE> 20
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED NUMBER OF BENEFICIALLY OWNED
PRIOR TO OFFERING SHARES BEING AFTER OFFERING (1)
NAME OF SELLING STOCKHOLDER NUMBER OFFERED NUMBER PERCENT
-------------------------------------------- ------ ------------ ------ -------
<S> <C> <C> <C> <C>
The Shaar Fund Ltd. (2) 2,692,527 2,692,527 0 *
Theodore J. Goodlander (3) 4,666,000 4,664,000 2,000 *
Citizens Bank of Massachusetts 75,000 75,000 0 *
J.P. Turner & Company, L.L.C. 12,500 12,500 0 *
John Clarke 18,750 18,750 0 *
Daniel Krzanowski 18,750 18,750 0 *
Hartsfield Capital Securities, Inc. 45,000 45,000 0 *
Margaret Goodlander Trust (4) 822,500 822,500 0 *
Jeanne McCready, Trustee
John Goodlander Trust (5) 822,500 822,500 0 *
Jeanne McCready, Trustee
Kristina Goodlander Trust (6) 822,500 822,500 0 *
Jeanne McCready, Trustee
TechnoGraphy, Inc. 132,500 132,500 0 *
Green Mountain Capital, L.P. 121,000 121,000 0 *
RGC International Investors, LDC (7) 4,543,074 4,543,074 0 *
TOTAL 14,792,601 14,790,601 2,000 *
</TABLE>
-----------------------------------------
<PAGE> 21
(1) Assumes sale of all of the shares offered by this Prospectus.
(2) Includes 2,384,527 shares issuable upon the conversion of the Series A and
Series B Preferred Stock (assuming an effective conversion price of $2.00 per
share) and 308,000 shares issuable upon exercise of warrants held by The Shaar
Fund, Ltd.
(3) Theodore J. Goodlander currently serves (and has served for at least the
past three years) as the Company's CEO and Chairman. Includes 620,000 shares
issuable upon the conversion of Series A Preferred Stock (assuming an effective
conversion price of $2.00 per share) and 44,000 shares issuable upon exercise of
warrants held by Theodore J. Goodlander.
(4) Margaret Goodlander, the beneficiary of this trust, is the minor daughter of
Theodore J. Goodlander, our CEO. Theodore J. Goodlander exercises no control
over the voting or disposition of any shares held by this trust.
(5) John Goodlander, the beneficiary of this trust, is the minor son of Theodore
J. Goodlander, our CEO. Theodore J. Goodlander exercises no control over the
voting or disposition of any shares held by this trust.
(6) Kristina Goodlander, the beneficiary of this trust, is the minor daughter of
Theodore J. Goodlander, our CEO. Theodore J. Goodlander exercises no control
over the voting or disposition of any shares held by this trust.
(7) Assumes that 3,000 shares of Series D Preferred Stock have been issued to
RGC International Investors as of December 8, 2000. Includes 4,021,448 shares of
Common Stock issuable upon conversion of the Series C and Series D Preferred
Shares (assuming an effective conversion price of $3.73 per share) and 521,626
shares of Common Stock issuable upon the exercise of warrants relating to the
Series C and Series D Preferred Stock, each held by RGC International
Investors. The Company's issuance of the Series D Preferred Stock is subject to
conditions outside of the control of the investor.
* Represents beneficial ownership of less than 1%
DESCRIPTION OF CAPITAL STOCK
Authorized Capital Stock
Our authorized capital stock consists of 25,000,000 shares of Common Stock,
par value $0.001, and 1,000,000 shares of Preferred Stock, par value $0.001. Of
our authorized Preferred Stock, 90,000 shares have been designated Series A 8%
Convertible Preferred Stock, 20,000 shares have been designated Series B 8%
Convertible Preferred Stock, 12,000 shares have been designated Series C 8%
Convertible Preferred Stock, 3,000 shares have been designated Series D 8%
Convertible Stock, and 875,000 shares remain undesignated. As of December 8,
2000, there were outstanding 14,825,548 shares of Common Stock held of record by
approximately 600 shareholders. As of December 8, 2000, there were outstanding
45,000 shares of Series A 8% Convertible Preferred Stock held of record by 4
shareholders, which shares were convertible on December 8, 2000 into 774,527
shares of Common Stock. As of December 8, 2000, there were outstanding 20,000
shares of Series B Preferred Stock held of record by one shareholder, which
shares were convertible on December 8, 2000 into 327,332 shares of Common Stock.
As of December 8, 2000, there were outstanding 12,000 shares of Series C
Preferred Stock were held of record by one shareholder, which shares were
convertible into 905,660 shares of Common Stock. As of December 8, 2000, no
shares of Series D Preferred Stock had been issued. The Company has outstanding
stock options to purchase 1,880,087 shares of Common Stock and warrants and
other convertible securities outstanding to purchase 976,842 shares of Common
Stock.
The following summary of certain provisions of the Common Stock and
preferred stock is not intended to be complete and is qualified by reference to
the provisions of applicable law and our amended and restated certificate of
incorporation (as amended) and our amended and restated by-laws.
Common Stock
Holders of Common Stock are entitled to one vote for each share held.
Subject to preferences that may be applicable to any Preferred Stock outstanding
at the time, the holders of the outstanding shares of Common Stock are entitled
to receive dividends out of assets legally available therefore at such times and
in such amount as the Board may from time to time determine. The Common Stock is
not entitled to preemptive rights and is not subject to redemption. Upon
liquidation, dissolution or winding-up of the Company, the assets legally
available for distribution to stockholders are distributable ratably among the
holders of the Common Stock and any participating Preferred Stock outstanding at
that time after payment of liquidation preferences, if any, on any outstanding
Preferred Stock and payment of other claims of creditors. Each outstanding share
of Common Stock is validly issued, fully paid and nonassessable.
Series A 8% Convertible Preferred Stock
We have issued 80,000 shares of our Series A Preferred Stock, of which
45,000 shares were outstanding on December 8, 2000. The shares of Series A
Preferred Stock are pari passu with shares of Series B Preferred Stock and
Series C Preferred Stock and rank senior to all other shares of our capital
stock, including shares of our Common Stock. Upon liquidation, dissolution or
winding-up of the Company or the commencement of certain bankruptcy proceedings
involving the Company, the holders of our Series A Preferred Stock are entitled
to
<PAGE> 22
receive an amount equal to $130 per share, plus accrued and unpaid dividends,
before any payments or distributions of our assets to other shareholders. The
holders of our Series A Preferred Stock have the right to require us to treat
certain changes in the control of the Company as a liquidation pursuant to which
we will be required to distribute to them the same preferential amount they
would receive upon a liquidation, dissolution or winding up of the Company. Each
share of Series A Preferred Stock has a stated value of $100 and is entitled to
receive dividends at the rate of $8 per year, payable semi-annually. We have the
option of paying dividends in cash or through the issuance of shares of our
Common Stock to the holders of Series A Preferred Stock. Subject to certain
restrictions, the holders of our Series A Preferred Stock have the right to
convert their shares of Series A Preferred Stock into Common Stock at a
conversion price equal to the lesser of (i) $8.6625 per share (110% of the
market price of our Common Stock on April 19, 2000) or (ii) a discount
(beginning at 17.5% and increasing over time to 35%) below the market price of
our Common Stock on the date of conversion. We are required to convert any
shares of our Series A Preferred Stock remaining outstanding on April 19, 2003
into shares of Common Stock. We have the right to redeem our Series A Preferred
Stock at any time before April 19, 2003 at a price of $125 per share plus
accrued and unpaid dividends, so long as on the date of redemption the market
price of our Common Stock is less than $8.6625 per share (110% of the market
price of our Common Stock on April 19, 2000). The holders of our Series A
Preferred Stock generally do not have voting rights, although the consent of the
holders of 90% of the then-outstanding shares of Series A Preferred Stock is
required for certain fundamental changes in the rights, preferences or priority
of our Series A Preferred Stock.
Series B 8% Convertible Preferred Stock
We have issued 20,000 shares of our Series B Preferred Stock, all of
which were outstanding on December 8, 2000. The shares of Series B Preferred
Stock are pari passu with Series A Preferred Stock and Series C Preferred Stock
and rank senior to all other shares of our capital stock, including shares of
our Common Stock. Upon liquidation, dissolution or winding-up of the Company or
the commencement of certain bankruptcy proceedings involving the Company, the
holders of our Series B Preferred Stock are entitled to receive an amount equal
to $130 per share, plus accrued and unpaid dividends, before any payments or
distributions of our assets to other shareholders. The holders of our Series B
Preferred Stock have the right to require us to treat certain changes in the
control of the Company as a liquidation pursuant to which we will be required to
distribute to them the same preferential amount they would receive upon a
liquidation, dissolution or winding up of the Company. Each share of Series B
Preferred Stock has a stated value of $100 and is entitled to receive dividends
at the rate of $8 per year, payable semi-annually. We have the option of paying
dividends in cash or through the issuance of shares of our Common Stock to the
holders of Series B Preferred Stock. Subject to certain restrictions, the
holders of our Series B Preferred Stock have the right to convert their shares
of Series B Preferred Stock into Common Stock at a conversion price equal to the
lesser of (i) $13.41 per share (110% of the market price of our Common Stock on
September 28, 2000) or (ii) a discount (beginning at 17.5% and increasing over
time to 35%) below the market price of our Common Stock on the date of
conversion. We are required to convert any shares of our Series B Preferred
Stock remaining outstanding on September 28, 2003 into shares of Common Stock.
We have the right to redeem our Series B Preferred Stock at any time before
April 19, 2003 at a price of $125 per share plus accrued and unpaid dividends,
so long as on the date of redemption the market price of our Common Stock is
less than $13.41 per share (110% of the market price of our Common Stock on
September 28, 2000). The holders of our Series B Preferred Stock generally do
not have voting rights, although the consent of the holders of 90% of the
then-outstanding shares of Series B Preferred Stock is required for certain
fundamental changes in the rights, preferences or priority of our Series B
Preferred Stock.
Series C 8% Convertible Stock
We have issued 12,000 shares of our Series C Preferred Stock, all of
which were outstanding on December 8, 2000. The shares of Series C Preferred
Stock are pari passu with Series A Preferred Stock and Series B Preferred Stock
and rank senior to all other shares of our capital stock, including shares of
our Common Stock. Upon liquidation, dissolution or winding-up of the Company or
the commencement of certain bankruptcy proceedings involving the Company, the
holders of our Series C Preferred Stock are entitled to receive an amount equal
to $1,000 per share, plus accrued and unpaid dividends, before any payments or
distributions of our assets to other shareholders. The holders of our Series C
Preferred Stock have the right to require us to treat certain changes in the
control of the Company as a liquidation pursuant to which we will be required to
distribute to them 120% of the same preferential amount they would receive upon
a liquidation, dissolution or winding up of the Company. Each share of Series C
Preferred Stock has a stated value of $1,000 and does not bear dividends. After
July 31, 2001, the holders of our Series C Preferred Stock have the right to
convert their shares of Series C Preferred Stock into Common Stock at a
conversion price equal to the lesser of (i) $13.25 per share or (ii) the market
price for Common Stock. Subject to certain exceptions, prior to August 1, 2001,
the holders of our Series C Preferred Stock have the right to convert their
shares of Series C Preferred Stock into Common Stock at a conversion price equal
to $13.25 per share. We are required to convert any shares of our Series C
Preferred Stock remaining outstanding on October 31, 2003 into shares of Common
Stock. If at any time beginning nine months from the effectiveness of this
Registration Statement (or earlier upon the public offering of company common
stock meeting certain criteria) the market price for a share of Common Stock is
greater than $19.875 per share, we have the right to force the conversion of our
Series C Preferred Stock at any time before October 31, 2003 at a then
applicable conversion price per share, so long as on the date of conversion the
market price of our Common Stock is more than $13.25 per share. The holders of
our Series C Preferred Stock generally do not have voting rights, although the
consent of the holders of a majority of the then-outstanding shares of Series C
Preferred Stock is required for certain fundamental changes in the rights,
preferences or priority of our Series C Preferred Stock.
Series D 8% Convertible Stock
We have entered in an agreement pursuant to which we may issue 3,000
shares of our Series D Preferred Stock, subject to the satisfaction of certain
conditions, all of which are outside the control of the investor. The shares of
Series D Preferred Stock will be pari passu with Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock and rank senior to all
other shares of our capital stock, including shares of our Common Stock. Upon
liquidation, dissolution or winding-up of the Company or the commencement of
certain bankruptcy proceedings involving the Company, the holders of our Series
D Preferred Stock will be entitled to receive an amount equal to $1,000 per
share, plus accrued and unpaid dividends, before any payments or distributions
of our assets to other shareholders. The holders of our Series D Preferred Stock
will have the right to require us to treat certain changes in the control of the
Company as a liquidation pursuant to which we will be required to distribute to
them 120% of the same preferential amount they would receive upon a liquidation,
dissolution or winding up of the Company. Each share of Series D Preferred Stock
will have a stated value of $1,000 and will not bear dividends. After July 31,
2001, the holders of our Series D Preferred Stock will have the right to convert
their shares of Series D Preferred Stock into Common Stock at a conversion price
equal to the lesser of (i) $9.24 per share or (ii) the market price for Common
Stock. Subject to certain exceptions, prior to August 1, 2001, the holders of
our Series D Preferred Stock will have the right to convert their shares of
Series D Preferred Stock into Common Stock at a conversion price equal to $9.24
per share, assuming that the Series D were issued December 8, 2000. We will be
required to convert any shares of our Series D Preferred Stock remaining
outstanding on October 31, 2003 into shares of Common Stock. Assuming the Series
D Preferred Stock was issued on December 8, 2000. If at any time beginning nine
months from the effectiveness of this Registration Statement (or earlier upon
the public offering of company common stock meeting certain criteria) the market
price for a share of Common Stock is greater than $12.47 per share, we will have
the right to force the conversion of our Series D Preferred Stock at any time
before October 31, 2003 at a then applicable conversion price per share, so long
as on the date of conversion the market price of our Common Stock is more than
$9.24 per share. The holders of our Series D Preferred Stock generally will not
have voting rights, although the consent of the holders of a majority of the
then-outstanding shares of Series D Preferred Stock will be required for certain
fundamental changes in the rights, preferences or priority of our Series D
Preferred Stock.
Undesignated Preferred Stock
Our Board of Directors is authorized to issue up to 888,000 shares of
preferred stock, in one or more series with such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated and expressed in a Board
resolution or resolutions providing for the issue of such series without any
further vote or action by the stockholders. The Board may authorize the issuance
of such preferred stock with voting or conversion rights that could adversely
affect the voting power or other rights of the holders of the Common Stock.
Thus, the issuance of the currently-undesignated preferred stock may have the
effect of delaying, deferring or preventing a change in control of the Company.
Compliance with Rules and Regulations of the American Stock Exchange
The terms of the Series B Preferred Stock provide that, to the extent
shareholder approval of the issuance of Common Stock is required by the Rules of
the American Stock Exchange, the Company may not issue shares of Common Stock
upon conversion of Series B Preferred Stock if the number of such shares (when
added to the number of shares of Common Stock previously issued by the Company
upon conversion of other shares of Series B Preferred Stock, in payment of
dividends on the Series B Preferred Stock and upon exercise of the warrants)
would equal or exceed 20% of the number of shares of Common Stock issued and
outstanding on September 28, 2000 (the "Series B Maximum Issuable Amount"),
unless such shareholder approval has been obtained. If the issuance of Common
Stock upon conversion of the Series B Preferred Stock has not been approved by
the shareholders of the Company at the time when a holder of Series B Preferred
Stock exercises conversion rights, the Company will issue shares of Common Stock
up to the Series B Maximum Issuable Amount and will be required to redeem any
excess shares of Series B Preferred Stock at a price of $125 per share (plus all
accrued and unpaid dividends thereon).
The Company's issuance of 20,000 shares of Series B Preferred Stock has
not been approved by the shareholders of the Company. Under Section 713 of its
Company Guide, the American Stock Exchange requires shareholder approval, as a
condition to the approval of applications to list additional shares of an
Exchange-traded security in connection with a transaction involving the sale or
issuance of securities convertible into common stock equal to 20% or more of the
presently outstanding stock for less than the greater of book value or market
value of the stock.
If the conversion price for the Series B Preferred Shares were to drop
to less than $0.8418 per share (and assuming that all dividends on the Series B
Preferred Shares were paid in shares of Common Stock valued at such price), the
conversion of all of the outstanding Series B Preferred Shares would, but for
the Maximum Issuable Amount limitation, require the Company to issue more than
2,946,326 shares of Common Stock (which represents 20% of the total number of
shares of Common Stock issued and outstanding on September 28, 2000). In order
to permit the Company to issue shares of Common Stock upon conversion of Series
B Preferred Shares in excess of the Maximum Issuable Amount and to list such
shares for trading on the American Stock Exchange, such issuance must be
approved by the shareholders. If shareholder approval is not obtained, the
Company will be obligated to redeem any Series B Preferred Shares whose
conversion would require the issuance of Common Stock in excess of the Series B
Maximum Issuable Amount.
The terms of the Series C and, if issued, D Preferred Stock provide
that, to the extent shareholder approval of the issuance of Common Stock is
required by the Rules of the American Stock Exchange, the Company may not issue
shares of Common Stock upon conversion of Series C or D Preferred Stock if the
number of such shares (when added to the number of shares of Common Stock
previously issued by the Company upon conversion of other shares of Series C
Preferred Stock, and if the Series D Preferred Stock is issued, shares issued
upon conversion of the Series D Preferred Stock) would equal or exceed 20% of
the number of shares of Common Stock issued and outstanding on October 31, 2000
(the date the Series C Preferred Stock was issued) (the "Series C and D Maximum
Issuable Amount"), unless such shareholder approval has been obtained. If the
issuance of Common Stock upon conversion of the Series C and Series D Preferred
Stock has not been approved by the shareholders of the Company, the Company will
issue shares of Common Stock up to the Series C and D Maximum Issuable Amount
and will be required to redeem any excess shares of Series C and Series D
Preferred Stock at 125% of the stated value.
The Company's issuance of 12,000 shares of Series C Preferred Stock and
3,000 shares of Series D Preferred Stock has not been approved by the
shareholders of the Company. Under Section 713 of its Company Guide, the
American Stock Exchange requires shareholder approval, as a condition to the
approval of applications to list additional shares of an Exchange-traded
security in connection with a transaction involving the sale or issuance of
securities convertible into common stock equal to 20% or more of the presently
outstanding stock for less than the greater of book value or market value of the
stock.
If the Series D Preferred Stock is not issued and if the conversion
price for the Series C Preferred Shares were to drop to less than $4.057 per
share, the conversion of all of the outstanding Series C Preferred Shares would,
but for the Series C and D Maximum Issuable Amount limitation, require the
Company to issue more than 2,932,690 shares of Common Stock (which represents
20% of the total number of shares of Common Stock issued and outstanding on
October 31, 2000). In order to permit the Company to issue shares of Common
Stock upon conversion of Series C Preferred Shares in excess of the Series C and
D Maximum Issuable Amount and to list such shares for trading on the American
Stock Exchange, such issuance must be approved by the shareholders.
If the conversion price for the Series C and D Preferred Stock were to
drop to less than $5.12 per share, the conversion of all of the outstanding
Series D Preferred Stock would, but for the Series C and D Maximum Issuable
Amount limitation, require the Company to issue more than 2,932,690 shares of
Common Stock (which represents 20% of the total number of shares of Common Stock
issued and outstanding on October 31, 2000 (the date the Series C Preferred
Stock was issued). In order to permit the Company to issue shares of Common
Stock upon conversion of Series D Preferred Stock in excess of the Series C and
D Maximum Issuable Amount and to list such shares for trading on the American
Stock Exchange, such issuance must be approved by the shareholders.
PLAN OF DISTRIBUTION
Pursuant to this Prospectus, the selling stockholders are offering from
time to time, in whole or in part, an aggregate of 14,790,601 shares of Common
Stock for resale hereunder for their own accounts at such prices and on such
terms as are available at the time of sale. The proceeds from any sales of
Common Stock by the selling stockholders will not be received by the Company.
We will pay substantially all expenses incurred in the offering and sale of
the Common Stock to the public, other than commissions, concessions and
discounts of dealers or agents. These expenses (excluding such commissions and
discounts) are estimated to be approximately $120,000. For their shares, the
selling stockholders will receive the purchase price of the shares sold less any
agent's commissions, discounts and other related expenses. The shares being
offered by the selling stockholders or their respective pledgees, donees,
transferees or other successors in interest, will be sold from time to time in
one or more transactions (which may involve block transactions):
- on the American Stock Exchange or on such other market on which
the common stock may from time to time be trading;
- in privately-negotiated transactions;
- through the writing of options on the shares;
- short sales; or
- any combination thereof.
The sale price to the public may be:
- the market price prevailing at the time of sale;
- a price related to such prevailing market price;
- at negotiated prices; or
- such other price as the selling stockholders determine from time to
time.
The shares may also be sold pursuant to Rule 144. The selling stockholders shall
have the sole and absolute discretion not to accept any purchase offer or make
any sale of shares if they deem the purchase price to be unsatisfactory at any
particular time.
The selling stockholders or their respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom such broker-dealers may act as agents
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus would be issued to, or sold by, the selling stockholders. The selling
stockholders and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed "underwriters" as that
term is defined under the Securities Act or the Exchange Act, or the rules and
regulations under such acts.
The selling stockholders, alternatively, may sell all or any part of the
shares offered in this prospectus through an underwriter. No selling stockholder
has entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into. If a selling stockholder
enters into such an agreement or agreements, the relevant details will be set
forth in a supplement or revisions to this prospectus.
The selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations under such act, including, without
limitation, Regulation M. These provisions may restrict certain activities of,
and limit the timing of purchases and sales of any of the shares by, the selling
stockholders or any other such person. Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited form simultaneously
engaging in market making and certain other activities with respect to such
securities for a specified period of time prior to the commencement of such
distributions, subject to specified exceptions or exemptions. All of these
limitations may affect the marketability of the shares.
<PAGE> 23
In order to comply with the securities laws of certain states, if applicable,
the shares may be sold in such jurisdictions only through registered or licensed
brokers or dealers. In addition, in certain states the shares may not be sold
unless they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with.
<PAGE> 24
LEGAL MATTERS
The legality of our shares of Common Stock offered by this prospectus will
be passed upon for us by Peabody & Arnold LLP, 50 Rowes Wharf, Boston,
Massachusetts 02110. William E. Kelly, a partner at Peabody & Arnold LLP, is our
Secretary.
EXPERTS
Our consolidated financial statements as of December 31, 1999 and December
31, 1998, and for each of the two years in the period ended December 31, 1999,
incorporated herein by reference, have been audited by BDO Seidman, LLP,
independent certified public accountants, as indicated in their reports with
respect thereto, and are incorporated herein in reliance upon such reports given
upon the authority of said firm as experts in accounting and auditing. Our
consolidated financial statements for the year ended December 31, 1997,
incorporated herein by reference, have been audited by Richard A. Eisner &
Company, LLP, independent certified public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
WE HAVE AUTHORIZED NO ONE TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
THAT ARE NOT CONTAINED IN THIS PROSPECTUS. YOU SHOULD RELY ONLY
<PAGE> 25
ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED IN THIS PROSPECTUS. YOU
MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
THIS PROSPECTUS DOES NOT OFFER TO SELL OR BUY ANY SHARES IN ANY JURISDICTION
WHERE IT IS UNLAWFUL. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THE
DOCUMENT.
<PAGE> 26
No dealer, sales representative or any other person has been authorized to give
information or make any representation not contained in this prospectus in
connection with the offer made by this prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than those specifically
offered hereby or of any securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make an offer or solicitation in such
jurisdiction. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to the date
hereof.
14,790,601 Shares
Storage Computer Corporation
Common Stock
-----------------
PROSPECTUS
----------------
[Date]
<PAGE> 27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCES AND DISTRIBUTION
The expenses relating to the registration of the Shares hereunder will be
borne by us. Such expenses are estimated to be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee $ 41,000.00
AMEX Listing Application Fee $ 17,500.00
Legal Fees and Expenses $ 40,000.00
Accounting Fees and Expenses $ 7,500.00
Printing and Engraving $ 10,000.00
Transfer Agent and Registrar Fees $ 1,000.00
Miscellaneous $ 3,000.00
TOTAL EXPENSES $120,000.00
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") permits
indemnification of officers and directors in certain circumstances. As permitted
by the DGCL, we have included a provision in our Certificate of Incorporation
that, subject to certain limitations, eliminates our ability and that of our
stockholders to recover monetary damages from a director of our Company for
breach of fiduciary duty as a director. Additionally, our By-Laws contain
provisions that we must indemnify and make advances to officers and directors,
for all liabilities which they incur in discharging claims made against them for
their activities as a director or officer of us that are incurred during their
tenure with us, except claims brought against an employee, officer or director,
which are based upon acts of the employee, officer or director, which were not
performed in "good faith".
Limitation of Personal Liability of Directors. The DGCL provides that a
corporation's certificate of incorporation may include a provision limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director. However, no such
provision can eliminate or limit the liability of a director for (i) any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) violation of certain provisions of the DGCL
with respect to unlawful distributions to stockholders, (iv) any transaction
from which the director derived an improper personal benefit, or (v) any act or
omission prior to the adoption of such a provision in the certificate of
incorporation. Our Certificate of Incorporation contains a provision eliminating
the personal liability of its directors for monetary damages to the extent
permitted under Delaware law.
Indemnification of Directors and Officers. Under the DGCL, a corporation
may not indemnify any director, officer, employee or agent made, or threatened
to be made party to any threatened, pending or completed proceeding, unless such
person acted in good faith and in a manner such person acted in good faith and
in a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding, had
no reasonable cause to believe that his or her conduct was unlawful. Our By-Laws
contain provisions which require us to indemnify such persons to the full extent
permitted by the DGCL.
The DGCL also establishes several mandatory rules for indemnification. In
the case of a proceeding by or in the right of the corporation to procure
judgment in its favor (e.g., a stockholder derivative suit), a corporation may
indemnify an officer,
<PAGE> 28
director, employee or agent if such person acted in good faith and in a manner
such person reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal proceeding, had no reasonable
cause to believe that his or her conduct was unlawful. Our By-Laws contain
provisions which require us to indemnify such persons to the full extent
permitted by the DGCL.
The DGCL also establishes several mandatory rules for indemnification. In
the case of a proceeding by or in the right of the corporation to procure a
judgment in its favor (e.g., a stockholder derivative suit), a corporation may
indemnify an officer, director, employee or agent if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation; provided, however, that no person
adjudged to be liable to the corporation may be indemnified unless, and only to
the extent that, the Delaware Court of Chancery or the court in which such
action or suit was brought determines upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court deems proper. A director, officer, employee or agent who is
successful, on the merits or otherwise, in defense of any proceeding subject to
the DGCL's indemnification provisions must be indemnified by the corporation for
reasonable expenses incurred therein, including attorney's fees.
The DGCL and our By-Laws state that a determination must be made that a
director or officer has met the required standard of conduct before the director
or officer may be indemnified. The determination may be made by (i) a majority
vote of a quorum of disinterested directors, (ii) independent legal counsel
(selected by the disinterested directors) or (iii) the stockholders.
The DGCL and our By-Laws require us to advance reasonable expenses to a
director or officer after such person provides an undertaking to repay the
corporation if it is determined that the required standard of conduct has not
been met. In addition, the our By-Laws permit us to advance expenses to other
employees and agents in a similar manner.
The indemnification and advancement of expenses described above under the
DGCL is not exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law agreement, vote of
stockholders or disinterested directors or otherwise.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling us,
pursuant to the foregoing provisions, we have been informed that in the opinion
of the Securities Exchange and Commission, such indemnification is against
public policy as expressed in the Act and is therefore unenforceable.
<PAGE> 29
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
4.1+ The description of our Common Stock contained in our Registration
Statement on Form 8-A filed February 5, 1995.
4.2+ Amended Certificate of Designation of Series A 8% Convertible
Preferred Stock filed as Exhibit 2.1 to our Current Report on
Form 8-K filed on October 6, 2000.
4.3+ Certificate of Designation of Series B 8% Convertible Preferred
Stock filed as Exhibit 2.2 to our Current Report on Form 8-K
filed on October 6, 2000.
4.4+ Certificate of Designation of Series C 8% Convertible Preferred
Stock filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2000.
4.5+ Warrants to purchase shares of Common Stock filed as Exhibit 4.1
and 4.2 to our Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2000.
5.1 Opinion of Peabody & Arnold LLP.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Richard A. Eisner & Company, LLP.
23.3 Consent of Peabody & Arnold LLP (Included in Exhibit 5.1 hereto).
24.1 Power of Attorney (Included in Signature Page).
</TABLE>
+Previously filed.
ITEM 17. UNDERTAKINGS
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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(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 (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
<PAGE> 30
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered, which remain, unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (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 the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 15, 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 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Nashua, State of New Hampshire, on this 15th day of
December 2000.
STORAGE COMPUTER CORPORATION
By: /s/ Theodore J. Goodlander
---------------------------
Theodore J. Goodlander
Chief Executive Officer
POWER OF ATTORNEY
The undersigned directors and officers of Storage Computer Corporation
hereby severally constitute and appoint Theodore J. Goodlander our true and
lawful attorney-in-fact and agent, with full power of substitution to execute in
our name and behalf in the capacities indicated below any and all amendments to
this registration statement to be filed with the Securities and Exchange
Commission and hereby ratify and confirm all that such attorney-in-fact and
agent shall lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
their capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Theodore J. Goodlander Chairman of the Board of Directors December 15, 2000
-------------------------- and Chief Executive Officer
Theodore J. Goodlander (Principal Executive Officer)
/s/ Edward A. Gardner President and Director December 15, 2000
--------------------------
Edward A. Gardner
/s/ John L. Thonet Chief Operating Officer and December 15, 2000
-------------------------- Director
John L. Thonet
/s/ Peter N. Hood Chief Financial Officer and December 15, 2000
-------------------------- Treasurer (Chief Financial
Peter N. Hood and Accounting Officer)
/s/ Roger E. Gauld Director December 15, 2000
--------------------------
Roger E. Gauld
Director
--------------------------
Steven S. Chen
</TABLE>
<PAGE> 32
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
4.1+ The description of our Common Stock contained in our Registration
Statement on Form 8-A filed February 5, 1995.
4.2+ Amended Certificate of Designation of Series A 8% Convertible
Preferred Stock filed as Exhibit 2.1 to our Current Report on
Form 8-K filed on October 6, 2000.
4.3+ Certificate of Designation of Series B 8% Convertible Preferred
Stock filed as Exhibit 2.2 to our Current Report on Form 8-K
filed on October 6, 2000.
4.4+ Certificate of Designation of Series C 8% Convertible Preferred
Stock filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2000.
4.5+ Warrants to purchase shares of Common Stock filed as Exhibits 4.1
and 4.2 to our Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2000.
5.1 Opinion of Peabody & Arnold LLP.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Richard A. Eisner & Company, LLP.
23.3 Consent of Peabody & Arnold LLP (Included in Exhibit 5.1
hereto).
24.1 Power of Attorney (Included in Signature Page)
+ Previously filed.
