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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 9, 1999
REGISTRATION NO. 333-77369
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GENERAL MAGIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0250147
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (IRS EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
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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:
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TIMOTHY MOORE, ESQ. MARY E. DOYLE, ESQ.
COOLEY GODWARD LLP GENERAL MAGIC, INC.
FIVE PALO ALTO SQUARE 420 NORTH MARY AVENUE
3000 EL CAMINO REAL SUNNYVALE, CALIFORNIA 94086
PALO ALTO, CALIFORNIA 94306-2155 (408) 774-4000
(650) 843-5000
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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.
------------------------
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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SUBJECT TO COMPLETION, DATED JULY 9, 1999
21,035,016 Shares
GENERAL MAGIC, INC.
Common Stock
The selling stockholders listed on page 16 are offering up to 21,035,016
shares of General Magic, Inc. common stock. We will not receive any proceeds
from the sale of common stock by the selling stockholders.
Our common stock is quoted on The Nasdaq National Market under the symbol
"GMGC." On April 23, 1999, the last sale price of the common stock as reported
on The Nasdaq National Market was $3.50.
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------
The date of this prospectus is , 1999.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE
SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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TABLE OF CONTENTS
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PAGE
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About General Magic......................................... 2
Risk Factors................................................ 4
Special Note Regarding Forward-Looking Statements........... 13
Use of Proceeds............................................. 14
Selling Stockholders........................................ 14
Plan of Distribution........................................ 22
Legal Matters............................................... 24
Experts..................................................... 24
Where You Can Find More Information......................... 25
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ABOUT GENERAL MAGIC
We develop and market voice-enabled services that provide voice access over
the telephone to information that is stored in computer networks, including Web
sites. Our services are designed to make it easy and convenient for subscribers
to access and act on their personal and business information. Our primary
offerings are the Portico(TM) virtual assistant service, private-label versions
of the Portico service provided by telecommunication carriers to their
customers, the myTalk(TM) free email service, and services that provide voice
access to Web content over the phone. One of our core technology assets is the
magicTalk(TM) voice user interface, used in all of these offerings. We host
voice-enabled services in our network operations center, located in Sunnyvale,
California.
The Portico service provides many of the services of a human assistant on
an around-the-clock basis. Subscribers -- who today are principally mobile
professionals -- may access voice mail, email, calendar, address book, company
news and stock quotes from any telephone or, using a standard Web browser, from
any personal computer. When accessing the Portico service over the telephone,
subscribers interact with magicTalk, a personality-rich natural language voice
user interface. With magicTalk, the user doesn't need to remember special voice
commands or navigate lengthy push-button menus. The virtual assistant recognizes
a full range of conversational commands, from "Call John Smith" to "Would you
please call John Smith at home."
We distribute the Portico virtual assistant service through a nationwide
network of resellers, as well as direct to consumers through signup on the Web.
We are also working with telecommunication carriers to provide the service to
their customers. In May 1999, BellSouth Mobility, Inc. announced its intention
to begin a 3-4 month initial deployment of the Portico service in the Atlanta
area. Other telecommunications carriers are conducting trials of the Portico
service, and we expect to host customized, private-label versions of the service
for those additional carriers that elect to make the service commercially
available to their customers.
Voice enabling Web content is an emerging growth opportunity for us. The
Web offers a broad base of potential subscribers, including consumers who may
find voice to be an easy way to keep in touch with their favorite Web content
when away from home. In June 1999, we introduced myTalk, a free Internet email
service. myTalk is the first Internet service to feature a natural language
voice interface and allows users to access their email from any telephone and to
navigate and reply to messages using their own spoken words. The myTalk service
is also accessible through a standard Web browser.
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Users accessing myTalk will see banner ads during a myTalk Web site session and
will hear short audio ads periodically during a telephone session.
In June 1999, Excite@Home launched the Excite Voicemail service, a free,
advertising-supported service that allows Excite users to receive voicemail and
faxes in their Excite email accounts. It incorporates our magicTalk voice user
interface and operates in our network operations center. In 1998, we announced
an agreement with Intuit(R) Inc. to voice enable certain features of Intuit's
Quicken.com(TM) personal finance Web site.
General Magic was incorporated in California in May 1990 and was
reorganized as a Delaware corporation in February 1995. Our principal executive
offices are located at 420 North Mary Avenue, Sunnyvale, California 94086, and
our telephone number at that location is (408) 774-4000. In this prospectus,
"General Magic", "we" and "our" refer to General Magic, Inc., unless the context
otherwise requires.
You should rely only on the information provided or incorporated by
reference in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of the document.
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RISK FACTORS
An investment in the common stock offered pursuant to this prospectus
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.
WE MAY NEVER ACHIEVE AND SUSTAIN PROFITABILITY.
We may never achieve and sustain profitability. Since our inception, we
have generated only minimal revenues. We have incurred significant losses, and
we have substantial negative cash flow. As of March 31, 1999, we had an
accumulated deficit of $223.8 million, with a net loss of $13.7 million for the
three-month period ended March 31, 1999.
Historically, we have derived a large percentage of our total revenue from
license fees and customer support fees. As a consequence of our 1997 change in
business strategy, we expect to derive a significant portion of any future
revenues from sales of services and products by us and by our partners and not
from license fees. Although the Portico(TM) service was released on July 30,
1998, we expect to incur significant losses through the year 1999, and we may
never achieve or sustain significant revenues or become profitable.
OUR BUSINESS MODEL IS NEW AND UNPROVEN, AND WE MAY BE UNABLE TO IMPLEMENT IT
SUCCESSFULLY.
In early 1997, we changed our business strategy to focus on the marketing
and sale of voice-enabled services. Our new model for conducting business and
generating revenue is unproven, and we face many of the risks faced by new
businesses, especially companies in new and rapidly evolving markets. Our
business depends on our ability to generate revenue from multiple sources,
including:
- the Portico service;
- private-label versions of our virtual assistant services offered by
telecommunications carriers, device manufacturers and other companies;
- the myTalk service; and
- services based on our magicTalk(TM) voice user interface technology
offered by Internet companies.
If we fail to generate revenues from one or more of these sources,
development and sales of our products and services could be adversely affected.
Although the Portico service was released on July 30, 1998, revenues from
Portico subscriptions to date have not been significant. It is uncertain whether
we or our partners will be able to develop and maintain at reasonable cost a
significant subscriber base for virtual assistant services.
In addition, revenues from our Internet services depend on advertising and
sponsorship sales and upgrades to fee-based services, and such revenues may
never be sufficient to offset the costs of providing free services. See
"-- Revenues from our Internet services
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depend on banner and audio advertising sales and upgrades to fee-based services,
and our inability to generate sufficient revenues from advertising sales and
upgrades would harm our business."
REVENUES FROM OUR INTERNET SERVICES DEPEND ON BANNER AND AUDIO ADVERTISING SALES
AND ON UPGRADES TO FEE-BASED SERVICES, AND OUR INABILITY TO GENERATE SUFFICIENT
REVENUES FROM ADVERTISING SALES AND UPGRADES WOULD HARM OUR BUSINESS.
Our business model depends on our ability to generate sufficient revenues
from banner and audio advertising sales and upgrades to fee-based services to
offset the costs of providing a free service. In order to generate revenues, we
and our partners will need to attract a large number of banner and audio
advertisers and advertising sponsors on an ongoing basis. In addition, a
sufficient number of users must upgrade to fee-based services. If we are not
able to attract or retain a sufficient number of advertisers and sponsors or a
sufficient number of users to the fee-based services, we may not be able to
generate the revenues necessary to operate.
To attract advertisers and sponsors, we and our partners will need to
attract a large number of users to our services. To do so, we must increase
awareness of the myTalk and General Magic brands and continually enhance and
improve the features and quality of our services. If we or our partners cannot
attract a sufficient number of users, we will not be able to attract a
sufficient number of advertisers and sponsors to generate revenues.
THE MARKET FOR OUR SERVICES MAY NOT DEVELOP, WHICH WOULD SUBSTANTIALLY IMPEDE
OUR ABILITY TO GENERATE REVENUES.
Our future financial performance depends in large part on growth in demand
for our voice-enabled services and products. If the market for voice-enabled
services does not develop or if we are unable to capture a significant portion
of that market either directly or through our partners, our revenues and our
results of operations will be adversely affected.
The market for voice-enabled services is still evolving. Currently, there
are only a limited number of products and applications in this industry.
Negative consumer perceptions regarding reliability, cost, ease-of-use and
quality of speech-based products affects consumer demand and may impact the
growth of the market. As a result, we cannot guarantee that the market for
voice-enabled services and products will grow or that consumers will accept any
of the services or products built on our magicTalk voice user interface
platform.
OUR LIMITED RESOURCES MAY RESTRICT OUR OPERATIONS AND OUR ABILITY TO IMPLEMENT
OUR NEW STRATEGY, AND THE AVAILABILITY OF ADDITIONAL RESOURCES IS UNCERTAIN.
Our new business model requires us to devote significant financial
resources to a number of complex services, including our Portico and myTalk
services and private-label services offered by third parties. If we are not able
to successfully manage our existing resources or to secure additional resources
in a timely manner, our ability to successfully introduce all of our services
and to generate sufficient revenues will be restricted.
Our limited financial resources constrain the size of our technical,
business development, sales, marketing and customer support staffs. Our existing
personnel may not be able to manage and successfully complete all of the tasks
necessary to support the various aspects of our business. Furthermore, Silicon
Valley remains a highly competitive
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job market. Our key management, technical, business development, sales,
marketing, administrative and customer support personnel may not remain with us,
and we may be unable to attract sufficient additional personnel to execute our
business plan.
In addition, we must conserve cash because we have generated minimal
revenues to date. We do not expect to generate significant revenues until the
second half of 1999, if at all. We are currently negotiating the terms of a
financing. However, we cannot guarantee that the transaction will be consummated
in a timely manner or that we will be able to obtain alternative funding. Even
if we consummate the transaction, we may require additional funding in the
future and we cannot guarantee that we will be able to obtain such funding. The
unavailability or timing of significant revenues and financing could prevent or
delay the continued development and marketing of our services and may require us
to curtail our operations. In addition, if we are not able to generate revenues
or obtain funding, we may be unable to meet The Nasdaq National Market's
continued listing requirements and our common stock could be delisted from that
market. See "-- Our common stock may be delisted from The Nasdaq National Market
if we are not able to demonstrate compliance with the continued listing
requirements."
OUR COMMON STOCK MAY BE DELISTED FROM THE NASDAQ NATIONAL MARKET IF WE ARE NOT
ABLE TO DEMONSTRATE COMPLIANCE WITH THE CONTINUED LISTING REQUIREMENTS.
We are subject to the continued listing requirements of The Nasdaq National
Market. On April 15, 1999, we received a letter from The Nasdaq National Market
advising us that we had failed to meet these requirements. The letter required
us to demonstrate compliance with the continued listing requirements by July 13,
1999. In response to the April 15th letter, we submitted a letter demonstrating
our compliance as of May 7, 1999 and providing our plan for continued compliance
through December 31, 1999, including the completion, by July 30, 1999, of a
financing transaction currently under negotiation. On July 1, 1999, the Nasdaq
National Market accepted our proposal, contingent on our ability to successfully
execute it. We cannot guarantee that we will be able to successfully execute our
plan in a timely manner. In the event that we are not able to maintain continued
compliance with The Nasdaq National Market listing requirements through December
31, 1999, we would be subject to a delisting process. In the event that we are
delisted, we will seek to list our common stock on other markets, including The
Nasdaq Small Cap Market and the American Stock Exchange.
WE MAY EXPERIENCE INTERRUPTIONS IN SERVICE DUE TO ERRORS OR INADEQUACIES IN OUR
SOFTWARE AND SYSTEM ARCHITECTURE, WHICH MAY RESULT IN SIGNIFICANT COSTS, A
DECREASE IN REVENUES AND A DECLINE IN OUR STOCK PRICE.
The ability to provide the Portico and myTalk services and the services of
our partners depends on the integrity of our software, computer hardware systems
and network infrastructure. We have encountered, and may encounter in the
future, errors in our software and our system design. These errors may be
expensive to correct, and may lead to substantial interruptions in our service.
Shortly after the launch of our myTalk service and the Excite Voicemail
service, we experienced interruptions in service due to a sudden increase in the
number of users. In the event that we experience other sudden increases in the
number of users to our services or we are successful in establishing other
relationships with partners with large existing customer bases, our network
operations center may not be capable of meeting the resulting increase in
demand. A sudden increase in demand could lead to slow-downs or failures in
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our services. Furthermore, we presently do not have redundant, multiple site
capacity in the event of a technical failure of our services or a natural
disaster.
Any damage to or failure of our systems could lead to interruptions in
service and/or the loss of customer information. Such interruptions or loss
could damage our reputation and ability to attract and retain subscribers and
partners, and we may experience negative publicity that could adversely affect
our stock price.
WE MUST ESTABLISH AND MAINTAIN DISTRIBUTION RELATIONSHIPS TO GENERATE REVENUES.
Our success in generating revenues from private-label versions of our
virtual assistant services and other services based on our magicTalk voice user
interface is dependent on our ability to establish relationships with
telecommunication carriers, device manufacturers and Internet and other
companies. Although we have entered into arrangements with Qwest Communication
Corporation, Intuit(R) Inc., Wireless Knowledge, BellSouth Mobility, Inc. and
Excite, Inc., we cannot guarantee that we will be able to maintain these
relationships or establish additional relationships. Competition for
relationships with telecommunications carriers, device manufacturers and
Internet companies is extremely intense. In addition, decisions by these third
parties, particularly telecommunications carriers, to enter into distribution
relationships can be a lengthy, expensive process, with no assurance of success.
It is uncertain whether any of the services contemplated by our current and
future partners will be commercially launched. Even if these services were
commercially launched, our current and future partners may not be able to
attract and retain a sufficient number of subscribers to attain profitability.
Our control over the marketing efforts of Qwest, Intuit, Wireless Knowledge,
BellSouth and Excite is limited under our arrangements. We cannot guarantee that
Qwest, Intuit, Wireless Knowledge, BellSouth, Excite or any future partner will
actively market the services incorporating our technology.
WE ARE DEPENDENT ON THE INTERNET, AND THE INTERNET MAY PROVE NOT TO BE VIABLE.
Our future success is in part dependent upon continued growth in the use of
the Internet. Internet use by consumers is in an early stage of development, and
market acceptance of the Internet as a medium for content, advertising and
electronic commerce is highly uncertain. If the Internet fails to be a viable
means of conducting commerce or communications, we may not be able to generate
revenues. A number of factors may inhibit the growth of Internet usage including
security concerns, inconsistent quality of service, limited availability of
cost-effective, high-speed access and inadequate network infrastructure. If the
Internet continues to experience significant growth in the number of users and
level of use, the Internet infrastructure may not be able to support the demands
placed on it by such growth.
In addition, the market for Internet advertising may not develop. The
adoption of Internet advertising, particularly by companies that have
historically relied on traditional channels to advertise or sell their products
and services, requires the acceptance of a new way of conducting business.
Potential advertisers may have negative perceptions of the Internet as an
effective means of advertising or selling their products or services. If the
market for Internet advertising does not develop, our business would be harmed.
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WE MAY EXPERIENCE DELAYS IN PRODUCT DEVELOPMENT, WHICH COULD ADVERSELY AFFECT
OUR REVENUES OR RESULTS OF OPERATIONS.
Any delays in product development or market launch could adversely affect
our revenues or results of operations. To be successful, we must develop
technology to enable us to provide, bill for and enhance our Portico service,
myTalk service, fee-based services for the myTalk and other Internet services
and other voice-enabled services, including those we agree to supply for third
parties. Software product development schedules are difficult to predict because
they involve creativity and the use of new development tools and learning
processes. Our software development efforts have been delayed in the past. In
addition to software development delays, we may also experience delays in other
aspects of product development. Any product development delays could delay or
prevent successful introduction or marketing of new or improved products or
services or the delivery of new versions of our products or services.
THE FAILURE OR UNAVAILABILITY OF THIRD-PARTY TECHNOLOGIES AND SERVICES COULD
LIMIT OUR ABILITY TO GENERATE REVENUES.
We have incorporated technology developed by third parties in the Portico
and myTalk services and the services to be provided to our partners, including
the following:
- email servers which process both emails and voicemails;
- the calendar and contact software;
- the voice recognition software;
- the text-to-speech software;
- the billing system; and
- the network operations center equipment.
We will continue to incorporate third-party technology in future products
and services. We have limited control over whether or when these third-party
technologies will be enhanced. In addition, our competitors may acquire
interests in these third parties or their technologies, which may render the
technology unavailable to us. If a third party fails or refuses to timely
develop, license or support technology necessary to our services, market
acceptance of our services could be adversely affected.
In addition, we rely and will continue to rely on services supplied by
third parties in connection with providing our services such as
telecommunications, Internet access and power. If these services fail to meet
industry standards for quality and reliability, market acceptance of our
services could be adversely affected.
INTENSE COMPETITION IN THE MARKET FOR VOICE-ENABLED SERVICES COULD PREVENT US
FROM ACHIEVING OR SUSTAINING PROFITABILITY.
The market for voice-enabled services is intensely competitive. We may be
unable to compete with existing companies or new companies entering the market.
Many of these companies have greater financial resources, name recognition,
research and development capabilities, sales and marketing staffs, and better
developed distribution channels than we do. The services that we offer may not
achieve sufficient quality, functionality or cost-effectiveness to compete with
existing or future alternatives. Furthermore, our competitors may succeed in
developing competing products or services which are more effective and
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cheaper or which render our services or technology obsolete. If we are unable to
compete effectively, our business would be adversely affected.
CONVERSION OF PREFERRED STOCK OR ISSUANCE OF OTHER SECURITIES WOULD DILUTE
CURRENT STOCKHOLDERS.
We have 50,000 shares of Series A preferred stock, 2,000 shares of Series D
preferred stock and 599 shares of Series E preferred stock outstanding, all of
which are convertible into common stock. In addition, we have a warrant to
purchase an additional 100 shares of Series E preferred stock and warrants to
purchase an aggregate of 780,000 shares of common stock outstanding. The holders
of common stock could experience substantial dilution to their investment upon
conversion of the preferred shares or exercise of the warrants. The number of
shares of common stock issuable upon the conversion of the Series D preferred
stock depends on the prices of the common stock as quoted on Nasdaq shortly
before the date of conversion. We cannot predict the price of the common stock
in the future. If the price of our common stock decreases over time, the number
of shares of common stock issuable upon conversion of the preferred stock will
increase and the holders of common stock would experience additional dilution of
their investment. Such dilution could cause the stock price of our common stock
to decrease further. A decrease in the stock price of our common stock could
cause our common stock to be delisted from The Nasdaq Stock Market. See "Selling
Stockholders -- Relationships between Selling Stockholders and Us."
Our board of directors has the authority to issue 432,301 additional shares
of preferred stock that are convertible into common stock without any action by
our stockholders. In addition, our board of directors may sell additional shares
of common stock or other equity securities that are convertible into common
stock without any action by our stockholders. The issuance and conversion of any
such preferred stock or equity securities would further dilute the percentage
ownership of our stockholders.
WE MAY BE REQUIRED TO REDEEM THE SERIES D PREFERRED STOCK AND SUCH REDEMPTION
COULD SIGNIFICANTLY DEPLETE OUR CASH RESERVES, WHICH WOULD MATERIALLY ADVERSELY
AFFECT OUR FINANCIAL CONDITION.
The holders of the Series D preferred stock have redemption rights if we
fail to meet the requirements of the documents governing the Series D preferred
stock. Assuming that all 2,000 shares of Series D preferred stock are
outstanding, the total redemption value would be approximately $20 million to
$26 million. Such payments would significantly deplete our cash reserves, which
would materially adversely affect our financial condition. In addition, such
decrease in our cash reserves may cause our common stock to be delisted from The
Nasdaq Stock Market. We cannot guarantee that we will be able to meet all of the
requirements necessary to avoid a redemption. See "Selling
Stockholders -- Relationships between Selling Stockholders and Us."
TECHNOLOGY CHANGES RAPIDLY IN OUR MARKET, AND OUR FUTURE SUCCESS WILL DEPEND ON
OUR ABILITY TO MEET THE NEEDS OF OUR CUSTOMERS.
The telecommunications services 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 our voice-enabled services obsolete and unmarketable.
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Our success will depend upon our ability to timely develop and introduce
new products and services, as well as enhancements to our existing products and
services, to keep pace with technological developments and emerging industry
standards and address the changing needs of users. We may not be successful in
developing and marketing new products and services that respond to technological
changes, or evolving industry standards. We may experience difficulties that
could delay or prevent the successful development, introduction and marketing of
new products and services. In addition, our new products and services may not
adequately meet the requirements of the marketplace or achieve market
acceptance.
OUR INVESTMENT IN AND OTHER COMMITMENTS TO DATAROVER MOBILE SYSTEMS, INC. MAY
RESULT IN A SIGNIFICANT LOSS TO US.
Effective October 1998, we divested our DataRover handheld communications
device division in a transaction with DataRover Mobile Systems, Inc. ("DSI"). In
connection with the transaction, we made an investment in DSI totaling
$3,361,000, and received non-voting, non-redeemable preferred stock and 49% of
the outstanding common stock of DSI. We accounted for our investment under the
modified equity method, and we will record 100% of the losses incurred by DSI up
to a total of $3,361,000, our initial investment. As of March 31, 1999, we had
recorded a decrease of $2,521,000 in the value of our investment to reflect 100%
of the losses incurred by DSI through that date. In the event that DSI incurs
further losses in any future period, we will be required to record a
corresponding decline in the value of our investment. In addition, if we
determine that the value of our investment in DSI has been impaired, we will be
required to write off our investment, in whole or in part.
In connection with this transaction, we also agreed to purchase DataRover
840 units for DSI from Oki Electric Industry Co., Ltd. under an existing letter
of credit. During March 1999, we purchased all units which we were obligated to
purchase from Oki Electric. As of March 31, 1999, DSI's obligation to us was
valued at $2,884,000. We are to be reimbursed by DSI the cost of such units upon
the earlier of five days following the sale of the units by DSI, or 120 days
following shipment by Oki Electric. DSI's obligation to reimburse us is secured
by all of its personal property. We cannot guarantee that DSI will be able to
reimburse us, or that our security interest in their personal property will be
adequate to satisfy their obligation to us. We will incur additional losses in
the event DSI is not able to reimburse us.
OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY COULD IMPAIR OUR COMPETITIVE
POSITION.
We believe that our success depends, in part, on our ability to protect our
intellectual property. In order to do that, we must take the following measures:
- obtain patent, copyright and trademark protection where appropriate;
- preserve our trade secrets;
- defend our patents, copyrights, trademarks and trade secrets against
infringement; and
- prevent unauthorized disclosure of confidential information through the
use of confidentiality agreements with employees, consultants and
partners.
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We may be unable to accomplish these measures. In addition, we cannot be
certain that they will be adequate to protect our intellectual property. In
spite of our efforts, third parties may successfully copy our products or use
our confidential information.
VARIOUS PARTIES MAY ACCUSE US OF INFRINGING THEIR INTELLECTUAL PROPERTY RIGHTS,
AND ANY RELATED LITIGATION COULD HARM OUR BUSINESS REGARDLESS OF ITS MERIT.
Third parties may assert claims against us from time to time alleging
infringement, misappropriation or other violations of proprietary rights,
whether or not such claims have merit. Such claims can be time consuming and
expensive to defend and could require us to cease the use and sale of allegedly
infringing products and services, incur significant litigation costs and
expenses, develop or acquire non-infringing technology or obtain licenses to the
alleged infringing technology. We may not be able to develop or acquire
alternative technologies or obtain such licenses on commercially reasonable
terms.
SECURITY PROBLEMS IN OUR SERVICES WOULD LIKELY RESULT IN SIGNIFICANT LIABILITY
AND REDUCED REVENUES.
Security vulnerabilities and weaknesses may be discovered in our services
or licensed technology incorporated into our services or in the media by which
subscribers access our services. Any security problems in our services or the
licensed technology incorporated in our services may require us to expend
significant capital and other resources to alleviate the problems. In addition,
these problems could result in the loss or misuse of personal information,
including credit card numbers, and limit the number of subscribers to our
Portico and myTalk services and to services of our partners. A decrease in the
number of subscribers could lead to decreased revenues and termination of our
relationships with advertisers, sponsors and partners. These problems may also
cause interruptions or delays in the development of enhancements to our services
and may result in lawsuits against us.
We will continue to incorporate authentication, encryption and other
security technologies in our services. However, such technologies may not be
adequate to prevent break-ins. In addition, weaknesses in the media by which
users access these services, including the Internet, land-line telephones,
cellular phones and other wireless devices, may compromise the security of the
electronic information accessed from the service. We intend to continue to limit
our liability to end users and to our partners, including liability arising from
failure of the authentication, encryption and other security technologies
incorporated into our services, through contractual provisions. However, such
limitations may not eliminate liability. We do not currently have liability
insurance to protect against risks associated with forced break-ins or
disruptions.
A PRODUCT LIABILITY CLAIM ASSERTED AGAINST US COULD MATERIALLY AND ADVERSELY
AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We may be subject to claims for damages related to system errors and other
defects in our services. Agreements with end users of our services typically
contain provisions designed to limit exposure to potential product liability
claims. However, these provisions may not be sufficient to protect us from
liability. We currently have liability insurance to protect against certain
risks associated with system errors and other defects in our services. However,
we cannot guarantee that such insurance will be sufficient.
11
<PAGE> 13
OUR STOCK PRICE HAS BEEN EXTREMELY VOLATILE, AND EXTREME PRICE FLUCTUATIONS
COULD ADVERSELY AFFECT YOUR INVESTMENT.
The market price of our common stock has been extremely volatile. Since our
initial public offering in February 1995, the closing price of our common stock
has ranged from a high of $26.625 to a low of $0.938 per share.
Publicized events and announcements may have a significant impact on the
market price of our common stock. For example, shortfalls in our revenue or net
income, conversions of preferred stock into common stock, delays in product
development, disruptions in our service, or announcements of partnerships,
technological innovations or new products or services by our competitors could
have the effect of temporarily or permanently driving down the price of our
common stock. In addition, the stock market from time to time experiences
extreme price and volume fluctuations which particularly affect the market
prices for emerging and technology companies, such as ours, and which are often
unrelated to the operating performance of the affected companies. These broad
market fluctuations may adversely affect your ability to sell your shares at a
price equal to or above the price you purchased them. In addition, a decrease in
the stock price of our common stock could cause our common stock to be delisted
from The Nasdaq National Market.
YEAR 2000 COMPLICATIONS MAY DISRUPT OUR OPERATIONS AND HARM OUR BUSINESS.
We face risks related to the inability of computer systems to accurately
identify and process dates beyond the year 1999. We are currently taking steps
to address these risks for all of our computer systems, including internal
systems and systems supplied to us by third parties. These systems include those
that are commonly thought of as information technology systems, such as our
billing, accounting and network systems. In addition, these systems include
those that are non-information technology systems, such as our building control
systems, building safety systems and communications systems. Based on currently
available information, we do not believe that year 2000 issues will have a
material adverse impact on our results of operations or financial condition.
However, we may fail to identify all critical year 2000 problems, may not
properly assess, remediate or test our systems, and may encounter unexpected
delays or costs associated with our year 2000 effort. In addition, we have not
completed our assessment of the year 2000 readiness of significant suppliers. We
believe that noncompliance of products and services supplied to us by third
parties presents the most significant year 2000 risk. We rely on third-party
suppliers for a significant number of systems related to our Portico service,
such as:
- email servers which process both emails and voicemails;
- the calendar and contact software;
- the voice recognition software;
- the text-to-speech software;
- the billing system; and
- the network operations center equipment.
In addition, we rely on third parties for key services, such as
telecommunications, Internet access and power. In the event that we, or any of
our third-party suppliers, are not year 2000 ready, we could experience
significant disruptions in our operations and service
12
<PAGE> 14
offerings. Such interruptions could lead to lost sales, loss of relationships
with partners, advertisers and sponsors, and damage to our business reputation.
DELAWARE LAW AND CERTAIN PROVISIONS OF OUR CHARTER DOCUMENTS MAY INHIBIT
POTENTIAL ACQUISITION BIDS.
Delaware law and our charter may inhibit potential acquisition bids for
General Magic. We are subject to the antitakeover provisions of the Delaware
General Corporation Law, which could delay a merger, tender offer or proxy
contest or make such a transaction more difficult. In addition, provisions of
our certificate of incorporation and bylaws may have the effect of delaying or
preventing a change in control or in management, or may limit the price that
certain investors may be willing to pay in the future for shares of common
stock. These provisions include:
- issuance of "blank check" preferred stock, which is preferred stock that
can be issued by the board of directors without prior stockholder
approval, with rights senior to those of common stock;
- prohibition on stockholder action by written consent;
- requirement that a two-thirds vote of the stockholders is required to
amend the bylaws; and
- advance notice requirements for submitting nominations for election of
the board of directors and for proposing matters that can be acted upon
by stockholders at a meeting.
Furthermore, the Series D preferred stock provides holders rights to
redemption of their Series D preferred stock upon a change in control, which
could make an acquisition more difficult. See "Selling
Stockholders -- Relationships between Selling Stockholders and Us."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus and the documents incorporated by
reference are forward-looking statements. These forward-looking statements are
subject to certain risks and uncertainties, including, among others, those
listed under "Risk Factors" above and in the documents incorporated by
reference.
In some cases, you can identify forward-looking statements by words such as
"anticipates," "believes," "expects," "future," "intends," and similar
expressions.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance, or achievements. You are cautioned not to place undue
reliance on these forward-looking statements. We do not intend to update any of
the forward-looking statements after the date of this prospectus to conform them
to actual results.
13
<PAGE> 15
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered
pursuant to this prospectus by the selling stockholders and all proceeds will go
to the selling stockholders to be used for their own purposes.
SELLING STOCKHOLDERS
The following table sets forth:
- the names of the selling stockholders,
- the number of shares of common stock underlying the preferred stock and
warrants held by each of them as of June 10, 1999,
- the number of shares which may be offered pursuant to this prospectus and
- the number of shares and percentage of class to be beneficially owned by
each selling stockholder after this offering.
<TABLE>
<CAPTION>
TOTAL SHARES
PREFERRED STOCK WARRANTS OF COMMON STOCK
----------------------- ----------------------------------- -------------------------------------------
SHARES OF SHARES OF
UNDERLYING SHARES OF COMMON STOCK
SHARES OF SHARES OF SHARES OF SHARES OF COMMON COMMON SHARES OF BENEFICIALLY
UNDERLYING COMMON UNDERLYING COMMON STOCK STOCK COMMON OWNED
COMMON STOCK COMMON STOCK AFTER THE BENEFICIALLY STOCK AFTER THE
SELLING STOCKHOLDER STOCK OFFERED STOCK OFFERED OFFERING OWNED OFFERED OFFERING
------------------- ---------- ---------- ---------- --------- ---------- ------------ ---------- ---------------
# %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HFTP Investment
LLC................ 2,122,835 6,330,896 52,500 78,750 -- 2,175,335 6,409,646 -- --
RGC International
Investors, LDC..... 758,155 2,261,033 201,150 28,125 182,400 2,700,393 2,289,158 1,923,488 4.7
Halifax Fund, L.P.... 1,728,593 5,155,157 296,750 64,125 254,000 3,722,835 5,219,282 1,951,492 4.7
Palladin Partners I,
L.P................ 106,141 316,544 6,625 3,938 4,000 193,138 320,482 84,372 *
Palladin Overseas
Fund Limited....... 60,652 180,881 3,500 2,250 2,000 106,085 183,131 43,933 *
The Gleneagles Fund
Company............ 181,957 542,648 6,500 6,750 2,000 230,390 549,398 43,933 *
Conseco Direct
Life............... 136,467 406,985 5,375 5,063 2,000 183,775 412,048 43,933 *
Lancer Securities
(Cayman) Ltd....... 60,652 180,881 1,500 2,250 -- 62,152 183,131 -- --
Fisher Capital
Ltd................ 545,871 1,627,944 13,500 20,250 -- 559,371 1,648,194 -- --
Wingate Capital
Ltd................ 363,914 1,085,296 9,000 13,500 -- 372,914 1,098,796 -- --
Microsoft
Corporation........ 3,629,000 2,721,750 -- -- -- 3,629,000 2,721,750 907,250 2.2
TOTALS....... 20,810,015 225,001 21,035,016
</TABLE>
- -------------------------
* Represents less than 1%.
NOTES REGARDING PREFERRED STOCK AND WARRANTS
The preferred stock referenced in the table represents Series A Convertible
Preferred Stock as to Microsoft Corporation and Series D Convertible Preferred
Stock as to all other selling stockholders.
The information relating to the number of shares underlying the preferred
stock and the warrants assumes conversion or exercise as of June 10, 1999, and
as to the Series D
14
<PAGE> 16
preferred stock, assumes a conversion price of $3.33, the average of the closing
sales prices of the ten trading days immediately following March 30, 1999.
NOTES REGARDING NUMBER OF SHARES TO BE OFFERED
The conversion price of the Series D preferred stock and the exercise price
of the warrants are subject to adjustment for events which cannot be predicted
by us at this time, including the future market price of the common stock.
Consequently, the number of shares to be offered by the selling stockholders
other than Microsoft Corporation as set forth in the table represents an
estimate. The actual number of shares of common stock issuable upon conversion
of the Series D preferred stock and exercise of warrants could be materially
less or more. To provide for the range of reasonably possible conversion prices,
we have registered, and the number of shares offered by each selling stockholder
as set forth in the table, includes:
- approximately 300% of the common stock issuable upon conversion of the
Series D preferred stock held by such selling stockholder as of June 10,
1999 and
- 150% of the common stock issuable upon exercise of the warrants issued in
connection the Series D preferred stock held by such selling stockholder
as of June 10, 1999.
See "-- Relationships between the Selling Stockholders and Us."
NOTES REGARDING NUMBER OF SHARES OWNED AFTER OFFERING
Because the selling stockholders may offer all, some or none of their
common stock, we cannot provide a definitive estimate of the number of shares
that each selling stockholder will hold after the offering.
The shares beneficially owned after the offering column assumes the sale of
all shares offered. The percentage owned after the offering column is based on
41,036,769 shares of common stock outstanding as of June 10, 1999.
NOTES REGARDING BENEFICIAL OWNERSHIP
Except as set forth below, each of the selling stockholders has sole voting
and investment power with respect to all shares of General Magic common stock
shown as beneficially owned by them.
The number of shares of common stock set forth in the table as underlying
the preferred stock and the warrants or as beneficially owned by each selling
stockholder assumes conversion or exercise of all of the Series D preferred
stock and the warrants held by such selling stockholder. However, no selling
stockholder may convert or exercise the Series D preferred stock or the warrants
owned by it if such conversion or exercise would result in that selling
stockholder, together with its affiliates, beneficially owning more than 4.9% of
the then outstanding common stock. In this regard, beneficial ownership of the
selling stockholders set forth in the table is not determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
Promethean Investment Group L.L.C. is the general partner of Themis
Partners L.P. and the investment advisor for each of Heracles Fund and HFTP
Investment LLC. Consequently, Promethean has voting control and investment
discretion over securities of
15
<PAGE> 17
General Magic held by Themis, Heracles and HFTP. As of June 10, 1999, Themis
held 54,800 shares of common stock issuable upon the exercise of warrants and
Heracles held 66,800 shares of common stock issuable upon the exercise of
warrants. The ownership for each of Themis, Heracles and HFTP does not include
the ownership information for the other entities. Promethean and each of Themis,
Heracles and HFTP disclaims beneficial ownership of the securities of General
Magic held by all other entities controlled by Promethean.
The Palladin Group L.P. or an affiliate is the investment manager for each
of Halifax Fund, L.P., Palladin Partners I L.P., Palladin Overseas Fund Limited,
The Gleneagles Fund Company, Conseco Direct Life, and Lancer Securities (Cayman)
Ltd. Consequently, The Palladin Group has voting control and investment
discretion over securities held by such entities. The ownership for each such
entity does not include the ownership information for the other entities. The
Palladin Group and each such entity disclaim beneficial ownership of the
securities of General Magic held by all other entities over which The Palladin
Group has voting control and investment discretion.
Citadel Limited Partnership is the trading manager of each of Fisher
Capital Ltd. and Wingate Capital Ltd. Consequently, Citadel has voting control
and investment discretion over securities held by such entities. The ownership
for each such entity does not include the ownership information for the other
entities. Citadel and each such entity disclaims beneficial ownership of the
securities of General Magic held by all other entities controlled by Citadel.
RELATIONSHIPS BETWEEN THE SELLING STOCKHOLDERS AND US
None of the selling stockholders has held any position or office or has had
any other material relationship with General Magic or any of our affiliates
within the past three years other than as a result of its ownership of shares of
equity securities. This information is based upon information provided by the
selling stockholders.
Microsoft Corporation
In February 1998, we issued to Microsoft Corporation 50,000 shares of our
Series A Convertible Preferred Stock pursuant to a preferred stock purchase
agreement. The terms and conditions of the Series A shares are as follows:
Dividends. If and when the board of directors declares a dividend payable
on the common stock, each Series A share will be entitled to receive dividends
on an "as if converted" basis. We must pay dividends on Series A shares before
we pay any dividends on the common stock. Dividends on Series A shares are
non-cumulative.
Conversion. Each Series A share is convertible into 72.58 shares of our
common stock. The number of shares of common stock issuable upon conversion of
the Series A shares is subject to adjustment for:
- dividends or other distributions on outstanding common stock;
- a stock split or stock combination;
- a capital reorganization or reclassification; or
16
<PAGE> 18
- issuances of common stock at a price per share below $1.24 or of other
securities convertible or exercisable for common stock at a price below
$1.24.
The 50,000 Series A shares outstanding as of June 10, 1999, would be
convertible into approximately 3,629,000 shares of common stock.
Liquidation Preference. In the event that we liquidate, dissolve or unwind,
we must pay holders of the Series A shares an amount equal to $90 per share plus
any declared but unpaid dividends. We must pay the holders of the Series A
shares before we pay the holders of the common stock.
Voting Rights. Holders of Series A shares are eligible to vote with holders
of common stock on an "as if converted" basis.
As a condition to the sale of the Series A shares, we entered into a patent
license agreement with Microsoft for certain of our technology and agreed to a
covenant not to sue on matters relating to our patents.
The summary set forth above is not intended to be a complete description of
all of the terms of the documents governing our relationship with Microsoft.
Please refer to the copies of the relevant documents which were filed as
exhibits to our registration statement on Form S-3 filed with the SEC on May 1,
1998 and Amendment #2 to such registration statement filed with the SEC on June
5, 1998.
Selling Stockholders Other Than Microsoft
In March 1999, we issued to the selling stockholders other than Microsoft
an aggregate of 2,000 shares of our Series D Convertible Preferred Stock and
warrants to purchase an aggregate of 150,000 shares of common stock pursuant to
a securities purchase agreement.
The warrants are exercisable for 150,000 shares of common stock at a
current exercise price of $5.078 per share. They have a term of three years. The
exercise price and the number of shares issuable upon exercise of the warrants
will change in the event of any of the following:
- our issuance or sale or deemed issuance or sale of shares of common stock
at a price less than $5.078; or
- stock splits, stock dividends or similar transactions.
The terms of the Series D shares are as follows:
Dividends. The Series D shares accrue dividends quarterly at a rate of 5%
per annum. The dividends are payable, at our option, in cash or by adding the
amount of accrued and unpaid dividends to the liquidation preference, as
described below.
Conversion Rights. Each Series D share is convertible, at the option of a
Series D holder, into that number of shares of common stock obtained by dividing
the liquidation preference by the conversion price. The liquidation preference
of a Series D share equals $10,000 plus any accrued and unpaid dividends and any
unpaid default interest on cash dividends.
Initial Conversion Price. The initial conversion price will be equal to
110% of the average of the closing bid prices during the ten consecutive trading
days immediately after
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<PAGE> 19
June 28, 1999. However, it will equal $4.50, if prior to July 13, 1999, any of
the following events occur:
- a consolidation, merger or other business resulting in a change of
control;
- sale of all or substantially all of our assets; or
- a purchase, tender or exchange offer accepted by holders of more than 50%
of our common stock.
Resets of Conversion Price. The conversion price will be reset following
the last day of each September and March and on December 31, 1999 and June 30,
2000. The reset price will be equal to 110% of the average of the closing bid
prices of the common stock during the ten trading days immediately after each
reset date. The conversion price will only be reset if the reset price is less
than the then-effective conversion price.
Other Adjustments to Conversion Price. In addition, the conversion price
may change in the event of:
- stock splits, stock dividends or similar transactions;
- our failure to maintain the registration statement relating to shares
issuable upon conversion or exercise of the Series D share and the
warrants;
- our failure to maintain the listing of the common stock on The Nasdaq
National Market, The American Stock Exchange, Inc. or The New York Stock
Exchange;
- a purchase, tender or exchange offer accepted by holders of more than 50%
of our common stock which is approved or recommended by the board of
directors;
- our issuance or sale or deemed issuance or sale of shares of common stock
at a price less than the then-effective conversion price; or
- our issuance or sale or deemed issuance or sale of convertible securities
that are convertible into common stock at a conversion price which varies
with the market price of the common stock.
As discussed above, both the initial conversion price and subsequent
adjustments to the conversion price are determined, in part, by the future
market price of the common stock. The following table sets forth a range of
hypothetical market prices, the corresponding conversion prices, the number of
shares of common stock issuable upon conversion of all 2,000 Series D shares at
each such conversion price and the percentage of
18
<PAGE> 20
outstanding common stock represented by such shares, after giving effect to such
conversion.
<TABLE>
<CAPTION>
AVERAGE CLOSING BID CONVERSION PERCENTAGE OF
PRICE FOR 10 PRICE COMMON TOTAL
CONSECUTIVE (110% OF THE SHARES SHARES OF
TRADING DAYS AVERAGE) ISSUABLE(1) COMMON STOCK(2)
- ------------------- ------------ ----------- ---------------
<S> <C> <C> <C>
$1.00 $1.10 18,361,141 30.9%
$3.00 $3.30 6,120,375 13.0
$3.69(3) $4.06 4,974,688 10.8
$5.00 $5.50 3,672,225 8.2
$7.00 $7.70 2,623,015 6.0
</TABLE>
- -------------------------
(1) Assumes conversion on June 10, 1999.
(2) Based on 41,036,769 shares of common stock outstanding as of June 10, 1999
plus the number of shares of common stock issuable upon conversion of the
Series D shares at each of the indicated conversion prices.
(3) Represents the average of the closing bid prices for the 10 consecutive
trading days after May 24, 1999.
As shown in the table, in the event that the market price of the common
stock decreases over time, the number of shares of common stock issuable upon
conversion of the Series D shares will increase and holders of the common stock
would experience further dilution.
There is no minimum conversion price. Therefore, the conversion price could
be lower than $1.10 per share, in which case, the holders of the common stock
may be further diluted.
The number of shares of common stock issuable as shown in the table assumes
the conversion of all outstanding Series D shares. However, no Series D holder
may convert its Series D shares if the conversion would result in such holder,
together with its affiliates, beneficially owning more than 4.9% of the then
outstanding common stock.
Restrictions on Conversion. The Series D shares are not convertible into
common stock until July 13, 1999. However, the Series D shares are convertible
prior to such time in the event any of the following occurs:
- a consolidation, merger or other business combination resulting in a
change of control;
- sale of all or substantially all of our assets; or
- a purchase, tender or exchange offer accepted by holders of more than 50%
of our common stock.
Automatic Conversion. The outstanding Series D shares will automatically
convert into common stock on March 30, 2002. The conversion rate will equal the
liquidation preference divided by the closing bid price on that date. The
liquidation preference of a Series D share equals $10,000 plus any accrued and
unpaid dividends and any unpaid default interest on cash dividends.
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<PAGE> 21
Preemptive Rights. For a period of 365 days after the effectiveness of this
registration statement, the holders of the Series D shares have a right of first
refusal with respect to 100% of future issuances of:
- convertible securities that are convertible into or exchangeable for
common stock at a conversion price which may vary with the market price
of the common stock;
- shares of common stock issued at a price which is less than 93% of the
closing bid price on the issuance date of such shares; and
- convertible securities that are convertible into or exchangeable for
common stock at a conversion price which is less than 93% of the closing
bid price on the issuance date of such securities.
Our Redemption Rights upon a Change of Control. We may redeem all of the
Series D shares upon a consolidation, merger or other business combination
resulting in a change of control if:
- on each day during the 60-trading day period prior to our election of
redemption, the common stock is listed on Nasdaq or the NYSE;
- we have delivered all shares of common stock upon conversion on a timely
basis; and
- we have otherwise satisfied our obligations and are not in default under
the certificate of designations or the purchase agreement or the
registration rights agreement governing the rights of the Series D
shares.
If a registration statement for the sale of all common stock issuable upon
conversion or exercise of the Series D shares and warrants has been available at
all times during the 60 consecutive trading days prior to our election to
redeem, the redemption price will be equal to 115% of the liquidation
preference. If not, the redemption price will be the greater of 115% of the
liquidation preference or the market price on the date of the public
announcement of the consolidation, merger or other business combination.
Our Redemption Rights upon Resets of Conversion Price. In addition, in the
event that the conversion price is reset to an amount which is less than 50% of
the initial conversion price, we may redeem all of the Series D shares at the
liquidation preference if:
- on each day during the 20-trading day period prior to our election of
redemption, a registration statement is available for sale of no less
than 125% of the number of shares which have been issued and are issuable
upon conversion of the Series D shares and the warrants;
- on each day during the 20-trading day period prior to our election of
redemption, the common stock is listed on Nasdaq or the NYSE;
- we have delivered all shares of common stock upon conversion on a timely
basis;
- we have otherwise satisfied our obligations and are not in default under
the certificate of designations or the purchase agreement or the
registration rights agreement governing the rights of the Series D
shares; and
20
<PAGE> 22
- none of the following or any announcement of the following shall have
occurred:
- consolidation, merger or other business combination resulting in a
change of control;
- sale of all or substantially all of our assets; or
- a purchase, tender or exchange offer accepted by holders of more
than 50% of our common stock.
See "Resets of Conversion Price" above.
Redemption Rights of Series D Holders upon a Major Transaction, including a
Change of Control. The Series D holders are entitled to require us to redeem
some or all of their shares at a per share price equal to the greater of 125% of
the liquidation preference, or the market price at the time of the public
announcement of any of the following events:
- a consolidation, merger or other business combination resulting in a
change of control;
- sale of all or substantially all of our assets; or
- a purchase, tender or exchange offer accepted by holders of more than 50%
of our common stock which is approved or recommended by the board of
directors.
However, in the event of a consolidation, merger or other business
combination resulting in a change of control, the holders of the Series D Shares
may not exercise their rights of redemption if we have previously exercised our
redemption right. See " -- Our Redemption Rights upon a Change of Control."
Redemption Rights of Series D Holders upon Covenant Breaches. The Series D
holders are also entitled to require us to redeem some or all of their shares at
a per share price equal to the liquidation preference at the time of any of the
following events:
- our failure to maintain the registration statement for the resale of the
common stock issuable upon conversion or exercise of the Series D shares
and warrants;
- our failure to maintain listing of the common stock on Nasdaq, AMEX or
NYSE;
- a purchase, tender or exchange offer accepted by holders of more than 50%
of our common stock which is not approved or recommended by the board of
directors.
Furthermore, the Series D holders are entitled to require us to redeem some
or all of their shares at a per share price equal to 130% of the liquidation
preference if:
- any representation or warranty made by us in the documents related to the
sale of the Series D shares was not true and correct at the time it was
made; or
- we breach any covenant or other term or condition of any document related
to the sale of the Series D shares.
However, the Series D holders will not have the redemption right if such
breach would not have a material adverse effect on us or if a breach continues
for less than ten days.
21
<PAGE> 23
The Series D holders also have a right to require us to redeem some or all
of their shares at a price per share equal to the greater of 130% of the
liquidation preference or the market price at the time of any of the following
events:
- our failure to use our best efforts to maintain registration of the
common stock issuable upon conversion or exercise of the Series D shares
or warrants;
- our failure to use our reasonable best efforts to maintain the listing of
the common stock on Nasdaq National Market, AMEX or NYSE;
- our failure to timely convert Series D shares; or
- our failure to make penalty payments, if we choose not to redeem the
Series D shares upon the occurrence of any of the following:
- our failure to maintain listing of the common stock on Nasdaq, AMEX
or NYSE;
- a purchase, tender or exchange offer accepted by holders of more
than 50% of our common stock which is not approved or recommended by
the board of directors.
Voting Rights. An affirmative vote of not less than two-thirds of the
then-outstanding Series D shares is required to approve any change to the
Certificate of Designations or our Certification of Incorporation that would
adversely affect or otherwise impair the rights or priority of the Series D
holders relative to holders of any other class of capital stock. Otherwise,
except as required by law, the Series D shares have no other voting rights.
Liquidation Rights. In the event we liquidate, dissolve or wind up, we must
pay the holders of the Series D shares an amount per share equal to $10,000 plus
any accrued and unpaid dividends and any unpaid default interest on cash
dividends. We must pay the Series D holders before we pay the holders of common
stock.
The summary set forth above is not intended to be a complete description of
all of the terms of the documents governing the Series D shares and the
warrants. Please refer to the copies of the relevant documents which were filed
as exhibits to our Current Report on Form 8-K filed with the SEC on April 2,
1999.
We issued 5 1/2% Cumulative Convertible Series B Preferred Stock and Series
C Convertible Preferred Stock to some of the selling stockholders. However, as
of the date of this prospectus, all shares of Series B preferred stock and
Series C preferred stock have been converted into our common stock.
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 Nasdaq National Market, in privately negotiated transactions
or otherwise. Shares may be sold 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:
22
<PAGE> 24
- 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;
- purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;
- an exchange distribution in accordance with the rules of such exchange;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- privately negotiated transactions;
- short sales;
- through the writing of options on the shares;
- in one or more underwritten offerings on a firm commitment or best effort
basis; and
- 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. Broker-dealers may
agree with the selling stockholders to sell a specified number of such shares at
a stipulated price per share. 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 stipulated price. Broker-dealers who acquire shares as
principals may thereafter resell such shares from time to time in transactions
in The Nasdaq 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. Broker-dealers may use block transactions and sales to and through
broker-dealers, including transactions of the nature described above. The
selling stockholders may also sell the shares in accordance with Rule 144 under
the Securities Act of 1933, as amended, rather than pursuant to this prospectus.
From time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in some or all of the shares owned by
them. The pledgees, secured parties or persons to whom such securities have been
hypothecated will, upon foreclosure in the event of default, be deemed to be
selling stockholders. The number of a selling stockholder's shares offered under
this prospectus will decrease as and when it takes such actions. The plan of
distribution for such selling stockholder's shares will otherwise remain
unchanged. In addition, a selling stockholder may, from time to time, sell short
the common stock of General Magic, and in such instances, this prospectus may be
delivered in connection with such short sales and the shares offered under this
prospectus may be used to cover such short sales.
To the extent required under the Securities Act of 1933, as amended, the
aggregate amount of selling stockholders' shares of common stock being offered
and the terms of the offering, the names of any such agents, brokers, dealers or
underwriters and any applicable commission with respect to a particular offer
will be set forth in an accompanying prospectus supplement. Any underwriters,
dealers, brokers or agents participating in the distribution of the common stock
may receive compensation in the form of underwriting discounts, concessions,
commissions or fees from a selling stockholder and/or purchasers of selling
23
<PAGE> 25
stockholders' shares of common stock, for whom they may act (which compensation
as to a particular broker-dealer might be in excess of customary commissions).
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 of 1933, as amended, 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 of 1933, as amended.
A selling stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the common
stock in the course of hedging the positions they assume with such selling
stockholder, including, without limitation, in connection with distributions of
the common stock by such broker-dealers. A selling stockholder may enter into
option or other transactions with broker-dealers that involve the delivery of
the shares offered hereby to the broker-dealers, who may then resell or
otherwise transfer such shares. A selling stockholder may also loan or pledge
the shares offered hereby to a broker-dealer and the broker-dealer may sell the
shares offered hereby so loaned or upon a default may sell or otherwise transfer
the pledged shares offered hereby.
The selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, 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.
We have 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 of
1933, as amended. The selling stockholders have agreed to indemnify in certain
circumstances General Magic against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
The shares of common stock were originally issued to the selling
stockholders pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended, provided by Section 4(2) thereof. We agreed
to register the common stock under the Securities Act of 1933, as amended. We
have agreed to pay all reasonable expenses, other than underwriter discounts and
commissions, incident to the filing of this registration statement. We also
agreed to reimburse the selling stockholders for expenses incurred by the
selling stockholders in their purchase of the Series D Convertible Preferred
Stock and warrants, up to a maximum of $25,000.
LEGAL MATTERS
The legality of the shares of common stock offered hereby is being passed
upon by Cooley Godward LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements of General Magic, Inc. as of December
31, 1998 and December 31, 1997, and for each of the years in the three-year
period ended
24
<PAGE> 26
December 31, 1998 and for the period from May 1, 1990 (inception) to December
31, 1998 have been incorporated herein by reference and in the registration
statement in reliance upon the report of KPMG LLP, independent auditors,
incorporated herein by reference and upon the authority of said firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3 to register
the common stock offered by this prospectus. However, this prospectus does not
contain all of the information contained in the registration statement and the
exhibits and schedules to the registration statement. We strongly encourage you
to carefully read the registration statement and the exhibits and schedules to
the registration statement.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, DC, New York, New York and Chicago,
Illinois. You can request copies of these documents by contacting the SEC and
paying a fee for the copying cost. 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 from the SEC's website at www.sec.gov.
The SEC allows us to "incorporate by reference" the information contained
in documents that 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 this information. We incorporate by reference the documents listed
below:
1. Our Annual Report on Form 10-K for the year ended December 31, 1998,
filed with the Commission on March 31, 1999;
2. Our Report on Form 8-K filed with the Commission on April 2, 1999; and
3. Our Quarterly Report on Form 10-Q filed with the Commission on May 17,
1999.
4. The description of the common stock contained in our Registration
Statement on Form 8-A filed under the Securities Exchange Act of 1934,
as amended, including any amendment or report filed for the purpose of
updating such description.
In addition, we incorporate by reference 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, as amended.
You may request a copy of these filings, at no cost to you, by writing or
telephoning us at:
General Magic, Inc.
Attention: Investor Relations
420 N. Mary Avenue
Sunnyvale, California 94086
Telephone: (408) 774-4000
25
<PAGE> 27
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
21,035,016 Shares
GENERAL MAGIC, INC.
Common Stock
-------------------------
PROSPECTUS
-------------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 28
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........................................ $20,208
Nasdaq filing fee........................................... $17,500
Accounting fees and expenses................................ $ 7,500
Legal fees and expenses..................................... $ 5,000
Printing expenses........................................... $ 2,000
Miscellaneous expenses...................................... $ 1,792
-------
Total............................................. $54,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents and in agreements with its directors and
officers provisions expanding the scope of indemnification beyond that
specifically provided by the Delaware law. 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. We have entered into such indemnification agreements
with our directors and 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> 29
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
3.1(b) Certificate of Designations of Series A Convertible
Preferred Stock filed with the Delaware Secretary of State
on February 27, 1998 is incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on May 1,
1998 (File No. 333-51685).
3.2(b) Certificate of Designations, Preferences and Rights of
Series D Convertible Preferred Stock filed with the Delaware
Secretary of State on March 30, 1999 is incorporated by
reference to Exhibit 3.1 of the Registrant's current Report
on Form 8-K filed with the Securities and Exchange
Commission on April 2, 1999 (File No. 000-25374).
4.1(b) Preferred Stock Purchase Agreement by and between the
Registrant and Microsoft Corporation dated February 26, 1998
is incorporated by reference to Exhibit 4.4 to Amendment No.
2 to the Registrant's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on June 5,
1998 (File No. 333-51685).
4.2(a)(b) Investors Rights Agreement by and between the Registrant and
Microsoft Corporation dated February 27, 1998 is
incorporated by reference to Exhibit 4.5 to Amendment No. 2
to the Registrant's Registration Statement on Form S-3 filed
with the Securities and Exchange Commission on June 5, 1998
(File No. 333-51685).
4.3(b) Securities Purchase Agreement, dated as of March 30, 1999,
by and among the Registrant and the buyers listed on the
Schedule of Buyers thereto is incorporated by reference to
Exhibit 4.1 to the Registrant's Current Report on Form 8-K
filed on April 2, 1999 (File No. 000-25374).
4.4(b) Form of Warrant issued to holders of the Series D
Convertible Preferred Stock is incorporated by reference to
Exhibit 4.2 to the Registrant's Current Report on Form 8-K
filed on April 2, 1999 (File No. 000-25374).
4.5(b) Registration Rights Agreement, dated as of March 30, 1999,
by and among the Registrant and the holders of the Series D
Convertible Preferred Stock is incorporated by reference to
Exhibit 4.3 to the Registrant's Current Report on Form 8-K
filed on April 2, 1999 (File No. 000-25374).
5.1(b) Opinion of Cooley Godward LLP.
23.1 Consent of KPMG LLP, independent auditors.
23.2(b) Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1(b) Power of Attorney.
</TABLE>
- ---------------
(a) Certain portions of this document are subject to an Application for
Confidential Treatment filed with the Commission on May 1, 1998.
(b) Previously filed.
II-2
<PAGE> 30
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
II-3
<PAGE> 31
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 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> 32
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 amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Sunnyvale, State of California on July 9, 1999.
GENERAL MAGIC, INC.
By: /s/ STEVEN MARKMAN
-----------------------------------
Steven Markman
President, Chief Executive Officer
and Chairman of the Board of
Directors
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 July 9, 1999
- --------------------------------------------- Officer, Chairman of the
Steven Markman Board, Director (Principal
Executive Officer)
* Chief Operating Officer and July 9, 1999
- --------------------------------------------- Chief Financial Officer
James P. McCormick (Principal Financial and
Accounting Officer)
* Director July 9, 1999
- ---------------------------------------------
Michael E. Kalogris
* Director July 9, 1999
- ---------------------------------------------
Dennis F. Strigl
* Director July 9, 1999
- ---------------------------------------------
Susan G. Swenson
* Director July 9, 1999
- ---------------------------------------------
Philip D. Knell
* Director July 9, 1999
- ---------------------------------------------
Roel Pieper
*By: /s/ STEVEN MARKMAN
---------------------------------------
Steven Markman
Attorney-in-fact
</TABLE>
II-5
<PAGE> 33
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1(b) Certificate of Designations of Series A Convertible
Preferred Stock filed with the Delaware Secretary of State
on February 27, 1998 is incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on May 1,
1998 (File No. 333-51685).
3.2(b) Certificate of Designations, Preferences and Rights of
Series D Convertible Preferred Stock filed with the Delaware
Secretary of State on March 30, 1999 is incorporated by
reference to Exhibit 3.1 of the Registrant's current Report
on Form 8-K filed with the Securities and Exchange
Commission on April 2, 1999 (File No. 000-25374).
4.1(b) Preferred Stock Purchase Agreement by and between the
Registrant and Microsoft Corporation dated February 26, 1998
is incorporated by reference to Exhibit 4.4 to Amendment No.
2 to the Registrant's Registration Statement on Form S-3
filed with the Securities and Exchange Commission on June 5,
1998 (File No. 333-51685).
4.2(a)(b) Investors Rights Agreement by and between the Registrant and
Microsoft Corporation dated February 27, 1998 is
incorporated by reference to Exhibit 4.5 to Amendment No. 2
to the Registrant's Registration Statement on Form S-3 filed
with the Securities and Exchange Commission on June 5, 1998
(File No. 333-51685).
4.3(b) Securities Purchase Agreement, dated as of March 30, 1999,
by and among the Registrant and the buyers listed on the
Schedule of Buyers thereto is incorporated by reference to
Exhibit 4.1 to the Registrant's Current Report on Form 8-K
filed on April 2, 1999 (File No. 000-25374).
4.4(b) Form of Warrant issued to holders of the Series D
Convertible Preferred Stock is incorporated by reference to
Exhibit 4.2 to the Registrant's Current Report on Form 8-K
filed on April 2, 1999 (File No. 000-25374).
4.5(b) Registration Rights Agreement, dated as of March 30, 1999,
by and among the Registrant and the holders of the Series D
Convertible Preferred Stock is incorporated by reference to
Exhibit 4.3 to the Registrant's Current Report on Form 8-K
filed on April 2, 1999 (File No. 000-25374).
5.1(b) Opinion of Cooley Godward LLP.
23.1 Consent of KPMG LLP, independent auditors.
23.2(b) Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1(b) Power of Attorney.
</TABLE>
- ---------------
(a) Certain portions of this document are subject to an Application for
Confidential Treatment filed with the Commission on May 1, 1998.
(b) Previously filed.
<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 or about July 9, 1999 as Amendment No. 3 to Form S-3 (Registration
No. 333-77369) of General Magic, Inc. of our report dated January 22, 1999,
except as to note 17, which is as of March 30, 1999, relating to the
consolidated balance sheets of General Magic, Inc. and subsidiary (a development
stage enterprise) as of December 31, 1998 and 1997, 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, 1998, and for the
period from May 1, 1990 (inception) to December 31, 1998, which report appears
in the December 31, 1998 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 LLP
Mountain View, California
July 9, 1999
