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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1999
REGISTRATION NO. 333-90023
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GENERAL MAGIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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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 J. MOORE, ESQ. MARY E. DOYLE, ESQ.
COOLEY GODWARD LLP GENERAL MAGIC, INC.
FIVE PALO ALTO SQUARE, 3000 EL CAMINO REAL 420 NORTH MARY AVENUE
PALO ALTO, CALIFORNIA 94306-2155 SUNNYVALE, CALIFORNIA 94086
(650) 843-5000 (408) 774-4000
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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 DECEMBER 15, 1999
25,844,666 Shares
GENERAL MAGIC, INC.
Common Stock
The selling stockholders listed on page 14 are offering up to 25,844,666
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 December 10, 1999, the last sale price of the common stock as
reported on The Nasdaq National Market was $4.125.
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 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............................................. 13
Selling Stockholders........................................ 14
Plan of Distribution........................................ 22
Legal Matters............................................... 24
Experts..................................................... 24
Where You Can Find More Information......................... 24
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ABOUT GENERAL MAGIC
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.
We offer voice-enabled services and technologies that enable voice access
over the telephone to information that is stored on computer networks, including
Web sites. Our services are designed to make it easy and convenient for people
to access and act on their personal and business information and to engage in
personal and business transactions. We offer both General Magic branded services
as well as professional and custom engineering services to other companies that
wish to license our technologies for use in their own voice-enabled services.
The General Magic branded offerings are the myTalk(TM) service, which
provides consumers with free phone and Web access to personal content, and the
Portico(TM) virtual assistant service, a pay-for service for mobile
professionals.
In June 1999, we introduced myTalk, a service allowing members to access
their email and voicemail from any telephone, reply to email messages using
their own spoken words and make free two-minute phone calls anywhere in the U.S.
The myTalk service is also accessible by personal computer through a standard
Web browser. Members accessing myTalk will see banner ads during a myTalk Web
site session and will hear short audio ads periodically during a telephone
session. This approach to advertising, called rich media, seeks to interactively
involve consumers and enhance their interest in the products and services of
advertisers.
In July 1998, we released the Portico service, which provides many of the
services of a human assistant on an around-the-clock basis. Subscribers can
access voicemail, email, faxes, calendar, address book, company news and stock
quotes from any telephone or, using a standard Web browser, from any personal
computer. This subscription-based service has served as a model for
voice-enabled services, and has allowed us to fine-tune our technologies for
broader deployment while providing a demonstration platform for our
capabilities.
One of our core technology assets is the magicTalk(TM) voice user
interface, integral to all our offerings. magicTalk is a personality-rich
natural language voice user interface. With magicTalk, users don't need to
remember special voice commands or navigate lengthy push-button menus to access
information and perform tasks. We host voice-enabled services in our network
operations center,
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located in Sunnyvale, California, and plan to assist our partners and customers
in designing and building network operations centers to host their own magicTalk
voice-enabled services.
Our magicTalk voice user interface is a flexible technology platform that
can be used to voice enable network-based content, communications and electronic
commerce applications. Our services include planning, design, development,
deployment, training, maintenance and hosting of customized voice-enabled
services for third parties.
In May 1999, BellSouth Mobility, Inc. announced its intention to begin an
initial deployment of a magicTalk-based service in the Atlanta area. The service
is a private-labeled version of our Portico service and is hosted in our network
operations center in Sunnyvale, California. High-reliability telephone lines and
cross-connect technologies were designed and installed to connect BellSouth
cellular switches in Atlanta to our network operations center. This arrangement
allows BellSouth customers to use the Portico virtual assistant to answer their
cellular telephones. Initial deployment of the service commenced in November
1999.
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. Excite Voicemail uses our magicTalk voice
user interface to guide callers in leaving voicemail messages and faxes for
registered Excite members. We host the service in our Sunnyvale, California
network operations center. Special telephone lines have been installed to
connect the Excite@Home operations center with our network operations center,
allowing voicemail and faxes to appear in the Excite member's mailbox.
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. The
private-labeled service employs our magicTalk voice user interface and would be
hosted in our network operations center. Intuit is currently reevaluating its
plans to launch voice-enabled Quicken.com services, and there can be no
assurance that Intuit will proceed under its agreement with us.
On November 9, 1999, the Company entered into a licensing and technology
agreement with General Motors Corporation through its OnStar division ("OnStar")
pursuant to which OnStar paid a $5 million fee for custom engineering services
and a license to the Company's magicTalk voice user interface technology. OnStar
has selected magicTalk as the voice user interface for its OnStar Virtual
Advisor, which will provide hands-free, voice-activated access to Web-based
information services in vehicles.
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.
Since our inception, we have generated only minimal revenues. We have
incurred significant losses, and we have substantial negative cash flow. As of
September 30, 1999, we had an accumulated deficit of $247.7 million, with a net
loss of $38.2 million for the six-month period ended September 30, 1999. We
expect to incur significant losses through the year 1999, and we may never
achieve or sustain significant revenues or become profitable.
OUR LIMITED FUNDING MAY RESTRICT OUR OPERATIONS AND OUR ABILITY TO IMPLEMENT OUR
NEW STRATEGY, AND THE AVAILABILITY OF ADDITIONAL RESOURCES IS UNCERTAIN.
Our business model requires us to devote significant financial resources to
the development, enhancement and maintenance of our General Magic branded
services, and to professional and custom engineering services for third parties.
If we are not able to successfully manage our existing resources or to secure
additional funding and other resources in a timely manner, our ability to
successfully provide these services and to generate sufficient revenues will be
restricted.
We must conserve cash because we have generated minimal revenues to date.
On November 9, 1999, we entered into a definitive agreement, which closed on
December 9, 1999, pursuant to which General Motors Corporation, through its
OnStar division, made a $15 million investment in the Company in the form of
Series G convertible preferred stock and a warrant to purchase additional shares
of Series G preferred stock for $5 million. In addition, OnStar paid a $5
million up-front, nonrefundable fee for custom engineering services and a
license to our magicTalk voice user interface technology.
Effective July 30, 1999, we entered into a common stock investment
agreement with an existing institutional investor providing for an equity line
of credit. The common stock investment agreement permits us to require the
investor to purchase from time to time an aggregate of up to $20,000,000 of the
common stock in increments of up to $5,000,000. In addition, the investor has
the right to purchase in its sole discretion up to 30% of each increment
requested by us, up to an aggregate of an additional $6,000,000 of common stock
during the term of the common stock investment agreement. However, there are
numerous conditions on our right to draw down under the equity line, including
that the closing bid price of the common stock on the business day immediately
preceding a draw down notice must be at least $2.00 per share and that the
common stock is listed on The American Stock Exchange ("AMEX"), The New York
Stock Exchange ("NYSE"), The Nasdaq National Market or The Nasdaq SmallCap
Market. In addition, the dollar amount specified in any draw down notice will be
decreased by one twentieth (1/20) for each business day during the twenty (20)
business days immediately following delivery of the draw down notice on which
the weighted average price of the common stock is less than $2.062. The weighted
average price of our common stock was less than $2.062 on each business day
through much of September, October and the first half of November. It is
uncertain that we will be able consistently to meet the closing bid price
condition, the listing condition or any other condition. In addition, although
we may request drawdowns in increments of up to $5,000,000, the actual dollar
amount is subject to limitations based on the daily trading volumes, the market
price of the common stock and the investor's ownership percentage, which have
also significantly limited our ability to draw down to date.
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As of December 10, 1999, the Company's capital stock consisted of
100,000,000 shares of common stock, 41,927,616 of which were issued and
outstanding and 39,091,874 of which were issuable and reserved for issuance
pursuant to securities convertible into or exercisable for shares of our common
stock. An additional 15,767,127 shares were reserved pursuant to provisions of
agreements governing issuance of our Series D and Series F preferred stock and
those governing warrants issued in connection with the Series B, Series C and
Series D preferred stock transactions that require us to reserve a multiple of
the shares of common stock issuable upon conversion of the preferred stock or
exercise of the warrants. We have no present plans to draw down under the equity
line. However if, at the time we elect to draw down under our equity line, we do
not have a sufficient number of authorized but unissued and unreserved shares of
common stock available for issuance under the equity line, we may be required to
seek stockholder approval of an increase in the authorized capital stock of the
Company. There can be no assurance that we will obtain stockholder approval of
an increase in our authorized capital stock, or that such approval will be
timely.
Accordingly, we cannot guarantee that sufficient funds will be available to
meet our future needs. In any event, to support our operations through the year
2000, we will be required to raise additional public or private financing. No
assurance can be given that additional financing will be available or that, if
available, it will be available on terms favorable to the Company or its
stockholders. The unavailability or timing of significant revenues and financing
could prevent or delay the continued provision 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."
WE MAY NOT BE ABLE TO RETAIN OR ATTRACT KEY EMPLOYEES.
In September 1999, we reduced our workforce by 20%. This reduction may
adversely affect our ability to attract, retain and motivate qualified
personnel. Our limited financial resources may constrain the size of our
technical, business development, sales, marketing and professional service
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 job market.
Our key management, technical, business development, sales, marketing,
administrative and professional service personnel may not remain with us, and we
may be unable to attract and retain sufficient personnel to execute our business
plan.
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 technologies. 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 technologies will grow or that consumers will accept
any of the services or products built on our magicTalk voice user interface
platform.
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OUR BUSINESS MODEL IS NEW AND UNPROVEN, AND WE MAY BE UNABLE TO IMPLEMENT IT
SUCCESSFULLY.
Our model for conducting business and generating revenue is new and
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 our General Magic branded services, and from
third parties that license our technologies and retain our professional and
engineering services. If we fail to generate sufficient revenues from these
sources, our revenues and results of operation will be adversely affected.
Revenues from our Portico service and from any service commercially
launched by such partners as BellSouth depend on the generation of significant
numbers of subscribers. It is uncertain whether our partners or we will be able
to develop and maintain at reasonable cost a significant subscriber base for
virtual assistant services. Revenues from Portico subscriptions to date have not
been significant. Moreover, market deployment of private-labeled versions of the
Portico service by telecommunications carriers has proceeded more slowly than
anticipated, and the Company does not expect a full commercial deployment by a
carrier, or associated revenues, in 1999.
In addition, revenues from our myTalk service as well as from certain
voice-enabled services licensed to partners such as Excite@Home depend on
advertising and sponsorship sales. Such revenues are not currently sufficient to
offset the costs to General Magic of providing these services. See "-- Revenues
from our Internet service depend on banner and audio advertising sales, and our
inability to generate sufficient revenues from advertising sales would harm our
business."
WE MUST ESTABLISH AND MAINTAIN RELATIONSHIPS WITH PARTNERS AND CUSTOMERS 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 and maintain relationships
with telecommunication carriers, device manufacturers, service providers,
Internet and other companies. Although we have entered into arrangements with
Qwest Communications Corporation, Intuit(R) Inc., Wireless Knowledge, BellSouth
Mobility, Inc., Exite@Home and the OnStar division of General Motors
Corporation, we cannot guarantee that we will be able to maintain these
relationships or establish additional relationships. Competition for
relationships with these companies is extremely intense. In addition, decisions
by these companies, particularly telecommunications carriers, to enter into
partner or customer 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 result in significant
revenue to General Magic.
REVENUES FROM OUR MYTALK SERVICE AND THE INTERNET SERVICES OF CERTAIN OF OUR
PARTNERS AND CUSTOMERS DEPEND ON BANNER AND AUDIO ADVERTISING SALES AND UPON
INCORPORATION OF FEE-BASED SERVICES, AND OUR INABILITY TO GENERATE SUFFICIENT
REVENUES FROM ADVERTISING SALES AND FEE-BASED SERVICES WOULD HARM OUR BUSINESS.
The business model for our myTalk service, as well as for certain
voice-enabled services licensed to partners such as Excite@Home, depends on
generation of revenues from banner and audio advertising sales and incorporation
of 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, over time, a sufficient number of users must utilize fee-based
services. If we are not able to attract or retain a sufficient
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number of advertisers and sponsors or a sufficient number of users of 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 our partners or we cannot
attract a sufficient number of users, we will not be able to attract a
sufficient number of advertisers and sponsors to generate revenues.
In addition, the market for Internet audio and banner advertising may not
develop. It is uncertain whether companies that have historically relied on
traditional channels to advertise or sell their products and services will adopt
audio and banner advertising. 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 audio and banner advertising does
not develop, our business would be harmed.
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 cheaper
or which render our services or technologies obsolete. If we are unable to
compete effectively, our business would be adversely affected.
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 the "net tangible assets" requirement for
continued listing on that market. The letter required us to demonstrate
compliance with this requirement 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. Our
plan was accepted by The Nasdaq National Market on July 1, 1999, contingent on
our ability to complete a financing transaction by July 30, 1999, and to
demonstrate compliance with the "net tangible assets" requirement through the
remainder of the year. As of July 30, 1999, we entered into an agreement
providing for an equity line of credit arrangement. Also, on September 9, 1999,
we entered into an exchange agreement with holders of our Series D preferred
stock. Pursuant to the agreement, holders of the Series D preferred stock
exchanged an aggregate of $10,000,000 of Series D preferred stock for
$10,000,000 of a newly created Series F convertible preferred stock. The
redemption provisions of the Series F preferred stock allow us to treat it as
"equity" for accounting purposes. This reclassification of $10,000,000 of the
Series D preferred stock will further our ability to meet the "net tangible
assets" requirement for continued listing on The Nasdaq National Market.
Finally, on November 9, 1999, we entered into a definitive agreement, which
closed on December 9, 1999, pursuant to which General Motors Corporation,
through its OnStar division, made a $15 million equity investment in the Company
in the form of Series G convertible preferred stock and a warrant to purchase
additional shares of Series G preferred stock for $5 million. In addition,
OnStar paid a $5 million up-front, nonrefundable fee for custom engineering
services and a license to our magicTalk voice user interface technology. In
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the event that we are not able to maintain continued compliance with The Nasdaq
National Market's "net tangible assets" requirement or any other of its listing
requirements through December 31, 1999, and thereafter, 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 such as The Nasdaq Small Cap Market and The
American Stock Exchange, Inc. We cannot guarantee that we will be able to meet
the listing requirements of these or any other markets. In the event that we are
delisted from The Nasdaq National Market or are not able to list on any other
market, the ability to sell shares of our common stock will be adversely
affected.
WE MAY BE REQUIRED TO REDEEM THE SERIES D PREFERRED STOCK AND THE SERIES F
PREFERRED STOCK AND SUCH REDEMPTION COULD SIGNIFICANTLY DEPLETE OUR CASH
RESERVES, WHICH WOULD MATERIALLY AND ADVERSELY AFFECT OUR FINANCIAL CONDITION.
The holders of the Series D preferred stock and the Series F preferred
stock have redemption rights if we fail to meet the requirements of the
documents governing the Series D preferred stock and the Series F preferred
stock. Assuming that all 1,000 shares of Series D preferred stock and all 1,000
shares of the Series F preferred stock are outstanding, the total redemption
value would be approximately $20 million to $26 million. Such payments would
deplete our cash reserves, which would materially and adversely affect our
financial condition. In addition, such a decrease in our cash reserves would
likely cause our common stock to be delisted from The Nasdaq National 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."
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 myTalk and Portico 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 could result in substantial interruptions in our
service.
Since the launch of our myTalk service and the Excite Voicemail service, we
have experienced interruptions in service due to increases in the number of
users served by our network operations center. In the event that we experience
sudden increases in the number of users of the services hosted in our network
operations center 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 services hosted by General Magic.
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,
partners, sponsors, and advertisers, and we may experience negative publicity
that could adversely affect our stock price.
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 continue to
develop and enhance technologies to enable us to offer our General Magic branded
services and to supply other voice-enabled services to third parties. Software
product development schedules are difficult to predict because they involve
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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 myTalk
and Portico 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.
CONVERSION OF PREFERRED STOCK OR ISSUANCE OF OTHER SECURITIES WOULD DILUTE
CURRENT STOCKHOLDERS.
We have 50,000 shares of Series A preferred stock, 1,000 shares of Series D
preferred stock, 599 shares of Series E preferred stock, 1,000 shares of Series
F preferred stock and 2,000 shares of Series G 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, a warrant to purchase up to
an additional 500 shares of Series G preferred stock and warrants to purchase an
aggregate, as of October 29, 1999, of 780,000 shares of common stock
outstanding. We also have an equity line of credit arrangement under which we
could issue up to $25,750,000 in common stock. The holders of common stock could
experience substantial dilution to their investment upon conversion of the
preferred shares, exercise of the warrants, or drawdowns under the equity line
of credit arrangement. The number of shares of common stock issuable upon the
conversion of the Series D preferred stock and the Series F preferred stock and
pursuant to the equity line of credit arrangement depends in part on future
prices of the common stock on The Nasdaq National Market. The number of shares
of common stock issued pursuant to the equity line of credit arrangement depends
on the prices of common stock on The Nasdaq National Market shortly before the
date of issuance and sale. 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 and
drawdowns under the equity line of credit will increase and the holders of
common stock would experience additional dilution of their investment. Such
dilution could cause the stock price of
9
<PAGE> 11
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
National Market. See "Selling Stockholders -- Relationships between Selling
Stockholders and Us."
Our board of directors may authorize issuance of up to 430,301 additional
shares of preferred stock that are convertible into common stock without any
action by our stockholders. In addition, our board of directors may authorize
the sale of 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.
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.
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 partners, users, sponsors, and
advertisers. 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.
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 remains 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.
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.
10
<PAGE> 12
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, and 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, we may
not successfully negotiate such limitations with all our partners, nor may such
limitations 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
October 1, 1998, the closing price of our common stock has varied significantly
from a high of $7.438 to a low of $1.375 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. 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. Although we have requested
written assurances from all of our significant suppliers, to date a number of
suppliers have not responded to such requests. 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 offerings. Such
interruptions could lead to lost sales, loss of relationships with partners,
advertisers and sponsors, and damage to our business reputation.
12
<PAGE> 14
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 anti-takeover 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 and the Series F preferred stock
provide holders rights to redemption of their Series D preferred stock or Series
F preferred stock, as the case may be, or penalty payments upon a change in
control. In addition, the documents governing the Series D preferred stock and
Series F preferred stock prohibit changes of control unless the surviving entity
assumes all our obligations under the Series D preferred stock or Series F
preferred stock, as the case may be, and is a publicly traded corporation traded
on The Nasdaq National Market, NYSE or AMEX. All of these rights could make an
acquisition even 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.
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.
13
<PAGE> 15
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 October 29, 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>
PREFERRED STOCK WARRANTS
------------------------------------ ---------------------------------
SHARES OF SHARES OF
UNDERLYING SHARES UNDERLYING
SHARES OF SHARES OF COMMON SHARES OF OF COMMON
UNDERLYING COMMON STOCK UNDERLYING COMMON STOCK
COMMON STOCK AFTER THE COMMON STOCK AFTER THE
SELLING STOCKHOLDER STOCK OFFERED OFFERING STOCK OFFERED OFFERING
------------------- ---------- ---------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
HFTP Investment LLC.... 4,753,050 9,506,100 -- 52,500 78,750 --
RGC International
Investors, LDC......... 1,697,517 1,882,548 763,938 201,150 -- 201,150
Halifax Fund, L.P...... 3,870,341 7,740,682 -- 296,750 64,125 254,000
Palladin Partners I,
L.P.................. 236,973 473,946 -- 6,625 3,938 4,000
Palladin Overseas Fund
Limited.............. 135,801 271,602 -- 3,500 2,250 2,000
The Gleneagles Fund
Company.............. 407,404 814,808 -- 6,500 6,750 2,000
Conseco Direct Life.... 306,231 612,462 -- 5,375 5,063 2,000
Lancer Securities
(Cayman) Ltd......... 135,801 271,602 -- 1,500 2,250 --
Fisher Capital Ltd..... 1,222,212 2,444,424 -- 13,500 20,250 --
Wingate Capital Ltd.... 814,808 1,629,616 -- 9,000 13,500 --
TOTALS......... 13,580,138 25,647,790 763,938 596,400 196,876 465,150
<CAPTION>
TOTAL SHARES OF COMMON STOCK
-----------------------------------------------
SHARES OF COMMON
SHARES OF SHARES STOCK BENEFICIALLY
COMMON OF OWNED AFTER
STOCK COMMON THE OFFERING
BENEFICIALLY STOCK -------------------
SELLING STOCKHOLDER OWNED OFFERED # %
------------------- ------------ ---------- ------------ ----
<S> <C> <C> <C> <C>
HFTP Investment LLC.... 4,805,550 9,584,850 -- --
RGC International
Investors, LDC......... 2,535,355 1,882,548 1,601,776 2.4
Halifax Fund, L.P...... 4,167,091 7,804,807 254,000 *
Palladin Partners I,
L.P.................. 243,598 477,884 4,000 *
Palladin Overseas Fund
Limited.............. 139,301 273,852 2,000 *
The Gleneagles Fund
Company.............. 413,904 821,558 2,000 *
Conseco Direct Life.... 311,606 617,525 2,000 *
Lancer Securities
(Cayman) Ltd......... 137,301 273,852 -- *
Fisher Capital Ltd..... 1,235,712 2,464,674 -- *
Wingate Capital Ltd.... 823,808 1,643,116 -- *
TOTALS......... 14,813,226 25,844,666 1,865,776 2.8
</TABLE>
- -------------------------
* Represents less than 1%.
NOTES REGARDING PREFERRED STOCK AND WARRANTS
The preferred stock referenced in the table represents Series D Convertible
Preferred Stock and Series F Convertible Preferred Stock.
The information relating to the number of shares underlying the preferred
stock and the warrants assumes conversion or exercise as of October 29, 1999.
NOTES REGARDING NUMBER OF SHARES TO BE OFFERED
The conversion price of the Series D preferred stock and the Series F
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 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 the Series F 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:
- 200% of the common stock issuable upon conversion of the Series D
preferred stock held by such selling stockholder as of October 29, 1999,
except with respect to the common stock issuable upon conversion of the
Series D preferred stock held by RGC International Investors, LDC, as to
which 15,390 shares of common are being registered and offered, and,
together with the 1,130,517 shares of common stock issuable upon
conversion of the Series D preferred stock registered pursuant to a
registration statement on Form S-3 filed April 29, 1999, and
14
<PAGE> 16
declared effective on August 19, 1999, represent 150% of the common stock
issuable upon conversion of the Series D preferred stock held by RGC as
of October 29, 1999.
- 200% of the common stock issuable upon conversion of the Series F
preferred stock held by such selling stockholder as of October 29, 1999;
- 150% of the common stock issuable upon exercise of certain warrants
issued in connection with the Series D preferred stock held by such
selling stockholder as of October 29, 1999, except with respect to the
common stock issuable upon exercise of certain warrants issued in
connection with the Series D preferred stock held by RGC International
Investors, LDC, as to which no shares of common stock are being
registered or offered. 150% of the common stock issuable upon exercise of
such warrants was registered previously pursuant to a registration
statement on Form S-3 filed April 29, 1999, and declared effective on
August 19, 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 41,254,159
shares of Common Stock outstanding as of October 29, 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 it.
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, the Series F preferred stock and the warrants held by such selling
stockholder. However, no selling stockholder may convert or exercise the Series
D preferred stock, the Series F 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 4.99% of the then outstanding
common stock excluding the non-converted portion of the preferred shares and the
unexercised warrants. 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 General Magic held by Themis, Heracles and HFTP.
As of October 29, 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
15
<PAGE> 17
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.
The Palladin Group L.P. is under common control with Cripple Creek
Securities, LLC. See "-- Relationships between the Selling Stockholders and Us"
below.
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
our securities. This information is based upon information provided by the
selling stockholders.
In March 1999, we issued to the selling stockholders 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. In September 1999, the selling stockholders exchanged an aggregate of
1,000 shares of the Series D preferred stock for 1,000 shares of our Series F
Convertible Preferred Stock. We are advised by each selling stockholder that it
purchased the convertible preferred shares and warrants in the ordinary course
of its business and, at the time such selling stockholder purchased the
convertible preferred shares and warrants, it was not a party to any agreement
or other understanding to distribute the securities, directly or indirectly.
The terms of the warrants are as follows:
The warrants are exercisable for 150,000 shares of common stock at an
exercise price as of October 29, 1999 of $5.078. The warrants have a term of
three years. The exercise price of the warrants will be reduced on a weighted
average basis in the event of our issuance or sale or deemed issuance or sale of
shares of common stock at a price less than $5.078 or the then applicable
warrant exercise price. The number of shares issuable upon exercise of the
warrants will be proportionately increased so that the aggregate exercise price
of all shares acquirable pursuant to the warrants will remain the same. In
addition, the warrant exercise price and the number of shares issuable upon
exercise of the warrants will be increased or decreased, as appropriate, in the
event of stock splits, stock dividends and similar transactions.
The terms of the Series D shares and the Series F shares are as follows:
Dividends. The Series D shares and the Series F 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
conversion amount, as described below.
Conversion Rights. Each Series D share and Series F share is convertible,
at the option of the holder, into that number of shares of common stock obtained
by dividing the conversion amount by the conversion price. The conversion amount
of each Series D share and Series F share equals $10,000 plus any accrued and
unpaid dividends and any unpaid default interest on cash dividends.
Conversion Price. The conversion price of each Series D share as of October
29, 1999 was $1.684. The conversion price of each Series F share as of October
29, 1999 was $1.378.
16
<PAGE> 18
Resets of Conversion Price. The Series D conversion price will be reset
following the last day of each March and September and on December 31, 1999 and
June 30, 2000. The Series F conversion price will be reset following the last
day of each December, March, June and September.
The Series D 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 Series F reset price will be equal to 90% of the
average of the closing bid prices of the common stock during the ten trading
days immediately after each reset date.
The Series D and Series F conversion prices will only be reset if the reset
price is less than the then-effective conversion price.
Anti-Dilution Adjustments to Conversion Price. If we issue or sell or are
deemed to have issued or sold shares of our common stock at a price less than
the then applicable conversion price of the Series D shares or the Series F
shares, then the conversion price of either or both the Series D shares and the
Series F shares, as applicable, will be reduced:
- to the consideration per share for each share of our common stock issued
or sold or deemed issued or sold if such issuance or sale or deemed
issuance or sale occurs within twelve months of the effective date of
this registration statement, or
- on a weighted-average basis if the issuance or sale or deemed issuance or
sale of our common stock occurs thereafter.
Other Adjustments to Conversion Price. In addition, the Series D and Series
F conversion prices may change in the event of:
- stock splits, stock dividends or similar transactions;
- our failure to have declared effective within 180 days after issuance and
to maintain, thereafter, the registration statement relating to shares
issuable upon conversion or exercise of the Series D shares, the Series F
shares and the warrants, provided we have used our reasonable best
efforts to do so;
- our failure to use best efforts to maintain the listing of the common
stock on The Nasdaq National Market, The American Stock Exchange, Inc.
("AMEX") or The New York Stock Exchange ("NYSE"), provided we have used
our reasonable best efforts to do so;
- 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; 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.
See "-- Redemption Rights of Holders upon Covenant Breaches."
As discussed above, subsequent adjustments to the Series D and Series F
conversion prices 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 1,000 Series D shares and all 1,000 Series
F shares at
17
<PAGE> 19
each such conversion price and the percentage of outstanding common stock
represented by such shares, after giving effect to such conversion.
<TABLE>
<CAPTION>
CONVERSION PRICE COMMON SHARES ISSUABLE(1)
AVERAGE CLOSING BID -------------------------- -----------------------------------------
PRICE FOR 10 SERIES D SERIES F UPON UPON UPON
CONSECUTIVE (110% OF THE (90% OF THE CONVERSION CONVERSION CONVERSION OF
TRADING DAYS AVERAGE) AVERAGE) OF SERIES D OF SERIES F SERIES D & F
- --------------------- ------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$1.000............... $1.100 $ .900 9,356,164 11,435,312 20,791,476
$1.140........... 1.254 1.026 8,207,161 10,030,975 18,238,136
$1.281........... 1.409 1.153 7,303,797 8,926,863 16,230,660
$1.531........... $1.684(3) $1.378(4) 6,111,145 7,469,178 13,580,323
$2.000........... $1.684(3) $1.378(4) 6,111,145 7,469,178 13,580,323
<CAPTION>
PERCENTAGE OF TOTAL
SHARES OF COMMON STOCK(2)
AVERAGE CLOSING BID -----------------------------------------
PRICE FOR 10 UPON UPON UPON
CONSECUTIVE CONVERSION CONVERSION CONVERSION OF
TRADING DAYS OF SERIES D OF SERIES F SERIES D & F
- --------------------- ----------- ----------- -------------
<S> <C> <C> <C>
$1.000............... 18.5 21.7 33.5
$1.140........... 16.6 19.6 30.7
$1.281........... 15.0 17.8 28.2
$1.531........... 12.9 15.3 24.8
$2.000........... 12.9 15.3 24.8
</TABLE>
- -------------------------
(1) Assumes conversion on October 29, 1999.
(2) Based on 41,254,159 shares of common stock outstanding as of October 29,
1999, plus the number of shares of common stock issuable upon conversion of
the Series D shares and the Series F shares at each of the indicated
conversion prices.
(3) The Series D conversion price as of October 29, 1999.
(4) The Series F conversion price as of October 29, 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 and the Series F shares will increase and
holders of the common stock would experience further dilution.
The conversion price will not reset at a price greater than $1.684 for the
Series D shares and $1.378 for the Series F shares. There is no minimum
conversion price. Therefore, the conversion price could be lower than $0.90 per
share or $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 and Series F shares. However,
no Series D holder or Series F holder may convert its Series D shares or Series
F shares, as the case may be, if the conversion would result in such holder,
together with its affiliates, beneficially owning more than 4.99% of the then
outstanding common stock excluding the non-converted portion of the preferred
shares and the unexercised warrants.
Conversion at our Option. Until March 30, 2001, we have a right to require
holders to convert any or all of the outstanding Series D shares or the Series F
shares if:
- on each day during the 20-trading day period prior to the conversion, the
closing bid price of the common stock is at least $5.89875;
- on each day during the 60-trading day period prior to the conversion, 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, the Series F shares and the warrants;
- on each day during the 60-trading day period prior to the conversion, the
common stock is listed on The Nasdaq National Market, the NYSE or as to
the Series F shares, AMEX;
- 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 documents governing the rights of the Series D shares or the Series F
shares, as the case may be.
18
<PAGE> 20
Automatic Conversion/Redemption. The outstanding Series D shares and the
Series F shares will automatically convert into common stock on March 30, 2002,
unless we elect to redeem the shares at that time at a price approximately equal
to the conversion amount.
Preemptive Rights. Subject to certain limitations, for a period of 365 days
after the effectiveness of this registration statement, the holders of the
Series D shares and the Series F 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 and the Series F 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 the redemption, the
common stock is listed on The Nasdaq National Market 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 documents governing the rights of the Series D shares or the Series F
shares, as the case may be.
If a registration statement for the sale of all common stock issuable upon
conversion or exercise of the Series D shares, the Series F shares and warrants
has been available at all times during the 60 consecutive trading days prior to
the redemption, the redemption price will be equal to 115% of the conversion
amount. If not, the redemption price will be the greater of 115% of the
conversion amount or a price based on the closing bid 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 Series D conversion price or the Series F conversion price is
reset to an amount which is less than $1.96625, we may redeem all of the Series
D shares or the Series F shares, as the case may be, at the conversion amount
if:
- on each day during the 20-trading day period prior to the 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, the Series F shares and the warrants;
- on each day during the 20-trading day period prior to the redemption, the
common stock is listed on The Nasdaq National Market, NYSE or as to
Series F, AMEX;
- 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 documents governing the rights of the Series D shares or the Series F
shares, as the case may be; and
- 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
19
<PAGE> 21
- 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 Holders upon a Major Transaction, including a Change
of Control. The Series D holders and the Series F 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 conversion amount or a price based on the closing bid
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, if a purchase, tender or exchange offer accepted by holders of
more than 50% of our common stock is not approved or recommended by the board,
then, at the option of the holders of Series D shares, we must redeem some or
all of their shares at a price per share equal to the conversion amount, or pay
1% of the conversion amount for each day thereafter, not to exceed 20
consecutive days, and have the conversion price substantially reduced, and for
the Series F holders, we must pay 1% of the conversion amount for each day
thereafter for a period not to exceed 20 consecutive days in any 365-day period,
and have the conversion price substantially reduced.
In the event of a consolidation, merger or other business combination
resulting in a change of control, the holders of the Series D shares and the
Series F 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 Holders upon Covenant Breaches. 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 conversion amount at the time of either 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; or
- our failure to maintain listing of the common stock on The Nasdaq
National Market, NYSE or AMEX.
The Series D holders also have the 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
conversion amount or a price based on the closing bid price of our common stock
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 The Nasdaq National Market, NYSE or AMEX;
- our failure to timely convert Series D shares; or
- our failure to make a penalty payment in the amount of 1% of the
conversion amount for each day the breach continues up to a maximum of 20
days should we choose not to redeem the Series D upon our failure to
maintain listing of the common stock on The Nasdaq National Market, NYSE
or AMEX.
With respect to the Series F shares, unless we elect to redeem the Series F
shares at a price per share equal to the greater of 130% of the conversion
amount or a price based on the closing bid price
20
<PAGE> 22
of our common stock, then, at the time of any of the following events, the
Series F holders are entitled to require us to pay 1% of the conversion amount
for each day that any of such breaches or events continue for up to 20 days in
any 365-day period and have the conversion price substantially reduced:
- our failure to have the registration statement declared effective by the
SEC within 120 days of the issuance of the Series F shares;
- our failure to maintain registration of the common stock issuable upon
conversion or exercise of the Series F shares; or
- our failure to maintain the listing of the common stock on The Nasdaq
National Market, NYSE or AMEX.
If we fail to make these 1% penalty payments, the Series F holders will
have the right to require us to redeem some of all of their shares at a price
per share equal to the greater of 130% of the conversion amount or a price based
on the closing bid price. The Series F holders also have the right to require us
to redeem their shares at such price upon the occurrence of any of the following
events:
- our failure to use our reasonable best efforts to have the registration
statement declared effective by the SEC within 120 days of the issuance
of the Series F shares;
- our failure to use our best efforts to maintain registration of the
common stock issuable upon conversion or exercise of the Series F shares;
- our failure to use our reasonable best efforts to maintain the listing of
the common stock on The Nasdaq National Market, NYSE or AMEX; or
- our failure to timely convert Series F shares.
Furthermore, the Series D holders and the Series F holders are entitled to
require us to redeem some or all of their shares at a per share price equal to
130% of the conversion amount if:
- any representation or warranty made by us in the documents related to the
sale of the Series D shares or the Series F shares, as the case may be,
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 or the Series F shares, as the case
may be.
However, the Series D holders and the Series F 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.
Voting Rights. An affirmative vote of not less than two-thirds of the
then-outstanding Series D shares or the Series F shares, as the case may be, 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 or the Series F holders, as the case
may be, relative to holders of any other class of capital stock; and
- redemption, or payment of cash dividends on, the common stock.
Otherwise, except as required by law, the Series D shares and the Series F
shares have no other voting rights.
Liquidation Rights. In the event we liquidate, dissolve or wind up, we must
pay the Series D holders and the Series F holders an amount per share equal to
$10,000 plus any accrued and unpaid
21
<PAGE> 23
dividends and any unpaid default interest on cash dividends. We must pay the
Series D holders and the Series F 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, the Series F
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 and our Current Report on Form 8-K filed with the SEC on
September 10, 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.
Effective July 1999, we entered into a Common Stock Investment Agreement,
which provides for an equity line of credit arrangement, with Cripple Creek
Securities, LLC. Cripple Creek is under common control with the Palladin Group,
L.P. The equity line of credit is available to us during the period beginning
August 25, 1999 and ending August 24, 2001. During that period, we may require
Cripple Creek to purchase, from time to time, an aggregate of up to $20,000,000
of common stock. In addition, Cripple Creek will have a right, at its sole
discretion, to purchase up to an additional $6,000,000 of common stock during
the term of the equity line of financing. However, there are numerous conditions
on our right to draw down under the equity line, and there can be no assurance
that we will be able to draw down on the line in an amount totalling
$20,000,000, if at all. For a complete description of all of the terms of the
documents governing the equity line of credit arrangement, please refer to our
Current Report on Form 8-K filed with the SEC on August 3, 1999 and the exhibits
thereto.
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:
- 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.
22
<PAGE> 24
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
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.
23
<PAGE> 25
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 preferred stock and
warrants, up to a maximum of $25,000 and the Series F preferred stock, 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 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
24
<PAGE> 26
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 Current Report on Form 8-K filed with the Commission on April 2,
1999;
3. Our Quarterly Report on Form 10-Q filed with the Commission on May 17,
1999;
4. Our Current Report on Form 8-K filed with the Commission on August 3,
1999;
5. Our Current Report on Form 8-K filed with the Commission on August 3,
1999;
6. Our Quarterly Report on Form 10-Q filed with the Commission on August
16, 1999;
7. Our Quarterly Report on Form 10-Q/A filed with the Commission on August
23, 1999;
8. Our Current Report on Form 8-K filed with the Commission on September
8, 1999;
9. Our Current Report on Form 8-K filed with the Commission on September
8, 1999;
10. Our Current Report on Form 8-K filed with the Commission on September
10, 1999;
11. Our Current Report on Form 8-K filed with the Commission on October 22,
1999;
12. Our Current Report on Form 8-K filed with the Commission on November
12, 1999;
13. Our Quarterly Report on Form 10-Q filed with the Commission on November
15, 1999;
14. Our Current Report on Form 8-K filed with the Commission on December
14, 1999; and
15. 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
25,741,298 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........................................ $12,421
Nasdaq filing fee........................................... $17,500
Accounting fees and expenses................................ $ 7,500
Legal fees and expenses..................................... $ 5,000
Printing expenses........................................... $ 2,000
Miscellaneous expenses...................................... $ 2,500
-------
Total............................................. $46,921
=======
</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 (a) 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.
3.2 (a) Certificate of Designations, Preferences and Rights of
Series F Convertible Preferred Stock filed with the Delaware
Secretary of State on September 9, 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 September 10, 1999.
4.1 (a) 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.
4.2 (a) 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.
4.3 (a) 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.
4.4 (a) Amendment #1 to Registration Rights Agreement, dated as of
June 25, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock is incorporated by
reference to Exhibit 4.5 to the Registrant's Current Report
on Form 8-K filed with the Securities and Exchange
Commission on September 10, 1999.
4.5 (a) Amendment #2 to Registration Rights Agreement, dated as of
July 9, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock is incorporated by
reference to Exhibit 4.6 to the Registrant's Current Report
on Form 8-K filed with the Securities and Exchange
Commission on September 10, 1999.
4.6 (a) Amendment #3 to Registration Rights Agreement, dated as of
July 23, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock is incorporated by
reference to Exhibit 4.7 to the Registrant's Current Report
on Form 8-K filed with the Securities and Exchange
Commission on September 10, 1999.
4.7 (a) Amendment #4 to Registration Rights Agreement, dated as of
August 6, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock is incorporated by
reference to Exhibit 4.8 to the Registrant's Current Report
on Form 8-K filed with the Securities and Exchange
Commission on September 10, 1999.
4.8 (a) Exchange Agreement, dated as of September 9, 1999, by and
among Registrant and the investors listed on the Schedule of
Investors thereto is incorporated by reference to Exhibit
4.1 to the Registrant's Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 10,
1999.
</TABLE>
II-2
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- ----------------------
<C> <S>
4.9 (a) Registration Rights Agreement, dated as of September 9,
1999, by and among Registrant and holders listed on the
Schedule of Holders thereto is incorporated by reference to
Exhibit 4.3 to the Registrant's Current Report on Form 8-K
filed with the Securities and Exchange Commission on
September 10, 1999.
4.10(a) Waiver Agreement, dated as of September 9, 1999, by and
among Registrant and the stockholders listed on the Schedule
of Stockholders thereto is incorporated by reference to
Exhibit 4.9 to the Registrant's Current Report on Form 8-K
filed with the Securities and Exchange Commission on
September 10, 1999.
5.1 (a) Opinion of Cooley Godward LLP.
23.1 Consent of KPMG LLP, independent auditors.
23.2 (a) Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained
in Part II).
</TABLE>
- -------------------------
(a) Previously filed.
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.
II-3
<PAGE> 31
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for 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 December 15,
1999.
GENERAL MAGIC, INC.
By: /s/ STEVEN MARKMAN
------------------------------------
Steven Markman
President, Chief Executive Officer
and Chairman of the Board of
Directors
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Steven Markman and Rose Marcario, and
each of them, as his or her true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post effective amendments) to this Registration Statement on Form
S-3, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or his or her substitute or substitutes may lawfully do or cause to be
done by virtue hereof. Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to 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 December 15, 1999
- ----------------------------------------------------- Officer, Chairman of the
Steven Markman Board, Director (Principal
Executive Officer)
/s/ ROSE M. MARCARIO Chief Financial Officer December 15, 1999
- ----------------------------------------------------- (Principal Financial and
Rose M. Marcario Accounting Officer)
/s/ PHILIP D. KNELL Director December 15, 1999
- -----------------------------------------------------
Philip D. Knell
Director December , 1999
- -----------------------------------------------------
Roel Pieper
/s/ DENNIS F. STRIGL Director December 15, 1999
- -----------------------------------------------------
Dennis F. Strigl
/s/ SUSAN G. SWENSON Director December 15, 1999
- -----------------------------------------------------
Susan G. Swenson
</TABLE>
II-5
<PAGE> 33
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
3.1(a) 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.
3.2(a) Certificate of Designations, Preferences and Rights of
Series F Convertible Preferred Stock filed with the Delaware
Secretary of State on September 9, 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 September 10, 1999.
4.1(a) 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.
4.2(a) 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.
4.3(a) 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.
4.4(a) Amendment #1 to Registration Rights Agreement, dated as of
June 25, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock is incorporated by
reference to Exhibit 4.5 to the Registrant's Current Report
on Form 8-K filed with the Securities and Exchange
Commission on September 10, 1999.
4.5(a) Amendment #2 to Registration Rights Agreement, dated as of
July 9, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock is incorporated by
reference to Exhibit 4.6 to the Registrant's Current Report
on Form 8-K filed with the Securities and Exchange
Commission on September 10, 1999.
4.6(a) Amendment #3 to Registration Rights Agreement, dated as of
July 23, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock is incorporated by
reference to Exhibit 4.7 to the Registrant's Current Report
on Form 8-K filed with the Securities and Exchange
Commission on September 10, 1999.
4.7(a) Amendment #4 to Registration Rights Agreement, dated as of
August 6, 1999, by and among Registrant and holders of the
Series D Convertible Preferred Stock is incorporated by
reference to Exhibit 4.8 to the Registrant's Current Report
on Form 8-K filed with the Securities and Exchange
Commission on September 10, 1999.
4.8(a) Exchange Agreement, dated as of September 9, 1999, by and
among Registrant and the investors listed on the Schedule of
Investors thereto is incorporated by reference to Exhibit
4.1 to the Registrant's Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 10,
1999.
4.9(a) Registration Rights Agreement, dated as of September 9,
1999, by and among Registrant and holders listed on the
Schedule of Holders thereto is incorporated by reference to
Exhibit 4.3 to the Registrant's Current Report on Form 8-K
filed with the Securities and Exchange Commission on
September 10, 1999.
4.10(a) Waiver Agreement, dated as of September 9, 1999, by and
among Registrant and the stockholders listed on the Schedule
of Stockholders thereto is incorporated by reference to
Exhibit 4.9 to the Registrant's Current Report on Form 8-K
filed with the Securities and Exchange Commission on
September 10, 1999.
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
5.1(a) Opinion of Cooley Godward LLP.
23.1 Consent of KPMG LLP, independent auditors.
23.2(a) Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained
in Part II of the Registration Statement).
</TABLE>
- ------------------------
(a) 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 Amendment No. 1 to the registration
statement to be filed on or about December 15, 1999 on Form S-3 of General
Magic, Inc. of our report dated January 22, 1999, except for 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.
KPMG LLP
Mountain View, California
December 15, 1999
