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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 10, 2000
REGISTRATION NO. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF REGISTRATION
REGISTERED REGISTERED PER SHARE (1) PRICE FEE
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Common Stock, $0.001 par 12,679,000 shares $11.125 $141,053,875 $37,238.22
value per share (2)(3)
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(1) The price of $11.125, the average of the high and low prices ($11.75
and $10.50, respectively) of our common stock ("Common Stock") on the
American Stock Exchange on October 5, 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 of the selling stockholders upon conversion of
shares of our Series A 8% Convertible Preferred Stock (the "Series A
Preferred Stock") and our Series B 8% Convertible Preferred Stock (the
"Series B Preferred Stock") (together the "Preferred Stock") held by the
selling stockholders (the "Preferred Shares") and in payment of dividends
on the Preferred Stock. 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 Stock are outstanding before conversion. For purposes of this
Registration Statement, we have assumed that the Preferred Shares 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 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 $2.00.
(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.
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
12,679,000 SHARES
STORAGE COMPUTER CORPORATION
COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of 10,279,000 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 Registration Statement,
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 Preferred
Stock will be paid in shares of Common Stock, and that the effective price at
which the Preferred Stock and dividends will convert to common shares will be
$2.00. The actual number of common shares into which the Preferred Stock held by
the selling stockholders were convertible on October 2, 2000 was 495,462 shares.
The Preferred Shares and certain warrants relating to the Preferred 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 and September 28, 2000. We are filing the registration statement of
which this prospectus is a part pursuant to a contractual obligation incurred at
the time we issued and sold the Preferred Shares and Warrants to the selling
stockholders.
Additionally, we have registered 2,400,000 shares of Common Stock for sale
to the public by us for our account. With respect to the shares of our Common
Stock being registered for sale by us, this prospectus is part of a registration
statement the we have filed with the SEC using a "shelf" registration process.
We may offer such shares through agents that we designate from time to time or
to or through underwriters or dealers. If any agents or underwriters are
involved in the sale of the shares, their names and any applicable purchase
price, fee, commission or discount arrangement between them will be set forth in
a supplement to this prospectus. No shares of Common Stock may be sold by us
without delivery of the applicable prospectus supplement.
The prices at which the selling stockholders may sell shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. 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 October 2, 2000, the average of the high and low prices for our
Common Stock was $12.20 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.
<PAGE> 5
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. PLEASE CONSIDER
CAREFULLY THE RISK FACTORS BEGINNING AT PAGE 6 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:
1. Our Annual Report on Form 10-K/A for the fiscal year ended December
31, 1999;
2. Our Quarterly Report on Form 10-Q for the quarterly period ended June
30, 2000;
3. The description of our Common Stock contained in our Registration
Statement on Form 8-A filed February 5, 1995;
4. The description of our Series A 8% Convertible Preferred Stock,
contained in the Amended Certificate of Designation filed as Exhibit
2.1 our Current Report on Form 8-K filed on October 6, 2000.
5. 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; and
6. Our Current Report on Form 8-K filed September 29, 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.
We have issued 100,000 shares of Preferred Stock (80,000 of Series A
Preferred Stock and 20,000 shares of Series B Preferred Stock) and may issue up
to an aggregate total of 1,000,000 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 October 2, 2000, 30,000 shares of Preferred Stock had been converted into
approximately 420,438 shares of Common Stock, leaving a total of 60,000 shares
of Series A Preferred Stock potentially available for conversion and none of the
20,000 shares of Series B Preferred Stock had been converted into common stock,
thereby leaving a total of 80,000 shares of Preferred Stock potentially
available for conversion. If the conversion price were to be reduced to $2.00
per share as a result of declines in the market value of the Common Stock (and
assuming conversion of all remaining 80,000 shares of authorized Preferred Stock
at that price), the holders of Preferred Stock would receive 4,000,000 shares of
Common Stock (representing approximately 21% 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. Each holder of Preferred Stock
has agreed with the Company that, so long as it holds Preferred Stock, it will
not enter into any put option or short sale of Common Stock and it will not use
the Common Stock acquired through conversion of its shares of Preferred Stock to
settle any put option or short position which may have been entered into prior
to its investment in the Preferred 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
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 Preferred Stock is 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. If the Series
A Preferred Stock is converted prior to October 17, 2000, the conversion price
will be the lower of $8.6625 or 82.5% of the market price of the Common Stock
just prior to the conversion date; if the Series A Preferred Stock is converted
on or
<PAGE> 13
after October 17, 2000 but 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.
The following table is based on the conversion of the remaining 50,000
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 Series A 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 October 2, 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 Series A 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.
<PAGE> 14
SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF 50,000 SHARES OF SERIES A
PREFERRED STOCK (ASSUMING 0%, 25%, 50% AND 75% REDUCTIONS IN MARKET PRICE FOR
COMMON STOCK)
<TABLE>
<CAPTION>
Conversion Prior to 10/17/00
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
<S> <C> <C> <C>
$12.17 $8.6625 577,201 3.92%
$9.1275 $7.5302 663,994 4.51%
$6.085 $5.0201 995,991 6.76%
$3.0425 $2.5101 1,991,982 13.52%
</TABLE>
<TABLE>
<CAPTION>
Conversion from 10/17/00 to 1/15/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
<S> <C> <C> <C>
$12.17 $8.6625 577,201 3.92%
$9.1275 $7.1651 697,828 4.74%
$6.085 $4.7767 1,046,742 7.11%
$3.0425 $2.3884 2,093,485 14.21%
</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>
$12.17 $8.6625 577,201 3.92%
$9.1275 $6.8356 730,394 4.96%
$6.085 $4.5638 1,095,590 7.44%
$3.0425 $2.2819 2,191,180 14.88%
</TABLE>
<TABLE>
<CAPTION>
Conversion 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>
$12.17 $7.9105 632,071 4.29%
$9.1275 $5.9329 842,762 5.72%
$6.085 $3.9553 1,264,143 8.58%
$3.0425 $1.9776 2,528,285 17.16%
</TABLE>
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.
The following table is based on the conversion of the remaining 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
October 2, 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.
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
<S> <C> <C> <C>
$12.17 $10.0403 199,198 1.35%
$9.125 $7.5302 265,598 1.80%
$6.085 $5.0213 398,397 2.70%
$3.0425 $2.5101 796,793 5.41%
</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
<S> <C> <C> <C>
$12.17 $9.5535 209,349 1.42%
$9.125 $7.1651 279,131 1.89%
$6.085 $4.7767 418,697 2.84%
$3.0425 $2.3883 837,394 5.68%
</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
<S> <C> <C> <C>
$12.17 $9.1275 219,118 1.49%
$9.125 $6.8456 292,157 1.98%
$6.085 $4.5638 438,236 2.97%
$3.0425 $2.2819 876,472 5.95%
</TABLE>
<TABLE>
<CAPTION>
Conversion after 6/28/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
<S> <C> <C> <C>
$12.17 $7.9105 252,829 1.72%
$9.125 $5.9329 337,105 2.29%
$6.085 $3.9552 505,657 3.43%
$3.0425 $1.9776 1,011,314 6.86%
</TABLE>
The following table is based on the simultaneous conversion of the
remaining issued and outstanding 50,000 shares of Series A Preferred Stock and
20,000 shares of Series B Preferred Stock 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 October 2, 2000), (ii) the
number of shares of Common Stock issuable upon conversion of all of the Series A
Preferred Stock and 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 A Preferred Stock or 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.
AGGREGATE TOTAL OF SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF BOTH
50,000 SHARES OF SERIES A PREFERRED STOCK AND 20,000 SERIES B PREFERRED STOCK
(ASSUMING 0%, 25%, 50% AND 75% REDUCTIONS IN MARKET PRICE FOR COMMON STOCK)
<TABLE>
<CAPTION>
Conversion After 06/28/01
-----------------------------------------------
NUMBER OF PERCENTAGE
SHARES OF OWNERSHIP
COMMON OF CONVERTED
MARKET CONVERSION STOCK PREFERRED
PRICE PRICE ISSUABLE STOCK
<S> <C> <C> <C>
$12.17 $7.9105 884,900 6.01%
$9.1275 $5.9329 1,179,867 8.01%
$6.085 $3.9552 1,769,800 12.01%
$3.0425 $1.9776 3,539,599 24.03%
</TABLE>
<PAGE> 15
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 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 Preferred Stock may not be
converted for a 30-day period or until the market price exceeds $2.00 (if
earlier).
THE OWNERSHIP AND CONTROL OF THE COMPANY IS CONCENTRATED.
At October 2, 2000 our executive officers and directors beneficially owned
approximately 32.00% of the outstanding shares of our Common Stock. Theodore J.
Goodlander, our CEO, directly owns approximately 27.17% of the outstanding
shares of our Common Stock and 10,000 shares of our Series A Preferred Stock,
which were convertible on October 2, 2000 into 115,440 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 October 2, 2000, he
would own approximately 27.73% of the then outstanding shares of our Common
Stock. In addition, trusts established for the benefit of Mr. Goodlander's
children own approximately 22.33% 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 fund operations through December 31, 2000. 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> 16
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. We currently intend to use the net proceeds from sales of shares by us
for working capital, for developing new products and for other general purposes.
Depending on our circumstances at the time the net proceeds from such sales
become available, if at all, we reserve the right to use such net proceeds for
other purposes.
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 10,279,000 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> 17
exercise of Warrants. Additionally, 246,000 shares are issuable upon conversion
of warrants held by other selling shareholders. We have registered the
10,279,000 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 The Shaar Fund, Ltd.,
Green Mountain Capital and Theodore J. Goodlander, pursuant to contractual
obligations between the Company and each of such selling shareholders. 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 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 "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 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 following table sets forth the name of each of the selling
stockholders, the number of shares owned by each of the selling stockholders,
the number of shares that may be offered under this prospectus, and the number
of shares of our Common Stock 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 October 2, 2000.
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 4,187,146 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.
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. Percentage ownership is based on
14,731,631 shares of our Common Stock outstanding on October 2, 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 Stock 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 Stock are outstanding before conversion. For purposes of this table,
we have assumed that the Preferred Stock will remain outstanding for a period of
three years (the maximum period before the Preferred Stock are subject to
mandatory conversion into Common Stock), that all dividends on the Preferred
Stock will be paid in shares of Common Stock, and that the effective price at
which the Preferred Stock and dividends will convert to common shares will be
$8.6625 with respect to Series A Preferred Stock and $13.41 with respect to
Series B Preferred Stock. The actual number of common shares into which the
Preferred Stock held by the selling stockholders were convertible on October 2,
2000 was 495,462 shares.
<PAGE> 18
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY OWNED NUMBER OF BENEFICIALLY OWNED
PRIOR TO OFFERING SHARES BEING AFTER OFFERING (1)
NAME OF SELLING STOCKHOLDER NUMBER PERCENT OFFERED NUMBER PERCENT
-------------------------------------------- ------ ------- ------------ ------ -------
<S> <C> <C> <C> <C> <C>
The Shaar Fund Ltd. (2)
c/o Levinson Capital Management 879,228 5.67% 779,228 100,000(3) *
2 World Trade Center, Suite 1830
New York, NY 10048
Theodore J. Goodlander (4)
c/o Storage Computer Corporation 4,189,146 28.08% 4,187,146 2,000 *
11 Riverside Street
Nashua, NH 03062
Citizens Bank of Massachusetts (5)
28 State Street 75,000 * 75,000 0 *
Boston, MA 02109
J.P. Turner & Company, L.L.C. (6)
3340 Peachtree Road, Suite 2300 12,500 * 12,500 0 *
Atlanta, GA 30326.
John Clarke (6) 18,750 * 18,750 0 *
1006 Tullamore Place
Alpharetta, GA 30022
Daniel Krzanowski (6) 18,750 * 18,750 0 *
580 Creekwood Crossing East
Roswell, GA 30076
Margaret Goodlander Trust (7)
Jeanne McCready, Trustee 822,500 5.58% 822,500 0 *
c/o Storage Computer Corporation
11 Riverside Street
Nashua, NH 03062
John Goodlander Trust (8) 822,500 5.58% 822,500 0 *
Jeanne McCready, Trustee
c/o Storage Computer Corporation
11 Riverside Street
Nashua, NH 03062
Kristina Goodlander Trust (9) 822,500 5.58% 822,500 0 *
Jeanne McCready, Trustee
c/o Storage Computer Corporation
11 Riverside Street
Nashua, NH 03062
TechnoGraphy, Inc. 132,500 * 132,500 0 *
2-16-7 Iwataminani
Komae-shi
Tokyo, Japan 182
Green Mountain Capital, L.P. 121,000 * 121,000 0 *
RD1, Box 1503
Waterbury, VT 05676
TOTAL 7,914,374 49.64% 7,812,374 102,000 *
</TABLE>
-----------------------------------------
<PAGE> 19
(1) Assumes sale of all of the shares offered by this Prospectus Series A.
(2) Includes 286,291 shares issuable upon the conversion of the Preferred Stock
and 122,000 shares of Common Stock issuable upon exercise of other warrants,
each held by Shaar Fund, Ltd. and 247,005 shares issuable upon the conversion of
the Series B Preferred Stock and 186,000 shares of Common Stock issuable upon
exercise of other warrants, each also held by The Shaar Fund, Ltd.
(3) Represents shares of Common Stock held by the Shaar Fund, Ltd. that may be
sold from time to time pursuant to the prospectus contained in Registration No.
333-38422.
(4) Theodore J. Goodlander currently serves (and has for at least the past three
years) as the Company's CEO and Chairman. Includes 143,146 shares of Common
Stock resulting from the conversion of Series A Preferred Stock and 44,000
shares of Common Stock issuable upon exercise of other warrants, each held by
Theodore J. Goodlander.
(5) Citizens Bank of Massachusetts provided a credit facility to the Company in
the amount of from August 1995 to August 2000. Represents shares of Common Stock
issuable upon exercise of a warrant held by Citizens Bank of Massachusetts.
(6) Served as broker/dealer with respect to investments in the Company made by
Shaar Fund, Ltd. in April, August 2000 and September 2000.
(7) 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.
(8) 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.
(9) 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.
* 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 and 890,000 shares remain undesignated. As of
October 2, 2000, there were outstanding 14,731,631 shares of Common Stock held
of record by approximately 600 shareholders. As of October 2, 2000, there were
outstanding 50,000 shares of Series A Preferred Stock held of record by 5
shareholders, which shares were convertible on October 2, 2000 into 577,201
shares of Common Stock. As of October 2, 2000 there were outstanding 20,000
shares of Series B Preferred Stock held of record by one Shareholder, which
shares were convertible on October 2, 2000 into 149,142 shares of Common Stock.
The Company has outstanding stock options to purchase 2,066,096 shares of Common
Stock and warrants and other convertible securities outstanding to purchase
686,000 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
50,000 shares were outstanding on October 2, 2000. The shares of Series A
Preferred Stock are pari passu with shares of 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 A Preferred Stock are entitled to
<PAGE> 20
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. The
shares of Series B Preferred Stock are pari passu with Series A 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.
Undesignated Preferred Stock
Our Board of Directors is authorized to issue up to 890,000 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.
PLAN OF DISTRIBUTION
Selling Shareholders
Pursuant to the terms of this Prospectus, the selling shareholders are
offering from time to time, in whole or in part, an aggregate of 10,279,000
shares of Common Stock for resale hereunder for their own account 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 $101,500. 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 selling
stockholders, directly or through agents, brokers or dealers, may sell the
shares of Common Stock described in this prospectus (1) on terms to be
determined at the time of a sale, (2) in transactions on the American Stock
Exchange, (3) in privately negotiated transactions or (4) in a combination of
these methods of sale. The selling stockholders may also sell the shares to or
through brokers or dealers. These brokers or dealers may
<PAGE> 21
receive compensation in the form of discounts, concessions or commissions from
the selling stockholder. We will not receive any proceeds from the sale of the
shares by the selling stockholders.
The selling stockholders and any persons who participate in the
distribution of the shares may be deemed to be underwriters within the meaning
of the Securities Act. Any discounts, commissions or concessions received by
these underwriters and any provided for the sale of the shares by them may be
considered underwriting discounts and commissions under the Securities Act. The
selling stockholder will be subject to the applicable provisions of the Exchange
Act and the rules and regulations of the Exchange Act, including Rules 10b-2,
10b-6 and 10b-7, which provisions may limit the timing of purchases and sales of
any of the Common Stock by the selling stockholders.
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.
Sale of Common Stock by the Company
Any of the Common Stock being offered by us under this prospectus may be sold in
any one or more of the following ways from time to time:
- through agents,
- to or through underwriters,
- through dealers, and
- directly by us to purchasers.
The distribution of the shares may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
Offers to purchase Common Stock may be solicited by agents designated by us
from time to time. Any agent involved in the offer or sale of the Common Stock
under this prospectus will be named, and any commissions payable by us to these
agents will be set forth, in a related prospectus supplement. Unless otherwise
indicated in a prospectus supplement, any agent will be acting on a reasonable
best efforts basis for the period of its appointment. Any agent may be deemed to
be an underwriter, as the term is defined in the Securities Act, of the Common
Stock so offered and sold.
If Common Stock is sold by means of an underwritten offering, we will
execute an underwriting agreement with an underwriter or underwriters at the
time an agreement for such sale is reached, and the names of the specific
managing underwriter or underwriters, as well as any other underwriters, the
respective amounts underwritten and the terms of the transaction, including
commissions, discounts and any other compensation of the underwriters and
dealers, if any, will be set forth in a related prospectus supplement. That
prospectus supplement and this prospectus will be used by the underwriters to
make resales of the shares. If underwriters are used in the sale of any Common
Stock in connection with this prospectus, those shares will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at fixed public offering
prices or at varying prices determined by the underwriters and us at the time of
sale. Common Stock may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by one or more
underwriters. If any underwriter or underwriters are used in the sale of Common
Stock, unless otherwise indicated in a related prospectus supplement, the
underwriting agreement will provide that the obligations of the underwriters are
subject to some conditions precedent and that the underwriters with respect to a
sale of these shares will be obligated to purchase all such shares if any are
purchased.
We may grant to the underwriters options to purchase additional Common
Stock, to cover over-allotments, if any, at the public offering price, with
additional underwriting commissions or discounts, as may be set forth in a
related prospectus supplement. If we grant any over-allotment option, the terms
of that over-allotment option will be set forth in the prospectus supplement for
these shares.
<PAGE> 22
If a dealer is utilized in the sale of the Common Stock in respect of which
this prospectus is delivered, we will sell these shares to the dealer as
principal. The dealer may then resell such shares to the public at varying
prices to be determined by such dealer at the time of resale. Any such dealer
may be deemed to be an underwriter, as such term is defined in the Securities
Act, of the shares so offered and sold. The name of the dealer and the terms of
transaction will be set forth in the prospectus supplement relating to those
offers and sales.
Offers to purchase Common Stock may be solicited directly by us and those
sales may be made by us directly to institutional investors or others, who may
be deemed to be underwriters within the meaning of the Securities Act with
respect to any resale of those shares. The terms of any sales of this type will
be described in the prospectus supplement.
If so indicated in a related prospectus supplement, we may authorize agents
and underwriters to solicit offers by certain institutions to purchase shares
from us at the public offering price set forth in a related prospectus
supplement as part of delayed delivery contracts providing for payment and
delivery on the date or dates stated in a related prospectus supplement. Such
delayed delivery contracts will be subject to only those conditions set forth in
a related prospectus supplement. A commission indicated in a related prospectus
supplement will be paid to underwriters and agents soliciting purchases of
shares pursuant to delayed delivery contracts accepted by us.
Agents, underwriters and dealers may be entitled under relevant agreements
with us to indemnification by us against some liabilities, including liabilities
under the Securities Act, or to contributions with respect to payments which
such agents, underwriters and dealers may be required to make in respect
thereof.
Agents, underwriters and dealers may be customers of, engage in
transactions with, or perform services for, us in the ordinary course of our
business.
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> 23
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> 24
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.
12,679,000 Shares
Storage Computer Corporation
Common Stock
-----------------
PROSPECTUS
----------------
[Date]
<PAGE> 25
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:
Securities and Exchange Commission Registration Fee $ 37,500.00
AMEX Listing Application Fee $ 17,500.00
Legal Fees and Expenses $ 25,000.00
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 $101,500.00
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> 26
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> 27
ITEM 16. EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
4.1+ Instruments defining the rights of security holders
Reference is made to the description of our Common Stock contained
in our Registration Statement on Form 8-A filed February 5, 1995,
to 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, and to 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.
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).
+Previously filed.
++To be filed by amendment.
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> 28
(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> 29
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 6th day of
October 2000.
STORAGE COMPUTER CORPORATION
By: /s/ Theodore J. Goodlander
---------------------------
Theodore J. Goodlander
Chief Executive Officer
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 October 6, 2000
-------------------------- and Chief Executive Officer
Theodore J. Goodlander (Principal Executive Officer)
/s/ Edward A. Gardner President and Director October 6, 2000
--------------------------
Edward A. Gardner
/s/ John L. Thonet Chief Operating Officer and October 6, 2000
-------------------------- Director
John L. Thonet
/s/ Peter N. Hood Chief Financial Officer and October 6, 2000
-------------------------- Treasurer (Chief Financial
Peter N. Hood and Accounting Officer)
/s/ Roger E. Gauld Director October 6, 2000
--------------------------
Roger E. Gauld
Director
--------------------------
Steven S. Chen
</TABLE>
<PAGE> 30
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------
4.1+ Instruments defining the rights of security holders
Reference is made to the description of our Common Stock
contained in our Registration Statement on Form 8-A filed
February 5, 1995, to 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, and to 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.
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).
+ Previously filed.
++To be filed by amendment.
