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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1998
REGISTRATION NO. 333-_____________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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GENERAL MAGIC, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7372 77-0250147
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Number) Identification No.)
</TABLE>
420 NORTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 774-4000
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
------------------------
STEVEN MARKMAN
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD OF DIRECTORS
GENERAL MAGIC, INC.
420 NORTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 774-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
JAMES M. KOSHLAND, ESQ.
Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, California 94301-1825
(650) 328-6561
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time as described in the Prospectus 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. / / _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
Title of Each Class of AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
Securities to be Registered REGISTERED PER SHARE PRICE
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<S> <C> <C> <C> <C>
Common Stock ($0.001 par 5,383,459 shares (1) $11.88 (2) $63,955,490.47 $18,866.87
value)
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Common Stock ($0.001 par 225,000 shares (3) $11.88 (4) $2,673,000 $788.54
value)
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TOTAL 5,608,459 shares $66,628,490.47 $19,655.40
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</TABLE>
(1) Represents 200% of the shares of Common Stock issuable upon conversion of
all issued shares of Series C Convertible Preferred Stock as described in
the Prospectus, assuming that such conversion is as of July 23, 1998.
Pursuant to Rule 416 promulgated under the Securities Act, this
Registration Statement also covers such indeterminable number of additional
shares as may become issuable upon conversion of Series C Convertible
Preferred Stock (i) to prevent dilution resulting from stock splits, stock
dividends or similar transactions, and (ii) if permitted by law, by reason
of changes in the conversion price or conversion rate of the Series C
Convertible Preferred Stock in accordance with the terms of the Certificate
of Designations, Preferences and Rights of the Series C Convertible
Preferred Stock.
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c) of the 1933 Act and based on the average of the high and low
sales prices of the Common Stock of General Magic, Inc. reported on the
Nasdaq National Market on July 16, 1998.
(3) Represents 150% of the shares of Common Stock issued or issuable upon
exercise of warrants issued as described in the Prospectus. Pursuant to
Rule 416 of the Securities Act, this Registration Statement also covers
such indeterminable additional shares of Common Stock as may become
issuable upon exercise of warrants (i) to prevent dilution as a result of
any future stock split, stock dividends or similar transactions, and (ii)
if permitted by law, by reason of changes in the number of shares issuable
upon exercise of the warrants in accordance with the terms of the warrants.
(4) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(g)(1) of the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED ________________, 1998
5,383,459 SHARES (issuable upon conversion of Series C
Convertible Preferred Stock)
225,000 SHARES (issuable upon exercise of issued warrants)
GENERAL MAGIC, INC.
COMMON STOCK
The 5,608,459 shares of Common Stock of General Magic Inc., a Delaware
corporation ("General Magic" or the "Company"), offered by this Prospectus (the
"Shares") are issuable upon conversion of issued shares of Series C Convertible
Preferred Stock of the Company (the "Series C Shares") and upon exercise of
issued warrants to purchase Common Stock (the "Warrants"). The Shares may be
sold from time to time, after conversion or exercise, as applicable, by or on
behalf of the holders of Shares (the "Selling Stockholders"). Pursuant to Rule
416 promulgated under the Securities Act, this Registration Statement also
covers such indeterminable number of additional shares as may become issuable
upon conversion of Series C Shares and exercise of the Warrants (i) to prevent
dilution resulting from stock splits, stock dividends or similar transactions,
and (ii) if permitted by law, by reason of changes in the conversion rate of the
Series C Shares in accordance with the terms of the Certificate of Designations,
Preferences and Rights of Series C Convertible Preferred Stock (the "Series C
Certificate of Designations") or changes in the number of shares issuable upon
exercise of the Warrants in accordance with the terms of the Warrants.
The Series C Shares and the Warrants were issued in connection with a
privately placed equity financing to institutional investors (the "Institutional
Investors"), pursuant to a Securities Purchase Agreement (the "Agreement").
Pursuant to the Agreement, the Company issued 3,000 Series C Shares which are
convertible into shares of the Company's Common Stock as set forth in the Series
C Certificate of Designations. The Series C Shares are convertible, at the
option of the holder, into shares of Common Stock at the lower of (i) $19.49 and
(ii) a price based on the market price of the Common Stock prior to conversion.
With limited exceptions, the Series C Shares are not convertible into Common
Stock until five months after the date of issuance and, subject to extension
under certain circumstances, shall automatically convert into Common Stock on
June 25, 2001, unless sooner converted. The number of shares of Common Stock
into which the Series C Shares are convertible may be subject to adjustment in
the event (i) of stock splits, stock dividends or similar transactions; (ii)
of the Company's failure to comply with certain requirements, including
requirements relating to the registration of the Common Stock into which the
Series C Shares are convertible, and the timely conversion of the Series C
Shares in certain circumstances; (iii) the Company issues or sells, or is deemed
to have issued or sold, shares of Common Stock at a price less than $19.49; and
(iv) the Company issues or sells convertible securities within one year
following the date this registration statement becomes effective that are
convertible into Common Stock at a price which varies with the market price of
the Common Stock and which price is calculated using a different formula than
the formula used to calculate the conversion price of the Series C Shares. The
Series C Shares accrue dividends at a rate of 5% per annum, payable quarterly in
cash or in shares of Common Stock.
In connection with the sale of the Series C Shares, certain holders of
shares of the Company's 5 1/2% Cumulative Convertible Series B Preferred Stock
(the "Series B Preferred Stock") agreed (i) to purchase 2,000 additional shares
of Series B Preferred Stock and warrants to purchase an additional 160,000
shares of Common Stock for an aggregate purchase price of $2,000,000 and (ii) to
convert at least 2,500 currently outstanding shares of Series B Preferred Stock
into Common Stock. In addition, the Company waived its rights to require the
holders of the Series B Preferred Stock to purchase an additional 5,000 shares
of Series B Preferred Stock and warrants to acquire 400,000 shares of Common
Stock.
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The Warrants are exercisable for 150,000 shares of the Company's Common
Stock at an exercise price of $17.22 per share, have a term of three (3) years,
and may be exercised for cash or on a cashless basis based on the net
appreciated value of the underlying shares.
The Company has agreed to register the Shares under the Securities Act of
1933, as amended (the "Securities Act"). The Company is also obligated to use
its best efforts to maintain its listing under the Nasdaq National Market and
list such shares accordingly, and in addition, take certain actions to comply
with applicable state securities laws and regulations. The Company will bear all
out-of-pocket expenses incurred in connection with the registration of the
Shares, including, without limitation, all registration and filing fees imposed
by the Securities and Exchange Commission (the "Commission"), the National
Association of Securities Dealers, Inc. (the "NASD") and blue sky laws, all
printing expenses, transfer agents' and registrars' fees, and the reasonable
fees and disbursements of the Company's outside counsel and independent
accountants, but excluding transfer or other taxes and other costs and expenses
incident to the issuances of the Shares.
The Company's Common Stock is quoted on The Nasdaq National Market under
the symbol "GMGC." On July 23, 1998, the last sale price of the Company's Common
Stock as reported on The Nasdaq National Market was $12.00.
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SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------------------------
The date of this Prospectus is __________________, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements (if required)
and other information with the Commission. The reports, proxy statements and
other information filed by the Company with the Commission may be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Regional Offices of the Commission located at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60611 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can also
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. The Company's Common Stock is traded
on The Nasdaq National Market. Reports and other information concerning the
Company can also be inspected at the offices of the National Association of
Securities Dealers, Inc., Market Listing Section, 1735 K Street, N.W.,
Washington, D.C. 20006. Such reports and other information may also be inspected
without charge at a Web site maintained by the Commission. The address of the
site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by General Magic pursuant
to the Exchange Act are incorporated herein by reference:
1. Report on Form 8-K filed with the Commission on June 29, 1998;
2. The definitive Proxy Statement for the Company's 1998 Annual Meeting
of Stockholders filed with the Commission on May 18, 1998 pursuant to
Regulation 14A;
3. Quarterly Report on Form 10-Q for the quarter ended March 31, 1998,
filed with the Commission on May 15, 1998;
4. Amended Annual Report on Form 10-K/A for the year ended December 31,
1997, filed with the Commission on April 30, 1998;
5. Annual Report on Form 10-K for the year ended December 31, 1997, filed
with the Commission on March 31, 1998; and
6. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed under the Exchange
Act, including any amendment or report filed for the purpose of
updating such description.
All documents and reports subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Registration Statement and prior to the effective date of this Registration
Statement shall be deemed to be incorporated by reference herein and to be a
part hereof from the date of filing of such documents or reports. Any statement
contained in a document incorporated by reference or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Registration Statement to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Registration Statement. The Company
will provide without charge to each person to whom this Registration Statement
is delivered, upon written or oral request, a copy of any or all of the
foregoing documents incorporated by reference in this Registration Statement
(other than any exhibits thereto). Requests for such documents should be
directed to General Magic, Inc. at 420 North Mary Avenue, Sunnyvale, California
94086 (telephone number (408) 774-4000), Attn.: Investor Relations.
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THE COMPANY
The Company develops and markets integrated voice and data applications.
The Company is currently developing an advanced network service to meet the
communication and information management requirements of today's mobile
professionals. The first version of the advanced network service is named
Portico(TM) (formerly code-named Serengeti) and is planned for commercial
release beginning July 30, 1998. The Portico service will allow subscribers to
access and respond to information important to their success, either through a
leading Web browser or MagicTalk(TM), the Company's voice user interface
platform. Among other things, the Portico service is expected to (i) manage the
subscriber's inbound and outbound calls; (ii) collect and consolidate the
subscriber's email, and notify the subscriber upon receipt of priority messages;
(iii) maintain the subscriber's calendar, address book and task list; (iv)
collect and forward stock quotes, news and selected public information based on
subscriber preferences; and (v) retrieve press releases and other news and
information concerning thousands of publicly traded companies. The Company is
also developing and marketing handheld communication devices based on its Magic
Cap platform technology. The first of these devices, the DataRover(TM) 840, was
commercially released in February 1998, and is intended to meet the data-access
and communication needs of mobile workers in the health care, utilities and
transportation industries.
The Company's current business strategy was announced early in 1997. In
prior years, the Company had developed and licensed two platform technologies,
Magic Cap and Telescript. Magic Cap is an integrated communication applications
platform, initially designed for handheld communication devices. Telescript was
the first implementation of the Company's patented agent technology. It was
comprised of two significant components: a programming language that enabled the
creation of agents, and a virtual machine that executed agents and transported
them from one device to another over a network. The Company initially licensed
its Magic Cap and Telescript platform technologies to multinational consumer
electronics companies and to telecommunications network operators. The consumer
market for handheld communication devices was slow to develop, however, and the
Company did not generate significant royalty revenues in connection with its
licensing efforts. In addition, the Internet emerged as the public data
communications network of choice, significantly reducing the market opportunity
for the proprietary Telescript platform.
During this period, demand for products and services that address the
communication and information management needs of an increasingly mobile society
rapidly expanded as evidenced by the proliferation of electronic devices and the
explosive growth of the Internet, corporate intranets and network services.
Advances in wireless telecommunication technologies enabled the growth of paging
and cellular telephone networks. Devices such as notebook and subnotebook
computers with modems (both wireline and wireless) allowed mobile professionals
to connect to their PCs from almost any location, as well as to access on-line
information and electronic mail services while traveling worldwide. In response
to the growing demand of users for a single resource to access and manage
communication and information, the Company adopted its new business strategy
designed to establish the Company as a leading provider of integrated voice and
data applications. The Company is developing the Portico service to provide a
single, easy-to-use, cost-effective solution to mobile professionals who need to
access, sort through and respond to a multitude of messages, manage their
business information, and obtain relevant news and other information on demand.
The Company was incorporated in California in May 1990 and was reorganized
as a Delaware corporation in February 1995. The principal executive offices of
the Company are located at 420 North Mary Avenue, Sunnyvale, California 94086,
and its telephone number at that location is (408) 774-4000.
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RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk and the Common Stock should not be purchased by persons who cannot afford
the loss of their entire investment. Purchasers should carefully consider the
following risk factors in conjunction with the other information included and
incorporated by reference in this Prospectus before purchasing or otherwise
acquiring the Common Stock offered hereby.
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Actual
results could differ materially from those projected in these forward-looking
statements as a result of a variety of factors, including those set forth below
and elsewhere in this Prospectus.
CHANGE IN STRATEGY. The Company is at an early stage of development in its
new business strategy and is subject to all of the risks inherent in the
establishment of a new business enterprise. To address these risks, the Company
must, among other things, establish technical feasibility and complete
development of its Portico service, enter into strategic development and
distribution arrangements, respond to competitive developments, and attract,
retain and motivate qualified personnel. The Company's decision to become a
provider of an advanced network service is predicated on the assumption that in
the future, the number of subscribers to the service will be large enough to
permit the Company to operate profitably. There can be no assurance that the
Company's assumption will be correct or that the Company will be able to
successfully compete as a network service provider. If the Company's assumption
is not accurate, or if the Company is unable to compete as a network service
provider, the Company's business, operating results and financial condition will
be materially adversely affected.
MINIMAL REVENUES; HISTORY OF AND ANTICIPATION OF LOSSES. The Company has
generated minimal revenues, has incurred significant losses and has substantial
negative cash flow. As of March 31, 1998, the Company had an accumulated deficit
of $159.5 million, with net losses of $6.4 million, $28.4 million and $45.6
million for the three-month period ended March 31, 1998, and the years ended
December 31, 1997 and 1996, respectively.
Historically, a large percentage of the total revenue earned by the Company
to date has been attributable to up-front license fees and customer support
fees, as opposed to recurring royalty revenue. As a consequence of the Company's
recent change in business strategy, the Company expects that a significant
portion of future revenues will be derived from direct sales of its products and
services and not from license fees or royalties. The Company's DataRover 840
device was commercially released in February 1998, and its Portico service is
planned for commercial release beginning July 30, 1998. However, the Company
expects to incur significant losses through 1998. There can be no assurance that
the Company will achieve or sustain significant revenues or become cash flow
positive or profitable at any time in the future.
POTENTIAL DILUTIVE EFFECTS. The number of shares of Common Stock which may
be issued upon conversion of the Series B Shares is dependent upon the trading
price of the Common Stock at the time of conversion. If the lowest sales price
of the Common Stock in the five trading days prior to conversion is less than
$3.53, the number of shares of Common Stock issuable upon conversion of the
Series B Shares will increase. The number of shares of Common Stock which may be
issued upon conversion of the Series C Shares is also dependent upon the trading
price of the Common Stock at the time of conversion. If the sales price of the
Common Stock decreases, the number of shares of Common Stock issuable upon
conversion of the Series C Shares will increase.
TECHNOLOGY DEVELOPMENT. The Company's future success is based substantially
upon its ability to develop new technology to enable it to provide as well as
bill for the Portico service, and to enhance and extend its existing products
and technologies. Software product development schedules are difficult to
predict because they involve creative processes, use of new development tools
and learning processes associated with development of new technologies, as well
as other factors. The Company has in the past experienced delays in its software
development efforts and there can be no assurance that the Company will not
experience future delays in connection with its current development or future
development activities. Delays or difficulties associated with the development
of new, and the enhancement of existing, technologies could have a material
adverse effect on the Company's
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business, operating results and financial condition. Moreover, software products
as complex as those being developed for the Company's Portico service frequently
contain undetected errors or shortcomings, and may fail to perform or to scale
as expected. Although the Company has tested and will continue to test its
Portico service prior to releasing it, such tests may not accurately simulate
actual use of the service by customers. As a result, errors may be found in the
Portico service after it is commercially released which may result in loss of or
a delay in market acceptance of the Company's Portico service.
DISTRIBUTION RISKS. In connection with the change in its business strategy,
the Company must establish and maintain relationships with new distribution
channels for its Portico service and DataRover 840 devices. The Company believes
that in order to successfully market its Portico service, it must, among other
things, enter into distribution arrangements with telephony providers such as
wireless and wireline carriers, as well as resellers, device manufacturers and
Internet service providers. Competition in establishing such relationships is
extremely intense. In addition, decisions by such parties, particularly cellular
carriers, to enter into a distribution relationship with the Company can entail
a lengthy process during which the Company may be required to incur significant
expenditures without any assurance of success. There can be no assurance that
the Company will succeed in establishing distribution relationships, or that if
established, the Company will be able to maintain such relationships or that
such relationships will result in sales of the Company's Portico service. The
failure of the Company to establish and then successfully maintain distribution
relationships for its Portico service will have a material adverse effect on the
Company's business, operating results and financial condition.
The Company plans to distribute the DataRover 840 device through a variety
of distribution channels, including a direct sales force, resellers, value-added
resellers ("VARs") and outside sales representatives. To date, the Company has
established distribution arrangements with three VARs. There can be no assurance
that the Company will be able to establish distribution relationships with
additional VARs and outside sales representatives for its DataRover 840 device.
The Company's failure to establish, or if established, successfully maintain
such relationships could have a material adverse effect on the Company's
business, operating results and financial condition.
LENGTHY SALES CYCLES. Sales of the Company's DataRover 840 device depend,
in significant part, upon the decision of a prospective customer to choose
handheld devices as a means of communication for its employees. As a result, the
amount of time from the initial contact with a customer to the customer's
placement of an order may range from a few weeks to many months, depending on
such factors as the amount of time required to test and customize the DataRover
840 device for the particular customer. If a customer decides not to purchase
the DataRover 840 device, the Company may not have another opportunity to sell
its handheld devices to that customer for a number of years, if at all. For
these and other reasons, the Company expects its DataRover 840 device will have
a lengthy sales cycle during which the Company may expend substantial funds and
significant sales and technical effort. There can be no assurance that the
Company's expenditures or efforts during the lengthy sales process with any
potential customer will result in sales.
DEPENDENCE ON EMERGING MARKETS; ACCEPTANCE OF THE COMPANY'S SERVICES AND
PRODUCTS. The Company's future financial performance will depend in large part
on the growth in demand for the Portico service by mobile business professionals
and other consumers. This market is new and emerging, is rapidly evolving, is
characterized by an increasing number of market entrants and will be subject to
frequent and continuing changes in customer preferences and technology. As is
typical in new and evolving markets, demand and market acceptance for the
Company's technologies is subject to a high level of uncertainty. Because the
market for the Company's Portico service is evolving, it is difficult to assess
or predict with any assurance the size or growth rate, if any, of this market.
There can be no assurance that the market for the Company's Portico service will
develop, or that it will not develop more slowly than expected or attract new
competitors. In addition, even if a market develops for an advanced network
service, there can be no assurance that the markets for the Company's service
will develop, or that the Company's service will be adopted. If the market fails
to develop, develops more slowly than expected or attracts new competitors, or
if the Company's Portico service does not achieve market acceptance, the
Company's business, operating results and financial condition will be materially
adversely affected.
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DEPENDENCE ON THIRD PARTY TECHNOLOGY AND PRODUCTS. To develop its Portico
service, the Company has incorporated and will continue to incorporate
technology developed by third parties. In addition to all the risks associated
with the development of complex technologies, the Company has limited control
over whether or when such third party technologies will be developed or
enhanced. Moreover, the Company has limited control over whether or to what
extent interests in such third parties or third-party technologies are acquired
by companies with which the Company may now or in the future compete. A third
party's failure or refusal, for any reason, to timely develop, license or
support the software technology, or the occurrence of errors in such technology,
could prevent or delay introduction or market acceptance, or continued
maintenance and support, of the Company's Portico service, which could have a
material adverse effect on the Company's business, operating results and
financial condition.
The Company has entered into an OEM agreement with Oki Electric for the
manufacture of DataRover 840 devices. To the extent Oki Electric fails to timely
manufacture the DataRover devices or meet the Company's volume and quality
requirements and delivery schedules, which has occurred in the past, the
Company's business, operating results and financial condition could be
materially adversely affected. In addition, because the Company currently
depends solely on Oki Electric for the manufacture of its DataRover devices, in
the event Oki Electric were to become unwilling or unable to manufacture the
DataRover devices, the Company would be required to identify and qualify an
acceptable replacement. The process of qualifying another manufacturer could be
lengthy, and no assurance can be given that another manufacturer would be
available to the Company on a timely basis. Because Oki Electric is located in
Japan, the Company is also directly affected by the political and economic
conditions of this region and subject to the risks normally attendant to the
conduct of foreign trade, including fluctuations in currency exchange rates and
longer delivery times.
COMPETITION. Many of the companies with which the Company competes, or
which are expected to offer products or services based on alternatives to the
Company's technologies, have substantially greater financial resources, research
and development capabilities, sales and marketing staffs, and better developed
distribution channels than the Company. There can be no assurance that the
services and products that the Company offers will achieve sufficient quality,
functionality or cost-effectiveness to compete with existing or future
alternatives. Furthermore, there can be no assurance that the Company's
competitors will not succeed in developing products or services which are more
effective and lower cost than those offered by the Company, or which render the
Company's Portico service or DataRover 840 device obsolete. The Company believes
that its ability to compete depends on factors both within and outside its
control. The principal competitive factors affecting the market for the
Company's products and services are the availability of the Company's products
and services; the quality, performance and functionality of the Portico service
and DataRover 840 device developed and marketed by the Company; the
effectiveness of the Company in marketing and distributing its products and
services; and price. There can be no assurance that the Company will be
successful in the face of increasing competition from new technologies, products
or services introduced by existing competitors and by new companies entering the
market.
INTELLECTUAL PROPERTY. The Company seeks to protect its proprietary
information and technology through contractual confidentiality provisions and
the application for United States and foreign patents, trademarks and
copyrights. There can be no assurance of patents, trademarks or copyrights or
that third parties will not seek to challenge, invalidate or circumvent such
applications or resulting patents, trademarks or copyrights. Additionally,
competitors may independently develop equivalent or superior, non-infringing
technologies. The Company's revenue could be adversely affected to the extent
that such technologies avoid infringement of the Company's patents. Furthermore,
there can be no assurance that third parties will not assert claims of
infringement of intellectual property rights against the Company and that such
claims will not lead to litigation and/or require the Company to significantly
modify or even discontinue sales of certain of its products or services.. Any
such event may have a material adverse effect on the Company's business,
operating results and financial condition.
POTENTIAL SECURITY ISSUES. The implementation of the Portico service poses
several security issues, including the possibility of break-ins and other
similar disruptions. The Company intends to incorporate authentication,
encryption and other security technologies in its Portico service. However,
there can be no assurance that such technologies will be adequate to prevent
break-ins. In addition, as is generally known, weaknesses in the
7
<PAGE> 9
medium by which users may access the Company's Portico service, including the
Internet, telephones, cellular phones and other wireless devices, may compromise
the security of the confidential electronic information accessed from the
Portico service. There can be no assurance that the Company will be able to
provide a safe and secure service. The Company's failure to provide a secure
service may result in significant liability to the Company and may deter
potential users of the service. The Company intends to limit its liability to
users, including liability arising from failure of the authentication,
encryption and other security technologies that will be incorporated into its
Portico service, through contractual provisions. However, there can be no
assurance that such limitations will be effective. The Company currently does
not have liability insurance to protect against risks associated with forced
break-ins or disruptions. There can be no assurance that security
vulnerabilities and weaknesses will not be discovered in the Company's Portico
service or licensed technology incorporated into such service or in the mediums
by which subscribers access the Portico service. Any security problems in the
Portico service or the licensed technology incorporated in such service may
require significant expenditures of capital and resources by the Company to
alleviate such problems, may result in lawsuits against the Company, may limit
the number of subscribers of the Portico service and may cause interruptions or
delays in the development and completion of, or the cessation of, the Company's
service. Any such expenditures, lawsuits, reduction of subscribers,
interruptions or delays in the development and commercial release of the Portico
service, or the cessation of such service by the Company, could have a material
adverse effect on the Company's business, operating results and financial
condition.
PERSONNEL. The Company must continue to attract, retain and motivate
qualified personnel. Silicon Valley remains a highly competitive job market, and
there can be no assurance that key Company management, engineering, marketing,
sales, administrative and customer support personnel will remain employed by the
Company, or that the Company will be able to attract sufficient additional
personnel to execute its business plan. The Company experienced significant
attrition of engineering, marketing, administrative and sales personnel during
the latter part of 1996 and the first half of 1997, including an approximate
one-half reduction in its workforce between October 1996 and January 1997. These
reductions adversely affected, and may in the future adversely affect, the
Company's ability to attract, retain and motivate qualified personnel. There can
be no assurance that the Company's current employees will continue to work for
the Company or that the Company will be able to obtain the services of
additional personnel necessary for the Company's growth. Failure to attract or
retain qualified personnel could have a material adverse effect on the Company's
business, operating results and financial condition.
LIMITED RESOURCES. Building the Portico service is a complex process that
requires significant engineering and financial resources. Among other things, to
implement its Portico service, the Company must develop certain technologies and
license other technologies from third parties, establish strategic distribution
and development arrangements and undertake a substantial marketing campaign. The
Company has limited technical, sales and marketing staffs and there can be no
assurance that such personnel will be able to manage and successfully complete
all of the tasks necessary to develop and launch the Company's Portico service.
In addition, because the Company has generated minimal revenues to date and does
not expect to generate substantial revenues in 1998, the Company must conserve
cash. As a result, the Company may not be able to fund the marketing efforts
required to successfully introduce the service to customers. Alternatively,
market acceptance for its Portico service may overwhelm the Company's limited
staffs such that the Company is unable to adequately respond to and satisfy
customers' demand for the Portico service. The Company's failure to develop and
launch its Portico service, or to respond to market demand for its Portico
service, will likely have a material adverse effect on the Company's business,
operating results and financial condition.
FUTURE CAPITAL REQUIREMENTS AND AVAILABILITY OF ADDITIONAL FINANCING. In
February of 1998, the Company completed a private placement of $4.5 million of
Series A Convertible Preferred Stock to Microsoft. In March of 1998 the Company
completed a separate private placement of $5.0 million of 5 1/2% Cumulative
Convertible Series B Preferred Stock (the "Series B Shares") and warrants to
institutional investors. In June of 1998 the Company completed a separate
private placement of $30.0 million of Series C Shares and warrants to
institutional investors (such sales of Series A Convertible Preferred Stock,
Series B Shares and Series C Shares being referred to collectively as the "1998
Private Placements"). In addition, in conjunction with the sale of the Series C
Shares, the Company waived its right to require the holders of the Series B
Shares to purchase an additional $5.0 million principal amount of Series B
Shares and such holders exercised their right to purchase an
8
<PAGE> 10
additional $2.0 million principal amount of Series B Shares. The proceeds of the
1998 Private Placements will be used for working capital purposes. In June of
1998, the Company secured a $3.0 million loan from an institutional lender to
make capital equipment purchases. If expenditures required to achieve the
Company's plans are greater than projected or if the Company is unable to
generate adequate cash flow from sales of its products and services, the Company
may need to seek additional sources of capital. The Company has no other
commitments or arrangements to obtain any additional funding and there can be no
assurance that the Company will be able to obtain such additional funding, if
necessary, on acceptable terms or at all. The unavailability or timing of any
financing could prevent or delay the continued development and marketing of the
products and services of the Company and may require curtailment of operations
of the Company. The failure to raise needed funds on sufficiently favorable
terms or at all could have a material adverse effect on the Company's business,
operating results and financial condition.
EXTREME VOLATILITY OF STOCK PRICE. Like the stock of other high technology
companies, the market price of the Company's Common Stock has been and may
continue to be extremely volatile. Since its initial public offering in February
1995, the closing price of the Company's Common Stock has ranged from a high of
$26.625 to a low of $0.938 per share. Factors such as quarterly fluctuations in
the Company's results of operations or the announcement of technological
innovations or strategic alliances or the introduction of new products by the
Company or its competitors may have a significant impact on the market price of
the Company's Common Stock.
COMPLIANCE WITH NASDAQ LISTING REQUIREMENTS; DISCLOSURE RELATING TO
LOW-PRICED STOCK. The Company's Common Stock is quoted on the Nasdaq National
Market (the "National Market"). Pursuant to the terms of the sale of the Series
B Shares and the Agreement, the Company is required to list the Common Stock
issuable upon conversion of the Series B Shares and exercise of the related
warrants, and the Common Stock issuable upon conversion of the Series C Shares
and exercise of the related Warrants, on the National Market. However, in order
to continue to be included in the National Market, a company must meet certain
maintenance criteria. Effective February 23, 1998, the maintenance criteria
require a minimum bid price of $1.00 per share, $4,000,000 in net tangible
assets (total assets less total liabilities and goodwill) and $5,000,000 market
value of the public float (excluding shares held directly or indirectly by any
officer or director of the Company and by any person holding beneficially more
than 10% of the Company's outstanding shares). Failure to meet these maintenance
criteria may result in the delisting of the Company's Common Stock from the
National Market and the quotation of the Company's Common Stock on the Nasdaq
SmallCap Market (the "SmallCap Market"), if the requirements for inclusion on
the SmallCap Market are met. As a result of quotation on the SmallCap Market, an
investor may find it more difficult to dispose of the Company's Common Stock.
Effective February 1998, a company must have $4,000,000 in net tangible assets
or $50,000,000 market capitalization or $750,000 net income in two of the last
three years, a minimum bid price of $4.00 per share and a public float of
$5,000,000 for inclusion in the SmallCap Market, subject to certain exceptions.
Failure to meet the National Market inclusion criteria, or the failure to meet
the SmallCap Market maintenance criteria, may result in the delisting of the
Company's Common Stock. Trading, if any, in the Company's Common Stock would
thereafter be conducted in the over-the-counter market. As a result of such
delisting, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Company's Common Stock.
RAPID TECHNOLOGICAL CHANGE. The communications technology market is
characterized by rapid technological change, changing customer needs, frequent
new product introductions and evolving industry standards. The introduction of
products or services embodying new technologies and the emergence of new
industry standards could render the Company's products and services obsolete or
unmarketable. The Company's future success will depend upon its ability to
timely develop and introduce new products and services, including the Portico
service, as well as enhancements to such products and services, to keep pace
with technological developments and emerging industry standards and address the
increasingly sophisticated needs of the user. There can be no assurance that the
Company will be successful in developing and marketing new products and services
that respond to technological changes or evolving industry standards, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of new products and services,
or that its new products and services will adequately meet the requirements of
the marketplace and achieve market acceptance. If the Company is unable, for
technological or other reasons, to timely develop and introduce
9
<PAGE> 11
new products and services in response to changing market conditions or consumer
requirements, the Company's business, operating results and financial condition
will be materially adversely affected.
DEPENDENCE ON AND RESPONSIVENESS TO THE INTERNET. The Company believes that
its future success is in part dependent upon continued growth in the use of the
Internet. The Internet may prove not to be a viable means of conducting commerce
or communications for a number of reasons, including, but not limited to,
potentially unreliable network infrastructure, or untimely development of
performance improvements including high speed modems. In addition, to the extent
that the Internet continues to experience significant growth in the number of
users and level of use, there can be no assurance that the Internet
infrastructure will continue to be able to support the demands placed on it by
any such growth. Failure of the Internet as a mode of conducting commerce and
communications could have a material adverse effect on the Company's business,
operating results and financial condition.
YEAR 2000 COMPLIANCE. The Company uses a significant number of computer
software programs and operating systems in its internal operations, including
applications used in financial business systems and various administration
functions. To the extent that these software applications contain source code
that is unable to appropriately interpret the upcoming calendar year "2000,"
some level of modification or even replacement of such source code or
applications will be necessary. The Company is in the process of identifying the
software applications that are not "Year 2000" compliant. Given the information
known at this time about the Company's systems, coupled with the Company's
ongoing efforts to upgrade or replace business critical systems as necessary, it
is currently not anticipated that these "Year 2000" costs will have a material
adverse impact on the Company's business, operating results and financial
condition. However, the Company is still analyzing its software applications
and, to the extent they are not fully "Year 2000" compliant, there can be no
assurance that the costs necessary to update software or potential systems
interruptions would not have a material adverse effect on the Company's
business, operating results and financial condition.
SINGLE CALIFORNIA LOCATION. Currently, the Company's only network
operations center is located at its headquarters in Sunnyvale, California.
Operation of the Portico service is dependent in part upon the Company's ability
to protect the network operations center against physical damage from power
outages, telecommunications failures, physical break-ins and other similar
events. In addition, Northern California historically has been vulnerable to
certain natural disasters and other risks, such as earthquakes, fires and
floods, which at times have disrupted the local economy and pose physical risks
to the Company's property. The Company presently does not have redundant,
multiple site capacity in the event of a technical failure of its Portico
service or a natural disaster. In the event of such a failure or disaster, the
Company's business, operating results and financial condition could be
materially adversely affected.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders and all proceeds will go to the Selling Stockholders to
be used for their own purposes. The Company may receive cash proceeds upon the
exercise of the Warrants, and expects to use such proceeds, if any, for working
capital. The Company will not receive any proceeds from conversions of the
Series C Shares.
10
<PAGE> 12
SELLING STOCKHOLDERS
The Selling Stockholders hold or will hold shares of Common Stock which are
issuable upon conversion of the Series C Shares and upon exercise of the
Warrants. The table below lists the Selling Stockholders, the number of shares
of Common Stock which each owns or will own, assuming a conversion and exercise
date of July 23, 1998 for the Series C Shares and Warrants, respectively, the
number of shares of Common Stock subject to sale pursuant to this Registration
Statement and the number of shares of Common Stock each would own assuming sale
of all shares of Common Stock registered by this Registration Statement.
<TABLE>
<CAPTION>
Shares
Shares Beneficially Shares Offered Beneficially
Owned Prior to the by this Owned After Percentage
Selling Stockholder (1) Offering (2) Prospectus (2) the Offering (3) of Class (4)
- ----------------------------------------- ------------------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
Themis Partners L.P. 279,111 234,311 44,800 (5)
Heracles Fund 560,284 515,484 44,800 (5)
RGC International Investors, LDC 1,970,592 1,124,692 845,900 2.9
Halifax Fund, L.P. 2,065,904 656,070 1,409,833 4.9
Palladin Partners I, L.P. 93,724 93,724 -- (5)
Palladin Overseas Fund Limited 46,862 46,862 -- (5)
The Gleneagles Fund Company 46,862 46,862 -- (5)
Palladin Securities, LLC 46,862 46,862 -- (5)
Colonial Penn Life Insurance Company 46,862 46,862 -- (5)
AFO Capital Advisors, LLC 142,000 30,000 112,000 (5)
TOTALS: 5,299,063 2,841,729 2,457,333
- ---------------------
</TABLE>
(1) The persons named in the table have sole voting and investment power
with respect to all shares of General Magic Common Stock shown as
beneficially owned by them, subject to community property laws, where
applicable.
(2) The number of shares set forth in the table represents an estimate of
the number of shares of Common Stock to be offered by the Selling
Stockholder and assumes the exercise of all Warrants as described in
this Prospectus. Pursuant to the Company's agreement with the
Institutional Investors as set forth in the Agreement, the number of
shares of Common Stock registered in the name of the Institutional
Investors by this Registration Statement approximately equals the sum
of (i) 200% of the shares of Common Stock that would be issued had all
Series C Shares been converted on July 23, 1998, and (ii) 150% of the
shares of Common Stock issuable upon exercise of the Warrants. The
actual number of shares of Common Stock issuable upon conversion of
Series C Shares and exercise of the Warrants is indeterminate, is
subject to adjustment and could be materially less or more than such
estimated number depending on factors which cannot be predicted by the
Company at this time, including among other factors, the future market
price of the Common Stock. The actual number of shares of Common Stock
offered hereby, and included in the Registration Statement of which
this Prospectus is a part, includes such additional number of shares of
Common Stock as may be issued or issuable upon conversion of the Series
C Shares and exercise of the Warrants by reason of the floating rate
conversion price mechanism or other adjustment mechanisms described in
the Series C Certificate of Designations, or by reason of any stock
split, stock dividend or similar transaction involving the Common
Stock, in order to prevent dilution, in accordance with Rule 416 under
the Securities Act. Pursuant to the Series C Certificate of
Designations, if the Series C Shares had been actually converted on
July 23, 1998, the
11
<PAGE> 13
conversion price would have been $11.188, at which price the Series C
Shares would have been converted into approximately 2,691,729 shares
of Common Stock. Pursuant to the terms of the Series C Certificate of
Designations and the Warrants, the Series C Shares are convertible and
the Warrants are exercisable by each of the Selling Stockholders only
to the extent that the number of shares of Common Stock thereby
issuable (but not including shares of Common Stock underlying
unconverted shares of Series C Shares and unexercised portions of the
Issued Warrants) would not exceed 4.99% of the Company's outstanding
Common Stock as determined in accordance with Section 13(d) of the
Exchange Act. This 4.99% restriction may be lifted or modified under
certain circumstances, with at least 61 days advance notice.
(3) Assumes the sale of all shares offered hereby.
(4) Based on 28,818,653 shares of Common Stock outstanding as of
April 28, 1998.
(5) Represents less than 1%.
PLAN OF DISTRIBUTION
The Selling Stockholders or their respective pledgees, donees, transferees
or other successors in interest may, from time to time, sell all or a portion of
the Shares on the National Market, in privately negotiated transactions or
otherwise, at fixed prices that may be changed, at market prices prevailing at
the time of sale, at prices related to such market prices or at negotiated
prices. The Shares may be sold by the Selling Stockholders by one or more of the
following methods, without limitation: (a) block trades in which the broker or
dealer so engaged will attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction, (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus, (c) an exchange distribution in
accordance with the rules of such exchange, (d) ordinary brokerage transactions
and transactions in which the broker solicits purchasers, (e) privately
negotiated transactions, (f) short sales and (g) a combination of any such
methods of sale. In effecting sales, brokers and dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the Selling Stockholders (or,
if any such broker-dealer acts as agent for the purchaser of such shares, from
such purchaser) in amounts to be negotiated which are not expected to exceed
those customary in the types of transactions involved. Broker-dealers may agree
with the Selling Stockholders to sell a specified number of such Shares at a
stipulated price per share, and, to the extent such broker-dealer is unable to
do so acting as agent for a Selling Stockholder, to purchase as principal any
unsold Shares at the price required to fulfill the broker-dealer commitment to
the Selling Stockholders. Broker-dealers who acquire Shares as principals may
thereafter resell such Shares from time to time in transactions (which may
involve block transactions and sales to and through other broker-dealers,
including transactions of the nature described above) in the National Market at
prices and on terms then prevailing at the time of sale, at prices related to
the then-current market price or in negotiated transactions and, in connection
with such resales, may pay to or receive from the purchasers of such Shares
commissions as described above. The Selling Stockholders may also sell the
Shares in accordance with Rule 144 under the Securities Act, rather than
pursuant to this Prospectus.
The Selling Stockholders and any broker-dealers or agents that participate
with the Selling Stockholders in sales of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the Shares purchased by them may be deemed to be
an underwriting commission or discount under the Securities Act.
From time to time the Selling Stockholders may engage in short sales, short
sales against the box, puts and calls and other transactions in securities of
the Company or derivatives thereof, and may sell and deliver the Shares in
connection therewith or in settlement of securities loans. From time to time the
Selling Stockholders may pledge their Shares pursuant to the margin provisions
of their customer agreements with their brokers. Upon a default by the Selling
Stockholders, the broker may offer and sell the pledged Shares from time to
time.
12
<PAGE> 14
The Selling Stockholders and any other persons participating in the sale or
distribution of the Shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Shares by the Selling
Stockholders or any other such person. The foregoing may affect the
marketability of the Shares.
The Company has agreed to indemnify in certain circumstances the Selling
Stockholders and the broker-dealers and agents who may be deemed to be
underwriters, if any, of the securities covered by the Registration Statement,
against certain liabilities, including liabilities under the Securities Act. The
Selling Stockholders have agreed to indemnify in certain circumstances the
Company against certain liabilities, including liabilities under the Securities
Act.
The Company has agreed to use its best efforts to keep the Registration
Statement, of which this Prospectus constitutes a part, effective until the
earlier of (i) the date on which the Selling Shareholders have completed the
sales or distribution described herein or (ii) until the Shares may be sold
pursuant to Rule 144(k) of the Securities Act.
LEGAL MATTERS
The legality of the Shares is being passed upon by Gray Cary Ware &
Freidenrich LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements of General Magic, Inc. as of December
31, 1997 and 1996, and for each of the years in the three-year period ended
December 31, 1997 and for the period from May 1, 1990 (inception) to December
31, 1997 have been incorporated herein by reference and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
auditors, incorporated herein by reference and upon the authority of said firm
as experts in accounting and auditing.
13
<PAGE> 15
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES, OR AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, IN ANY 5,608,459 SHARES
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN GENERAL MAGIC, INC. 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information...................................3
Incorporation of Certain Documents by
Reference...........................................3
The Company.............................................4
Risk Factors............................................5
Use of Proceeds........................................10
Selling Stockholders...................................11
Plan of Distribution...................................12
Legal Matters..........................................13
Experts................................................13
</TABLE>
5,608,459 SHARES
GENERAL MAGIC, INC.
COMMON STOCK
----------------------------------
PROSPECTUS
----------------------------------
_____________, 1998
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection
with the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fees and Nasdaq
filing fee.
<TABLE>
<CAPTION>
To be Paid
By The
Registrant
----------
<S> <C>
SEC Registration Fee $ 19,656*
Nasdaq filing fee $ 17,500
Accounting fees and expenses $ 5,000
Legal fees and expenses $ 60,000
Miscellaneous expenses $ 2,844
Total............................................. $105,000
=======
</TABLE>
* The Company will pay all expenses of registration, issuance and
distribution of the Shares being sold by the Selling Stockholders,
excluding underwriting commissions and similar charges.
- -------------------------------------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Bylaws provide that the Registrant shall indemnify to
the full extent authorized by law any person made or threatened to be made a
party to an action or a proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he or she, his or her testator or
intestate was or is a director, officer or employee of the Registrant or any
predecessor of the Registrant or serves or served any other enterprise as a
director, officer or employee at the request of the Registrant or a predecessor
of the Registrant. The Registrant's Bylaws also provide that the Registrant may
enter into one or more agreements with any person which provides for
indemnification greater or different than that provided in such Bylaws.
The Registrant has entered into indemnification agreements with its
directors and its officers.
The Registrant maintains insurance on behalf of any person who is a
director or officer against any loss arising from any claim asserted against him
or her and incurred by him or her in any such capacity, subject to certain
exclusions.
See also the undertakings set out in response to Item 17 herein.
II-1
<PAGE> 17
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- -------------------------------------------------------------------------------------------------
<S> <C>
3.1 (1) Certificate of Designations, Preferences and Rights of Series C Convertible Preferred Stock filed
with the Delaware Secretary of State on June 25, 1998.
4.1 (1) Securities Purchase Agreement by and among Registrant and the Institutional Investors dated June
24, 1998.
4.2 (1) Registration Rights Agreement by and among Registrant and the Institutional Investors dated
June 24, 1998.
4.3 (1) Form of Warrant
5.1 Opinion of Gray Cary Ware & Freidenrich LLP.
23.1 Consent of KPMG Peat Marwick LLP, independent auditors.
23.2 Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained in Part II of the Registration
Statement).
</TABLE>
(1) Incorporated by reference from the Company's Report on Form 8-K, filed with
the Commission on June 29, 1998.
II-2
<PAGE> 18
- --------------------------
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(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 (a)(1)(i) and (a)(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 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, 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.
(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.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in 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.
C. The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
II-3
<PAGE> 19
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.
E. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
II-4
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Sunnyvale, State of California on July 23, 1998.
GENERAL MAGIC, INC.
By: /s/ STEVEN MARKMAN
----------------------------------------
Steven Markman
President, Chief Executive Officer
and Chairman of the Board of Directors
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Steven Markman and James P. McCormick, or
either of them, as his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement on Form
S-3, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-facts and agents, or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ STEVEN MARKMAN President, Chief Executive Officer, Chairman July 23, 1998
- ------------------------------------------- of the Board, Director (Principal Executive
Steven Markman Officer)
/s/ JAMES P. McCORMICK Chief Financial Officer (Principal Financial July 23, 1998
- ------------------------------------------- and Accounting Officer)
James P. McCormick
Director July __, 1998
- -------------------------------------------
Michael E. Kalogris
/s/ CARL F. PASCARELLA Director July 23, 1998
- -------------------------------------------
Carl F. Pascarella
Director July __, 1998
- -------------------------------------------
Roel Pieper
/s/ DENNIS F. STRIGL Director July 23, 1998
- -------------------------------------------
Dennis F. Strigl
/s/ SUSAN G. SWENSON Director July 23, 1998
- -------------------------------------------
Susan G. Swenson
/s/ PHILIP D. KNELL Director July 23, 1998
- -------------------------------------------
Philip D. Knell
</TABLE>
II-5
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- ----------------------------------------------------------------------------------------------
<S> <C>
3.1 (1) Certificate of Designations, Preferences and Rights Series C Convertible Preferred Stock filed
with the Delaware Secretary of State on June 25, 1998.
4.1 (1) Securities Purchase Agreement by and among Registrant and the Institutional Investors dated
June 24, 1998.
4.2 (1) Registration Rights Agreement by and among Registrant and the Institutional Investors dated
June 24, 1998.
4.3 (1) Form of Warrant
5.1 Opinion of Gray Cary Ware & Freidenrich LLP.
23.1 Consent of KPMG Peat Marwick LLP, independent auditors.
23.2 Consent of Gray Cary Ware & Freidenrich LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained in Part II of the Registration
Statement).
</TABLE>
(1) Incorporated by reference from the Company's Report on Form 8-K, filed with
the Commission on June 29, 1998.
II-6
<PAGE> 1
Exhibit 5.1
July 23, 1998
Securities and Exchange Commission
450 Fifth Street, N.W
Washington, D.C. 20549
RE: GENERAL MAGIC, INC.
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
As legal counsel for General Magic, Inc., a Delaware corporation (the
"Company"), we are rendering this opinion in connection with the preparation and
filing of a registration statement on Form S-3 (the "Registration Statement")
relating to the registration under the Securities Act of 1933, as amended, of
5,608,459 shares (the "Shares") of Common Stock, par value $0.001 per share (the
"Common Stock"), (i) to be issued by the Company upon conversion of shares of
the Company's Series C Convertible Preferred Stock and upon exercise of certain
warrants.
We have examined such instruments, documents and records as we deemed relevant
and necessary for the basis of our opinion hereinafter expressed. In such
examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies.
Based on such examination, we are of the opinion that the Shares are, or when
issued will be, duly authorized shares, validly issued, fully paid, and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement referred to above and the use of our name wherever it
appears in said Registration Statement.
This opinion is to be used only in connection with the issuance of the Common
Stock while the Registration Statement is in effect.
Respectfully submitted,
/s/ Gray Care Ware & Freidrenrich LLP
- -------------------------------------
GRAY CARE WARE & FREIDRENRICH LLP
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
General Magic, Inc.:
We consent to incorporation by reference in the registration statement to be
filed on July 23, 1998, on Form S-3 of General Magic, Inc. of our report dated
January 23, 1998, except for note 12, which is as of March 6, 1998, relating to
the consolidated balance sheets of General Magic, Inc. and subsidiary (a
development stage enterprise) as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for each of the years in the three-year period ended December 31, 1997,
and for the period from May 1, 1990 (inception) to December 31, 1997, which
report appears in the December 31, 1997, annual report on Form 10-K of General
Magic, Inc. We also consent to the reference to our firm under the heading
"Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
Mountain View, California
July 22, 1998
