<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION VIA EDGAR
ON DECEMBER 8, 1998
REGISTRATION NO. 333-66663
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MUSTANG SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
California 7372 77-0204718
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
6200 Lake Ming Road
Bakersfield, California 93306
(805) 873-2500
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
JAMES A. HARRER
President and Chief Executive Officer
Mustang Software, Inc.
6200 Lake Ming Road
Bakersfield, California 93306
(805) 873-2500 Extension 9001
(805) 873-2457 (Fax)
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies to:
Mark A. Klein, Esq.
David M. Tamman, Esq.
Freshman, Marantz, Orlanski,
Cooper & Klein
9100 Wilshire Boulevard,
8-East
Beverly Hills, CA 90212-3480
Telephone: (310) 273-1870
Facsimile: (310) 274-8357
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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, check the following box and
list the Securities Act registration statement number of 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 under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
--------------------------- ----------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Common stock, no par value per share(2) 1,780,833(3) $2.00 $3,569,569 $992.00
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c) and (g) based on the average
between the bid and ask prices on The Nasdaq SmallCap Market on October 30,
1998.
(2) The shares of Common stock being registered hereunder are being registered
for resale by the selling shareholders named in the prospectus (the
"Selling Shareholders") and consist of outstanding shares of common stock,
shares of common stock issuable upon conversion of outstanding shares of
Series A Convertible Preferred Stock ("Series A Preferred Stock") and
shares of common stock issuable upon exercise of outstanding warrants. Such
common stock, Series A Preferred Stock and warrants were sold by the
Company to the Selling Shareholders on September 17, 1998 pursuant to a
Securities Purchase Agreement (the "Agreement") between the Company and the
Selling Shareholders dated as of September 14, 1998.
(3) In accordance with a Registration Rights Agreement dated as of September
14, 1998 between the Company and the Selling Shareholders, entered into in
conjunction with the Agreement, the number of shares being registered
equals the sum of the following: 641,480 shares of outstanding common
stock; 200% of 451,176 shares of common stock issuable upon conversion
of 5,456 shares of outstanding Series A Preferred Stock (determined based
on 90% of the average of the four lowest closing bid prices of the Company
during the 10 trading-day period ending October 30, 1998); and 237,000
shares of common stock issuable upon exercise of outstanding "A" Warrants
and "B" Warrants (collectively the "Warrants").
<PAGE> 2
MUSTANG SOFTWARE, INC.
COMMON STOCK
The shareholders of Mustang Software, Inc. listed below in the section of this
Prospectus called "Selling Shareholders" are offering and selling up to
1,780,833 shares of Mustang's common stock. Of that common stock, the selling
shareholders are offering up to
- 641,480 shares that they own outright;
- 902,353 shares that they may get upon their conversion of Mustang's
Series A Convertible Preferred Stock which they own; and
- 237,000 shares that they may purchase upon their exercise of Warrants
which they own
The selling shareholders acquired Mustang's common stock, Series A Convertible
Preferred Stock and Warrants in a private placement that was completed on
September 17, 1998. Mustang will not receive any proceeds from the sale of
shares by the selling shareholders.
Mustang's common stock is listed on The Nasdaq SmallCap Market under the symbol
"MSTG." On December 7, 1998, the closing price on The Nasdaq SmallCap Market
was $1.94 per share.
The selling shareholders may offer their Mustang shares through public or
private transactions, in or off the over-the-counter market in the United
States, at prevailing market prices, or at privately negotiated prices. For
details of how the Selling Shareholders may offer their Mustang common stock,
please the section of this Prospectus called "Plan of Distribution."
Your purchase of the common stock involves a high degree of risk. See "Risk
Factors" beginning at page 4.
----------
The Securities and Exchange Commission or any state securities commission has
not approved the Mustang shares offered or sold under this Prospectus, nor have
these organizations determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
----------
The date of this Prospectus is December 8, 1998
<PAGE> 3
WHERE YOU CAN FIND MORE INFORMATION
Mustang files annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document it files at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms.
The SEC allows Mustang to "incorporate by reference" the information it files
with it, which means that Mustang can disclose important information to you by
referring you to those documents. The information incorporated by reference is
part of this Prospectus, and later information that Mustang files with the SEC
will automatically update and supersede this information. Mustang incorporates
by reference the documents listed below. Mustang also incorporates by reference
any future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d)
of the Securities Exchange Act of 1934 until the selling shareholders sell all
their shares. This Prospectus is part of a registration statement that Mustang
filed with the SEC (Registration No. 333-66663).
- Annual Report on Form 10-KSB for the year ended December 31, 1997;
- Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998;
- Current Reports on Form 8-K dated June 2, 1998, October 23, 1998
and November 19, 1998.
You may request a copy of these filings, at no cost, by writing us at the
following address: 6200 Lake Ming Road, Bakersfield, California 93306,
Attention: Chief Financial Officer. You should rely only on the information
incorporated by reference or provided in this Prospectus or any supplement.
Mustang has not authorized anyone else to provide you with different
information. The selling shareholders will not make an offer of these shares in
any state that does not permit the offer. You should not assume that the
information in this Prospectus or any supplement is accurate as of any date
other than the date of those documents.
Table of Contents
<TABLE>
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C>
Where You Can Find More Information.... 2 Selling Shareholders................ 13
About Mustang.......................... 3 Plan of Distribution................ 15
Risk Factors........................... 4 Description of Securities........... 16
Use of Proceeds........................ 11 Legal Matters....................... 18
Dividend Policy........................ 11 Experts............................. 19
Price Range of Common Stock............ 12
</TABLE>
2
<PAGE> 4
ABOUT MUSTANG
Mustang develops and sells software that assists computer users to
communicate with each other more efficiently through the Internet, local area
networks called "LANs" or "intranets," wide area networks called "WANs" and
standard telephone lines. Mustang markets these products as "Web Essentials."
Mustang's Web Essentials line of software applications include:
- IMC, short for Internet Message Center, an application that lets
businesses manage incoming e-mail with the same efficiency and
tracking as call centers handle incoming telephone calls;
- FileCenter, a high performance program that permits operators of
worldwide web sites known as "webmasters" to provide their users with
an organized, searchable library of files;
- and ListCaster, a powerful e-mail message server that allows easy mass
e-mailings from maintained lists and enables e-mail recipients to
correspond with each other through the originating web site.
Mustang's other product line consists of the QmodemPro line of
telecommunications software.
Mustang's products are used for a wide range of services including e-mail
exchange, file transfer, fax-back services and information gathering and
dissemination using multiple sources such as LANs, WANs, the Internet and the
global World Wide Web of the Internet. These products offer the capability for
businesses to enhance sales, improve customer service, market products and
increase employee productivity. The Company has targeted IMC, its flagship
product which has received several prestigious awards as best new product, at
the rapidly growing customer management, call center and help desk markets.
Mustang began operations in 1986 as a sole proprietorship, became a general
partnership in 1987 and incorporated in California on December 23, 1988. Its
executive offices and sales, marketing and administration facilities are located
at 6200 Lake Ming Road, Bakersfield, California, 93306 and its telephone number
is (805) 873-2500.
The following are Mustang's trademarks: Mustang(TM), Web Essentials(TM),
Internet Message Center(TM), FileCenter(TM), ListCaster(TM) and QmodemPro(TM).
"Windows," "Windows 95" and "Windows NT" are trademarks of Microsoft
Corporation. This Prospectus also contains or incorporates trademarks of other
companies.
3
<PAGE> 5
RISK FACTORS
This prospectus contains or incorporates forward-looking statements. You
can identify these forward-looking statements by our use of the words
"believes," "anticipates," "plans," "expects," "may," "will," "intends,"
"estimates" and similar expressions, whether in the negative or affirmative.
Although we believe that these forward-looking statements reflect our plans,
intentions, and expectations reasonably, we can give no assurance that we
actually will achieve these plans, intentions or expectations. Our actual
results could differ materially from the plans, intentions and expectations
disclosed in the forward-looking statements we make. We have put in the
cautionary statements below important factors that we believe could cause our
actual results to differ materially from the forward-looking statements that we
make. We do not intend to update information contained in any forward-looking
statement we make.
DECLINE IN REVENUES AND RECENT LOSSES.
New technology involving the Internet made our legacy products outmoded.
The market place did not accept new versions of our communications products.
We still have not had sufficient revenues from our Web Essentials to offset our
cost of producing that revenue and our operating expenses and we may never be
profitable
Over the last several years and recently, our revenues have declined and we have
reported losses. The following table shows the revenues and losses we have
reported:
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30
---------------------------------------- -------------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue $4,819,999 $3,810,240 $1,898,402 $1,589,914 $1,304,601
Net loss 1,096,852 3,452,825 1,340,673 823,461 1,009,798
</TABLE>
The decline in our revenue directly corresponds to the decline in sales of our
legacy products, QmodemPro and Wildcat! Bulletin Board System software. These
communication products predated the emergence of the Internet and the Web as a
widely accepted and used communication medium. Our old products became
antiquated for several reasons:
- - the built-in communication functions of Windows 95 and Windows NT operating
systems;
- - the emergence of internet service providers, which provided their own
communications software, and Web browsers; and
- - the use of commercial web sites instead of bulletin boards.
While we were early to release our QmodemPro telecommunications software for
Windows 95 and our Wildcat!5 Interactive Net Server, which was capable of
creating and managing a web site on the World Wide Web in addition to a
traditional bulletin board and was designed to take advantage of the power built
into the new Windows 95 and Windows NT operating systems, the products did not
achieve the market acceptance that we had expected and did not stem the decline
in our revenues. We announced our new Web Essentials product line in April 1997
and released the ListCaster, IMC and FileCenter modules of Web Essentials from
May 1997 through October 1997. However, we still have not derived substantial
revenues from these products and have continued to have losses. There can be no
assurance that we will be able to market any of our new Web Essential products
or any other products we may develop successfully.
4
<PAGE> 6
MARKET ACCEPTANCE OF NEW PRODUCTS
Before we can succeed, our targeted market must accept our new web utilities,
especially IMC.
Our future depends upon the market place's acceptance of our new Web Essential
line of web utilities. We hope that the market will accept Web Essentials,
especially our Internet Mail Center program. However, there can be no assurance
that Web Essentials will attain the levels of market acceptance necessary for us
to become profitable or succeed.
VARIABILITY OF OPERATING RESULTS
Revenues during any period are dependent on numerous factors, many of which are
beyond our control.
We typically cannot adjust expenses quickly enough to compensate for an
unexpected shortfall in revenues
Our operating results from quarter to quarter have varied significantly.
Historically, we have not had a material backlog of unfilled orders, and
revenues in any quarter or other period are substantially dependent on orders
booked in that period. Revenues for any period are dependent upon numerous
factors, including
- - the scheduled release of new products and product enhancements and updates
of our products or those of our competitors;
- - the release or anticipated release of complementary products by other
software suppliers, the market acceptance of these products, enhancements
and updates; and
- - numerous other factors, many of which are beyond our control.
In addition, we fix, to a significant extent, our expense levels for each
quarter in advance based upon our expectations as to net sales during that
quarter. Accordingly, we are generally unable to adjust spending in a timely
manner to compensate for any unexpected shortfall in net sales. Thus, any delay
in product introductions, whether due to internal delays or delays caused by
third party difficulties or any significant shortfall of demand in relation to
our expectations would have an almost immediate adverse impact on our operating
results. In the past, we have experienced significant variations in
quarter-to-quarter operating results.
COMPETITION
Our competition is typically larger than we are. We may not be able to exploit
our technological advantages over our competition.
The markets for our products are intensely competitive. We compete with a number
of companies, many of which have far greater financial, technical and marketing
resources than we do. There can be no assurance that we will be able to compete
successfully with these companies. Although we think some of our products have
certain technological advantages, there can be no assurance that we will be able
to maintain or capitalize on these perceived competitive advantages.
5
<PAGE> 7
PRODUCT DEVELOPMENT, INTRODUCTION AND ENHANCEMENT OF PRODUCTS; PRODUCT
CONCENTRATION
Our success depends on choosing to develop and support products that achieve
market acceptance.
Delays in introducing new products, enhancements or upgrades have hurt us.
Our inadvertent release of products with undetected bugs could harm our
business.
Rapidly changing technology and frequent new product introductions are
characteristic of the markets for our products. Accordingly, we believe that our
future prospects depend on our ability not only to enhance and successfully
market our existing products, but also to develop and introduce new products in
a timely fashion which achieve market acceptance. There can be no assurance that
we will be able to identify, design, develop, market or support such products
successfully or that we will be able to respond effectively to technological
changes or product announcements by our competitors. Key to our business our
correct anticipation of customer demand for new products, product enhancements
or upgrades, and making correct product development decisions. If we do not, our
business could suffer, both by the loss of anticipated revenue and, possibly, by
the increase in the installed base of our competitor's customers. These adverse
results could be particularly significant if we were to make a number of
incorrect product development decisions in succession or within a short period.
We have had delays on a number of occasions in starting commercial shipments of
new products and enhancements, resulting in the delay or loss of product
revenues. From time to time, our competition and we may announce new products,
capabilities or technologies that have the potential to replace or shorten the
life cycle of our existing product offerings. Announcements of currently planned
or other new product offerings could cause customers to defer purchasing our
existing products. In addition, complex programs such as our software may
contain undetected errors or "bugs" when we first introduce them or release new
versions. Delays or difficulties associated with new product introductions or
product enhancements, or the introduction of unsuccessful products or products
containing undetected "bugs," could have a material adverse effect on our
business, operating results and financial condition."
PRODUCT RETURN RIGHTS
Product returns in excess of allowances would adversely affect our financial
results.
We generally give our customers the right to return our software within 30 days
after purchase. Although we believe that we have made adequate allowances for
returns, actual returns could exceed our allowances. Product returns in amounts
that are more than recorded allowances could have a material adverse effect on
our business, operating results and financial condition.
6
<PAGE> 8
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
Third parties might duplicate our software and we may not be able to enforce our
rights, especially in foreign countries.
Third parties could claim our products infringe on theirs, resulting in costly
litigation.
We regard our software as proprietary and attempt to protect it with copyrights,
trademarks, restrictions on disclosure, copying and transferring title and
enforcement of trade secret laws. Despite these precautions, it is possible for
unauthorized third parties to copy our products and it may be possible for them
to obtain and use information that we feel is proprietary. We have no patents,
and existing copyright laws afford only limited protection for our software. In
addition, the laws of some foreign countries do not protect our proprietary
rights to the same extent, as do the laws in the United States. Our licenses may
be unenforceable under the laws of certain jurisdictions. As the number of
software products increases and the functionality of these products further
overlaps, we believe that software will increasingly become the subject of
claims that it infringes the rights of others. We do not believe our products
infringe on the rights of third parties. Nevertheless, third parties could
assert infringement claims against us in the future and such assertion could
result in costly litigation or require us to obtain a license to the
intellectual property rights of such parties. There can be no assurance that
such licenses will be available on reasonable terms, or at all.
DEPENDENCE ON KEY PERSONNEL.
Our business may suffer if we lose the services of either our President or Chief
Technical Officer
Our business also may suffer if we cannot recruit or retain qualified technical
personnel
We are dependent upon James A. Harrer, our President and Chief Executive Officer
and C. Scott Hunter, our Vice President and Chief Technical Officer. The loss of
either of these executives could have a material adverse effect on us. While we
have employment agreements with these executives, they may terminate them
without any reason upon four months notice. Moreover, unforeseen circumstances
could cause either of them to no longer render services to the Company. The
Company has key-man life insurance on the life of Mr. Harrer for $1,000,000.
However, the proceeds from this policy may be insufficient to compensate us in
case of Mr. Harrer's death. Further, this policy does not cover us in the event
that he becomes disabled or is otherwise unable to render services. The
continued success of the Company is also dependent upon its ability to attract
and retain highly qualified personnel. There can be no assurance that the
Company will be able to recruit and retain such personnel.
7
<PAGE> 9
RISKS FROM INTERNATIONAL SALES
We face a variety of risks by making sales oversees.
Historically, international sales have accounted for a significant amount of our
revenues. International sales are subject to inherent risks including exposure
to currency fluctuations, regulatory requirements, political and economic
instability and trade restrictions. Our sales have been typically made in U.S.
dollars. However, a weakening in the value of foreign currencies relative to the
U.S. dollar could have an adverse impact on us by increasing the effective price
of our products in international markets. In addition, lower sales levels in
Europe, which typically occur during the summer months, may adversely affect our
business.
POSSIBLE NASDAQ DELISTING
We could be delisted from the Nasdaq Stock Market.
We currently list our common stock on The Nasdaq SmallCap Market. Nasdaq moved
the listing from the Nasdaq National Market to The Nasdaq Small Cap Market on
October 15, 1998 because we did not meet the maintenance requirements for the
Nasdaq National Market at June 30, 1998. We recently raised $1,500,000 in a
private placement of common stock, Series A Convertible Preferred Stock and
Warrants. In this transaction, we also arranged for an equity line of credit
under which we may "put" to the investors more shares of our common stock,
potentially raising additional gross proceeds of up to $5,000,000. Nasdaq moved
our listing to The Nasdaq Small Cap Market via an exception from its net
tangible assets requirement.
8
<PAGE> 10
We have to maintain certain minimum requirements for the continued listing of
our common stock on The Nasdaq SmallCap Market. In this regard, we need:
- - net tangible assets of at least $2,000,000, or a market capitalization of
at least $35,000,000, or net income in two of the last three years of at
least $500,000,
- - a public float of at least 500,000 shares with a minimum market value of
$1,000,000,
- - a minimum bid price of at least $1.00 per share, and a
- - minimum of two active market makers and 300 round lot shareholders.
While we met the requirements for continued listing at December 1, 1998, we
reported only $2,064,011 of net tangible assets at September 30, 1998.
Accordingly, if we have losses during the quarter ending December 31, 1998 or
future quarters that cause our net tangible assets to drop below $2,000,000 and
if we are unable or unwilling to utilize our equity line of credit, we could be
delisted from The Nasdaq Stock Market. Similarly, if we are unable to satisfy
Nasdaq's other maintenance requirements, Nasdaq may delist our common stock from
The Nasdaq Stock Market. If our stock is delisted from the Nasdaq Stock Market,
public trading, if any, in the common stock would be limited to the
over-the-counter markets in the so-called "pink sheets" or the NASD's OTC
Electronic Bulletin Board. Consequently, the liquidity of our common stock could
be impaired.
9
<PAGE> 11
RISK OF LOW PRICED ("PENNY") STOCKS
If Nasdaq delisted our common stock we could become subject to the SEC's penny
stock rules.
In that event, because of the burden placed on broker-dealers to comply with the
rules applicable to penny stocks, investors may have difficulty selling our
common stock in the open market.
If Nasdaq delisted our common stock from the Nasdaq Stock Market, it could
become subject to Rule 15g-9 under the Securities Exchange Act of 1934. This
rule imposes additional sales practice requirements on broker-dealers who sell
so-called "penny" stocks to persons other than established customers and
"accredited investors." Generally, accredited investors are individuals with a
net worth more than $1,000,000 or annual incomes exceeding $200,000, or $300,000
together with their spouses). For transactions covered by this rule, a
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction before
sale. Consequently, the rule may adversely affect the ability of broker-dealers
to sell our shares in the secondary market.
Subject to some exceptions, the SEC's regulations define a "penny stock" to be
any non-Nasdaq equity security that has a market price of less than $5.00 per
share, or with an exercise price of less than $5.00 per share. Unless exempt,
the rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule relating to the penny stock market and the associated risks.
The rules also require disclosure about commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, the rules require that broker-dealers send monthly
statements disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks.
If our common stock became subject to the rules applicable to penny stocks, the
market liquidity for the common stock could be severely adversely affected.
10
<PAGE> 12
USE OF PROCEEDS
The Company will not receive any proceeds from the sales of shares of
common stock by the selling shareholders. The Company will add the net proceeds,
if any, received from the exercise of the Warrants to working capital and used
its for general corporate purposes. There can be no assurance as to whether any,
or the number of, Warrants that may be exercised.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on the common stock
since its inception. The Company currently intends to retain all of its
earnings, if any, for use in the operation and expansion of its business and
does not intend to pay any cash dividends to its stockholders in the foreseeable
future.
11
<PAGE> 13
PRICE RANGE OF COMMON STOCK
Through October 14, 1998, Mustang listed its common stock on the Nasdaq
National Market under the symbol "MSTG." Effective on October 15, 1995, Mustang
began listing its common stock on The Nasdaq SmallCap Market under the symbol
"MSTGC." Nasdaq moved the listing from the Nasdaq National Market to The Nasdaq
Small Cap Market conditionally because Mustang did not meet the maintenance
requirements for the Nasdaq National Market. Mustang met conditions on
December 1, 1998 and on December 4, 1998, Mustang's trading symbol was chaged
back to "MSTG." In order to maintain the listing on the Nasdaq SmallCap Market,
the Company must satisfy certain conditions. See "Risk Factors - Possible
Delisting from the Nasdaq Stock Market. The following table sets forth for the
quarters indicated the high and low last reported sale prices as reported on the
Nasdaq National Market through October 14, 1998 and the high and low bid prices
as reported on The Nasdaq SmallCap market from October 15, 1998. Quotations
since October 15, 1998 reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1996
First Quarter $ 9.00 $ 5.50
Second Quarter 7.50 4.00
Third Quarter 3.75 2.25
Fourth Quarter 2.63 1.00
1997
First Quarter $ 2.50 $ .63
Second Quarter 1.63 .63
Third Quarter 2.13 .56
Fourth Quarter 1.88 .50
1998
First Quarter $ 4.06 $ 1.25
Second Quarter 3.25 1.25
Third Quarter 2.28 1.50
Fourth Quarter (through December 7, 1998) 2.19 1.25
</TABLE>
The 4,098,845, shares of common stock of the Company outstanding as of
October 26, 1998 were held of by 185 shareholders of record, who, the Company
believes, held for in excess of 1,538 beneficial holders. On December 7, 1998,
the last sale price of the common stock as reported on The Nasdaq SmallCap
Market was $1.94 per share.
12
<PAGE> 14
SELLING SHAREHOLDERS
Effective on September 17, 1998, pursuant to a Securities Purchase
Agreement (the "Agreement"), the Company completed a private placement of its
securities with the four institutional investors (the "Selling Shareholders")
named in the table below. One of the investors, namely, Settondown Capital
International Limited, served as the placement agent (the "Placement Agent") for
itself and the other investors. Under the Agreement, the Company sold to the
investors for $1,500,000 an aggregate of 612,000 shares of its common stock,
5,246 shares of its Series A Convertible Preferred Stock (the "Series A
Preferred Stock") and Warrants to purchase an aggregate of 180,000 shares of
common stock. For its services in the transaction, which included placing the
initial $1,500,000 investment, and arranging an equity line of credit for the
Company, the Company paid Settondown, as Placement Agent, a fee consisting of
$60,000 cash, 29,480 shares of its common stock, 210 shares of its Series A
Preferred Stock and Warrants to purchase an aggregate of 57,000 shares of common
stock. The Selling Shareholders (including the Placement Agent) are offering for
resale pursuant to this Prospectus the shares of common stock issued and
underlying the Series A Preferred Stock and Warrants sold on September 17, 1998.
The following table sets forth certain information regarding the beneficial
ownership of shares of common stock by the Selling Shareholders as of October
30, 1998. The information in the table concerning the Selling Shareholders who
may offer shares hereunder from time to time is based on information provided to
the Company by such shareholder, except for the assumed conversion of the Series
A Preferred Stock into common stock and the assumed exercise of the Warrants by
the holders, which are based solely on the assumptions referenced in footnote
(1), (2), (3) and (4) to the table. Because the Selling Shareholders may offer
all or some of the shares pursuant to this Prospectus, and to the Company's
knowledge there are currently no agreements, arrangements or understandings with
respect to the sale of any of the shares that may be held by the Selling
Shareholders after completion of this offering, no estimate can be given as to
the amount of Shares that will be held by the Selling Shareholders after
completion of this offering. Information concerning the Selling Shareholders may
change from time to time and any changes of which the Company is advised will be
set forth in a Prospectus Supplement to the extent required. See "Plan of
Distribution."
<TABLE>
<CAPTION>
Number of shares of common stock
--------------------------------------------------------
Issuable
upon
Beneficially conversion Issuable
owned of upon
before Series A exercise Offered Percent of
this Preferred of the in this outstanding
offering Stock Warrants offering shares
Name of Selling Shareholder (1) (1)(2)(3) (1)(2) (1)(2)(3) (2)(4)
- --------------------------------------- ------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Settondown Capital International Ltd. 182,480 251,719 102,000 586,199 12.0
The Cutty Hunk Fund Ltd. 153,000 216,823 45,000 414,823 9.5
Canal, Ltd. 153,000 216,988 45,000 414,988 9.5
Manchester Asset Management Ltd. 153,000 216,823 45,000 414,823 9.5
</TABLE>
- ----------
(1) The Series A Preferred Stock is not convertible and the Warrants are not
exercisable unless, among other things, shareholders so approve or the
Company's common stock is no longer listed on The Nasdaq Stock Market.
Prior to
13
<PAGE> 15
December 2, 1998, the Company plans to hold a Special Meeting of
Shareholders seeking approval for the conversion of the Series A Preferred
Stock and exercise of the Warrants. Nasdaq has notified the Company that
its common stock will be delisted from the Nasdaq Stock Market if
shareholders do not approve such conversion or exercise by that date.
(2) The information assumes that the Series A Preferred Stock will be
convertible and the Warrants will be exercisable either because
shareholders approve the same or because the Company's common stock is no
longer listed on The Nasdaq Stock Market.
(3) Consists of 200% of 451,176 shares of common stock issuable upon exercise
of 5,456 shares of outstanding Series A Preferred Stock. The number of
shares issuable upon conversion of the Series A Preferred Stock has been
determined based on 90% of the average of the four lowest closing bid
prices of the Company during the 10-day trading period ended October 30,
1998). The Company agreed to register the number of shares of common stock
so determined in a Registration Rights Agreement with the Selling
Shareholders entered into concurrently with the Agreement. The number of
shares of common stock actually issued upon conversion of the Series A
Preferred Stock will depend on the market price of the Company's common
stock at the time the Series A Preferred Stock is converted by the Selling
Shareholders from time to time. See "Description of Securities."
Accordingly, information concerning the number of shares of common stock
issuable upon conversion of the Series A Preferred Stock and the number of
shares that the Selling Shareholders will offer may change from time to
time and any changes of which the Company is advised will be set forth in a
Prospectus Supplement to the extent required.
(4) Beneficial ownership for purpose of computing the percent of outstanding
shares is determined in accordance with the rules of the Securities and
Exchange Commission. Shares of common stock issuable upon exercise of the
Series A Preferred Stock and Warrants are considered outstanding for
purpose of computing the percentage ownership of the Selling Shareholder
holding the Series A Preferred Stock and Warrants but are not considered
outstanding for purpose of computing percentage ownership of any other
Selling Shareholder.
To the knowledge of the Company, none of the Selling Shareholders has
any material relationship or engaged in any transaction with the Company except
pursuant to the Agreement.
14
<PAGE> 16
PLAN OF DISTRIBUTION
The distribution of the shares by the Selling Shareholders may be effected
from time to time in one or more transactions (which may involve block
transactions), in special offerings, exchange distributions and/or secondary
distributions, in negotiated transactions, in settlement of short sales of
common stock or a combination or such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Such transactions may be effected on the
over-the-counter market or privately. The Selling Shareholders may effect such
transactions by selling the shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Shareholders for whom they may act
as agent (which compensation may be in excess of customary commissions). Without
limiting the foregoing, such brokers may act as dealers by purchasing any and
all of the shares covered by this Prospectus either as agents for others or as
principals for their own accounts and reselling such securities pursuant to this
Prospectus. The Selling Shareholders and any broker-dealers or other persons
acting on the behalf of parties that participate with such Selling Shareholders
in the distribution of the shares may be deemed to be underwriters and any
commissions received or profit realized by them on the resale of the shares may
be deemed to be underwriting discounts and commissions under the Securities Act
of 1933 (the "Securities Act"). As of the date of this Prospectus, the Company
is not aware of any agreement, arrangement or understanding between any broker
or dealer and the Selling Shareholders with respect to the offer or sale of the
shares pursuant to this Prospectus.
At the time that any particular offering of shares is made, to the extent
required by the Securities Act, a prospectus supplement will be distributed,
setting forth the terms of the offering, including the aggregate number of
shares being offered, the names of any underwriters, dealers or agents, any
discounts, commissions and other items constituting compensation from the
Selling Shareholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers.
Selling Shareholders may also sell their shares pursuant to Rule 144
promulgated under the Securities Act. Each of the Selling Shareholders may from
time to time pledge the shares owned by it to secure margin or other loans made
to such Selling Shareholder. Thus, the person or entity receiving the pledge of
any of the shares may sell them, in a foreclosure sale or otherwise, in the same
manner as described above for such Selling Shareholder.
The Company will not receive any of the proceeds from any sale of the
shares by the Selling Shareholders offered hereby.
Pursuant to a Registration Rights Agreement that the Company and the
Selling Stockholders entered into at the same time they entered into the
Agreement (the "Registration Rights Agreement"), the Company and the Selling
Shareholders have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act. The Company shall bear customary
expenses incident to the registration of the shares for the benefit of such
Selling Shareholders in accordance with such agreements, other than underwriting
discounts commissions.
The Company has agreed to use its best efforts to keep the Registration
Statement of which this Prospectus is a part effective until the earliest of (i)
the date that all of the common stock which it
15
<PAGE> 17
has agreed to register under the Registration Rights Agreement has been sold
pursuant to the Registration Statement of which this Prospectus is a part or any
post-effective amendment thereto (ii) the date the Selling Shareholders may sell
all the shares under the provisions of Rule 144 or (iii) September 17, 2001.
DESCRIPTION OF SECURITIES
GENERAL
The authorized capital stock of the Company consists of 30,000,000 shares
of common stock, no par value, and 10,000,000 shares of preferred stock, no par
value.
THE PRIVATE PLACEMENT
Effective on September 17, 1998, pursuant to the Agreement, the Company
completed a private placement of its securities to the Selling Shareholders.
Under the Agreement, the Company sold to the Selling Shareholders for $1,500,000
an aggregate of 612,000 shares of its common stock, 5,246 shares of its Series A
Convertible Preferred Stock (the "Series A Preferred Stock") and Warrants to
purchase an aggregate of 180,000 shares of common stock. For its services in the
transaction, which included placing the initial $1,500,000 investment, and
arranging an equity line of credit for the Company, the Company paid Settondown
Capital International Limited, as Placement Agent, a fee consisting of $60,000
cash, 29,480 shares of its common stock, 210 shares of its Series A Preferred
Stock and Warrants to purchase an aggregate of 57,000 shares of common stock.
COMMON STOCK
As of October 26, 1998, 4,063,365 shares of common stock were outstanding.
The holders of common stock are entitled to receive dividends when and as
declared by the Board of Directors out of any funds legally available therefor.
Holders of common stock are entitled to one vote per share on all matters on
which the holders of common stock are entitled to vote and the holders of common
stock may cumulate their votes in the election of directors upon giving notice
as required by law. Cumulative voting means that in any election of directors,
each shareholder may give one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of shares held by such
shareholder, or such shareholder may distribute such number of votes among as
many candidates as the shareholder sees fit. There are no preemptive rights
associated with any of the shares of common stock. In the event of a
liquidation, dissolution or winding up of the Company, holders of common stock
are entitled to share equally and ratably in the assets of the Company, if any,
remaining after the payment of all debt and liabilities of the Company and the
liquidation preference of any outstanding class or series of preferred stock.
The shares of common stock offered by the Selling Shareholders hereby will be,
when sold, fully paid and nonassessable. The rights, preferences and privileges
of holders of common stock are subject to any series of preferred stock which
the Company may issue in the future.
16
<PAGE> 18
PREFERRED STOCK
The Company is authorized to issue preferred stock in series to be
designated by the Board of Directors. Material provisions describing the terms
of any series of preferred stock which may be issued in the future, such as
dividend rate, conversion features, voting rights, redemption rights and
liquidation preferences, are determined by the Board of Directors of the Company
at the time of issuance. The right of the Board of Directors to issue "blank
check" preferred stock may adversely affect the rights of holders of shares of
common stock and also could be used by the Company as a means of resisting a
change of control of the Company.
Of the 10,000,000 shares of preferred stock authorized in general, the
Company has authorized 15,246 shares of Series A Convertible Preferred Stock
(the "Series A Preferred Stock"), of which 5,456 shares have been issued. All of
the Series A Preferred Stock has been issued to the Selling Shareholders.
Holders of Series A Preferred Stock are not entitled to dividends and have
no voting rights, except as provided otherwise by law. For each share of Series
A Preferred Stock held, holders are entitled to a liquidation preference of $100
plus 5 percent per annum thereon from September 17, 1998 to the day immediately
prior to any liquidation, dissolution or winding up of Mustang.
Subject to certain conditions and limitations (including shareholder
approval or the delisting of the Company's common stock from The Nasdaq Stock
Market) beginning on December 15, 1998, each share of Series A Preferred Stock
will be convertible into that number of shares of the Company's common stock
which is determined by dividing $100 plus 5% per annum thereon from September
17, 1998 to the date of conversion, by the lower of $1.875 per share or the
"market price" per share at the time of conversion. The "market price" for
purposes of conversion is 90% of the average of the four lowest closing bid
prices of the common stock during the 10 day trading period immediately
preceding the conversion date (the "Lookback Period"). The Lookback Period is be
increased by two trading days every month commencing on January 17, 1999 and
continue to increase by two trading days every month thereafter that the Series
A Preferred Stock is outstanding until the Lookback Period equals a maximum of
thirty trading days.
If not earlier converted, the Series A Preferred Stock will automatically
convert into common stock on September 17, 2000. Subject to certain conditions
and limitations, the Company has the right to force conversion by the holders of
the Series A Preferred Stock in the event the closing bid price of the common
stock is equal to or greater than $2.8125, $3.28125 or $3.75. In such event,
the Company may force conversion by the holder of up to 15% of the total number
of shares of Series A Preferred Stock, up to a cumulative aggregate of 75% of
the total number of shares of Series A Preferred Stock issued to the holders.
WARRANTS
Under the Agreement, the Company issued Warrants (the "A" Warrants) to
purchase an aggregate of 200,000 shares of common stock. These Warrants will be
exercisable until September 13, 2000 at an exercise price of $1.90, an amount
equal to 110% of the average closing bid price of the common stock for the five
trading days preceding September 17, 1998.
17
<PAGE> 19
Under the Agreement, the Company also issued Warrants (the "B" Warrants) to
purchase an aggregate of 37,000 shares of common stock. These Warrants are
exercisable until September 13, 2000 at an exercise price of $2.08, an amount
equal to 120% of the average closing bid price of the common stock for the five
trading days preceding September 17, 1998.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock of the Company is
U.S. Stock Transfer Corporation, Glendale, California.
LEGAL MATTERS
The validity of the common stock offered hereby has been passed upon for
the Company by Freshman, Marantz, Orlanski, Cooper & Klein, a law corporation,
Beverly Hills, California.
EXPERTS
The financial statements of the Company incorporated into this Prospectus
by reference to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997 have been audited by Arthur Andersen LLP, independent public
accountants, and are incorporated herein and in the Registration Statement of
which this Prospectus is a part in reliance upon the report of Arthur Andersen
LLC and upon the authority of said firm as experts in accounting and auditing.
18
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
Registrant in connection with the sale of the Common Stock being registered
hereby, other than selling commissions, all of which are estimated except for
the SEC filing fees.
<TABLE>
<CAPTION>
Item Amount
---- ------
<S> <C>
SEC registration fee $ 992
Nasdaq Additional Listing Fee 6,415
Blue Sky fees and expenses 10,000
Printing and engraving expenses 10,000
Legal fees and expenses 15,000
Accounting fees and expenses 5,000
Transfer Agent and registrar fees 2,500
Miscellaneous expenses 93
-------
Total $50,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended and Restated Articles of Incorporation and Amended and
Restated Bylaws of Mustang Software, Inc., (the "Company") require the Company
to indemnify officers and directors of the Company to the fullest extent
permissible under California law. Section 317 of the California General
Corporation Law makes provision for the indemnification of officers, directors
and other corporate agents in terms sufficiently broad to indemnify such
persons, under certain circumstances, for liabilities (including reimbursement
of expenses incurred) arising under the Securities Act of 1933, as amended (the
"Act").
ITEM 16. EXHIBITS
4.1 Form of Common Stock certificate (incorporated by reference to Exhibit
4.1 of the Company's Registration Statement of Form SB-2 (file no.
33-89900-LA)).
4.2 Securities Purchase Agreement dated as of September 14, 1998 between
the Company and Settondown Capital International Limited and the other
investors named therein.
4.3 Certificate of Determination of Mustang Software, Inc. relating to the
authorization and determination of the Series A Convertible Preferred
Stock.
4.4 Escrow Agreement dated as of September 14, 1998 between the Company and
Settondown Capital International Limited and the other investors named
therein
4.5 Registration Rights Agreement dated as of September 14, 1998 between
the Company and Settondown Capital International Limited and the other
investors named therein
4.6 Form of Stock Purchase Warrant A
4.7 Form of Stock Purchase Warrant B
5.1 Opinion of Freshman, Marantz, Orlanski, Cooper & Klein, a law
corporation
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Freshman, Marantz, Orlanski, Cooper & Klein, a law
corporation (contained in Exhibit 5)
24.1 Power of Attorney (contained on signature page of Registration
Statement filed November 2, 1998)
1
<PAGE> 21
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(a) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) to reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent post-effective
amendment hereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this 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.
(c) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement.
provided, however, that the undertakings set forth in paragraph (a) and (b)
above shall 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 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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
of 1933 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 of 1933 and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 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.
For purposes of determining any liability under the Securities Act of 1933,
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 of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective. For the purpose of
determining any liability under the Securities Act of 1933, each post-effective
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.
2
<PAGE> 22
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 Chatsworth, State of California, on the 7th day of
December, 1998.
MUSTANG SOFTWARE, INC.
By: /s/ Donald M. Leonard
---------------------------------
Donald M. Leonard
Vice President, Finance
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>
Names Title Date
----- ----- ----
<S> <C> <C>
/s/ James A. Harrer* President and Chief Executive Officer
James A. Harrer (Principal Executive Officer) and a Director December 7, 1998
/s/ Donald M. Leonard Vice President Finance, Chief Financial December 7, 1998
Donald M. Leonard Officer (Principal Financial and Accounting
Officer) and a Director
/s/ C. Scott Hunter* Director December 7, 1998
C. Scott Hunter
/s/ Stanley A. Hirschman* Director December 7, 1998
Stanley A. Hirschman
/s/ Michael S. Noling* Director December 7, 1998
Michael S. Noling
*by /s/ Donald M. Leonard
---------------------
Donald M. Leonard
Attorney-in-Fact
</TABLE>
3
<PAGE> 1
EXHIBIT 5.1
[FRESHMAN, MARANTZ, ORLANSKI, COOPER & KLEIN LETTERHEAD]
December 7, 1998
Mustang Software, Inc.
6200 Lake Ming Road
Bakersfield CA 93306
Re: Mustang Software, Inc.
Registration Statement on Form S-3
SEC 333-66663
Dear Sirs:
We have acted as special counsel to Mustang Software, Inc., a California
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "SEC") of the Registration Statement
on Form S-3, File No. 333-66663, together with Amendment No. 1 thereto
(collectively, the "Registration Statement"), of the Company, with exhibits as
filed in connection therewith and the form of prospectus contained therein, for
registration for resale under the Securities Act of 1933, as amended (the
"Securities Act"), of 1,780,833 shares (the "Shares") of the Company's common
stock, no par value (the Common Stock ).
For purposes of this opinion, we have examined such matters of law and
originals, or copies certified or otherwise identified to our satisfaction, of
such documents, corporate records and other instruments as we have deemed
necessary. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified,
photostatic or conformed copies, and the authenticity of the originals of all
such latter documents. We have also assumed the due execution and delivery of
all documents where due execution and delivery are prerequisites to the
effectiveness thereof. We have relied upon certificates of public officials and
certificates of officers of the Company for the accuracy of material, factual
matters contained therein that were not independently established.
<PAGE> 2
Mustang Software, Inc.
December 7, 1998
Page 2
Based on the foregoing and on all other instruments, documents and matters
examined for the rendering of this opinion, it is our opinion that the Shares
are legally issued, fully paid and non-assessable shares of the Common Stock of
the Company.
We express no opinion as to the applicability or effect of any laws, orders or
judgments of any state or jurisdiction other than the substantive laws of the
State of California. Further, our opinion is based solely upon existing laws,
rules and regulations, and we undertake no obligation to advise you of any
changes that may be brought to our attention after the date hereof.
We consent to the use of our name under the caption "Legal Matters" in the
Prospectus, constituting part of the Registration Statement, and to the filing
of this opinion as an exhibit to the Registration Statement.
By giving you this opinion and consent, we do not admit that we are experts with
respect to any part of the Registration Statement or Prospectus within the
meaning of the term expert as used in Section 11 of the Securities Act, or the
rules and regulations promulgated thereunder by the SEC, nor do we admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
/S/ FRESHMAN, MARANTZ, ORLANSKI, COOPER & KLEIN
------------------------------------------------
FRESHMAN, MARANTZ, ORLANSKI, COOPER & KLEIN
