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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GENERAL MAGIC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 77-0250147
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (IRS EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
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420 NORTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 774-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEVEN MARKMAN
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD OF DIRECTORS
GENERAL MAGIC, INC.
420 NORTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94086
(408) 774-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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TIMOTHY MOORE, ESQ. MARY E. DOYLE, ESQ.
COOLEY GODWARD LLP GENERAL MAGIC, INC.
FIVE PALO ALTO SQUARE 420 NORTH MARY AVENUE
3000 EL CAMINO REAL SUNNYVALE, CALIFORNIA 94086
PALO ALTO, CALIFORNIA 94306-2155 (408) 774-4000
(650) 843-5000
</TABLE>
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.
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING
SECURITIES TO BE REGISTERED REGISTERED PER SHARE PRICE
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Common Stock ($0.001 par value)............ 12,056,440 shares(1) $3.438(2) $41,450,040.72
Common Stock ($0.001 par value)............ 225,001 shares(3) $5.078(4) $1,142,555.08
Common Stock ($0.001 par value)............ 2,721,750 shares(5) $3.438(2) $9,357,376.50
Common Stock ($0.001 par value)............ 6,031,825 shares(6) $3.438(2) $20,737,414.35
TOTAL.............................. 21,035,016 shares $72,687,386.65
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<CAPTION>
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TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
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Common Stock ($0.001 par value)............ $11,523
Common Stock ($0.001 par value)............ $318
Common Stock ($0.001 par value)............ $2,602
Common Stock ($0.001 par value)............ $5,765
TOTAL.............................. $20,208
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(1) Represents 200% of the shares of common stock issuable upon conversion of
all issued shares of the Company's Series D Convertible Preferred Stock (the
"Series D Preferred"). The number of shares of common stock included in the
Registration Statement is based on the Company's good faith estimate of the
number of shares of common stock issuable upon conversion of the Series D
Preferred calculated assuming a conversion price of $3.33 per share and
conversion as of April 26, 1999. Pursuant to Rule 416 promulgated under the
Securities Act, this Registration Statement also covers such indeterminable
number of additional shares of common stock as may become issuable upon
conversion of Series D Preferred to prevent dilution resulting from stock
splits, stock dividends or similar transactions
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c) of the Securities Act and based on the average of the high
and low sales prices of the Common Stock of General Magic, Inc. reported on
the Nasdaq National Market on April 23, 1999.
(3) Represents 150% of the shares of common stock issued or issuable upon
exercise of warrants to purchase common stock. Pursuant to Rule 416 of the
Securities Act, this Registration Statement also covers such indeterminable
additional shares of common stock as may become issuable upon exercise of
warrants to prevent dilution as a result of any future stock splits, stock
dividends or similar transactions.
(4) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(g)(1) of the Securities Act.
(5) Represents shares of common stock issuable upon conversion of seventy-five
percent (75%) of issued shares of the Company's Series A Convertible
Preferred Stock, assuming that such conversion is as of the date of this
Registration Statement. Pursuant to Rule 416 of the Securities Act, this
Registration Statement also covers such indeterminable additional shares as
may become issuable upon conversion of the Series A Convertible Preferred
Stock as a result of any future stock splits, stock dividends or similar
transactions.
(6) Represents 150% of the shares of common stock issuable upon conversion of
all shares of the Company's Series C Convertible Preferred Stock (the
"Series C Preferred") issued and outstanding as of April 26, 1999 held by
the selling stockholders. The number of shares of common stock included in
the Registration Statement is based on the Company's good faith estimate of
the number of shares of common stock issuable upon conversion of the issued
and outstanding Series C Preferred assuming conversion as of April 26, 1999.
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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<PAGE> 2
SUBJECT TO COMPLETION, DATED APRIL 29, 1999
21,035,016 Shares
GENERAL MAGIC, INC.
Common Stock
The selling stockholders listed on page 15 are offering up to shares of
General Magic, Inc. common stock that they may acquire by converting Series A
Convertible Preferred Stock, Series C Convertible Preferred Stock or Series D
Convertible Preferred Stock or by exercising warrants to purchase shares of
common stock. The selling stockholders also may offer additional shares of
common stock acquired upon conversion of Series D Convertible Preferred Stock or
exercise of warrants as a result of stock splits or similar events.
On February 27, 1998, we sold 50,000 shares of our Series A Convertible
Preferred Stock to a selling stockholder in a private transaction. We sold 3,000
shares of our Series C Convertible Preferred Stock on June 24, 1998 and 2,000
shares of our Series D Convertible Preferred Stock and warrants to purchase
150,000 shares of common stock on March 30, 1999 to the other selling
stockholders in separate private transactions. We will not receive any proceeds
from the sale of common stock by the selling stockholders. However, we will
receive the exercise price of any warrants exercised for cash.
We will bear all reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with the registration of the shares of
common stock offered pursuant to this prospectus.
Our common stock is quoted on The Nasdaq National Market under the symbol
"GMGC." On April 23, 1999, the last sale price of the common stock as reported
on The Nasdaq National Market was $3.50.
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 3 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
Forward-Looking Statements.................................. 2
Risk Factors................................................ 3
Where You Can Find More Information......................... 14
Use of Proceeds............................................. 15
Selling Stockholders........................................ 15
Plan of Distribution........................................ 18
Legal Matters............................................... 20
Experts..................................................... 20
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ABOUT GENERAL MAGIC
We develop and market voice-enabled services designed to make it easy and
convenient for subscribers to access and act on information important to them.
Our primary offerings are the Portico(TM) virtual assistant service, introduced
in 1998, and voice-enabled services for the Web. One of our core technology
assets is the magicTalk(TM) voice user interface, used both in the Portico
service and for voice enabling Web content. We host voice-enabled services in
our network operations center, located in Sunnyvale, California.
General Magic was incorporated in California in May 1990 and was
reorganized as a Delaware corporation in February 1995. Our principal executive
offices are located at 420 North Mary Avenue, Sunnyvale, California 94086, and
our telephone number at that location is (408) 774-4000. In this prospectus,
"General Magic", "we" and "our" refer to General Magic, Inc., unless the context
otherwise requires.
You should rely only on the information provided or incorporated by
reference in this prospectus. We have authorized no one to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the date on the front of the document.
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" below 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.
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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.
OUR BUSINESS STRATEGY IS NEW, AND WE MAY BE UNABLE TO IMPLEMENT IT SUCCESSFULLY.
In early 1997, we changed our business strategy to focus on the marketing
and sale of voice-enabled services. We are still at an early stage in the
implementation of our new strategy. We face many of the risks faced by new
businesses, especially companies in new and rapidly evolving markets. Such risks
include, among others:
- our business model has not been tested;
- the market for voice-enabled services is not established;
- we may not be able to capture a significant part of the market;
- we may not be able to anticipate and adapt to changes in the market; and
- we may be unable to secure profitable relationships with additional
partners, including telecommunications carriers, device manufacturers,
and Internet companies.
In order to compete successfully as a provider of voice-enabled services,
among other things, we believe we must:
- develop and maintain at reasonable cost a significant subscriber base for
our Portico and other voice-enabled services;
- establish and maintain relationships with companies seeking to
private-label our services and with companies seeking to voice-enable
their services;
- enhance the features and functionality of the Portico service to address
the preferences and requirements of our subscribers, and to respond to
competitive developments;
- develop and enhance our core technologies, including our magicTalk voice
user interface platform, our network operations center, and our
second-generation agent technology, both to enhance the performance and
lower the cost of our services; and
- continue to attract, retain and motivate qualified personnel.
We may not have the resources necessary to fully execute each of these
goals. If we fail to accomplish any of them or otherwise address the risks
stated above, our ability to compete as a provider of voice-enabled services may
be compromised.
WE MAY NEVER ACHIEVE AND SUSTAIN PROFITABILITY.
We may never achieve and sustain profitability. Since our inception, we
have generated only minimal revenues. We have incurred significant losses, and
we have
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substantial negative cash flow. As of December 31, 1998, we had an accumulated
deficit of $209.5 million, with a net loss of $38.9 million for the year ended
December 31, 1998.
Historically, we have derived a large percentage of our total revenue from
license fees and customer support fees. As a consequence of our 1997 change in
business strategy, we expect to derive a significant portion of any future
revenues from sales of services and products by us and by our partners and not
from license fees. Although the Portico service was released on July 30, 1998,
we expect to incur significant losses through the year 1999, and we may never
achieve or sustain significant revenues or become profitable.
THE ACCEPTANCE OF OUR PRODUCTS AND SERVICES IS UNCERTAIN.
Our future financial performance depends in large part on growth in demand
for the Portico service and our other voice-enabled services and products. If
the market for voice-enabled services does not develop or if we are unable to
capture a significant portion of that market either directly or through our
partners, our revenues and our results of operations will be adversely affected.
The market for voice-enabled services is still evolving. Currently, there
are only a limited number of products and applications in this industry.
Negative consumer perceptions regarding reliability, cost, ease-of- use and
quality of speech-based products affects consumer demand and may impact the
growth of the market. As a result, we cannot guarantee that the market for
voice-enabled services and products will grow or that consumers will accept any
of the services or products built on our magicTalk voice user interface
platform.
In particular, our success is dependent upon the number of subscribers to
our services that we are able to attract and retain, and the number of
subscribers to private-label and other voice-enabled services that our partners
are able to attract and retain. Although Portico was launched in July 1998,
revenues from Portico subscriptions to date have not been significant. In
addition, although we have entered into arrangements with Qwest and Intuit, we
cannot guarantee that any of the services contemplated by these companies will
be commercially launched. Even if these services were commercially launched, our
partners may not be able to attract and retain a sufficient number of
subscribers to attain profitability. If we and our partners are not able to
attract and retain a sufficient number of subscribers, our revenues and results
of operations will be adversely affected.
WE WILL NEED TO EXPAND OUR DISTRIBUTION CHANNELS IN ORDER TO EXPAND OUR
BUSINESS, AND WE ARE DEPENDENT ON DISTRIBUTION RELATIONSHIPS.
We plan to distribute our services through multiple channels. If we do not
successfully implement this multi-channel strategy, our revenues and results of
operations may be adversely affected. We believe that to successfully market our
services, we must:
- undertake a marketing campaign to identify and successfully pursue
effective ways to market General Magic-labeled services to mobile
professionals and other users;
- identify, establish and maintain arrangements with telecommunications
carriers, device manufacturers and other companies seeking private-label
versions of our services; and
- identify, establish and maintain arrangements with Internet companies and
other companies seeking to voice enable Web content and other
network-based services.
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If one or more of these distribution channels fails, development and sales
of our products and services could be adversely affected.
Competition for relationships with telecommunications carriers, device
manufacturers and Internet companies is extremely intense. In addition,
decisions by these third parties, particularly telecommunications carriers, to
enter into distribution relationships can be a lengthy, expensive process, with
no assurance of success.
On November 6, 1998, we entered into an agreement with Intuit Inc. to
develop voice access to certain financial services and information on Intuit's
Quicken.com Web site. The agreement provides for an initial two-year term, with
automatic one-year renewal terms unless either party provides written notice to
the other 60 days prior to the end of the then current term. However, the
agreement will automatically terminate if the services to be provided under the
agreement are not commercially released by December 31, 1999. We cannot
guarantee that this deadline will be met. In addition, Intuit may terminate the
agreement if we fail to perform or observe any material term or obligation under
the agreement.
On November 11, 1998, we entered into an agreement with Qwest
Communications Corporation to develop a Qwest-branded version of our Portico
service. The agreement provides for an initial six-month term, with automatic
one-year renewal terms thereafter. However, either party has the right to
terminate the agreement for any reason by providing written notice of
non-renewal 60 days prior to the end of the then current term. We cannot
guarantee that Qwest will renew the agreement in any given year. In addition,
Qwest may terminate the agreement if we fail to perform or observe any material
term or obligation under the agreement.
In February 1999, we, along with Wireless Knowledge LLC, announced plans to
provide Revolv service users with voice-enabled access to information and
corporate groupware. Although we have signed a letter of intent with Wireless
Knowledge, the letter of intent is non-binding. Wireless Knowledge may terminate
the arrangement at any time.
We may not succeed in maintaining these distribution relationships. In
addition, we may not be successful in establishing additional relationships.
Even if we are able to establish and maintain these relationships, these
companies may be unable to successfully remarket our voice-enabled services. Our
control over the marketing efforts of Qwest, Intuit and Wireless Knowledge are
limited under our agreements. We cannot guarantee that Qwest, Intuit, Wireless
Knowledge or any future partner will actively market the services incorporating
our technology.
OUR LIMITED RESOURCES MAY RESTRICT OUR OPERATIONS AND OUR ABILITY TO IMPLEMENT
OUR NEW STRATEGY.
Building, maintaining and enhancing our Portico and other voice-enabled
services, and developing private-label services with third parties are complex
processes that require significant financial and other resources. Among other
things, we must:
- enhance the features and functionality of the Portico service to address
the preferences and requirements of our subscribers, and to respond to
competitive developments;
- develop and deploy private-label versions of the Portico service for
existing and future partners;
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- develop and deploy our magicTalk voice user interface to voice enable Web
content and other network-based services, such as Intuit's Quicken.com
Web site;
- continue to identify, establish and maintain relationships with
telecommunications carriers, device manufacturers, Internet firms and
other companies for the resale, remarketing and distribution of our
services;
- enhance our core technologies, including our magicTalk voice user
interface platform, network operations center, second-generation agent
technology and Internet appliance; and
- undertake related marketing and advertising campaigns.
We have limited technical, business development, sales and marketing staffs
and such personnel may not be able to manage and successfully complete all of
the tasks necessary to support the various aspects of our business.
In addition, we must conserve cash because we have generated minimal
revenues to date and do not expect to generate significant revenues until the
second half of 1999, if at all. As a result, we may not be able to fund all of
the product development and marketing efforts required to successfully introduce
all of our services.
WE WILL HAVE TO SECURE ADDITIONAL FINANCING TO MEET OUR FUTURE NEEDS, AND THE
AVAILABILITY OF ADDITIONAL FINANCING IS UNCERTAIN.
If expenditures required to achieve our plans are greater than projected or
if we are unable to generate adequate cash flow from sales of our Portico
services, private-label Portico services and services built on our magicTalk
voice user interface platform, we will need to seek additional sources of
capital. The Portico service was introduced in July 1998, and to date we have
not generated significant revenue. In addition, although we have entered into
arrangements with Qwest and Intuit, we cannot guarantee that we will be able to
generate significant revenue from these arrangements. We have no commitments or
arrangements to obtain any additional funding. We may not be able to obtain such
additional funding if it becomes necessary. The unavailability or timing of any
financing could prevent or delay the continued development and marketing of our
services and may require us to curtail our operations.
WE ARE DEPENDENT ON THE INTERNET, AND WE ARE NOT CERTAIN THAT THE BUSINESS MODEL
FOR SERVICES TO BE PROVIDED THROUGH THE INTERNET WILL SUCCEED.
Voice enabling content on the Internet is a key element of our strategy,
and we plan to seek additional partnerships with Internet companies. However,
the business model common among Internet companies is untested. Many Internet
companies provide free services which are supported by advertising revenue and
revenue generated from upgrades to fee-based services. We expect to be required
to adopt a similar business model, and we cannot guarantee that revenue
generated from advertising or from upgrades to fee-based services, if any, will
be sufficient to offset the cost of providing a free baseline service to users.
In addition, our future success is in part dependent upon continued growth
in the use of the Internet. The Internet may prove not to be a viable means of
conducting commerce or communications for a number of reasons, including
potentially unreliable network infrastructure and poor performance. In addition,
if the Internet continues to experience
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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. Failure of the Internet as a mode of conducting commerce and
communications could have a material adverse effect on our business.
WE MAY EXPERIENCE INTERRUPTIONS IN SERVICE DUE TO ERRORS IN OUR SOFTWARE AND
SYSTEM ARCHITECTURE, AND OUR NETWORK OPERATIONS CENTER MAY NOT BE ABLE TO
ACCOMMODATE POTENTIAL GROWTH.
The ability to provide the Portico service and the services of our partners
depends on the integrity of our software, computer hardware systems and network
infrastructure. Since launching the Portico service, we have encountered errors
in our software and our system design which have resulted in interruptions of
service. Although we were able to correct such errors, we may encounter
additional errors. These errors may be expensive to correct, and may lead to
substantial interruptions in our service.
In addition, in the event that the number of subscribers to our services
increases substantially in a short period of time or we are successful in
establishing a relationship with a partner with a large existing customer base,
our network operations center may not be capable of meeting the resulting
increase in demand. Although we believe that our systems are scalable, we cannot
test conclusively for scalability. A sudden increase in demand could lead to
slowdowns or failures in our services.
Currently, our only network operations center is located at our
headquarters in Sunnyvale, California. Operation of our Portico and other
voice-enabled services is dependent upon our ability to protect the network
operations center against physical damage from power outages, telecommunications
failures, physical break-ins and other similar events. Northern California
historically has been vulnerable to certain natural disasters and other risks,
such as earthquakes, fires and floods, which at times have disrupted the local
economy and pose physical risks to our property. We presently do not have
redundant, multiple site capacity in the event of a technical failure of our
services or a natural disaster.
Any damage to or failure of our systems could lead to interruptions in
service and/or the loss of customer information. Such interruptions or loss
could damage our reputation and ability to attract and retain subscribers and
partners. In addition, we may experience negative publicity that could adversely
affect our stock price.
CONVERSION OF PREFERRED STOCK OR ISSUANCE OF OTHER SECURITIES WOULD DILUTE
CURRENT STOCKHOLDERS.
We have four series of preferred stock outstanding, all of which are
convertible into common stock. In some cases, the number of shares of common
stock issuable upon the conversion of the preferred stock depends on the prices
of the common stock as quoted on Nasdaq shortly before the date of conversion.
We cannot predict the price of the common stock in the future. If the price of
our common stock decreases over time, the number of shares of common stock
issuable upon conversion of the preferred stock will increase and the holders of
common stock would experience substantial dilution of their investment. The
following shares of preferred stock are currently outstanding:
- 50,000 shares of Series A preferred stock. Each share of Series A
preferred stock is convertible into 72.58 shares of common stock, subject
to adjustment for stock
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splits, dividends and similar events and for future issuances of stock at
a price below $1.24 per share. The 50,000 shares of Series A preferred
stock outstanding as of April 26, 1999, would be convertible into
approximately 3,629,000 shares of common stock.
- 1,152 shares of Series C preferred stock. Each share of Series C
preferred stock is convertible into that number of shares of common stock
equal to: (A) $10,000 plus accrued but unpaid dividends plus certain
other penalty amounts divided by (B) the lower of (i) $10.00 and (ii) the
average of the four lowest closing bid prices of a share of common stock
during the 20 trading days prior a conversion date. The number of shares
of common stock issuable upon conversion is subject to adjustment, among
other things: for stock splits, dividends and similar events; for
issuances of stock at a price below $10.00 per share; for future
issuances of convertible stock with a variable conversion price; and in
the event we fail to comply with certain requirements. The 1,152 shares
of Series C preferred stock outstanding as of April 26, 1999, would be
convertible into approximately 4,021,215 shares of common stock.
- 2,000 shares of Series D preferred stock. Each share of Series D
preferred stock is convertible into that number of shares of common stock
equal to: (A) $10,000 plus accrued but unpaid dividends divided by (B)
110% of the average of closing bid prices of a share of common stock
during the ten trading days after, at our sole election, April 29, 1999,
May 29, 1999, or June 28, 1999 (the "initial conversion price"). The
number of shares of common stock issuable upon conversion is subject to
adjustment: for stock splits, dividends and similar events; for future
issuances of stock at a price below the initial conversion price; on
December 31, 1999, June 30, 2000, and on the last day of each September
and March through March 2002, depending on the closing bid prices of our
common stock at such times; for future issuances of convertible stock
with a variable conversion price; and in the event we fail to comply with
certain requirements. Assuming a conversion price based on the average of
the closing sales prices during the ten consecutive trading days
immediately after March 30, 1999 ($3.33), the 2,000 shares of Series D
preferred stock outstanding as of April 26, 1999, would be convertible
into approximately 6,028,220 shares of common stock.
In order to comply with the rules of the Nasdaq Stock Market, we must
obtain stockholder approval prior to issuing shares of common stock upon
conversion of our Series D preferred stock in excess of 19.9% of our common
stock outstanding as of March 30, 1999, the date of issuance of the Series D
preferred stock. If we do not obtain approval, we could in certain circumstances
be required to redeem the outstanding shares of the Series D preferred stock. In
addition, certain other events could require us to redeem Series D preferred
stock and other preferred stock. Redemption of any series of preferred stock
could significantly deplete our cash reserves, which would materially adversely
affect our financial condition.
Our board of directors has the authority to issue 433,000 additional shares
of preferred stock that are convertible into common stock without any action by
our stockholders. In addition, our board of directors may sell additional shares
of common stock or other equity securities that are convertible into common
stock without any action by our stockholders. The issuance and conversion of any
such preferred stock or equity securities would further dilute the percentage
ownership of our stockholders.
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WE MAY EXPERIENCE DELAYS IN PRODUCT DEVELOPMENT.
Any delays in product development or market launch could adversely affect
our revenues or results of operations. To be successful, we must, among other
things, develop technology to enable us to provide, bill for and enhance our
Portico services and other voice-enabled services, including those we agree to
supply for third parties. Software product development schedules are difficult
to predict because they involve creativity and the use of new development tools
and learning processes. Our software development efforts have been delayed in
the past. In addition to software development delays, we may also experience
delays in other aspects of product development. Any product development delays
could delay or prevent successful introduction or marketing of new or improved
products or services or the delivery of new versions of products or services.
WE ARE DEPENDENT ON THIRD-PARTY TECHNOLOGIES AND SERVICES.
We have incorporated technology developed by third parties in the Portico
service and the services to be provided to our partners. 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
developed or 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 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.
THE MARKET FOR VOICE-ENABLED SERVICES IS EXTREMELY COMPETITIVE.
The market for voice-enabled services is intensely competitive and subject
to rapid technological change. 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 technology obsolete. If we are unable to compete effectively, our
business would be adversely affected.
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. If we fail to
timely develop and introduce new products and services in response to changing
market conditions or consumer requirements our business would be adversely
affected.
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<PAGE> 11
Our success will depend upon our ability to timely develop and introduce
new products and services, as well as enhancements to our existing products and
services, to keep pace with technological developments and emerging industry
standards and address the changing needs of users. We may not be successful in
developing and marketing new products and services that respond to technological
changes, or evolving industry standards. We may experience difficulties that
could delay or prevent the successful development, introduction and marketing of
new products and services. In addition, our new products and services may not
adequately meet the requirements of the marketplace or achieve market
acceptance.
WE ARE DEPENDENT ON KEY PERSONNEL.
Our success depends in part on our ability to attract, retain and motivate
qualified personnel. Silicon Valley remains a highly competitive job market, and
our key management, technical, marketing, sales, administrative and customer
support personnel may not remain with us. In addition, we may be unable to
attract sufficient additional personnel to execute our business plan.
OUR INVESTMENT IN AND OTHER COMMITMENTS TO DATAROVER MOBILE SYSTEMS, INC. MAY
RESULT IN A SIGNIFICANT LOSS TO US.
Effective October 1998, we divested our DataRover handheld communications
device division in a transaction with DataRover Mobile Systems, Inc. ("DSI"). In
connection with the transaction, we made an investment in DSI totaling
$3,361,000, and received non-voting, non-redeemable preferred stock and 49% of
the outstanding common stock of DSI. We accounted for our investment under the
equity method, and we recorded 100% of the losses incurred by DSI up to a total
of $3,361,000, our initial investment. As of March 31, 1999, we had recorded a
decrease of $2,521,000 in the value of our investment to reflect our equity in
the losses incurred by DSI through that date. In the event that DSI incurs
further losses in any future period, we will be required to record a
corresponding decline in the value of our investment. In addition, if we
determine that the value of our investment in DSI has been impaired, we will be
required to write off our investment, in whole or in part.
In connection with this transaction, we also agreed to purchase DataRover
840 units for DSI from Oki Electric Industry Co., Ltd. under an existing letter
of credit. We are to be reimbursed by DSI the cost of such units upon the
earlier of five days following the sale of the units by DSI, or 120 days
following shipment by Oki Electric. As of March 31, 1999, DSI's obligation to us
was valued at $2,884,000. DSI's obligation to reimburse us is secured by all of
its personal property. We cannot guarantee that DSI will be able to reimburse
us, or that our security interest in their personal property will be adequate to
satisfy their obligation to us.
PROTECTION OF OUR INTELLECTUAL PROPERTY IS UNCERTAIN.
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;
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<PAGE> 12
- defend our patents, copyrights, trademarks and trade secrets against
infringement;
- operate without infringing the intellectual property rights of others;
and
- prevent unauthorized disclosure of confidential information through the
use of confidentiality agreements with employees, consultants and
partners.
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. Furthermore, third parties may assert claims of
infringement against us. These claims may lead to litigation and/or require us
to significantly modify or even discontinue sales of our products or services.
OUR SERVICE MAY RAISE SECURITY ISSUES.
The implementation of our voice-enabled services poses several security
issues, including the possibility of break-ins and other similar disruptions.
Failure to provide a secure service may result in significant liability to us.
In addition, failure to provide a secure service may deter potential users of
our services, and potential channel and strategic partners and may adversely
affect market acceptance.
Security vulnerabilities and weaknesses may be discovered in our services
or licensed technology incorporated into a service or in the media by which
subscribers access the service. Any security problems in a service or the
licensed technology incorporated in the service may require us to expend
significant capital and other resources to alleviate the problems. In addition,
these problems could limit the number of subscribers to our Portico service and
to services of our partners, which could lead to decreased revenues and
termination of our relationships with partners. These problems may also cause
interruptions or delays in the development of enhancements to our services and
those of third parties and may result in lawsuits against us.
We will continue to incorporate authentication, encryption and other
security technologies in our services. However, such technologies may not be
adequate to prevent break-ins. In addition, weaknesses in the media by which
users access these services, including the Internet, land-line telephones,
cellular phones and other wireless devices, may compromise the security of the
electronic information accessed from the service. We intend to continue to limit
our liability to end users and to our partners, including liability arising from
failure of the authentication, encryption and other security technologies
incorporated into our services, through contractual provisions. However, such
limitations may not eliminate liability. We do not currently have liability
insurance to protect against risks associated with forced break-ins or
disruptions.
A PRODUCT LIABILITY CLAIM ASSERTED AGAINST US COULD MATERIALLY AND ADVERSELY
AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We may be subject to claims for damages related to system errors and other
defects in our services. Agreements with end users of our services typically
contain provisions designed to limit exposure to potential product liability
claims. However, these provisions may not be sufficient to protect us from
liability. We currently have liability insurance to protect against certain
risks associated with system errors and other defects in our services. However,
we cannot guarantee that such insurance will be sufficient.
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<PAGE> 13
OUR STOCK PRICE HAS BEEN EXTREMELY VOLATILE.
The market price of our common stock has been and may continue to be
extremely volatile. Since our initial public offering in February 1995, the
closing price of our common stock has ranged from a high of $26.625 to a low of
$0.938 per share. The following factors may have a significant impact on the
market price of our common stock:
- any shortfall in our revenue or net income or in the revenue or net
income expected by securities analysts;
- conversion of preferred stock into common stock that results in
substantial dilution to the holders of our common stock;
- quarterly fluctuations in our financial results or the results of other
companies in our industry;
- changes in analyst's estimates of our financial performance or the
financial performance of our competitors;
- delays in product development or disruptions in our service;
- investments by large equity partners;
- the announcement of arrangements with channel or strategic partners by us
or our competitors;
- the announcement of technological innovations by us or our competitors;
- the introduction of new products or services by us or our competitors;
- sales of large blocks or significant short selling of our common stock;
and
- conditions in the financial markets in general and in our industry in
particular.
WE MAY HAVE YEAR 2000 COMPLIANCE ISSUES.
We face risks related to the inability of computer systems to accurately
identify and process dates beyond the year 1999. We are currently taking steps
to address these risks for all of our computer systems, including internal
systems and systems supplied to us by third parties. These systems include those
that are commonly thought of as information technology systems, such as our
billing, accounting and network systems. In addition, these systems include
those that are non-information technology systems, such as our building control
systems, building safety systems and communications systems. Based on currently
available information, we do not believe that year 2000 issues will have a
material adverse impact on our results of operations or financial condition.
However, we may fail to identify all critical year 2000 problems, may not
properly assess, remediate or test our systems, and may encounter unexpected
delays or costs associated with our year 2000 effort. In addition, we have not
completed our assessment of the year 2000 readiness of significant suppliers. We
believe that noncompliance of products and services supplied to us by third
parties presents the most significant year 2000 risk. We rely on third-party
suppliers for a significant number of systems related to our Portico service,
such as:
- the calendar and contact software;
- the voice recognition software;
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<PAGE> 14
- the text-to-speech software;
- the billing system; and
- the network operations center equipment.
In addition, we rely on third parties for key services, such as
telecommunications, Internet access and power. In the event that we, or any of
our third-party suppliers, are not year 2000 ready, we could experience
significant disruptions in our operations and service offerings. Such
interruptions could lead to lost sales, loss of relationships with partners and
damage to our business reputation.
DELAWARE LAW AND CERTAIN PROVISIONS OF OUR CHARTER DOCUMENTS MAY INHIBIT
POTENTIAL ACQUISITION BIDS.
Certain provisions of Delaware law and certain provisions of our charter
may inhibit potential acquisition bids for General Magic. We are subject to the
antitakeover provisions of the Delaware General Corporation Law, which could
delay a merger, tender offer or proxy contest or make such a transaction more
difficult. In addition, certain 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. Furthermore, certain series of our
preferred stock provide holders rights to redemption of their preferred stock
upon a change in control, which could make an acquisition more difficult.
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<PAGE> 15
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-3 to register
the common stock offered by this prospectus. However, this prospectus does not
contain all of the information contained in the registration statement and the
exhibits and schedules to the registration statement. We strongly encourage you
to carefully read the registration statement and the exhibits and schedules to
the registration statement.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, DC, New York, New York and Chicago,
Illinois. You can request copies of these documents by contacting the SEC and
paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from the SEC's website at www.sec.gov.
The SEC allows us to "incorporate by reference" the information contained
in documents that we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information in this prospectus supersedes information incorporated by reference
which we filed with the SEC prior to the date of this prospectus, while
information that we file later with the SEC will automatically update and
supersede this information. We incorporate by reference the documents listed
below:
1. Our Annual Report on Form 10-K for the year ended December 31, 1998,
filed with the Commission on March 31, 1999;
2. Our Report on Form 8-K filed with the Commission on April 2, 1999; and
3. 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
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<PAGE> 16
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares offered
pursuant to this prospectus by the selling stockholders and all proceeds will go
to the selling stockholders to be used for their own purposes.
SELLING STOCKHOLDERS
The following table sets forth the names of the selling stockholders, the
number of shares of common stock owned beneficially by each of them as of April
26, 1999, calculated in the manner described below, the number of shares which
may be offered pursuant to this prospectus and the number of shares and
percentage of class to be owned by each selling stockholder after this offering.
None of the selling stockholders has held any position or office or has had any
other material relationship with the Company or any of its affiliates within the
past three years other than as a result of his or her ownership of shares of
equity securities. This information is based upon information provided by the
selling stockholders. Because the selling stockholders may offer all, some or
none of their common stock, no definitive estimate as to the number of shares
thereof that will be held by the selling stockholders after such offering can be
provided.
The number of shares set forth in the table represents an estimate of the
number of shares of common stock to be offered by the selling stockholders and
includes (i) 200% of the common stock issuable upon conversion of the Series D
Convertible Preferred Stock held by such selling stockholder as of April 26,
1999, (ii) 150% of the common stock issuable upon conversion of the Series C
Convertible Preferred Stock held by such selling stockholder as of April 26,
1999 and (iii) 150% of the common stock issuable upon exercise of the warrants
issued in connection the Series D Preferred held by such selling stockholder as
of April 26, 1999. The information set forth in the table assumes conversion or
exercise of the Series C Preferred, the Series D Preferred and the warrants as
of April 26, 1999, and as to the Series D Preferred, assumes a conversion price
of $3.33.
The actual number of shares of common stock issuable upon conversion of the
Series C Convertible Preferred Stock and the Series D Convertible Preferred
Stock and exercise of warrants is indeterminate, is subject to adjustment and
could be materially less or more than such estimated number depending on factors
which cannot be predicted by us at this time, including, among other factors,
the future market price of the common stock. In accordance with Rule 416 under
the Securities Act of 1933, as amended, the actual number of shares of common
stock offered hereby, and included in the registration statement of which this
prospectus is a part, includes such additional number of shares of common stock
as may be issued or issuable upon conversion of the Series D Convertible
Preferred Stock and exercise of the warrants by reason of any stock split, stock
dividend or similar transaction involving the common stock.
Pursuant to its terms, the Series C Preferred, the Series D Preferred and
the warrants issued in connection therewith are convertible or exercisable by
any holder only to the extent that the number of shares of common stock thereby
issuable, together with the number of shares of common stock owned by such
holder and its affiliates (but not including shares of common stock underlying
unconverted or unexercised options, warrants or convertible securities) would
not exceed 4.9% of the then outstanding common stock as determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended.
Accordingly, the number of shares of common stock set forth in the table as
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<PAGE> 17
beneficially owned by the selling stockholders before and after the offering may
exceed the number of shares of common stock that they could own beneficially at
any given time as a result of their ownership of the Series C Preferred, the
Series D Preferred and the warrants issued in connection therewith. With respect
to the Series C Preferred and the warrants issued in connection therewith, this
limitation may be waived by the holder upon 61 days notice to General Magic. 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.
Except as set forth in the footnotes to the table, the persons named in the
table have sole voting and investment power with respect to all shares of
General Magic common stock shown as beneficially owned by them, subject to
community property laws, where applicable.
The "Shares Beneficially Owned After the Offering" column assumes the sale
of all shares offered. The "Percentage of Class" column is based on 36,988,582
shares of common stock outstanding as of April 26, 1999.
<TABLE>
<CAPTION>
SHARES
SHARES BENEFICIALLY
BENEFICIALLY SHARES OFFERED OWNED
OWNED PRIOR TO BY THIS AFTER PERCENTAGE
SELLING STOCKHOLDER THE OFFERING PROSPECTUS THE OFFERING OF CLASS
------------------- --------------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
HFTP Investment LLC(1)............. 2,162,377 4,298,504 -- --
RGC International Investors,
LDC(2)........................... 4,017,784 5,723,944 452,997 1.2%
Halifax Fund, L.P.(3).............. 2,540,929 4,262,274 1,785,854 4.8
Palladin Partners I, L.P.(4)....... 192,404 335,353 4,000 *
Palladin Overseas Fund
Limited(5)....................... 105,670 185,646 2,000 *
The Gleneagles Fund Company(6)..... 229,235 431,276 2,000 *
Palladin Securities, LLC(7)........ 105,670 185,646 2,000 *
Conseco Direct Life(8)............. 182,898 339,165 2,000 *
Lancer Securities (Cayman)
Ltd.(9).......................... 61,782 122,814 -- --
Fisher Capital Ltd.(10)(11)........ 586,040 1,105,330 30,000 *
Wingate Capital Ltd.(11)(12)....... 390,693 736,886 20,000 *
Themis Partners, L.P.(13).......... 176,972 183,259 54,800 *
Heracles Fund(14).................. 335,579 403,169 66,800 *
Microsoft Corporation(15).......... 3,629,000 2,721,750 907,250 2.4
TOTALS................... 21,035,016
</TABLE>
- -------------------------
* Represents less than 1%.
(1) Includes up to 2,109,877 shares of common stock issuable upon conversion of
the Series D Preferred and up to 52,500 shares of common stock issuable
upon the
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<PAGE> 18
exercise of warrants issued in connection therewith held of record by HFTP
Investment LLC.
(2) Includes up to 753,527 shares of common stock issuable upon conversion of
the Series D Preferred and up to 18,750 shares of common stock issuable
upon the exercise of warrants issued in connection therewith held of record
by RGC International Investors, LDC. Also includes 2,792,510 shares of
common stock issuable upon conversion of the Series C Preferred and 182,400
shares of common stock issuable upon the exercise of warrants issued in
connection with the Series B Preferred and the Series C Preferred.
(3) Includes up to 1,657,761 shares of common stock issuable upon conversion of
the Series D Preferred and up to 41,250 shares of common stock issuable
upon the exercise of warrants issued in connection therewith held of record
by Halifax Fund, L.P. Also includes 589,918 shares of common stock issuable
upon conversion of the Series C Preferred and 252,000 shares of common
stock issuable upon the exercise of warrants issued in connection with the
Series B Preferred Stock and the Series C Preferred.
(4) Includes up to 105,494 shares of common stock issuable upon conversion of
the Series D Preferred and up to 2,625 shares of common stock issuable upon
the exercise of warrants issued in connection therewith held of record by
Palladin Partners I, L.P. Also includes 80,285 shares of common stock
issuable upon conversion of the Series C Preferred and 4,000 shares of
common stock issuable upon the exercise of warrants issued in connection
therewith.
(5) Includes up to 60,282 shares of common stock issuable upon conversion of
the Series D Preferred and up to 1,500 shares of common stock issuable upon
the exercise of warrants issued in connection therewith held of record by
Palladin Overseas Fund Limited. Also includes 41,888 shares of common stock
issuable upon conversion of the Series C Preferred and 2,000 shares of
common stock issuable upon the exercise of warrants issued in connection
therewith.
(6) Includes up to 180,847 shares of common stock issuable upon conversion of
the Series D Preferred and up to 4,500 shares of common stock issuable upon
the exercise of warrants issued in connection therewith held of record by
The Gleneagles Fund Company. Also includes 41,888 shares of common stock
issuable upon conversion of the Series C Preferred and 2,000 shares of
common stock issuable upon the exercise of warrants issued in connection
therewith.
(7) Includes up to 60,282 shares of common stock issuable upon conversion of the
Series D Preferred and up to 1,500 shares of common stock issuable upon the
exercise of warrants issued in connection therewith held of record by
Palladin Securities, LLC. Also includes 41,888 shares of common stock
issuable upon conversion of the Series C Preferred and 2,000 shares of
common stock issuable upon the exercise of warrants issued in connection
therewith.
(8) Includes up to 135,635 shares of common stock issuable upon conversion of
the Series D Preferred and up to 3,375 shares of common stock issuable upon
the exercise of warrants issued in connection therewith held of record by
Conseco Direct Life. Also includes 41,888 shares of common stock issuable
upon conversion of the Series C Preferred and 2,000 shares of common stock
issuable upon the exercise of warrants issued in connection therewith.
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<PAGE> 19
(9) Includes up to 60,282 shares of common stock issuable upon conversion of the
Series D Preferred and up to 1,500 shares of common stock issuable upon the
exercise of warrants issued in connection therewith held of record by Lancer
Securities (Cayman) Ltd.
(10) Includes up to 542,540 shares of common stock issuable upon conversion of
the Series D Preferred and up to 13,500 shares of common stock issuable
upon the exercise of warrants issued in connection therewith held of record
by Fisher Capital Ltd.
(11) Citadel Limited Partnership is the trading manager of each of Fisher
Capital Ltd. and Wingate Capital Ltd. (the "Citadel Entities") and
consequently has voting control and investment discretion over securities
held by the Citadel Entities. The ownership for each of Fisher Capital Ltd.
and Wingate Capital Ltd. does not include the ownership information for the
other Citadel Entities. Citadel Limited Partnership and each of the Citadel
Entities disclaims beneficial ownership of the securities of General Magic
held by all other entities controlled by Citadel Limited Partnership, all
of which entities collectively held 624,100 shares of common stock as of
April 26, 1999.
(12) Includes up to 361,693 shares of common stock issuable upon conversion of
the Series D Preferred and up to 9,000 shares of common stock issuable upon
the exercise of warrants issued in connection therewith held of record by
Wingate Capital Ltd.
(13) Includes up to 122,172 shares of common stock issuable upon conversion of
the Series C Preferred and up to 54,800 shares of common stock issuable
upon the exercise of warrants issued in connection with the Series B
Preferred and the Series C Preferred held of record by Themis Partners,
L.P.
(14) Includes up to 268,779 shares of common stock issuable upon conversion of
the Series C Preferred and up to 66,800 shares of common stock issuable
upon the exercise of warrants issued in connection with the Series B
Preferred and the Series C Preferred held of record by Heracles Fund.
(15) Includes up to 3,629,000 shares of common stock issuable upon conversion of
the Series A Convertible Preferred Stock, assuming conversion as of April
26, 1999.
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;
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<PAGE> 20
- an exchange distribution in accordance with the rules of such exchange;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- privately negotiated transactions;
- short sales;
- through the writing of options on the shares;
- in one or more underwritten offerings on a firm commitment or best effort
basis; and
- a combination of any such methods of sale.
In effecting sales, brokers and dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate. Broker-dealers may
agree with the selling stockholders to sell a specified number of such shares at
a stipulated price per share. To the extent such broker-dealer is unable to do
so acting as agent for a selling stockholder, to purchase as principal any
unsold shares at the stipulated price. Broker-dealers who acquire shares as
principals may thereafter resell such shares from time to time in transactions
in the Nasdaq National Market at prices and on terms then prevailing at the time
of sale, at prices related to the then-current market price or in negotiated
transactions. Broker-dealers may use block transactions and sales to and through
broker-dealers, including transactions of the nature described above. The
selling stockholders may also sell the shares in accordance with Rule 144 under
the Securities Act of 1933, as amended, rather than pursuant to this prospectus.
From time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in some or all of the shares owned by
them. The pledgees, secured parties or persons to whom such securities have been
hypothecated will, upon foreclosure in the event of default, be deemed to be
selling stockholders. The number of a selling stockholder's shares offered under
this prospectus will decrease as and when it takes such actions. The plan of
distribution for such selling stockholder's shares will otherwise remain
unchanged. In addition, a selling stockholder may, from time to time, sell short
the common stock of General Magic, and in such instances, this prospectus may be
delivered in connection with such short sales and the shares offered under this
prospectus may be used to cover such short sales.
To the extent required under the Securities Act of 1933, as amended, the
aggregate amount of selling stockholders' shares of common stock being offered
and the terms of the offering, the names of any such agents, brokers, dealers or
underwriters and any applicable commission with respect to a particular offer
will be set forth in an accompanying prospectus supplement. Any underwriters,
dealers, brokers or agents participating in the distribution of the common stock
may receive compensation in the form of underwriting discounts, concessions,
commissions or fees from a selling stockholder and/or purchasers of selling
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
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<PAGE> 21
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be an
underwriting commission or discount under the Securities Act of 1933, as
amended.
A selling stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the common
stock in the course of hedging the positions they assume with such selling
stockholder, including, without limitation, in connection with distributions of
the common stock by such broker-dealers. A selling stockholder may enter into
option or other transactions with broker-dealers that involve the delivery of
the shares offered hereby to the broker-dealers, who may then resell or
otherwise transfer such shares. A selling stockholder may also loan or pledge
the shares offered hereby to a broker-dealer and the broker-dealer may sell the
shares offered hereby so loaned or upon a default may sell or otherwise transfer
the pledged shares offered hereby.
The selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, which provisions may limit the timing of purchases and sales of any
of the shares by the selling stockholders or any other such person. The
foregoing may affect the marketability of the shares.
We have agreed to indemnify in certain circumstances the selling
stockholders and the broker-dealers and agents who may be deemed to be
underwriters, if any, of the securities covered by the registration statement,
against certain liabilities, including liabilities under the Securities Act of
1933, as amended. The selling stockholders have agreed to indemnify in certain
circumstances General Magic against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
The shares of common stock were originally issued to the selling
stockholders pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended, provided by Section 4(2) thereof. We agreed
to register the common stock under the Securities Act of 1933, as amended. We
have agreed to pay all reasonable expenses, other than underwriter discounts and
commissions, incident to the filing of this registration statement. We also
agreed to reimburse the selling stockholders, for expenses incurred by the
selling stockholders in their purchase of the Series D Convertible Preferred
Stock and warrants, up to a maximum of $25,000.
LEGAL MATTERS
The legality of the shares of common stock offered hereby is being passed
upon by Cooley Godward LLP, Palo Alto, California.
EXPERTS
The consolidated financial statements of General Magic, Inc. as of December
31, 1998 and December 31, 1997, and for each of the years in the three-year
period ended 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.
20
<PAGE> 22
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
21,035,016 Shares
GENERAL MAGIC, INC.
Common Stock
-------------------------
PROSPECTUS
-------------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection with
the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fees and Nasdaq
filing fee.
<TABLE>
<CAPTION>
TO BE PAID
BY THE
REGISTRANT
----------
<S> <C>
SEC Registration Fee........................................ $20,208
Nasdaq filing fee........................................... $17,500
Accounting fees and expenses................................ $ 7,500
Legal fees and expenses..................................... $ 5,000
Printing expenses........................................... $ 2,000
Miscellaneous expenses...................................... $ 1,792
Total............................................. $54,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents and in agreements with its directors and
officers provisions expanding the scope of indemnification beyond that
specifically provided by the Delaware law. The Registrant's Bylaws provide that
the Registrant shall indemnify to the full extent authorized by law any person
made or threatened to be made a party to an action or a proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that he
or she, his or her testator or intestate was or is a director, officer or
employee of the Registrant or any predecessor of the Registrant or serves or
served any other enterprise as a director, officer or employee at the request of
the Registrant or a predecessor of the Registrant. The Registrant's Bylaws also
provide that the Registrant may enter into one or more agreements with any
person which provides for indemnification greater or different than that
provided in such Bylaws. We have entered into such indemnification agreements
with our directors and officers.
The Registrant maintains insurance on behalf of any person who is a
director or officer against any loss arising from any claim asserted against him
or her and incurred by him or her in any such capacity, subject to certain
exclusions.
See also the undertakings set out in response to Item 17 herein.
II-1
<PAGE> 24
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
5.1 Opinion of Cooley Godward LLP
23.1 Consent of KPMG LLP, independent auditors
23.2 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>
<TABLE>
<C> <S>
</TABLE>
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant
II-2
<PAGE> 25
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-3
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Sunnyvale, State of California on April 29, 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 James P. McCormick,
and each of them, as his or her true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
on Form S-3, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-facts and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ STEVEN MARKMAN President, Chief April 29, 1999
- --------------------------------------------------- Executive Officer,
Steven Markman Chairman of the Board,
Director (Principal
Executive Officer)
/s/ JAMES P. MCCORMICK Chief Operating Officer April 29, 1999
- --------------------------------------------------- and Chief Financial
James P. McCormick Officer (Principal
Financial and
Accounting Officer)
/s/ MICHAEL E. KALOGRIS Director April 29, 1999
- ---------------------------------------------------
Michael E. Kalogris
</TABLE>
II-4
<PAGE> 27
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Director April , 1999
- ---------------------------------------------------
Carl F. Pascarella
Director April , 1999
- ---------------------------------------------------
Roel Pieper
/s/ DENNIS F. STRIGL Director April 29, 1999
- ---------------------------------------------------
Dennis F. Strigl
/s/ SUSAN G. SWENSON Director April 29, 1999
- ---------------------------------------------------
Susan G. Swenson
/s/ PHILIP D. KNELL Director April 29, 1999
- ---------------------------------------------------
Philip D. Knell
</TABLE>
II-5
<PAGE> 28
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of KPMG LLP, independent auditors.
23.2 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>
<PAGE> 1
[Cooley Godward LLP LETTERHEAD]
April 29, 1999
General Magic, Inc.
420 North Mary Avenue
Sunnyvale, CA 94086
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by GENERAL MAGIC, INC. (the "Company") of a Form S-3
Registration Statement (the "Registration Statement"), including a related
prospectus filed with the Registration Statement (the "Prospectus"), covering
the registration of an aggregate of 21,035,016 shares of the Company's Common
Stock, $.001 par value, by certain selling stockholders, including 225,001
shares of Common Stock (the "Warrant Shares") issuable upon the exercise of
certain warrants (the "Warrants"), 2,721,750 shares of Common Stock (the
"Series A Shares") issuable upon conversion of the Company's outstanding
Series A Convertible Preferred Stock (the "Series A Preferred"), 6,031,825
shares of Common Stock (the "Series C Shares") issuable upon the conversion of
the Company's outstanding Series C Convertible Preferred Stock (the "Series C
Preferred") and 12,056,440 shares of Common Stock (the "Series D Shares")
issuable upon conversion of the Company's outstanding Series D Convertible
Preferred Stock (the "Series D Preferred").
In connection with this opinion, we have examined the Registration Statement and
related Prospectus, your Amended and Restated Certificate of Incorporation and
Bylaws, the Certificate of Designation of the 5% Series A Convertible Preferred
Stock, the Certificate of Designation of the Series C Convertible Preferred
Stock and the Certificate of Designation of the Series D Convertible Preferred
Stock (the "Certificates of Designation"), the Warrants and related agreements,
and such other documents, records, certificates, memoranda and other instruments
as we deem necessary as a basis for this opinion. We have assumed the
genuineness and authenticity of all documents submitted to us as originals, the
conformity to originals of all documents submitted to us as copies thereof and
the due execution and delivery of all documents where due execution and delivery
are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
(i) that the Warrant Shares, when issued and sold in accordance with the terms
of the Warrants (and in accordance with the terms of the related agreements,
where applicable,) will be validly issued, fully paid and nonassessable, (ii)
that the Series A Shares, when issued upon conversion of the Series A Preferred
as provided for in the applicable Certificate of Designation, will be validly
issued, fully paid and nonassessable, (iii) that the Series C Shares, when
issued upon conversion of the Series C Preferred as provided for in the
applicable Certificate of Designation, will be validly issued, fully paid and
nonassessable and (iv) that the Series D Shares, when issued upon conversion of
the Series D Preferred as provided for in the applicable Certificate of
Designation, will be validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ Eric J. Loumeau
-------------------
Eric J. Loumeau
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
General Magic, Inc.:
We consent to incorporation by reference in the registration statement to
be filed on April 29, 1999 on Form S-3 of General Magic, Inc. of our report
dated January 22, 1999, except as to note 17, which is as of March 30, 1999,
relating to the consolidated balance sheets of General Magic, Inc. and
subsidiary (a development stage enterprise) as of December 31, 1998 and 1997,
and the related consolidated statements of operations, stockholders equity
(deficit), and cash flows for each of the years in the three-year period ended
December 31, 1998, and for the period from May 1, 1990 (inception) to December
31, 1998, which report appears in the December 31, 1998 annual report on Form
10-K of General Magic, Inc. We also consent to the reference to our firm under
the heading "Experts" in the Prospectus.
/s/ KPMG LLP
Mountain View, California
April 28, 1999
