<PAGE>
PROSPECTUS
DISCREET LOGIC INC.
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555,000 Shares
Common Shares
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This Prospectus relates to the sale of up to an aggregate of 555,000 shares
(the "Shares") of Common Shares, without par value per share (the "Common
Shares"), of Discreet Logic Inc., a Quebec corporation ("Discreet" or the
"Company"), by certain shareholders of the Company (collectively, the "Selling
Stockholders"). The Selling Stockholders may sell the Shares at market prices
prevailing at the time of the sale or at prices otherwise negotiated. See "Plan
of Distribution." The Selling Stockholders and certain persons who purchase
shares from them including broker-dealers acting as principals who may resell
the Shares, may be deemed "underwriters," as that term is defined in the
Securities Act of 1933, as amended (the "Securities Act"). See "Plan of
Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares. The Company is responsible for the expenses incurred in connection with
the registration of the Shares. The Selling Stockholders will pay or assume
brokerage commissions or other similar charges incurred in the sale of the
Shares. The Company has agreed to indemnify the Selling Stockholders against
certain liabilities, including liabilities under the Securities Act.
The Company's Common Shares are listed on the Nasdaq National Market under
the symbol "DSLGF." On September 15, 1997, the last reported sale price for the
Common Shares on the Nasdaq National Market was $26.75.
_____________________
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
_____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
_____________________
The date of this Prospectus is September 16, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information are available for inspection and copying at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: Seven World Trade Center, 13th Floor, New York, New York 10048,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511 and 73 Tremont Street, Suite 600, Boston, Massachusetts 02108-3912. Copies
of such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a World Wide Web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding the Company. The Common Shares of the Company are quoted on the
Nasdaq National Market and such material may also be inspected and copied at the
offices of the National Association of Security Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (including all amendments thereto, the "Registration Statement") under the
Securities Act, with respect to the Common Shares offered hereby. This
Prospectus does not contain all information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information regarding the Company
and the Common Shares offered hereby, reference is hereby made to the
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any agreement
or other document filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is made to the copy of such
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference. The Registration Statement,
including the exhibits and schedules thereto, may be inspected at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and copies of all or any part thereof may be
obtained from such office upon payment of the prescribed fees.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated in this Prospectus by reference as of their
respective dates (Commission File No. 0-26100):
1. The Company's Annual Report on Form 10-K for the fiscal year ended July
31, 1996;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
October 31, 1996;
3. The Company's Quarterly Report on Form 10-Q for the two month period
ended December 31, 1997;
4. The Company's Current Report on Form 8-K dated January 9, 1997;
5. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997;
6. The Company's Current Reports on Form 8-K dated June 12, 1997 and July
30, 1997; and
7. The description of the Company's Common Shares contained in the
Company's Registration Statement on Form 8-A filed pursuant to Section
12(g) of the Exchange Act on May 18, 1995.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the
offering made hereby, shall be deemed to be incorporated by reference in this
Prospectus from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein or
in any prospectus supplement shall be deemed to be modified
<PAGE>
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which is also
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents described above (other than exhibits to such
documents). Requests for such copies should be directed to Giovanni
Tagliamonti, Corporate Controller, Discreet Logic Inc., 10 Duke Street,
Montreal, Quebec, Canada H3C 2L7, telephone (514) 393-1616. Unless the context
otherwise requires, references in the Prospectus to the "Company," "Discreet" or
"Discreet Logic," refer to Discreet Logic Inc. and its subsidiaries.
This Prospectus contains forward-looking statements which involve risks
and uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
TRADEMARKS
DISCREET LOGIC, DENIM, D-VISION, FIRE, FLAME, FLINT, FROST, ILLUMINAIRE,
INFERNO, OnLINE, SPARKS, STONE + WIRE, VAPOUR and WIRE are trademarks of the
Company. This Prospectus also includes trademarks and trade names of other
companies.
THE COMPANY
Discreet Logic Inc. develops, assembles, markets and supports non-linear,
digital systems and software for creating, editing and compositing imagery and
special effects for film and video. The Company's systems and software are
utilized by creative professionals for a variety of applications, including
feature films, television programs, commercials, music videos, interactive game
production and live broadcasting. Discreet Logic's systems have played key
roles in the creation of special visual effects for recent films such as Forrest
Gump, Independence Day, The Fifth Element, Batman & Robin, Contact and Air Force
One; television programs and special events such as ABC's "World News Tonight
with Peter Jennings" and the 1996 U.S. Presidential elections on ABC and CBS;
music videos by artists including U2, REM, Rolling Stones and The Beatles; and
commercials for clients such as Nike, Pepsi, AT&T and McDonald's.
The Company believes that creative professionals in the film and video
industries require systems and software that can integrate and simplify their
work, enabling them to devote more time to creative activities and less time to
technical tasks. Discreet Logic has traditionally offered turnkey systems
comprised of the Company's proprietary software utilizing workstations
manufactured by Silicon Graphics, Inc. (''SGI''), scaleable disk arrays and
other peripherals. Through two recent acquisitions, the Company now offers
editing software which runs on the Microsoft Windows NT operating system and
special effects software which runs on the Microsoft Windows NT and Apple
Macintosh operating systems. The Company's systems and software provide digital
solutions for creative professionals to input, create, manipulate, store and
output images in an integrated production environment. These systems can be
linked to enable users to collaborate and manage data more efficiently. In
addition, by utilizing general purpose workstation technology, the Company's
systems and software integrate more easily with third party software systems and
devices.
Discreet Logic's systems and software are focused towards three markets:
special effects, editing and broadcast production. The Company's systems
include its FLAME, FLINT, INFERNO, FIRE, VAPOUR and FROST systems. The
Company's FLAME system is used to create, edit and composite special visual
effects in an on-line, real-time environment, providing instant feedback to the
creative professional. The Company's FLINT system contains virtually the same
special visual effects features as FLAME, but runs in a non-real-time
environment. The Company's INFERNO system is an on-line, real-time digital
system providing all of the features of FLAME with increased film resolution and
color control. The Company's FLAME, FLINT and INFERNO systems run on SGI
platforms, are resolution independent and allow users to work on uncompressed
images from a variety of media
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<PAGE>
sources in the full range of resolutions necessary for film and video (including
HDTV). The Company's FIRE system runs on an SGI platform and is an
uncompressed, on-line, non-linear digital video editing system with limited
special effects capabilities. Commercial shipments of FIRE systems, including
software and hardware, began in October 1996. In the broadcast production
market, the Company offers VAPOUR, a computer-based, integrated graphics system,
which is used to create computer generated locales, also known as virtual sets,
for news, sports and entertainment programming, and FROST, a set of modeling,
animation and rendering tools for the creation and manipulation of 3D
environments for broadcast companies. The Company sells its systems and software
worldwide through a direct sales force as well as through distributors. The
Company's software-only products include its recently acquired ILLUMINAIRE
product line and OnLINE product. The Company's ILLUMINAIRE product line
consists of Microsoft Windows NT and Apple Macintosh based paint and compositing
software for producing effects, interactive content and graphics design. The
Company's OnLINE product is a non-linear video and digital media editing
software product that runs on the Microsoft Windows NT operating system.
Discreet Logic's strategy is to maintain and enhance its position as a
leading provider of digital systems by continuing to develop, integrate and
support complete systems that include applications, networking and
communications software, workstations, disk arrays and other peripherals. In
addition, Discreet is pursuing a strategy to develop a business model of selling
software across Apple Macintosh, Microsoft Windows NT and UNIX operating
systems, in addition to its existing fully integrated real-time turnkey systems
solutions. The Company seeks to further expand the range of creative
professionals served by the Company and, by leveraging its technology base,
customer relationships and existing reputation, extend its product line to
include other aspects of the content creation process. There can be no
assurance that the Company will be successful in pursuing its systems and
software market strategy, expanding its user base or extending its product line.
See "Risk Factors--Risks Associated with Product Development Introductions and
Announcements," "--Single Market for Company's Systems; Risks Associated with
Expansion into New Markets," "--Competition," "--Potential Risks Associated with
Acquisitions," "--Potential Distribution Channel Conflict," "--Limited
Protection of Proprietary Technology; Risk of Third Party Infringement Claims,"
and "--Reliance on Sole Source Providers."
The Company's principal executive offices are located at 10 Duke Street,
Montreal, Quebec, Canada H3C 2L7 and its telephone number at such address is
(514) 393-1616.
RECENT DEVELOPMENTS
The following Recent Developments section contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in "Risk Factors" and elsewhere in this Prospectus.
LITIGATION SETTLEMENT AGREEMENT-IN-PRINCIPLE
On May 29, 1996, June 13, 1996 and April 29, 1997 certain of the Company's
shareholders filed class action lawsuits alleging violations of federal
securities laws and other claims against the Company and certain of its officers
and directors. The three lawsuits were filed in the Superior Court of the State
of California, the United States District Court, District of Massachusetts and
the United States District Court, Northern District of California, respectively.
On August 12, 1997 the Company announced that it had reached an agreement-in-
principle to settle all three of the shareholder class action litigations. The
proposed $10.8 million settlement would require Discreet Logic to contribute
approximately $7.4 million from its own funds, with the remainder provided by
insurance. The settlement is subject to final determination (based on United
States/Canadian currency exchange rates) as to the contribution to be made by
Discreet Logic's insurance carrier, to the signing of a definitive agreement, to
adequate shareholder participation, and to final court approval of the proposed
settlement. There can be no assurance that the settlement will be consummated
and that the Company will not have to continue its defense of the lawsuits.
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RECENT FINANCIAL RESULTS
The following tables and information sets forth certain unaudited financial
data of the Company for the periods indicated.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS DATA
(All amounts in thousands of U.S. dollars, except for share dates)
Three Months Ended Three Months Ended Twelve Months Ended Eleven Months Ended
July 31, 1996 June 30, 1997 July 31, 1996 June 30, 1997
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<S> <C> <C> <C> <C>
Total Revenues...................... $ 19,052 $ 34,784 $ 83,997 $101,924
Net Loss............................ $(24,600) $(10,947) $(44,141) $ (6,756)
Net Loss per common share........... $ (0.89) $ (0.39) $ (1.64) $ (0.24)
</TABLE>
Total revenues for the quarter ended June 30, 1997 were $34.8 million as
compared with revenues of $19.1 million for the quarter ended July 31, 1996. Net
income for the quarter ended June 30, 1997 was $5.4 million, or $0.18 per share,
on a fully diluted basis, excluding a $9.8 million write-off of purchased in
process research and development resulting from the acquisition of Denim
Software L.L.C. ("Denim") and excluding a $6.5 million charge related to the
tentative settlement of three class action securities lawsuits in which the
Company is named as a defendant. Net loss for the quarter ended June 30, 1997
including these charges was $10.9 million, or $0.39 per share. For the quarter
ended July 31, 1996, the Company reported a net loss of $11.2 million, or $0.40
per share, excluding a $15.0 million restructuring charge and related tax
effects.
Total revenues for the eleven month period ended June 30, 1997 were $101.9
million. For the twelve month period ended July 31, 1996, total revenues were
$84.0 million. Net income for the eleven month fiscal year ended June 30, 1997
was $9.5 million, or $0.32 per share, excluding the $9.8 million write-off of
purchased in process research and development resulting from the acquisition of
Denim and excluding the $6.5 million charge related to the tentative settlement
of three class action securities lawsuits in which the Company is named a
defendant. Net loss for the fiscal year ended June 30, 1997 including these
charges was $6.8 million, or $0.24 per share. For the twelve month period ended
July 31, 1996, the Company reported a net loss of $22.2 million, or $0.83 per
share, excluding an $8.5 million write-off of purchased research and development
resulting from an acquisition, and excluding a $15.0 million restructuring
charge and related tax effects.
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CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands of U.S. Dollars, except for share data)
<TABLE>
<CAPTION>
ASSETS (audited)
July 31, June 30,
1996 1997
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<S> <C> <C>
Current Assets:
Cash and cash equivalents....................................... $21,658 $31,668
Accounts receivable (less reserves for doubtful accounts)....... 16,074 26,893
Inventory
Resale........................................................ 11,556 10,867
Demonstration................................................. 4,274 3,054
Income taxes receivable......................................... 3,191 448
Other current assets............................................ 3,640 3,889
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60,393 76,819
Property and equipment less accumulated depreciation and
amortization.................................................. 10,037 7,728
Deferred income taxes............................................. 4,722 3,489
Other assets...................................................... 1,140 2,660
Assets held for resale............................................ 3,856 5,248
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$80,148 $95,944
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses........................... $28,950 $44,086
Deferred revenue................................................ 4,770 8,103
Income taxes payable............................................ -- 4,734
Customer deposits............................................... 2,618 1,359
Due to related parties.......................................... 25 --
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36,363 58,282
Deferred income taxes............................................. 1,442 713
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Shareholders' equity:
Preferred shares no par value
Authorized-unlimited number of shares
Issued and outstanding-none
Common shares no par value
Issued and outstanding 27,699, 426 shares at July 31, 1996
and 28,117,415 at June 30, 1997.............................. 78,923 80,402
Accumulated deficit............................................. (35,883) (42,639)
Cumulative translation adjustment............................... (697) (814)
Total shareholders' equity.................................... 42,343 36,949
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$80,148 $95,944
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</TABLE>
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<PAGE>
RECENT ACQUISITIONS
Denim Software, L.L.C.. Acquisition. On June 12, 1997, the Company,
through its wholly-owned subsidiary 3380491 Canada Inc. ("Acquisition Sub"),
acquired substantially all of the assets and assumed certain liabilities of
Denim Software L.L.C., a Delaware limited liability company ("Denim"), pursuant
to the terms of an Asset Purchase Agreement dated as of June 12, 1997 among
Acquisition Sub, Denim, Sam Khulusi, Frank Khulusi, Westco Denim Investments
Group, Ltd., a California limited partnership, and Frank Khulusi Family Limited
Partnership, a California limited partnership. The purchased assets consisted
primarily of Denim software products, including ILLUMINAIRE Paint, ILLUMINAIRE
Composition and ILLUMINAIRE Studio, and related know-how and goodwill. The
aggregate purchase price for the assets was comprised of (i) approximately
$9,126,000 in cash, (ii) the assumption of certain enumerated liabilities in an
amount equal to no more than approximately $2,209,000 in the aggregate, and
(iii) the assumption of certain on-going obligations under certain existing
contracts of Denim. The approximately $9,126,000 cash consideration and
approximately $655,000 with respect to certain assumed liabilities were paid at
closing. The cash used by the Company to fund the acquisition was derived
primarily from cash flow from operations. The transaction was accounted for as
a purchase. The Company incurred a one-time charge of $9,800,000, or $0.35 per
share, for in-process research and development, purchased and expensed in its
fourth fiscal quarter ended June 30, 1997. The terms of the transaction and the
consideration received by Denim were the result of arms-length negotiations
between the representatives of Discreet and Denim. Denim develops Apple
Macintosh and Microsoft Windows NT - based paint and compositing software for
producing effects, interactive content and graphics design.
D-Vision Systems, Inc. Acquisition. On July 15, 1997, the Company
acquired all of the outstanding shares of capital stock of D-Vision Systems,
Inc. ("D-Vision"), an Illinois corporation, pursuant to a Stock Purchase
Agreement dated as of July 10, 1997 among the Company, D-Vision, the former
stockholders of D-Vision (the "Selling Stockholders") and certain other
individuals (the "D-Vision Acquisition"). As a result of the D-Vision
Acquisition, the Company acquired the D-Vision OnLINE and PRO software products
for non-linear video and digital media editing solutions including related know-
how and goodwill. The purchase price was paid in a combination of 555,000 newly
issued Discreet Common Shares and approximately $10,750,000 in cash. In
addition, approximately $4,000,000 of the cash consideration is being held in
escrow until September 30, 1999, subject to (i) earlier release from escrow of
up to $1,900,000 on September 30, 1998 and (ii) the resolution of any
indemnification claims made by the Company pursuant to the Stock Purchase
Agreement. The D-Vision Acquisition was accounted for as a purchase. A
substantial portion of the purchase price, net liabilities of D-Vision and
transaction costs was allocated to purchased in-process research and development
for which the Company expects to incur a one-time charge against earnings in the
range of $20,000,000 to $21,000,000, or $0.70 to $0.73 per share, in the quarter
ending September 30, 1997. The terms of the transaction and the consideration
received by the D-Vision stockholders were the result of arms-length
negotiations between the representatives of Discreet and D-Vision. D-Vision
develops Microsoft Windows NT - based non-linear editing solutions.
Each Selling Stockholder represented to the Company, in connection with
the D-Vision Acquisition, that such Selling Stockholder was acquiring the Shares
from the Company without any present intention of effecting a distribution of
those Shares. In recognition of the fact, however, that investors may want to
be able to sell their shares when they consider appropriate, pursuant to a
Registration Rights Agreement between the Company and the Selling Stockholders,
the Company agreed to file with the Commission a registration statement on Form
S-3 (of which this Prospectus is a part) to permit the public sale of the Shares
by the Selling Stockholders from time to time and to use its best efforts to
keep the registration statement effective until the earlier of the sale of the
Shares pursuant to the registration statement or ninety (90) days after the
effective date of the registration statement (subject to extension for any
period of time that sales of Shares pursuant to the registration statement may
be suspended by the Company). The Company will prepare and file such amendments
and supplements to the registration statement as may be necessary to keep it
effective until the earlier of the sale of all Shares pursuant to the
registration statement or until ninety (90) days after the effective date of the
registration statement (subject to extension for any period of time that sales
of Shares pursuant to the registration statement may be suspended by the
Company).
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<PAGE>
The acquisition of the ILLUMINAIRE products and D-Vision is part of
Discreet's new multi-platform software initiative which includes the formation
of two new product development groups: the Discreet Logic Systems Group and the
Discreet Logic Software Group. The new product organization is part of
Discreet's strategy to develop a comprehensive business model of selling
software across Apple Macintosh, Microsoft Windows NT and UNIX operating
systems, in addition to its existing fully integrated real-time turnkey systems
solutions. See "Risk Factors--Potential Risks Associated with Acquisitions."
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a
high degree of risk. This Prospectus contains certain forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in these forward-looking
statements as a result of certain of the risk factors set forth below and
elsewhere in this Prospectus. In addition to the other information contained in
this Prospectus, the following factors should be carefully considered by
prospective investors when evaluating an investment in the Company's securities.
Risks Associated with Product Development Introductions and Announcements.
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The markets for the Company's systems and software are characterized by evolving
industry standards, changing technologies and frequent new product
introductions. The Company's future success will depend in part upon its
ability to enhance its existing systems and software and to develop and
introduce new products and features which meet changing customer requirements
and emerging industry standards on a timely basis. In addition, in connection
with the Company's recent acquisitions, the Company must integrate the D-Vision
OnLINE product and the Denim ILLUMINAIRE products into its product line and
operations. There can be no assurance that the Company will be able to
successfully integrate these newly acquired products into its current product
line in a timely manner, if at all. The Company has from time to time
experienced delays in introducing new products and product enhancements and
there can be no assurance that the Company will not experience difficulties that
could delay or prevent the successful development, introduction and marketing of
new products or product enhancements. In addition, there can be no assurance
that such new products or product enhancements will meet the requirements of the
marketplace and achieve market acceptance. Any such failure could have a
material adverse effect on the Company's business and results of operations.
Furthermore, products such as those offered by the Company may contain
undetected or unresolved software errors when they are first introduced or as
new or enhanced versions are released. The Company has in the past discovered
software errors in certain of its new products and product enhancements. There
can be no assurance that, despite significant testing by the Company, software
errors will not be found in new products and product enhancements after
commencement of commercial shipments, resulting in delays in or loss of market
acceptance. In addition, from time to time the Company or others may announce
products, features or technologies which have the potential to shorten the life
cycle of or replace the Company's then existing products. Such announcements
could cause customers to defer the decision to buy or determine not to buy the
Company's products or cause the Company's distributors to seek to return
products to the Company, any of which would have a material adverse effect on
the Company's business and results of operations. In addition, product
announcements by SGI and others in the past have caused customers to defer the
decision to buy or determine not to buy the Company's products. See "Dependence
on Single Workstation Vendor." In addition, there can be no assurance that
products or technologies developed by others will not render the Company's
products or technologies non-competitive or obsolete
Single Market for the Company's Systems; Risks Associated with Expansion
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into New Markets. To date, the Company's products have been purchased primarily
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by creative professionals for use in production and post-production in the film
and video industries. In order for the Company to achieve sustained growth, the
market for the Company's systems and software must continue to develop and the
Company must expand this market to include additional applications within the
film and video industries and develop new products for use in related markets.
The Company recently announced its multi-platform software initiative to develop
and market software across Apple Macintosh, Microsoft Windows NT and UNIX
operating systems, in addition to its existing real-time turnkey systems
solutions, targeted at two new market segments: institutional customers and
prosumers
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<PAGE>
(professional consumers). While the Company believes that the market
recognition which it has achieved through sales of FLAME, FLINT, INFERNO and
FIRE systems to creative professionals will facilitate its marketing efforts in
new markets, there can be no assurance that the Company will be able to
successfully develop and market systems and software for other markets, or, if
it does so, that such systems and software will be accepted at a rate, and in
levels, sufficient to maintain growth. Further, the distribution channels,
technical requirements and levels and bases of competition in other markets are
different than those in the Company's current market and there can be no
assurance that the Company will be able to compete favorably in those markets.
Competition. The market in which the Company competes is characterized by
-----------
intense competition. In the real-time segment of the special effects market,
the Company's FLAME system competes with Quantel Limited's ("Quantel") Henry.
In certain applications in the non-real-time segment of the market the Company's
FLINT system competes with Avid Technology, Inc.'s ("Avid") Illusion. The
Company's INFERNO system competes with Quantel's Domino and Eastman Kodak
Company's ("Kodak") Cineon. The Company's FIRE system competes with Quantel's
Editbox and Sony Corporation's ("Sony") range of proprietary editing equipment.
In addition, the Company expects that the products gained from the Denim and D-
Vision acquisitions will compete with Adobe Systems Incorporated's special
effects products and, Avid's and Media 100 Inc.'s range of editing products.
Many of the Company's current and prospective competitors, including Quantel,
Kodak, Sony, Adobe and Avid, have significantly greater financial, technical,
manufacturing and marketing resources than the Company. Moreover, these
companies may introduce additional products that are competitive with those of
the Company, and there can be no assurance that the Company's products would
compete effectively with such products. In addition, as personal computers
become more powerful, software suppliers may be able to introduce products for
personal computers that would be competitive with the Company's products in
terms of price and performance for professional users.
The Company believes that its ability to compete depends on elements both
within and outside its control, including the success and timing of new product
development and introduction by the Company and its competitors, product
performance and price, distribution and customer support. There can be no
assurance that the Company will be able to compete successfully with respect to
these factors. Although the Company believes that it has certain technological
and other advantages over its competitors, maintaining such advantages will
require continued investment by the Company in research and development, sales
and marketing and customer service and support. There can be no assurance that
the Company will have sufficient resources to make such investments or that the
Company will be able to make the technological advances necessary to maintain
such competitive advantages. In addition, as the Company enters new markets,
distribution channels, technical requirements and levels and bases of
competition may be different than those in the Company's current markets and
there can be no assurance that the Company will be able to compete favorably.
Furthermore, competitive pressures or other factors, including the Company's
entry into new markets, may result in significant price erosion that could have
a material adverse effect on the Company's business and results of operations.
Potential Risks Associated with Acquisitions. On June 12, 1997, the
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Company acquired substantially all of the assets of Denim for (i) approximately
$9,126,000 in cash, (ii) the assumption of certain liabilities in an amount
equal to no more than approximately $2,209,000 in the aggregate and (iii) the
assumption of certain ongoing obligations under certain existing contracts of
Denim. On July 15, 1997, the Company acquired all of the outstanding capital
stock of D-Vision for a purchase price of 555,000 newly issued Discreet Common
Shares and approximately $10,750,000 in cash.
There can be no assurance that the products and technologies acquired from
these companies will be successful or will achieve market acceptance. In
addition, with the acquisition of these two companies, the Company has for the
first time entered the market with special effects software that runs on the
Apple Macintosh and Microsoft Windows NT operating systems and editing software
that runs on the Microsoft Windows NT operating system. In this market, the
Company expects to confront competitors that have substantially greater
financial, technical and marketing resources than the Company. Furthermore, the
Company anticipates that products developed for these markets will initially be
sold primarily through the Company's current distribution channels. No
assurance can be given that the Company can successfully develop an effective
distribution channel in
-9-
<PAGE>
such markets. Finally, there can be no assurance that the Company will not incur
disruptions and unexpected expenses in integrating the operations of Denim and
D-Vision with those of the Company.
In the normal course of business, the Company evaluates potential
acquisitions of businesses, products and technologies that would complement or
expand the Company's business. There can be no assurance that the Company will
be able to successfully negotiate, finance or integrate any such acquired
businesses, products or technologies. Furthermore, the integration of an
acquired business may cause a diversion of management time and resources. There
can be no assurance that a given acquisition, when consummated, will not
materially adversely affect the Company.
Fluctuations in Quarterly Operating Results. The Company believes that its
-------------------------------------------
operating results could vary significantly from quarter to quarter. A limited
number of system sales may account for a substantial percentage of the Company's
quarterly revenue because of the high average sales price of such systems and
the timing of purchase orders. Historically, the Company has generally
experienced greater revenue during the period following the completion of the
annual conference of the National Association of Broadcasters ("NAB"), which is
typically held in April. The Company's expense levels are based, in part, on
its expectations of future revenue. Therefore, if revenue levels are below
expectations, particularly following NAB, the Company's operating results are
likely to be adversely affected, as was the case for the three month periods
ended April 30, 1996 and July 31, 1996. In addition, the timing of revenue is
influenced by a number of other factors, including the timing of individual
orders and shipments, other industry trade shows, competition, seasonal customer
buying patterns, changes in customer buying patterns in response to platform
changes and changes in product development, and sales and marketing
expenditures. Because the Company's operating expenses are based on anticipated
revenue levels and a high percentage of the Company's expenses are relatively
fixed in the short term, variations in the timing of recognition of revenue
could cause significant fluctuations in operating results from quarter to
quarter and may result in unanticipated quarterly earnings shortfalls or losses.
There can be no assurance that the Company will be successful in maintaining or
improving its profitability or avoiding losses in any future period. The
Company believes that quarter-to-quarter comparisons of its financial results
are not necessarily meaningful and should not be relied upon as an indication of
future performance.
Dependence on Single Workstation Vendor. The Company's FLAME, FLINT,
---------------------------------------
INFERNO, FIRE, VAPOUR and FROST systems currently include workstations
manufactured by SGI. There are significant risks associated with this reliance
on SGI and the Company may be impacted by the timing of the development and
release of products by SGI, as was the case during fiscal 1996. In addition,
there may be unforeseen difficulties associated with adapting the Company's
products to future SGI products. The Company is an authorized master value
added reseller ("VAR") of workstations manufactured by SGI. The Company's
agreement with SGI is subject to annual renewal in May of each year and
termination by SGI for cause. The agreement with SGI has been extended through
October 1997 and the Company has no reason to believe that SGI will not renew
such agreement. In addition, although the Company has no reason to believe that
it will be unable to obtain sufficient quantities of SGI workstations on a
timely basis or that its status as a master VAR will be changed, there can be no
assurance that the Company will continue to be able to procure such workstations
in sufficient quantities or on a timely basis or that SGI will continue to
recognize the Company as a master VAR. The success of the Company also depends,
in part, on the continued market acceptance of SGI workstations, in general, and
by the professional film and video industries, in particular. Although the
Company intends to continue to evaluate new hardware platforms and may adapt its
products as technological advances and market demands dictate, and although the
Company has now entered the market for special effects and editing software, the
Company believes that it will continue to derive substantially all of its
revenue for the foreseeable future from the sale and maintenance of systems
designed to include SGI workstations. As a result, financial, market and other
developments adversely affecting SGI or the sales of workstations, the
introduction or acquisition by SGI of products which are competitive with those
of the Company, or the unanticipated timing or pricing of SGI products that
could cause customers to defer the decision to buy or determine not to buy the
Company's then available products or systems, could have an adverse effect upon
the Company's business and results of operations, as was the case for the three
month period ended January 31, 1996. As a master VAR, the Company also obtains
certain advance access to SGI technology in order to develop compatible systems
and to modify and improve existing products. If the Company were unable to
obtain such advance access, it could have an adverse impact on the Company's
business and results of operations.
-10-
<PAGE>
International Revenues. For fiscal 1994, 1995 and 1996, and the eleven
----------------------
months ended June 30, 1997 revenues from customers outside North America were
approximately $4,048,000, $29,033,000, $47,711,000 and $52,235,000,
respectively, representing approximately 26%, 45%, 57% and 51%, respectively, of
the Company's total revenues. During fiscal 1995, 1996 and the eleven months
ended June 30, 1997, the Company expanded its direct sales force and
distribution channels in Europe and the Pacific Rim at a greater rate than in
North America which resulted in revenues from customers outside North America
increasing at a significantly higher rate than revenues from customers inside
North America. The Company expects that revenues from customers outside North
America will continue to account for a substantial portion of its revenues.
International sales are subject to a number of risks, including the following:
agreements may be difficult to enforce and receivables difficult to collect
through a foreign country's legal system; foreign customers may have longer
payment cycles; foreign countries could impose additional withholding taxes or
otherwise tax the Company's foreign income, impose tariffs or adopt other
restrictions on foreign trade; fluctuations in exchange rates could affect
product demand; and the protection of intellectual property in foreign countries
may be more difficult to enforce. There can be no assurance that these factors
will not have a material adverse effect on the Company's future international
sales and, consequently, on the Company's business and results of operations.
In addition, fluctuations in exchange rates may render the Company's products
less competitive relative to local product offerings, or could result in foreign
exchange losses, depending upon the currency in which the Company sells its
products. To date, the Company has not engaged in exchange rate hedging
activities to minimize the risks of such fluctuations. The Company may seek to
implement hedging techniques in the future with respect to its foreign currency
transactions. There can be no assurance, however, that the Company will be
successful in such hedging activities.
Limited Protection of Proprietary Technology; Risk of Third Party
-----------------------------------------------------------------
Infringement Claims. The Company's success is dependent upon its proprietary
- -------------------
technology. Although the Company has one patent and has 74 patent applications
on its technology, it relies principally on unregistered copyrights and trade
secrets to protect its intellectual property. The Company generally seeks to
enter into confidentiality agreements with its employees and license agreements
with its distributors and to limit access to and distribution of its systems,
software, documentation and other proprietary information. Until fiscal 1996,
substantially all of the Company's systems were sold without written license
agreements. There can be no assurance that the Company will not be involved in
litigation with respect thereto or that the outcome of any such litigation might
not be more unfavorable to the Company as a result of such omissions. Any such
litigation could have a material adverse effect on the Company's business and
results of operations. The Company uses both software and hardware keys with
respect to its systems and software but otherwise does not copy-protect its
systems and software. It may be possible for unauthorized third parties to copy
the Company's products or to reverse engineer or obtain and use information that
the Company regards as proprietary. There can be no assurance that the
Company's competitors will not independently develop technologies that are
substantially equivalent or superior to the Company's technologies. In
addition, the laws of certain countries in which the Company's products are or
may be distributed do not protect the Company's products and intellectual
property rights to the same extent as the laws of Canada or the United States.
As the number of software products in the industry increases and the
functionality of these products further overlaps, the Company believes that
software products generally may increasingly become the subject of claims that
such software products infringe the rights of others.
Significant and protracted litigation may be necessary to protect the
Company's intellectual property rights, to determine the scope of the
proprietary rights of others or to defend against claims of infringement. The
Company attempts to ensure that its systems, software and processes do not
infringe any existing proprietary rights of others and is not currently involved
in any litigation with respect to intellectual property rights; however, there
can be no assurance that third-party claims alleging infringements will not be
asserted against the Company in the future. For example, the Company recently
received a letter from Avid stating its belief that certain of the Company's
recently acquired D-Vision products utilize inventions claimed in a patent on a
media editing system. To the Company's knowledge, Avid has not initiated any
suit, action, or other proceeding alleging any infringement by the Company of
such patent. If infringement is alleged by Avid, or any other holder of
protected intellectual property rights, the Company could be required to
discontinue the use of certain software code or processes, to cease the
manufacture, use and sale of infringing products, to incur significant
litigation costs and expenses and to develop non-infringing technology or to
obtain licenses to use the allegedly infringed technology. There can be no
assurance that the Company would be able to develop alternative technologies or
to obtain such licenses or, if a license were
-11-
<PAGE>
obtainable, that the terms would be commercially reasonable or acceptable to the
Company. Moreover, there may be pending or issued patents that extend to the
Company's products, which, together with the growing use of patents to protect
technology, increase the risk that third parties may assert infringement claims
against the Company in the future. There can be no assurance that a court to
which any infringement claims are submitted would not find that the Company's
products infringe any third party's intellectual property rights. Further, such
litigation, regardless of its outcome, could result in substantial costs to and
diversion of efforts by the Company. Litigation may also be necessary to enforce
the Company's intellectual property rights. Any infringement claim or other
litigation against or by the Company could have a material adverse effect on the
Company's business and results of operations.
Potential Distribution Channel Conflict. The Company currently markets its
---------------------------------------
systems and software through its direct sales organization and through
distributors. The Company further expects to increase its indirect channel as a
result of the Denim and D-Vision acquisitions. This marketing strategy may
result in distribution channel conflicts as the Company's direct sales efforts
may compete with those of its indirect channels.
Reliance on Sole Source Suppliers. The Company is dependent on SGI as the
---------------------------------
Company's sole source for video input/output ("I/O") cards used in the Company's
systems. The Company is also dependant on a single workstation vendor. See
"Risk Factors--Dependance on Single Workstation Vendor." The Company also
purchases electronic tablets manufactured by Wacom Technology Corporation
("Wacom") and believes that while alternative suppliers are available, there can
be no assurance that alternative electronic tablets would be functionally
equivalent or be available on a timely basis or on similar terms. The Company
generally purchases sole source or other components pursuant to purchase orders
placed from time to time in the ordinary course of business and has no written
agreements or guaranteed supply arrangements with its sole source suppliers.
The Company has experienced quality control problems and supply shortages for
sole source components in the past and there can be no assurance that the
Company will not experience significant quality control problems or supply
shortages for these components in the future. The Company does not maintain an
extensive inventory of these components, and an interruption in supply could
have a material adverse effect on the Company's business and results of
operations. Because of the Company's reliance on these suppliers, the Company
may also be subject to increases in component costs which could adversely affect
the Company's business and results of operations.
The Company's OnLINE product requires, and can only be used with, a Targa
videographic card manufactured by Truevision, Inc., which distributors
customarily purchase and resell to end users as part of a turn-key system. The
Company believes that while alternative suppliers are available, it would take a
significant amount of time to integrate any such replacement cards with the
Company's OnLINE product. There can be no assurance that alternative cards
would be functionally equivalent or be available to distributors or users on a
timely basis or at a similar price. An interruption in the supply or an
increase in price of these cards to OnLINE software users could have a material
adverse effect on the Company's business and results of operations.
Management of Changing Business. Since inception, the Company has
-------------------------------
experienced substantial changes in its operations which have placed significant
demands on the Company's management and administrative, operational and
financial resources. In addition, the Company's ability to manage growth will
require it to continue to implement and improve its operational, financial and
management information systems, and to motivate and effectively manage an
increasing number of employees. If the Company's management is unable to manage
growth effectively, the quality of the Company's products, its ability to retain
key personnel and its results of operations could be materially adversely
affected.
Dependence on Key Personnel. The Company's success to date has depended to
---------------------------
a significant extent upon a number of key management and technical employees.
The loss of the services of one or more of these key employees could have a
material adverse effect on the Company's business and results of operations.
The Company believes that its future success will also depend in large part upon
its ability to attract and retain highly skilled technical, management and sales
and marketing personnel. Moreover, because the development, marketing and
distribution of the Company's systems and software requires knowledge of film
and video production and post-production, key technical personnel must be
proficient in a number of disciplines. Competition for such technical
personnel is intense, and the failure of the Company to hire and retain talented
technical personnel or the loss of one or more key employees could have an
adverse effect on the Company's business and results of operations.
-12-
<PAGE>
Because of the relative shortage of skilled professionals who possess
knowledge of film and video production and post-production, the Company recruits
a significant percentage of its personnel from other industry participants.
From time to time, the Company receives notification from other industry
participants demanding that the Company refrain from recruiting such
participants' employees. Although the Company cannot predict what action these
participants may take, it believes that any action taken by these participants
with regard to these employees would not have a material adverse effect on the
Company's business and results of operations.
Control by Officers and Directors. The Company's officers and directors,
---------------------------------
in the aggregate, owned beneficially approximately 42.6% of the Common Shares
outstanding as of August 29, 1997. As a result, these shareholders, acting
together, would effectively be able to control most matters requiring approval
by the shareholders of the Company, including the election of a majority of the
directors or the approval of significant corporate matters, including change of
control transactions. The Company's charter provides for the issuance of
Preferred Shares, the terms of which may be fixed by the Board of Directors.
These factors could have the effect of delaying, deferring, dissuading or
preventing a change of control of the Company
Volatility of Stock Price. The market price of the Common Shares could be
-------------------------
subject to significant fluctuations in response to quarter-to-quarter variations
in the Company's operating results, announcements of technological innovations
or new products by the Company, its competitors or its suppliers and other
events or factors. In addition, the stock market in recent years has
experienced extreme price and volume fluctuations that have particularly
affected the market prices of many technology companies and that often have been
unrelated or disproportionate to the operational performance of these companies.
These fluctuations, as well as general economic and market conditions, may
materially and adversely affect the market price of the Common Shares.
Litigation. On May 29, 1996, a lawsuit entitled Sandra Esner and Jerry
----------
Krim, On Behalf of Themselves and All Others Similar Situated, vs. [. .
.]Discreet Logic Inc., et al., case No. 978584, was filed in the Superior Court
of the State of California, City and County of San Francisco. Named as
defendants are the Company, certain of the Company's former and existing
directors, officers, and affiliates, and certain underwriters and financial
analysts. The plaintiffs purport to represent a class of all persons who
purchased the Company's common stock between September 13, 1995, and May 1,
1996. The complaint alleges violations of California law through material
misrepresentations and omissions, among other things. The Company believes the
allegations in the complaint are without merit and has defended the lawsuit
vigorously.
On June 13, 1996, a lawsuit entitled Bruce Friedberg, On Behalf of Himself
and All Others Similarly Situated, vs. Discreet Logic Inc., et al., civ. No. 96-
11232-EFH, was filed in the United States District Court, District of
Massachusetts. Named as defendants are the Company and certain of the Company's
former and existing directors and officers. The plaintiff purports to represent
a class of all persons who purchased the Company's common stock between November
14, 1995 and February 13, 1996. On October 11, 1996, the plaintiff filed an
amended complaint which asserts substantially the same factual allegations as
the first complaint and proposes the identical class period. The complaint
alleges violations of United States Federal Securities law through material
misrepresentations and omissions. The Company believes the allegations in the
amended complaint are without merit and has defended the lawsuit vigorously.
On April 29, 1997, a lawsuit entitled Anton Paparella, Sandra Esner and
Geoffrey L. Sherwood, On Behalf of Themselves and All Others Similarly Situated
vs. Discreet Logic Inc., et al., case No. C-97-1570, was filed in the United
States District Court, Northern District of California. Named as defendants are
the Company and certain of the Company's former and existing officers, directors
and affiliates, and certain underwriters. The complaint asserts, in all
material respects, the same factual allegations and proposes the same class
period as the above-described California state court complaint filed in May
1996, except asserts claims under federal securities law instead of state law.
The Company believes the allegations in the California federal complaint are
without merit and has defended the lawsuit vigorously.
On August 12, 1997 the Company announced that it had reached an
agreement-in-principle to settle all three of the above shareholder class action
litigations. The proposed $10.8 million settlement would require
-13-
<PAGE>
Discreet Logic to contribute approximately $7.4 million from its own funds, with
the remainder provided by insurance. The settlement is subject to final
determination (based on U.S./Canadian currency exchange rates) as to the
contribution to be made by Discreet Logic's insurance carrier, to the signing of
a definitive agreement, to adequate shareholder participation and to final court
approval of the proposed settlement. There can be no assurance that the
settlement will be consummated and that the Company will not have to continue
its defense of the lawsuits. Should the proposed settlement not be consummated
or finally approved for any reason, the Company intends to defend the lawsuits
vigorously.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders.
-14-
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Shares as of September 16, 1997 and the number of Shares which
may be offered for the account of the Selling Stockholders or their pledgees,
donees, transferees, or other successors in interest from time to time. See
"Plan of Distribution."
<TABLE>
<CAPTION>
Shares Shares Shares
Beneficially To Be Sold Beneficially
Owned Prior In The Owned After
Selling Stockholder To The Offering Offering (1) The Offering (2)
------------------- -------------------- ---------------- ----------------------
===============================================================================================================
<S> <C> <C> <C>
Geocapital III, L.P. 158,177 158,177 *
Paul Reilly 105,927 105,927 *
Platinum Venture Partners I, L.P. 85,222 85,222 *
Kenneth A. Steel 73,747 73,747 *
Presidents Forum/D-Vision L.L.C. 48,112 48,112 *
Robert F. Steel 31,726 31,726 *
Bruce A. Rady 17,856 17,856 *
Sunbeam Ventures Ltd. 14,579 14,579 *
Michael J. Radi, Trustee for Michael J. Radi 4,604 4,604 *
Revocable Living Trust under Trust dated
2/12/91
Harvey L. Poppel 4,572 4,572 *
Todd Belfer 2,430 2,430 *
Bernard Ludwig 2,430 2,430 *
Bradley Shaw 2,430 2,430 *
Richard J. Radi 1,973 1,973 *
Michael Brown 1,215 1,215 *
_______
TOTAL 555,000
</TABLE>
__________
*See Footnote 2 below
(1) Assumes that all of the Shares owned by each Selling Stockholder and
offered under this Prospectus are sold during the distribution period.
(2) Because the Selling Stockholders or their transferees, distributees,
pledgees, donees or other successors in interest may sell all or any part
of their shares pursuant to this Prospectus, no estimate can be given as to
the number of Shares that will be held by each Selling Stockholder upon
termination of this offering. However, prior to the offering each Selling
Stockholder held less than one percent (1%) of Discreet's outstanding
Common Shares, based on the number of Common Shares outstanding as of
September 1, 1997.
-15-
<PAGE>
PLAN OF DISTRIBUTION
The Shares offered hereby may be sold from time to time by the Selling
Stockholders acting as principals for their own account. The Company is
responsible for the expenses incurred in connection with the registration of the
Shares. The Company will receive none of the proceeds from this offering. The
Selling Stockholders will pay or assume brokerage commissions or other charges
and expenses incurred in the sale of the Shares. In addition, Discreet has
agreed to indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Securities Act, and, in the event that any
offering is made by the Selling Stockholders through underwriters, to agree to
indemnify such underwriters for such liabilities.
The distribution of the Shares by the Selling Stockholders is not
currently subject to any underwriting agreement. The Shares covered by this
Prospectus may be sold by the Selling Stockholders or by their pledgees, donees,
transferees, or other successors in interest from time to time. Such sales may
be made at fixed prices that may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, or at
negotiated prices. Such sales may be effected in the over-the-counter market,
on the National Association of Securities Dealers Automated Quotation System, on
the Nasdaq National Market, or on any exchange on which the Shares may then be
listed. The Shares may be sold by one or more of the following: (a) one or
more block trades in which a broker or dealer so engaged will attempt to sell
all or a portion of the Shares held by the Selling Stockholders as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
(d) in negotiated transactions; and (e) through other means. The Selling
Stockholders may effect such transactions by selling Shares to or through
broker-dealers, and such broker-dealers will receive compensation in negotiated
amounts in the form of discounts, concessions, commissions or fees from the
Selling Stockholders and/or the purchasers of the Shares for whom such broker-
dealers may act as agent or to whom they sell as principal, or both (which
compensation to a particular broker-dealer might be in excess of customary
commissions). Such brokers or dealers or the participating brokers or dealers
and the Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with such sales, and any
commissions received by such broker-dealers may be deemed to be underwriting
compensation.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares offered hereby may not simultaneously
engage in market making activities with respect to the Shares for a period of
time prior to the commencement of such distribution. In addition, and without
limiting the foregoing, each Selling Stockholder will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including, without limitation, Rule 10b-5 and Regulation M, which provisions may
limit the timing of purchases and sales of the Shares by the Selling
Stockholder.
Any securities covered by this Prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act, may be sold under Rule 144 rather than
pursuant to this Prospectus.
The Selling Stockholders are not restricted as to the price or prices at
which they may sell their Shares. Sales of such Shares at less than the market
prices may depress the market price of the Company's Common Stock. During the
effective time of this Prospectus, the Selling Stockholders have agreed to
restrictions on resale during (i) the period beginning with the Company's
initial determination to conduct a primary, secondary or combined primary and
secondary public offering pursuant to which the Selling Stockholders have a
right to be included until no more than one hundred eighty (180) days from the
effective date of the registration statement relating to such public offering
(subject to any extension for any period of time that the sale of Shares
pursuant to the registration statement may be suspended by the Company); (ii)
the period beginning with notice from the Company that it is about to make a
normal course disclosure containing material information until five (5) business
days thereafter, more or less; (iii) the period beginning with notice from the
Company that it is engaged in a material activity that would be adversely
affected by the continued distribution of Shares by the Selling Stockholders
until the earlier of ninety (90) days after such notice or the termination of
such material activity. The Selling Stockholders are not
-16-
<PAGE>
restricted as to the number of Shares which may be sold at any one time, and it
is possible that a significant number of Shares could be sold at the same time.
The Company will use its best efforts to keep this registration statement
effective until the earlier of the sale of the Shares pursuant to the
registration statement or ninety (90) days after the effective date of the
registration statement (subject to any extension for any period of time that
sales of Shares pursuant to the registration statement may be suspended by the
Company).
Boston EquiServe, 150 Royall Street, Canton, Massachusetts 02021, is the
transfer agent for the Company's Common Shares.
LEGAL MATTERS
Certain legal matters with respect to the issuance of the Shares are being
passed upon for the Company by Stikeman, Elliott, 1155 Rene-Levesque Boulevard
West, Montreal, Quebec, Canada, H3B 3V2.
EXPERTS
The financial statements and schedules as of July 31, 1996 and 1995 and
for the three year period ended July 31, 1996 incorporated by reference in this
Prospectus and elsewhere in this Registration Statement have been audited by
Arthur Andersen & Cie, independent chartered accountants, as indicated in their
report dated September 13, 1996 with respect thereto, and are included herein in
reliance upon the authority of said Firm as experts in giving said report.
-17-
<PAGE>
================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to sell, any securities other than
the registered securities to which it relates, or an offer to or solicitation of
any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create an implication that the information
contained herein is correct as of any time subsequent to the date hereof.
_____________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................. 2
Information Incorporated by Reference.. 2
Trademarks............................. 3
The Company............................ 3
Recent Developments.................... 4
Risk Factors........................... 8
Use of Proceeds........................ 14
Selling Stockholders................... 15
Plan of Distribution................... 16
Legal Matters.......................... 17
Experts................................ 17
</TABLE>
================================================================================
================================================================================
555,000 Shares
DISCREET LOGIC INC.
Common Shares
____________________
PROSPECTUS
____________________
September 16, 1997
================================================================================
