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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1998
REGISTRATION NO. 333-20625
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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OBJECTIVE COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4825 54-1707962
(State or other jurisdiction of (Primary Standard Institutional (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
OBJECTIVE COMMUNICATIONS, INC. ROBERT H. EMERY
50 INTERNATIONAL DRIVE 50 INTERNATIONAL DRIVE
PORTSMOUTH, NEW HAMPSHIRE 03801 PORTSMOUTH, NEW HAMPSHIRE 03801
(603) 334-6700 (603) 334-6700
(Address, including zip code, and Name, address, including zip code,
telephone number, including area code, of and telephone number, including
Registrant's principal executive offices,) area code, of agent for service)
</TABLE>
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Copy to:
ELLEN C. GRADY, ESQ.
SHAW, PITTMAN, POTTS & TROWBRIDGE
1501 FARM CREDIT DRIVE
MCLEAN, VIRGINIA 22102
(703) 790-7900
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
possible 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, as amended, other than securities offered only in connection with dividend
or reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, as amended, check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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EXPLANATORY NOTE
This Post-Effective Amendment No. 2 to the Registration Statement
(Registration No. 333-20625) (the "Registration Statement") of Objective
Communications, Inc. (the "Company") is to amend the Registration Statement of
the Company originally filed on Form SB-2 to, among other things, change the
form of the Registration Statement to Form S-3. The common stock, par value $.01
per share (the "Common Stock"), of the Company has been registered under the
Securities Exchange Act of 1934, as amended, since April 3, 1997, and the
Company now meets the registrant requirements for use of Form S-3.
This Registration Statement covers the registration of the following
securities for resale by the holders thereof: (i) 350,000 shares of Common Stock
(the "Bridge Warrant Shares") issuable upon exercise of warrants (the "Bridge
Warrants") issued by the Company in October and November 1996; (ii) 500,000
shares of Common Stock (the "Series A Shares") issued upon conversion of
outstanding shares of the Company's Series A Convertible Preferred Stock, par
value $.01 per share (the "Series A Preferred Stock"), at the time of the
closing of the Company's initial public offering of Common Stock; (iii) 100,000
shares of Common Stock (the "Series A Warrant Shares") issuable upon exercise of
the warrants (the "Series A Warrants") issued by the Company in December 1996
and January 1997 in connection with the private placement of the shares of
Series A Preferred Stock; and (iv) 180,000 shares of Common Stock issuable upon
exercise of an option (the "Barington Option Shares") to purchase 180,000 shares
of Common Stock granted to Barington Capital Group, L.P. (the "Barington
Option") by the Company in connection with its Initial Offering. All of the
Bridge Warrant Shares, the Series A Shares, the Series A Warrant Shares and the
Barington Option Shares (collectively, the "Shares") will be sold for the
accounts of the Selling Stockholders, and the Company will receive no proceeds
therefrom. Additionally, 350,000 of such Shares are subject to lock-up
arrangements in favor of Barington Capital Group, L.P. , which restrict the sale
of the Shares until April 8, 1999, and 180,000 of such Shares are subject to
lock-up arrangements in favor of NationsBanc Montgomery Securities, Inc., which
restrict the sale of such shares until May 5, 1998, subject in each case to
certain limited exceptions.
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PROSPECTUS
OBJECTIVE COMMUNICATIONS, INC.
1,130,000 SHARES
COMMON STOCK
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The Prospectus relates to the offering (the "Offering") by certain selling
stockholders identified herein (the "Selling Stockholders") of 1,130,000 shares
(the "Shares") of Common Stock, par value $.01 per share, of Objective
Communications, Inc. (the "Company"), which may be sold from time to time by the
Selling Stockholders, or by pledgees, donees, transferees or other successors in
interest, on or after the date of this Prospectus. Of such Shares, 350,000
Shares are subject to contractual restrictions which provide that such
securities may not be sold until April 8, 1999, without the prior written
consent of Barington Capital Group, L.P., the underwriter of the Company's
initial public offering (the "Initial Offering"), and 180,000 Shares are subject
to contractual restrictions which provide that such securities may not be sold
until May 5, 1998, without the prior written consent of NationsBanc Montgomery
Securities, Inc., the managing underwriter of the offering of the Company's
Common Stock completed in November 1997 (the "Follow-on Offering"), in each
case, subject to certain limited exceptions. See "Selling Stockholders."
The Company will not receive any proceeds from sales of the Shares. See
"Selling Stockholders."
The Shares were registered in the Company's Initial Offering on a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), which was declared effective by the Securities and Exchange
Commission on April 3, 1997.
No underwriting arrangements have been entered into by the Selling
Stockholders. The distribution of the Shares by the Selling Stockholders may be
effected from time to time in transactions on the National Market of the
National Association of Securities Dealers Automated Quotation System
("Nasdaq"), in negotiated transactions, through the writing of options on the
Shares, or a combination of such methods of sale, 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. The Selling Stockholders
may effect such transactions by the sale of the Shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of the Shares for whom such broker-dealers may act as agent or to
whom they may sell as principal, or both. Usual and customary or specifically
negotiated brokerage fees or commissions may be paid by the Selling Stockholders
in connection with the sales of the Shares.
The Selling Stockholders and intermediaries through whom the Shares are
sold may be deemed "underwriters" within the meaning of the Securities Act, with
respect to the securities offered, and any profits realized or commissions
received may be deemed underwriting compensation.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE AND SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED CAREFULLY
AND ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE
"RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
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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 April , 1998.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Securities and Exchange Commission (the "Commission") (File No. 000-22235) and
are incorporated herein by reference and made a part hereof:
(1) The Company's Registration Statement on Form 8-A filed with the
Commission on March 13, 1997 registering the Common Stock of the Company
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act");
(2) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997; and
(3) All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to termination of the Offering of the
Shares to which this Prospectus relates.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be supplemented, modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that also is or is
deemed to be incorporated by reference herein supplements, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so supplemented, modified or superseded, to constitute
a part of this Prospectus.
This Prospectus incorporates documents by reference which are not included
herein or delivered herewith. Copies of these documents, except for the exhibits
to such documents (unless the exhibits are specifically incorporated by
reference in such documents), are available upon written request without charge.
Requests should be directed to Objective Communications, Inc., 50 International
Drive, Portsmouth, New Hampshire 03801, Attention: Corporate Secretary.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto set forth in and
incorporated by reference in this Prospectus.
THE COMPANY
Objective Communications designs, develops and markets the first high
quality, cost-effective video network system that supports video broadcast,
retrieval of stored video and multi-party conferencing to and from desktop
personal computers and conference rooms over the same wire used by the
telephone. The Company's VidPhone(R) system enables simultaneous transmission of
full-duplex S-VHS quality full-motion video, CD-quality stereo audio, and high
speed data. The VidPhone(R) system has imperceptible video and audio latency
within an enterprise. Because the VidPhone(R) system uses the same wiring to the
desktop as the telephone and is independent of the Local Area Network ("LAN"),
no additional wiring or LAN management is required. In addition, the VidPhone(R)
system is independent of the desktop's operating system and requires minimal
processing power. The Company introduced the VidPhone(R) system in July 1997 and
currently has arrangements with Sprint Communications Corporation, L.P.
("Sprint") and Bell Atlantic Corp. ("Bell Atlantic") to market and resell the
VidPhone(R) system. In December 1997, the Company shipped its first EVS-50
switch to the Miramar Marine Corps Air Station in California, fulfilling part of
an outstanding purchase order from a reseller, and shipped an additional 40
VidPhone(R) systems to a variety of recipients, including end-users and
resellers, during the fourth quarter of 1997. The Company did not earn any
revenues during the year ended December 31, 1997. The Company has additional
orders for components of the VidPhone(R) system, including the EVS-50 switch and
desktop VidModems(TM), and expects to continue making deliveries in the first
half of 1998.
The demand for video communications, historically limited primarily to
video conferencing, is driven by the desire to achieve the most effective means
to communicate. Information that is exchanged or presented visually, such as
in-person meetings or video presentations, has a stronger impact on the end-user
than non-visual communications. Unfortunately, people cannot always exchange or
present information in person and technology limitations and cost constraints
have restricted the use of video applications. Consequently, non-visual forms of
communication, such as telephony, voice mails, e-mails, facsimiles and overnight
mailings, are relied upon to communicate. Recent video application developments
such as broadcasting and conferencing achieve the effectiveness of face-to-face
meetings, while retaining the convenience of a telephone call. These
applications have the potential to become commonly used means of communication.
The Aberdeen Group estimates that the video communications market will grow from
an estimated $3.7 billion in 1996 to $28.4 billion in 2003, representing a
compound annual growth rate of 34%.
The Company is marketing the VidPhone(R) system through telephone product
and service providers that will resell it as an enhancement to existing
telephone systems. These providers offer sales, service and support
organizations, have relationships with virtually every business telephone user
in the world, and enjoy a high level of customer loyalty. These distribution
channels have a mature customer base which is generally receptive to system
upgrades. In July 1997, the Company entered into a one-year agreement with
Sprint under which Sprint has agreed to resell the Company's video network
products worldwide. The Company also has an arrangement with Bell Atlantic under
which it will market and resell the VidPhone(R) system to the U.S. Department of
Defense (the "DOD") and related agencies.
In April 1997, the Company completed its initial public offering of
2,070,000 shares of Common Stock at an initial public offering price of $5.50
per share. The Company received approximately $9.5 million in proceeds (net of
underwriting discounts and commissions and other expenses) from the Initial
Offering. In November 1997, the Company completed the Follow-on Offering of
1,000,000 shares of Common Stock at a public offering price of $23.125 per share
and received approximately $21.0 million in proceeds (net of underwriting
discounts and commissions and other expenses of the Follow-on Offering).
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The Company intends to leverage its position as the first provider of
integrated video networks to obtain brand-name recognition of the VidPhone(R)
system. The Company believes that existing video systems fail to meet the
requirements of the business community and that the VidPhone(R) system meets the
need for a fully functional video network.
The Company was incorporated in Delaware on October 5, 1993 by Steven A.
Rogers, its founder, President and Chief Executive Officer. The Company's
executive offices are located at 50 International Drive, Portsmouth, New
Hampshire, 03801. The Company's telephone number is (603) 334-6700.
Objective Communications(R), VidPhone(R) and TeleDraw(R) are registered
trademarks of the Company and ObjectiveView(TM), TeleShare(TM), TeleWord(TM),
EVS(TM) and VidModem(TM) are trademarks of the Company. This Prospectus also
contains trademarks and trade names of other companies.
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RISK FACTORS
An investment in the shares of Common Stock offered by this Prospectus
involves a high degree of risk. Prospective purchasers of the Common Stock
offered hereby should carefully review the following risk factors as well as
other information set forth in this Prospectus. The risks described below and
elsewhere in this Prospectus are not intended to be an exhaustive list of the
general or specific risks involved, but merely identify certain risks that are
now foreseen by the Company.
LIMITED OPERATING HISTORY
The Company was incorporated in October 1993 and has a limited operating
history. The Company's operations to date have related primarily to
organizational activities, including research and development, the development
of its initial products, recruiting management and technical personnel, and
raising capital. The VidPhone(R) system has been offered for sale to customers
only since July of 1997, and limited deliveries of the VidPhone(R) system have
been made to date. In November 1997, the Company shipped its first VidPhone(R)
system, fulfilling part of an outstanding purchase order from a reseller. The
Company has continued commercial production and installation of the initial
VidPhone(R) systems in the first quarter of 1998. The Company has received and
is currently working on a limited number of orders to purchase VidPhone(R)
systems and only began delivering such systems in the fourth quarter of 1997.
The Company did not earn any revenues during the year ended December 31, 1997.
Accordingly, to date the Company has not generated substantial revenues from the
sales of its products and services. The Company's business strategy is to
generate revenues through the sales of its products, particularly the
VidPhone(R) system, and to continue to devote substantially all of its efforts
to production, sales and support of the VidPhone(R) system. The Company's
business and its growth may be subject to expenses, delays and risks inherent in
the establishment of a new business enterprise, including limited capital,
delays in product development, cost overruns and uncertain market acceptance.
There can be no assurance that the Company will succeed in addressing any or all
of these risks and the failure to do so would have a material adverse effect on
the Company's business, financial condition and operating results.
LOSSES SINCE INCEPTION; ACCUMULATED DEFICIT; EXPECTATION OF CONTINUING LOSSES
To date, the Company has incurred substantial losses from operations and
had an accumulated deficit of approximately $17.1 million through December 31,
1997. As a result of recurring losses from operations, negative cash flows from
operations and the accumulated deficit, the report of the Independent
Accountants on the Financial Statements of the Company contains an explanatory
paragraph related to the Company's ability to continue as a going concern.
Accordingly, the Company is currently pursuing additional sources of financing,
and is considering both debt and equity financing alternatives. The Company has
required substantial funding through debt and equity financings since its
inception and, historically, has been successful in obtaining debt and equity
financing from unaffiliated third parties. The Company has established
relationships with investment banking firms, and management anticipates that it
will be able to raise additional capital to meet its obligations and fund
working capital requirements after June 1998 as such obligations come due.
However, the Company does not currently have any commitments for debt or equity
financing and accordingly, there can be no assurance that it will be successful
in its efforts to secure additional financing on terms acceptable to the Company
or at all.
The Company expects to continue to incur operating losses until the
Company's products achieve commercial acceptance, which is expected to occur in
1998. This expectation is based on a number of factors, certain of which are
beyond the Company's control. Accordingly, there can be no assurance that such
expectation will be correct. Most of the revenues earned by the Company from its
inception through December 31, 1997 were generated by consulting services
provided by the Company, not by its primary business. The Company did not
recognize any revenues during the year ended December 31, 1997.
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RISKS OF DISTRIBUTION; RELIANCE ON THIRD-PARTY RESELLERS
The Company's distribution strategy is to establish relationships with
major resellers of telephony products. Because these distributors generally have
large, captive customer bases, the Company believes that they will be able to
resell VidPhone(R) systems in large volume, without competing with one another.
However, to date the Company has arrangements with only two resellers. In July
1997, the Company entered into a one-year agreement with Sprint pursuant to
which Sprint has agreed to use commercially reasonable efforts to resell the
Company's video networking products worldwide. The Company also has an
arrangement with Bell Atlantic pursuant to which Bell Atlantic will offer the
Company's products to customers under certain telecommunications contracts that
Bell Atlantic has with the DOD and related contracting agencies. The Company has
received a limited number of orders for VidPhone(R) systems under such reseller
arrangements, and to date has delivered a limited number of systems. The process
of developing and maintaining reseller relationships is complex, and there can
be no assurance that the Company will be able to maintain existing relationships
or establish relationships with other major resellers of telephony products.
Further, there can be no assurance that the resellers of telephony products with
which the Company contracts will be successful in marketing and reselling the
Company's products, maintaining their customer bases, or competing with other
resellers.
A significant portion of the Company's future revenues is expected to be
attributable to sales to third-party resellers, particularly telephone product
and service providers. The Company's future performance will depend to a
significant degree upon the extent to which these resellers incorporate the
Company's products and services as part of their product and service offerings
to end users. The failure of these resellers to succeed in the marketplace, or
the failure of the Company's products to perform favorably in and become an
accepted component of the product and service offerings of resellers, would have
a material adverse effect on the Company's business, financial condition and
operating results.
DEPENDENCE ON EMERGING MARKET FOR VIDEO APPLICATIONS TECHNOLOGY
The market for video communications products is at an early stage of
development, is rapidly evolving and is characterized by an increasing number of
market entrants who have introduced or are developing competing products and
services. As is typical for a new and rapidly evolving industry, demand for and
market acceptance of recently introduced products and services are subject to a
high level of uncertainty. While the number of businesses utilizing video
applications has grown, the video applications market has thus far not developed
as rapidly as predicted by some and it is not known whether this market will
continue to develop such that sufficient demand for the Company's products and
services will emerge and become sustainable. The Company expects that
substantially all of its future revenues will be derived from sales of the
VidPhone(R) system and related software sales and customer service to businesses
or government organizations. However, as of December 31, 1997, the Company had
not recognized any revenues from sales of the VidPhone(R) system, and there can
be no assurance the Company will be successful in its efforts to market and sell
its products and services. Further, corporations or government agencies that
have already invested substantial resources in video conferencing systems may be
resistant to or slow to adopt a new suite of products. If the market for video
applications fails to develop or develops more slowly than expected, or if the
Company's products, in particular the VidPhone(R) system, do not achieve
acceptance by a significant number of businesses and government organizations,
the Company's business, financial condition and operating results will be
materially and adversely affected.
DEVELOPMENT OF NEW PRODUCTS; INDUSTRY ACCEPTANCE
The Company's ability to design, develop, test, introduce and support new
products that meet changing customer needs and that respond to technological
developments and emerging industry standards is crucial to the Company's
success. The Company's products incorporate certain technical standards, and
current and future sales of the Company's products will depend on industry
acceptance of such standards. While the Company has developed the VidPhone(R)
system to be compatible with the standards currently promulgated by leading
industry participants and groups, widespread adoption of a proprietary or closed
standard could preclude market acceptance of the Company's products. There can
be no assurance that the Company will be
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successful in developing and introducing its proposed products or new products
that meet changing customer needs and in responding to technological changes or
evolving industry standards in a timely manner, or at all. Furthermore, there
can be no assurance that the standards upon which the Company's products are or
will be based will be accepted by the industry or that products or technologies
developed by others will not render the Company's products or services
uncompetitive or obsolete. Because of the technological complexity of its
products, the Company may also experience delays from time to time in completing
the development of new products. The inability of the Company to respond to
changing market conditions, technological developments, evolving industry
standards or changing customer requirements, or the development of competing
technology or products that render the Company's services less desirable or
obsolete would have a material adverse effect on the Company's business,
financial condition and operating results. The Company has completed initial
development and production of the basic VidPhone(R) system and continues to
develop system enhancements. VidPhone(R) systems also are being used as
demonstration units to support sales and marketing initiatives. There can be no
assurance that such development initiatives will be successful. The failure of
the Company to achieve success in such initiatives would have a material adverse
effect on the Company's business, financial condition and operating results.
UNCERTAIN PROTECTION OF INTELLECTUAL PROPERTY
The Company's success will depend, in part, on its ability to protect the
hardware and software products that it develops with patents, licenses and other
intellectual property rights. Toward that end, the Company intends to continue
to seek patents, trademarks and copyrights on certain of its inventions and
proprietary processes. The Company relies in part on trademark, copyright and
trade secret law to protect its intellectual property in the United States and
abroad. The degree of protection provided by patents is uncertain and involves
complex legal and factual questions for which important legal principles are
largely unresolved.
Part of the Company's proprietary VidPhone(R) system technology is covered
by a U.S. patent (No. 5,621,455) issued in April 1997, which relates to a method
and apparatus for transmitting video information over telephone wires.
Corresponding foreign patent applications on the VidPhone(R) system technology
are pending in China, Canada, Mexico, Europe, Japan and Taiwan. Additionally,
the Company has filed a "continuation" U.S. patent application covering
variations of the basic VidPhone(R) system technology. The Company has received
notice from the U.S. Patent and Trademark Office that it expects to issue the
patent on the continuation application in May 1998. The Company has also filed a
patent application covering the VidPhone(R) system's networking and switching
technology. The Company does not expect to receive any notice from the U.S.
Patent and Trademark Office concerning this second patent application until the
second half of 1998. The Company is in the process of preparing additional U.S.
patent applications directed to various improvements in the field of video
conferencing. The Company expects to file approximately six to nine new U.S.
patent applications in 1998 covering these improvements, but it does not expect
to receive any notice from the U.S. Patent and Trademark Office for at least one
year after filing. The Company also has registered its trademarks Objective
Communications(R), VidPhone(R) and TeleDraw(R) and the registration for the
trademark for VidModem(TM) is pending.
The process of seeking patent and trademark protection can be long and
expensive, and there can be no assurance that patents and trademarks will issue
from currently pending or future applications or that any patents or trademarks
that are issued will be of sufficient scope to provide meaningful protection or
any commercial advantage to the Company. In the future, the Company may receive
communications alleging possible infringement of patents or other intellectual
property rights of others, although it is not presently aware of any basis for
such claims. Litigation, which could result in substantial cost to and diversion
of efforts by the Company, might be necessary to enforce patents or other
intellectual property rights owned by the Company or to determine the scope and
validity of other parties' proprietary rights. The failure to obtain necessary
patents, licenses or other rights or involvement in litigation arising from
infringement claims could have a material adverse effect on the Company.
A number of companies have developed technologies, filed patent
applications or received patents on technologies that may be related to, or
competitive with, the Company's technologies. Many of these entities are larger
and have significantly greater resources than the Company. Given the rapid
development of
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technology in the telecommunications industry, there also can be no assurance
that the Company's existing or future products do not or will not infringe upon
the existing or future proprietary rights of others. Any such infringement could
have a material adverse effect on the Company's business, financial condition
and operating results.
LIMITED MARKETING EXPERIENCE; NEED TO ESTABLISH PARTNERING RELATIONSHIPS; NEED
FOR ADDITIONAL PERSONNEL
As of March 31, 1998, the Company had only twenty full-time sales and
marketing employees. It will have to further develop its sales and marketing
force to establish distribution channels to resellers, collaborators, licensees
and others. The Company's ability to build its customer base and achieve market
acceptance will depend on its ability to establish an effective internal sales
organization and establish strategic marketing relationships with third-party
distributors. There can be no assurance, however, that the Company will be able
to create awareness of, and demand for, its products through its marketing
efforts. The failure by the Company to develop its marketing capabilities,
internally or through distributors and resellers, would have a material adverse
effect on the Company's business, financial condition and operating results.
Further, there can be no assurance that the development of such marketing
capabilities will lead to increased sales of the Company's products and services
or proposed products and services. In the event that the Company is able to
enter into satisfactory distribution arrangements with third parties, it is
anticipated that the Company will be largely dependent upon the third parties'
marketing efforts for the foreseeable future. While the Company believes that
such third-party distribution arrangements will enable it to lower its marketing
costs and expenses, the Company's revenues under such arrangements will be lower
than they would be if the Company directly marketed the VidPhone(R) system.
The success of the Company will depend on its ability to hire, train and
retain additional qualified sales and marketing personnel. The Company will
compete with other companies with greater financial and other resources to
attract such qualified personnel. There can be no assurance that the Company
will be able to hire additional personnel to support the Company's sales and
marketing efforts.
RISKS ASSOCIATED WITH RAPID GROWTH AND WITH THE COMPANY'S BUSINESS PLAN AND
STRATEGY
Execution of the Company's business plan and strategy could place
significant strain on its limited management, administrative, operational,
financial and other resources. There can be no assurance that the Company will
be able to implement its strategy or manage its operations successfully. The
inability of the Company to manage its growth would have a material adverse
effect on the Company's business, financial condition and operating results.
The Company has formulated its business plan and strategy based upon
certain assumptions of management regarding the size of the video communications
market and the estimated price of and level of acceptance of the Company's
products and services. There can be no assurance that these assumptions will
prove to be correct. Any future success of the Company will depend upon many
factors, including: technological advances and product obsolescence; levels of
competition, including the entry into the market of additional competitors and
increased success by existing competitors; changes in general economic
conditions; increases in operating costs including costs of production,
supplies, personnel or equipment; changes in requirements and regulations
promulgated by the Federal Communications Commission (the "FCC") or other
applicable U.S. federal and state regulatory authorities; and reduced margins
caused by competitive pressures and other factors.
LACK OF LIQUIDITY; NEED FOR ADDITIONAL FINANCING
The Company anticipates that its existing financial resources, together
with cash generated by operations, will be sufficient to continue to fund its
operating and capital requirements until June 1998. Cash flows from operations
are not currently expected to be sufficient to fund the Company's operations
during 1998, and management anticipates that it will continue to experience
negative cash flow from operations for the foreseeable future until its products
achieve commercial acceptance, which currently is estimated to occur in late
1998. As reflected in the Financial Statements of the Company for the year ended
December 31, 1997, and the report of the Company's Independent Accountants
thereon, the Company has suffered recurring losses
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<PAGE> 11
from operations and has a working capital and an accumulated deficit that raise
doubt about its ability to continue as a going concern. Accordingly, the Company
is currently pursuing additional sources of financing, and is considering both
debt and equity financing alternatives. The Company has required substantial
funding through debt and equity financings since its inception and,
historically, has been successful in obtaining debt and equity financing from
unaffiliated third parties. The Company has established relationships with
investment banking firms, and management anticipates that it will be able to
raise additional capital to meet its obligations and fund working capital
requirements after June 1998 as such obligations come due. However, the Company
does not currently have any commitments for debt or equity financing and
accordingly, there can be no assurance that it will be successful in its efforts
to secure additional financing on terms acceptable to the Company or at all.
Changes in the market in which the Company operates, in the Company's
business, or in its business plan could affect the Company's capital
requirements. These changes could create the need to raise additional moneys
earlier than expected in order to fund its operations or expansion, to develop
new or enhanced products, to respond to competitive pressures or to acquire
complementary businesses. The Company's future capital requirements will depend
on many factors, including the cost of manufacturing and marketing activities,
its ability to market its products successfully, the size of its research and
development programs, the length of time required to collect accounts
receivable, and competing technological and market developments. If the Company
were to raise additional funds through the issuance of equity or convertible
debt securities, stockholders could experience substantial dilution and such
securities could have rights, preferences and privileges senior to those of the
holders of the Company's Common Stock. There can be no assurance that the
Company will be able to raise any additional required funds, or that any such
funds will be available on terms favorable to, or acceptable to, the Company.
The lack of availability of adequate funds, or the lack of availability of funds
on terms acceptable to the Company, would have a material adverse effect on the
Company's business, financial condition and operating results.
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results may vary significantly from quarter to
quarter or year to year, depending on factors such as the timing of product
development, the timing of increased research and development, the timing of
sales and marketing expenses, the timing and size of orders and the introduction
of new products by the Company. Consequently, revenues or profits may vary
significantly from quarter to quarter or year to year, and revenues or profits
in any period will not necessarily be predictive of results in subsequent
periods. A significant portion of the Company's revenues in any quarter may be
derived from a limited number of large, non-recurring product sales, which may
cause significant variations in quarterly revenues. The Company also believes
that the purchase of its products is relatively discretionary and declines in
general economic conditions could precipitate significant reductions in
corporate spending for information technology, which could result in delays or
cancellations of orders for the Company's products.
GOVERNMENT REGULATION
The Enterprise Video Switch ("EVS(TM)") component of the Company's
VidPhone(R) system and the VidModem(TM) are required to comply with certain
regulations promulgated by the FCC under Parts 2, 15 and 68 of the FCC's
regulations, which relate to radio frequency devices and to terminal equipment
that is connected to the public switched telephone network ("PSTN"). Pursuant to
Part 15 of the FCC's regulations, the Company has determined that the
VidModem(TM) is an unintentional radiator that constitutes a Class A digital
device that may be operated without an individual license. Under Parts 2 and 15
of the FCC's regulations, the Company will be required to follow a verification
procedure consisting of a self-certification by the Company that the radio
frequency device complies with applicable Part 15 regulations. The Company has
already had the VidModem(TM) formally tested by a qualified, independent testing
facility, and it was found to comply with such regulatory requirements. Under
Part 2 of the FCC's regulations, the Company has the option of ensuring
compliance with the applicable technical specifications at the location of a
business end-user after installation. Pursuant to Part 68 of the FCC's
regulations, the Company will need to obtain
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<PAGE> 12
equipment registration from the FCC for certain VidPhone(R) system components
that are connected to the PSTN. The majority of the Company's products will not
involve connection to the PSTN. For those applications requiring connection to
the PSTN, the Company will be required to register the EVS(TM) as terminal
equipment under Part 68 of the FCC's regulations. To date, the Company has not
filed an application under Part 68 for equipment registration. Although the
Company has designed its initial line of products to conform with all applicable
guidelines and regulations, there can be no assurance that the Company's
products will actually meet such requirements, or that the Company will be able
to obtain and maintain in effect all necessary FCC or other governmental
approvals required to permit the Company to market its products. Additionally,
there can be no assurance that future governmental regulations will not
adversely affect the Company's products or technology.
DEPENDENCE ON THIRD PARTIES FOR MANUFACTURING
The Company entered into a manufacturing agreement in February 1998 with
Sanmina Corporation to outsource the manufacture and assembly of components used
in its VidPhone(R) system. Several other manufacturers are producing smaller
sub-assemblies and components for the Company pursuant to arrangements that the
Company enters into on a per-project basis. There can be no assurance that the
Company will be able to continue to negotiate acceptable arrangements with such
manufacturers, or, if negotiated, that such arrangements will be on terms and
conditions favorable to the Company. Any difficulties encountered with
third-party manufacturers could result in product defects, production delays,
cost overruns, or the inability to fulfill orders on a timely basis, which could
have a material adverse effect on the Company's business, financial condition
and operating results.
COMPETITION
The market for the Company's products and services is new, highly
competitive and rapidly evolving. The principal competitors in the video
conferencing market have been PictureTel Corporation, VTEL Corp. and its
wholly-owned subsidiary, CLI Compression Labs, Inc. According to a June 1995
article in U.S. News & World Report, PictureTel and CLI accounted for
approximately 71% market share in the video conferencing systems market.
Competitors in the video broadcast market include cable television and direct
satellite broadcast system providers. The Company is not aware of any current
competitors in the video retrieval market. The Company expects to compete with
the companies listed above and expects substantial additional competition from
new market entrants, such as Intel Corporation. Virtually all of the companies
with which the Company expects to compete have longer operating histories,
greater name recognition, larger customer bases and significantly greater
financial, technical and marketing resources than the Company. There can be no
assurance that the Company will have the financial resources, technical
expertise or manufacturing, marketing, distribution and support capabilities to
compete successfully against such competitors.
Furthermore, there can be no assurance that other companies will not
develop technologies such as those offered by the Company, technologies superior
to the Company's or alternative capabilities which meet the same needs of
customers. There can be no assurance that the Company will have the resources
required to respond effectively to market or technological changes. In addition,
there can be no assurance that the effect of competitive pressures will not
change the demand for, or pricing of, the Company's products and services. To
the extent that competitors achieve performance, price or other selling
advantages, the Company's business, financial condition and operating results
would be materially and adversely affected.
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent upon the continued
efforts and abilities of its key managerial and technical personnel,
particularly Mr. Steven A. Rogers, the Company's founder, President and Chief
Executive Officer. The loss of the services of Mr. Rogers or any of the
Company's other key management or technical personnel would have a material
adverse effect on the Company. The Company currently has an employment and
non-competition agreement with and a key person life insurance policy on Mr.
Rogers. However, the Company does not currently have any employment agreements
with, or key person
10
<PAGE> 13
insurance policies on, any of its other executive officers, key employees or
consultants. In order to support its anticipated growth, the Company will need
to recruit, hire, train and retain additional qualified personnel. The
competition for qualified technical and management personnel is intense and
there can be no assurance that the Company will be able to attract or retain
qualified personnel in the future. The Company is dependent upon its ability to
retain and motivate highly qualified personnel, especially its existing senior
management and technical personnel. The inability of the Company to retain its
existing or attract and retain additional personnel could have a material
adverse effect on the Company. The Company recently relocated to Portsmouth, New
Hampshire, an area north of Boston, Massachusetts with a high concentration of
technology companies and technology professionals, from which the Company
expects to be able to recruit additional employees. However, there can be no
assurance that the Company will be able to hire or retain qualified personnel.
CONTROL BY EXISTING STOCKHOLDERS
Following completion of the Offering, Mr. Steven A. Rogers will
beneficially own, and the directors and executive officers of the Company will
beneficially own in the aggregate, 15.3% and 25.9%, respectively, of the
outstanding shares of Common Stock. As a result of such ownership, Mr. Rogers,
acting individually, and such holders, if they act in concert, will be able to
exert significant influence in the election of the Company's Board of Directors
and the determination of all other matters requiring approval by the
stockholders of the Company.
POTENTIAL INFLUENCE BY CERTAIN STOCKHOLDERS
Pursuant to agreements with the Company or Mr. Steven A. Rogers, three
parties have the right to designate one nominee each for election as a member of
the Board of Directors. To the extent that such contractual rights are
exercised, such stockholders may be able to exercise substantial influence over
decisions of the Company's Board of Directors and the Company's business.
POSSIBILITY OF NASDAQ DELISTING
The Company's Common Stock currently is quoted on the Nasdaq National
Market. The continued quotation of the Company's Common Stock on the Nasdaq
National Market is conditioned upon the Company maintaining certain asset,
capitalization or income tests and stock price tests established by The Nasdaq
Stock Market, Inc. To maintain eligibility for continued quotation on the Nasdaq
National Market, the Company is required to maintain either (i) net tangible
assets in excess of $4.0 million and a bid price of at least $1.00 per share or
(ii) a market capitalization of at least $50.0 million or total assets and total
revenues of $50.0 million each, and a bid price of at least $5.00 per share. The
Company believes that it will continue to meet these tests set forth by Nasdaq.
If the Company fails any of the applicable tests, the Common Stock may be
delisted from quotation on such system. The effects of delisting include the
limited release of the market prices of the Company's securities and limited
news coverage of the Company. Delisting may restrict investors' interest in the
Common Stock and materially and adversely affect the trading market and prices
for the Common Stock and the Company's ability to issue additional securities or
to secure additional financing.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Future sales of Common Stock following the Offering could adversely affect
the market price of the Common Stock. Currently, the Company has 5,676,850
shares of Common Stock outstanding. Upon the completion of the Offering, the
Company will have 6,306,850 shares of Common Stock outstanding. Of such shares,
4,306,256 shares of Common Stock, consisting of (i) the 1,130,000 shares sold in
the Offering, (ii) the 1,000,000 shares sold in the Follow-on Offering, (iii)
the 2,070,000 shares sold in the Initial Offering, and (iv) 106,256 shares
previously resold in reliance on Rule 144 ("Rule 144") under the Securities Act
of 1933, as amended (the "Securities Act"), will be transferable without
restriction by persons other than "affiliates" of the Company, subject to
certain lock-up arrangements with Barington Capital Group, L.P. ("Barington")
and NationsBanc Montgomery Securities LLC ("NationsBanc Montgomery Securities").
The remaining 2,000,594 shares of Common Stock are "restricted securities" under
Rule 144 and may not be sold other than in accordance with Rule 144, or pursuant
to an effective registration statement under the Securities Act or an
11
<PAGE> 14
exemption from such registration requirement. The holders of 1,585,719 shares of
Common Stock also have certain registration rights.
Of the shares of Common Stock outstanding upon completion of the Offering,
1,366,844 shares of Common Stock available for sale in the public market are
limited by restrictions under lock-up agreements entered into with Barington in
connection with the Initial Offering, certain of which were transferred to and
assumed by NationsBanc Montgomery Securities at the time of the Follow-on
Offering. Under these agreements, the holders of warrants to purchase 350,000
Shares of Common Stock agreed not to sell or otherwise dispose of any of their
shares of Common Stock until April 8, 1999, without the prior written consent of
Barington, NationsBanc Montgomery Securities and the holder of options to
purchase 180,000 shares of Common Stock agreed not to sell or otherwise dispose
of any such shares until May 5, 1998, without the prior written consent of
NationsBanc Montgomery Securities, subject in each case to certain limited
exceptions. Sales of substantial amounts of the Common Stock in the public
market, whether by purchasers in the Offering or other stockholders of the
Company, or the perception that such sales could occur, may adversely affect the
market price of the Common Stock.
EFFECT OF OPTIONS AND WARRANTS ON STOCK PRICE
The Company has reserved (i) 338,000 shares of Common Stock for issuance to
key employees, officers and consultants upon the exercise of options granted
under the 1994 Stock Option Plan, (ii) 450,000 shares of Common Stock for
issuance to directors, executive officers and key employees upon the exercise of
options granted or to be granted under the 1996 Stock Incentive Plan, (iii)
190,000 shares of Common Stock for issuance upon the exercise of options granted
to certain directors of the Company, and (iv) 125,000 shares of Common Stock for
issuance upon the exercise of an option granted to Barington in December 1997.
In addition, assuming the exercise by the Selling Stockholders of the warrants
issued by the Company in October and November 1996 (the "Bridge Warrants"), the
warrants issued by the Company in December 1996 and January 1997 (the "Series A
Warrants") and the option granted to Barington in connection with the Initial
Offering (the "Barington Option"), the Company also has reserved 344,207 shares
of Common Stock for issuance upon exercise of other outstanding warrants. The
registration statement of which this Prospectus constitutes a part, registers
for resale by the Selling Stockholders the 630,000 shares of Common Stock to be
issued by the Company upon exercise of the Bridge Warrants, the Series A
Warrants and the Barington Option. Shares of Common Stock issuable upon the
exercise of outstanding warrants, outstanding options, options that may be
issued in the future under the Company's 1996 Stock Incentive Plan, and options
granted to directors could hinder future financings. In addition, certain
holders of such securities have certain registration rights, and the sale of
shares of Common Stock upon exercise of such rights or the availability of such
shares for sale could adversely affect the market price of the Common Stock.
VOLATILITY OF STOCK PRICE
The market price of the shares of the Company's Common Stock has been and
may in the future be highly volatile. Factors such as operating results,
announcements by the Company or its competitors concerning products, patents and
technology, governmental regulatory actions, events affecting technology
companies generally and general market conditions may have a significant impact
on the market price of the Common Stock and could cause it to fluctuate
substantially. In addition, stock markets have from time to time experienced
significant price and volume fluctuations that have particularly affected the
market prices for the common stock of technology companies. These broad market
fluctuations could adversely affect the market price of the Common Stock.
Further, there will be a relatively small number of shares of Common Stock
trading publicly following the Offering. Accordingly, stockholders may
experience difficulty selling or otherwise disposing of shares of Common Stock
at favorable prices, or at all.
LIMITATION ON UTILIZATION OF INCOME TAX LOSS CARRYFORWARDS
Based on the equity transactions consummated by the Company during 1996 and
early 1997, the Company may have undergone an "ownership change" within the
meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"). Under Section 382 of the Code, upon undergoing an
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<PAGE> 15
ownership change, the Company's right to use its then existing income tax loss
carryforwards as of the date of the ownership change is limited during each
future year to a percentage of the fair market value of the Company's
outstanding capital stock immediately before the ownership change. The Company
expects that its ability to utilize its net operating loss carryforwards to
offset future taxable income will be limited annually in the future. The Company
has a full valuation allowance against its net deferred tax asset.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION
AND THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to certain anti-takeover provisions of the General
Corporation Law of the State of Delaware (the "GCL"), which could have the
effect of discouraging, delaying or preventing a change in control of the
Company. In addition, the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") contains provisions that may
have the effect of discouraging certain transactions involving an actual or
threatened change in control of the Company. Such provisions include a provision
in the Certificate of Incorporation which grants to the Board of Directors the
authority to issue up to 2,500,000 shares of preferred stock in one or more
series and to fix the powers, preferences and rights of each such series without
further stockholder action. The issuance in the future of any such preferred
stock could have the effect of diluting the purchasers of the Common Stock
offered hereby, discouraging unsolicited acquisition proposals or making it more
difficult for a third party to commence such an acquisition.
LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides for the indemnification
of the Company's directors and officers to the fullest extent permitted under
the GCL. As permitted by the GCL, the Company's Certificate of Incorporation
provides that directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director, except (i) for any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or violation of law; (iii) for acts or
omissions relating to prohibited dividends or distributions or the purchase or
redemption of stock; or (iv) for any transaction from which the director derives
an improper personal benefit. However, insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. The Company also has obtained directors' and
officers' liability insurance with respect to liabilities arising out of certain
matters, including matters arising under the Securities Act.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the 1,130,000
shares of Common Stock, which are being offered for sale by the Selling
Stockholders for their own account. See "Plan of Distribution."
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<PAGE> 16
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock by each Selling Stockholder. Unless
otherwise noted, each stockholder named has sole voting and investment power
with respect to such shares, subject to community property laws, where
applicable.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRIOR TO THE BENEFICIAL OWNERSHIP
OFFERING(1) AFTER THE OFFERING(1)
--------------------- NUMBER OF ---------------------
NUMBER SHARES NUMBER
NAME OF SELLING STOCKHOLDER OF SHARES PERCENT BEING SOLD OF SHARES PERCENT
--------------------------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Applewood Associates, L.P.(2).................. 425,000 6.6% 425,000 -- --
Princeton Venture Research, Inc.(3)............ 635,661 10.0 300,000 335,661 5.3%
Leonard Adams(4)............................... 6,250 * 6,250 -- --
Louis J. Alimena(5)............................ 6,250 * 6,250 -- --
Paul Alter(6).................................. 6,250 * 6,250 -- --
David Babiarz(7)............................... 6,250 * 6,250 -- --
Barington Capital Group, L.P.(8)............... 180,000 2.9 180,000 -- --
Marvin Barish(9)............................... 12,500 * 12,500 -- --
Baron Associates(10)........................... 6,250 * 6,250 -- --
Gerald Benjamin(11)............................ 6,250 * 6,250 -- --
New York Urban Professionals Basketball League
Profit Sharing, John Bykowsky, Trustee(12)... 6,250 * 6,250 -- --
Dennis J. Drebsky(13).......................... 6,250 * 6,250 -- --
Harry Friedman Living Trust, Harry Friedman,
Trustee(14).................................. 12,500 * 12,500 -- --
Sara Hauser(15)................................ 6,250 * 6,250 -- --
Arthur Steinberg IRA R/O(16)................... 6,250 * 6,250 -- --
Robert Jacobs IRA R/O(17)...................... 6,250 * 6,250 -- --
Robert Steinberg IRA R/O(18)................... 6,250 * 6,250 -- --
David Kohane(19)............................... 6,250 * 6,250 -- --
David Mitchell(20)............................. 12,500 * 12,500 -- --
Samuel Musnikow(21)............................ 6,250 * 6,250 -- --
Dennis J. Mykytyn(22).......................... 6,250 * 6,250 -- --
Steven Ostner(23).............................. 12,500 * 12,500 -- --
Bruce H. Paul(24).............................. 6,250 * 6,250 -- --
Jerald Politzer(25)............................ 12,500 * 12,500 -- --
Linda Saker(26)................................ 6,250 * 6,250 -- --
Paul H. Salsgiver(27).......................... 12,500 * 12,500 -- --
Stewart A. Shiman(28).......................... 12,500 * 12,500 -- --
Floyd M. Smith(29)............................. 6,250 * 6,250 -- --
C.M. Solomon(30)............................... 6,250 * 6,250 -- --
Gershon H. Stern(31)........................... 6,250 * 6,250 -- --
Jack M. Threadgill(32)......................... 6,250 * 6,250 -- --
Steven Yavers(33).............................. 6,250 * 6,250 -- --
</TABLE>
- - ---------------
* Less than one percent
(1) Applicable percentage of ownership is based on 6,306,850 shares of Common
Stock outstanding as of March 31, 1998 and upon completion of the Offering.
The number of shares of Common Stock outstanding as of March 31, 1998
assumes the exercise by the Selling Stockholders of the Bridge Warrants,
the Series A Warrants and the Barington Option and the issuance of 630,000
shares of Common Stock upon exercise of such warrants and option.
Beneficial ownership is determined in accordance with the rules of the
Commission. For each beneficial owner, shares of Common Stock
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<PAGE> 17
subject to options or conversion rights exercisable within 60 days of March 31,
1998 are deemed outstanding.
(2) Includes 175,000 shares of Common Stock that may be acquired by Applewood
Associates, L.P. ("Applewood") upon the exercise of warrants. Applewood is
beneficially owned by its four general partners, Barry Rubenstein, Barry
Fingerhut, Irwin Lieber and Applewood Capital Corp., and by a number of
limited partners. Each of the general partners disclaims beneficial
ownership except to the extent of such general partner's equity interest
therein. Pursuant to this Registration Statement Applewood is offering
425,000 shares of Common Stock, 50,000 of which shares are issuable upon
exercise of the Series A Warrants.
(3) Consists of 578,041 shares of Common Stock (250,000 of which were issued
upon conversion of the Series A Convertible Preferred Stock, par value $.01
per share (the "Series A Preferred Stock"), owned by Princeton Venture
Research, Inc. ("PVR") and 50,000 of which are issuable upon exercise of
the Series A Warrants), and 57,620 shares of Common Stock that may be
acquired by PVR upon the exercise of currently exercisable warrants. Mr.
John Torkelsen, a director of the Company, has served as President of PVR
since 1984 and President of its affiliate, PVR Securities, Inc. ("PVR
Securities") since 1987. PVR Securities acted as the placement agent of the
Company in connection with private placements of stock and warrants in June
1995 and August 1996. Pursuant to this Registration Statement PVR is
offering for sale 300,000 shares of Common Stock, 50,000 of which shares
are issuable upon exercise of the Series A Warrants.
(4) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(5) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(6) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(7) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(8) Consists of 180,000 shares of Common Stock that may be acquired upon
exercise of the Barington Option, which was granted by the Company in
connection with the Initial Offering. Includes options to acquire 27,000
shares of Common Stock which Cross Connect L.L.C. has the right to acquire
under certain conditions. Cross Connect, L.L.C. is not affiliated with
Barington, and Barington disclaims beneficial ownership of the 27,000
shares of Common Stock that may be acquired upon exercise of such options.
(9) Consists of 12,500 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(10) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(11) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(12) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(13) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(14) Consists of 12,500 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(15) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(16) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(17) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(18) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(19) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(20) Consists of 12,500 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(21) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(22) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(23) Consists of 12,500 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(24) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(25) Consists of 12,500 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
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<PAGE> 18
(26) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(27) Consists of 12,500 shares of Common Stock issuable upon the exercise of
Bridge Warrants. Mr. Salsgiver beneficially owns the shares jointly with
his wife, Linda B. Salsgiver and son Paul H. Salsgiver, Jr.
(28) Consists of 12,500 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(29) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants. Mr. Smith beneficially owns the shares jointly with his
wife, Ilyse Smith.
(30) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(31) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(32) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
(33) Consists of 6,250 shares of Common Stock issuable upon the exercise of
Bridge Warrants.
The registration of the Shares under the Securities Act shall not be deemed
an admission by the Selling Stockholders or the Company that the Selling
Stockholders are underwriters for purposes of the Securities Act of any Shares
offered under this Prospectus.
LOCK-UP ARRANGEMENTS
Subject to the limited exceptions described below, Selling Stockholders
holding 350,000 Shares being offered and sold in the Offering have agreed not to
offer, issue, sell, contract to sell, grant any option for the sale of or
otherwise dispose of any securities of the Company until April 8, 1999, without
the prior written consent of Barington, and the Selling Stockholder holding
180,000 Shares in the Offering has agreed not to offer, issue, sell, contract to
sell, grant any option for the sale of or otherwise dispose of any securities of
the Company until May 5, 1998. Notwithstanding these lock-up arrangements, any
stockholder subject to such arrangements may sell up to 30% of his, her or its
shares of Common Stock commencing 12 months after the implementation of their
respective lock-up restrictions in the event that the last sales price for the
Common Stock on the Nasdaq National Market has been at least 200% of the initial
public offering price for a period of twenty consecutive trading days ending
within five days of the date of such sale, and such sale is completed at a price
in excess of 200% of the initial public offering price.
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<PAGE> 19
CERTAIN RELATIONSHIPS BETWEEN THE COMPANY
AND CERTAIN SELLING STOCKHOLDERS
Barington Capital Group, L.P. Barington, an investment banking firm, acted
as the placement agent of the Company in connection with the private placement
of $2.0 million aggregate principal amount of Bridge Notes and Bridge Warrants
to purchase 500,000 shares of Common Stock at an exercise price of $3.30 (the
"Bridge Financing"). The Bridge Financing was completed in November 1996. As
partial compensation for services provided in that offering, Barington received
warrants to purchase up to 50,000 shares of Common Stock at an exercise price of
$3.30 per share, which warrants were forfeited upon consummation of the Initial
Offering. In addition, Barington also received a fee of $200,000 for placement
services provided in connection with the Bridge Financing, which fee represented
10% of the gross proceeds raised in the Bridge Financing, and was reimbursed for
certain other expenses.
Barington also acted as the placement agent of the Company in connection
with the private placement of 250,000 shares of Series A Preferred Stock, and
Series A Warrants to purchase up to an additional 50,000 shares of Common Stock
in December 1996 and 250,000 shares of Series A Preferred Stock and Series A
Warrants to purchase 50,000 shares of Common Stock in January 1997 for aggregate
gross proceeds to the Company of $2.0 million. As compensation for services
provided in that private placement, the Company paid Barington a fee of
$140,000, which fee represented 7.0% of the gross proceeds raised in the private
placement.
Barington acted as an underwriter of the Follow-on Offering and was the
underwriter of the Initial Offering, for which it received underwriting
discounts and commissions totaling approximately $1.6 million. In addition,
Barington received a non-accountable expense allowance of $341,550, and was
issued the Barington Option to acquire 180,000 shares of Common Stock of the
Company at the Initial Offering. This Barington Option is exercisable for a
period of five years beginning on April 8, 1997 at an exercise price of $9.08
per share of Common Stock.
In December 1997 Barington received an option to acquire 125,000 shares of
Common Stock at an exercise price of $13.813 per share of Common Stock, the fair
market value of the Common Stock on the date of grant. Such option was granted
in consideration of business and financial services, including investment
banking services and consulting with respect to mergers and acquisitions, to be
provided to the Company over a two-year period.
For a period of five years following the completion of the Initial Offering
on April 8, 1997, the Company has agreed to use its best efforts (including the
solicitation of proxies, if necessary) to elect one designee of Barington to the
Board of Directors of the Company. Marc S. Cooper, Vice Chairman of Barington,
has served as a director of the Company since April 1997 and currently is a
member of the Executive and Audit Committees of the Board of Directors. Mr.
Cooper was elected to the Board pursuant to this agreement.
John B. Torkelsen and PVR Securities, Inc. John B. Torkelsen, President of
PVR and President of its affiliate, PVR Securities, has served as a director of
the Company since March 1996 and is a member of the Nominating Committee of the
Board of Directors. PVR Securities acted as the placement agent of the Company
in connection with the private placements in June 1995 and August 1996 (the "PVR
Offering"), of 50 units and 19.11 units, respectively, to accredited investors
(the "PVR Investors"). Each unit sold consisted of 5,000 shares of Common Stock
and warrants to purchase an additional 5,000 shares of Common Stock at $8.00 per
share. In the private placement conducted by PVR Securities, the Company issued
345,536 shares of Common Stock and warrants to acquire 345,536 shares of Common
Stock at an exercise price of $8.00 per share. Aggregate gross proceeds to the
Company from the offering were $2,073,222.
As partial compensation for services provided in the private placement, the
Company issued to Mr. Torkelsen, President of PVR Securities, warrants to
purchase an aggregate of 69,106 shares of Common Stock. Of such warrants, the
exercise price for warrants to acquire 34,553 shares of Common Stock was
originally $6.60 per share, and the exercise price for warrants to acquire
34,553 shares of Common Stock was originally $8.80 per share (the "PVR
Warrants"). In addition, as compensation for financial advisory and other
services rendered in connection with the private placement, the Company paid PVR
Securities a fee of approximately $150,000.
17
<PAGE> 20
Each PVR Investor was also given the opportunity to purchase from Steven A.
Rogers, the Chief Executive Officer and President of the Company, 2,500 shares
of Common Stock for each unit purchased in the private placement, at a price of
$2.00 per share. In connection with such transaction, PVR Investors in the
private placement purchased an aggregate of 172,583 shares of Common Stock from
Mr. Rogers for aggregate consideration of $345,166.
As part of the private placement of securities managed by PVR Securities,
between May 1995 and May 1996, the Company also issued to certain investors (the
"Debt Inducement Investors"), in a private placement, warrants to purchase an
aggregate of 102,332 shares of Common Stock at an exercise price of $8.00 per
share, in order to induce such investors to extend loans to the Company. These
debt transactions were considered by the Company to be part of its overall
financing activities during this time period, and were necessary because the
equity financing being raised in the PVR Offering was not obtained as quickly as
originally contemplated by the Company.
In January 1997, the Company issued and sold to Acorn Technology Partners,
L.P. ("Acorn") 250,000 shares of Series A Preferred Stock, which converted to
Common Stock on a one-to-one basis upon the Initial Offering, and warrants to
purchase 50,000 shares of Common Stock at an exercise price of $4.00 per share,
for aggregate gross proceeds of $1,000,000. Mr. Torkelsen was the President and
Manager of the general partner of Acorn. In September 1997, Acorn distributed
its holdings of the Company's securities to PVR. PVR served as the investment
advisor to Acorn.
In addition, PVR, a corporation of which Mr. Torkelsen, a director of the
Company, serves as the President, loaned the Company an aggregate of $320,000
during 1995. The loan accrued interest at a fixed rate of 7% per annum. As an
inducement to PVR to extend the loan to the Company, the Company issued to Mr.
Torkelsen warrants to purchase 53,333 shares of Common Stock at an original
exercise price of $8.00 per share. In June 1995, PVR converted the outstanding
principal amount of and the accrued interest on the loan to Common Stock and
warrants. In connection with the loan conversion, Mr. Torkelsen invested an
additional $160,000 in the Company. In the loan conversion transaction, the
Company issued to Mr. Torkelsen 60,361 shares of Common Stock and warrants to
purchase 60,361 shares of Common Stock, to Mrs. Pamela R. Torkelsen 10,000
shares of Common Stock and warrants to purchase 10,000 shares of Common Stock,
and to PVR 10,000 shares of Common Stock and warrants to purchase 10,000 shares
of Common Stock. All Common Stock was issued at $6.00 per share, and all
warrants to purchase Common Stock were issued with an original exercise price of
$8.00 per share.
In connection with the private placement of equity securities of the
Company by PVR Securities, Mr. Torkelsen, a director of the Company, and Mr.
Steven A. Rogers, a director and the President and Chief Executive Officer of
the Company, entered into an agreement that provides that, for a five-year
period beginning December 5, 1995, each of them will vote any shares of Common
Stock that he controls for the election to the Board of Directors of an
individual nominated by the other and on a best efforts basis will seek
additional votes for the other party's nominee. Mr. Torkelsen was elected to the
Board pursuant to this agreement. In addition, Mr. Torkelsen agreed, subject to
his fiduciary obligations to the Company, to vote for Mr. Rogers to continue his
position as President and Chief Executive Officer of the Company during the term
of the voting agreement.
Additional Transactions with PVR Investors. In January 1997, the Company
offered to certain investors the opportunity to exchange existing warrants to
purchase shares of Common Stock in the Company for new warrants to purchase
shares of Common Stock. The purpose of the warrant exchange was to induce such
investors to enter into lock-up arrangements with Barington, the underwriter of
the Initial Offering, and into agreements consolidating such investors'
registration rights with those granted by the Company to other investors, and so
that the investment by such investors in the Company would be on terms and
conditions that more closely reflect the terms and conditions upon which other
investors invested in the Company during a comparable time period.
For the investors who participated in the warrant exchange transaction, the
effect of the warrant exchange was to cause investors who previously had
purchased shares of Common Stock in the Company to purchase such shares at an
effective purchase price of $4.00 per share, and to cause investors who
previously had
18
<PAGE> 21
received warrants to purchase shares of Common Stock in the Company, to exchange
such warrants for warrants with an exercise price of $4.00 per share.
As a result of the warrant exchange transaction, the Company issued an
aggregate of 165,267 shares of Common Stock and new warrants to purchase an
aggregate of 336,707 shares of Common Stock at an exercise price of $4.00 per
share. As described in detail below, the new warrants to purchase 336,707 shares
of Common Stock consist of (i) warrants to purchase 165,269 shares of Common
Stock issued to PVR Investors, (ii) warrants to purchase 69,106 shares of Common
Stock issued to Mr. Torkelsen, a director of the Company and President of PVR
Securities, and (iii) warrants to purchase 102,332 shares of Common Stock issued
to the Debt Inducement Investors. The Company did not receive any additional
cash proceeds or consideration other than the securities exchanged by the
investors in the warrant exchange.
In January 1997, the Company offered to each of the PVR Investors the
opportunity to exchange their existing warrants, representing the right to
purchase an aggregate of 345,536 shares of Common Stock at an exercise price of
$8.00 per share, for new warrants representing the right to purchase
approximately one-half of the number of shares of Common Stock at an exercise
price of $4.00 per share. In exchange for warrants to purchase an aggregate of
330,536 shares of Common Stock at an exercise price of $8.00 per share, the
Company issued warrants to purchase an aggregate of 165,269 shares of Common
Stock at an exercise price of $4.00 per share. One PVR Investor holding warrants
to purchase 15,000 shares of Common Stock chose not to participate in the
warrant exchange transaction and to retain such warrants with an exercise price
of $8.00 per share. As part of the warrant exchange, each PVR Investor who
accepted the Company's offer also was issued by the Company an additional 2,500
shares of Common Stock for each unit purchased in the PVR Offering, for no
additional consideration. The Company issued an aggregate of 165,267 additional
shares of Common Stock to the PVR Investors in the warrant exchange. Each PVR
Investor also agreed to sign an agreement with the Company relating to
registration rights and a lock-up agreement with Barington, the underwriter of
the Initial Offering. In connection with the Follow-on Offering, Barington
conveyed to NationsBanc Montgomery Securities all rights and responsibilities
under this agreement.
As part of the warrant exchange, in order to restructure the transaction in
which the PVR Investors originally purchased shares of Common Stock from Mr.
Rogers at a below-market price per share to terms and conditions more closely
reflecting market terms and conditions, each PVR Investor who had originally
purchased shares of Common Stock from Mr. Rogers at a purchase price of $2.00
per share, also was required to pay Mr. Rogers an additional $2.00 for each
share originally purchased from him. Mr. Rogers received an aggregate of
$340,166 from PVR Investors in connection with the warrant exchange.
Also as part of the warrant exchange, the Company issued to Mr. Torkelsen,
a director of the Company and President of PVR Securities, new warrants to
purchase an aggregate of 69,106 shares of Common Stock at $4.00 per share, in
exchange for the warrants to purchase 34,553 shares of Common Stock at an
exercise price of $6.60 per share, and the warrants to purchase 34,553 shares of
Common Stock at an exercise price of $8.80 per share, previously issued to Mr.
Torkelsen as compensation for services in the private placement managed by PVR
Securities.
As part of the warrant exchange, the Company also exchanged warrants to
purchase an aggregate of 102,332 shares of Common Stock held by the Debt
Inducement Investors at an exercise price of $8.00 per share, for warrants to
purchase 102,332 shares at an exercise price of $4.00 per share.
Applewood Associates, L.P. In December 1996, the Company issued and sold to
Applewood 250,000 shares of Series A Preferred Stock, which converted to Common
Stock on a one-to-one basis upon the Initial Offering, and warrants to purchase
50,000 shares of Common Stock at an exercise price of $4.00 per share, for
aggregate gross proceeds of $1,000,000. Pursuant to a voting agreement, dated
December 19, 1996 by and among Applewood, Acorn and Steven A. Rogers, entered
into in connection with the private placement of the Series A Preferred Stock
and the Series A Warrants by the Company to Applewood and Acorn, Anthony M.
Agnello was elected to the Board of Directors in January 1996. Subject to
certain percentage ownership requirements, Mr. Rogers agreed, pursuant to such
voting agreement, to vote his shares of Common Stock to elect as a director the
nominee of Applewood and Acorn. Mr. Agnello serves on the Compensation Committee
of the Board of Directors.
19
<PAGE> 22
PLAN OF DISTRIBUTION
The distribution of the Shares by the Selling Stockholders, or by pledgees,
donees, transferees or other successors in interest including, without
limitation, Bear Stearns & Co. Inc., may be effected from time to time in
transactions on the Nasdaq National Market in negotiated transactions or other
exchanges or in the over-the-counter market, or otherwise at prices and at terms
then prevailing or at prices related to the then current market price, or in
negotiated transactions. The Shares may be sold by one or more of the following:
(i) a block trade in which the broker or dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (ii) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; (iii) an exchange distribution in accordance with the rules of such
exchange; and (iv) ordinary brokerage transactions and transactions in which the
broker solicits purchasers. In addition, any securities covered by this
Prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule
144 rather than pursuant to this Prospectus. From time to time the Selling
Stockholders may engage in short sales, short sales versus the box, puts and
calls and other transactions in securities of the issuer or derivatives thereof,
and may sell and deliver the shares in connection therewith. Broker-dealers
through which transactions involving the Shares are effected may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agent or to whom they may sell as principal, or both.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid by the Selling Stockholders in connection with sales of the Shares. No
underwriting arrangements have been entered into by the Selling Stockholders.
In effecting sales, brokers or dealers engaged by the Selling Stockholders
may arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from Selling Stockholders in amounts to be
negotiated immediately prior to the sale. The Selling Stockholders and agents
who execute orders on their behalf may be deemed to be underwriters as that term
is defined in Section 2(11) of the Securities Act and a portion of any proceeds
of sales and discounts, commissions or other compensation may be deemed to be
underwriting compensation for purposes of the Securities Act. The Company has
agreed to indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Securities Act.
ADDITIONAL INFORMATION
The Company is subject to the information requirements of the Exchange Act,
and, in accordance therewith, files reports and other information with the
Commission. Such reports, proxy statements, and other information can be
inspected without charge at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
Seven World Trade Center, 13th Floor, New York, New York 10048; and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained from the public reference section of the Commission, 450 Fifth
Street, N.W., Washington, D.C., 20549, at prescribed rates. The Registration
Statement is also publicly available through the Commission's web site located
at http://www.sec.gov. The Common Stock of the Company is quoted on the Nasdaq
National Market and other information concerning the Company can be inspected at
the office of the Nasdaq National Market, 1735 K Street, N.W., Washington, D.C.
20006-1500.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain terms of which are omitted in accordance with the rules and regulations
of the Commission. Statements contained in this Prospectus as to the contents of
any contract or other documents are not necessarily complete, and in each
instance, reference is made to the copy of such contract or documents filed as
an exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference and the exhibits and schedules thereto. For
further information regarding the Company and the Shares, reference is hereby
made to the Registration Statement and such exhibits and schedules which may be
obtained from the Commission at its principal office in Washington, D.C. upon
payment of the fees prescribed by the Commission.
20
<PAGE> 23
LEGAL MATTERS
The validity of the Common Stock offered hereby and legal matters will be
passed upon for the Company by Shaw Pittman Potts & Trowbridge, Washington,
D.C., a partnership including professional corporations.
EXPERTS
The balance sheet as of December 31, 1997 and 1996 and the statements of
operations, changes in stockholders' equity (deficit), and cash flows for each
of the three years in the period ended December 31, 1997 and for the period
October 5, 1993 (date of inception) to December 31, 1997, incorporated by
reference in this prospectus, have been incorporated herein in reliance on the
report, which includes an explanatory paragraph on the Company's ability to
continue as a going concern, of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
21
<PAGE> 24
======================================================
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING OTHER THAN THOSE 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 OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A
SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATES
AS OF WHICH SUCH INFORMATION IS FURNISHED.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 13
Selling Stockholders.................. 14
Plan of Distribution.................. 19
Additional Information................ 20
Legal Matters......................... 21
Experts............................... 21
</TABLE>
======================================================
======================================================
1,130,000 SHARES
[OBJECTIVE COMMUNICATIONS LOGO]
OBJECTIVE
COMMUNICATIONS, INC.
COMMON STOCK
======================================================
<PAGE> 25
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The shares of Common Stock offered hereby were originally registered on
this Registration Statement which was declared effective by the Commission on
April 3, 1997. In connection with the Registration Statement the Registrant has
paid approximately $545,000 in expenses of issuance and distribution. The
Registrant expects that it will incur the following additional expenses in
connection with the issuance and distribution of the securities registered
hereby, all of which expenses are estimates:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- -------
<S> <C>
Nasdaq National Market filing fee........................... $ -0-
Blue Sky fees and expenses (including fees of counsel)...... 2,000
Transfer Agent and Registrar's fees......................... 1,000
Printing expenses........................................... 8,000
Legal fees and expenses (other than blue sky)............... 15,000
Accounting fees and expenses................................ 12,000
Miscellaneous............................................... 5,000
-------
Total............................................. $43,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The GCL provides that a corporation may limit the liability of each
director to the corporation or its stockholders for monetary damages, except for
liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) in
respect of certain unlawful dividend payments or stock redemptions or
repurchases; and (iv) for any transaction from which the director derived an
improper personal benefit. The Amended and Restated Certificate of Incorporation
(the "Certificate") of the Registrant provides for the elimination and
limitation of the personal liability of directors of the Registrant for monetary
damages to the fullest extent permitted by the GCL.
In addition, the Certificate provides that if the GCL is amended to
authorize the further elimination or limitation of the liability of a director,
then the liability of the directors of the Registrant shall be eliminated or
limited to the fullest extent permitted by the GCL, as so amended. The effect of
this provision is to eliminate the right of the Registrant and its stockholders
(through stockholders' derivative suits on behalf of the Registrant) to recover
monetary damages against a director for breach of the fiduciary duty of care as
a director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) through (iv) above.
The provision does not limit or eliminate the rights of the Registrant or any
stockholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care. In addition, the Certificate
provides that the Registrant shall, to the fullest extent permitted by the GCL,
as amended from time to time, indemnify each of its currently acting and former
directors, officers, employees and agents.
II-1
<PAGE> 26
ITEM 16. EXHIBITS.
The following is a list of all exhibits filed as a part of this
Registration Statement on Form S-3, including those incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (Incorporated by reference to Exhibit 3.1
forming a part of the Registrant's Registration Statement
on Form SB-2 (File No. 333-20625) filed with the
Securities and Exchange Commission under the Securities
Act of 1933, as amended).
3.2 Amended and Restated Bylaws of the Registrant (Incorporated
by reference to Exhibit 3.2 forming a part of the
Registrant's Registration Statement on Form SB-2 (File
No. 333-20625) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended).
4.1 Form of Warrant for the Purchase of Shares of Common Stock,
issued in connection with the private placement of
$2,000,000 aggregate principal amount of Bridge Notes
(Incorporated by reference to Exhibit 3.4 forming a part
of the Registrant's Registration Statement on Form SB-2.
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
4.2 Form of Warrant to Purchase Common Stock of the Registrant,
issued in connection with the private placement of units
in June 1995 and August 1996 (Incorporated by reference
to Exhibit 3.5 forming a part of the Registrant's
Registration Statement on Form SB-2 (File No. 333-20625)
filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended).
4.3 Form of Warrants for the Purchase of 100,000 Shares of
Common Stock, $.01 par value per share issued in
connection with the private placement of Series A
Convertible Preferred Stock and warrants in December 1996
and January 1997 (Incorporated by reference to Exhibit
3.7 forming a part of the Registrant's Registration
Statement on Form SB-2 (File No. 333-20625) filed with
the Securities and Exchange Commission under the
Securities Act of 1933, as amended).
4.4 Form of Option for the Purchase of 180,000 Shares of Common
Stock issued to Barington Capital Group, L.P.
(Incorporated by reference to Exhibit 3.8 forming a part
of the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
4.5 Form of Stock Option Agreement, dated December 18, 1997, by
and between the Registrant and Barington Capital Group,
L.P. (Incorporated by reference to Exhibit 10.8 forming a
part of the Registrant's Current Report on Form 10-KSB
for the year ended December 31, 1997).
4.6 Specimen certificate evidencing shares of Common Stock of
the Registrant (Incorporated by reference to Exhibit 4.2
to the Registrant's Registration Statement on Form SB-2.
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
5 Opinion of Shaw, Pittman, Potts & Trowbridge as to the
legality of the securities being registered.
23.1 Consent of Shaw, Pittman, Potts & Trowbridge (included as
part of Exhibit 5).
23.2 Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney.
</TABLE>
II-2
<PAGE> 27
ITEM 28. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to file a post-effective
amendment to remove from registration any of the securities that remain unsold
at the end of the Offering.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies it has reasonable grounds to believe it meets all the
requirements for filing this Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Rockingham, New Hampshire, on April 3, 1998.
OBJECTIVE COMMUNICATIONS, INC.
(Registrant)
By: /s/ STEVEN A. ROGERS
----------------------------------
Steven A. Rogers
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ STEVEN A. ROGERS President and Chief Executive April 3, 1998
- - ----------------------------------------------------- Officer, and Director
Steven A. Rogers (Principal Executive
Officer)
/s/ ROBERT H. EMERY Vice President of April 3, 1998
- - ----------------------------------------------------- Administration and Finance
Robert H. Emery and Secretary (Principal
Financial and Accounting
Officer)
/s/ CLIFFORD M. KENDALL Chairman of the Board of April 3, 1998
- - ----------------------------------------------------- Directors
Clifford M. Kendall
/s/ ANTHONY M. AGNELLO Director April 3, 1998
- - -----------------------------------------------------
Anthony M. Agnello
/s/ ROBERT L. BARNETT Director April 3, 1998
- - -----------------------------------------------------
Robert L. Barnett
/s/ DONALD W. BARRETT Director April 3, 1998
- - -----------------------------------------------------
Donald W. Barrett
/s/ EUGENE R. CACCIAMANI Director April 3, 1998
- - -----------------------------------------------------
Eugene R. Cacciamani
/s/ MARC S. COOPER Director April 3, 1998
- - -----------------------------------------------------
Marc S. Cooper
/s/ LINCOLN D. FAURER Director April 3, 1998
- - -----------------------------------------------------
Lincoln D. Faurer
RICHARD T. LIEBHABER Director April 3, 1998
- - -----------------------------------------------------
Richard T. Liebhaber
/s/ ROY C. NASH Director April 3, 1998
- - -----------------------------------------------------
Roy C. Nash
/s/ JOHN B. TORKELSEN Director April 3, 1998
- - -----------------------------------------------------
John B. Torkelsen
</TABLE>
II-4
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (Incorporated by reference to Exhibit 3.1
forming a part of the Registrant's Registration Statement
on Form SB-2 (File No. 333-20625) filed with the
Securities and Exchange Commission under the Securities
Act of 1933, as amended).
3.2 Amended and Restated Bylaws of the Registrant (Incorporated
by reference to Exhibit 3.2 forming a part of the
Registrant's Registration Statement on Form SB-2 (File
No. 333-20625) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended).
4.1 Form of Warrant for the Purchase of Shares of Common Stock,
issued in connection with the private placement of
$2,000,000 aggregate principal amount of Bridge Notes
(Incorporated by reference to Exhibit 3.4 forming a part
of the Registrant's Registration Statement on Form SB-2.
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
4.2 Form of Warrant to Purchase Common Stock of the Registrant,
issued in connection with the private placement of units
in June 1995 and August 1996 (Incorporated by reference
to Exhibit 3.5 forming a part of the Registrant's
Registration Statement on Form SB-2 (File No. 333-20625)
filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended).
4.3 Form of Warrants for the Purchase of 100,000 Shares of
Common Stock, $.01 par value per share, issued in
connection with the private placement of Series A
Convertible Preferred Stock and warrants in December 1996
and January 1997 (Incorporated by reference to Exhibit
3.7 forming a part of the Registrant's Registration
Statement on Form SB-2 (File No. 333-20625) filed with
the Securities and Exchange Commission under the
Securities Act of 1933, as amended).
4.4 Form of Option for the Purchase of 180,000 Shares of Common
Stock issued to Barington Capital Group, L.P.
(Incorporated by reference to Exhibit 3.8 forming a part
of the Registrant's Registration Statement on Form SB-2
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
4.5 Form of Stock Option Agreement, dated December 18, 1997, by
and between the Registrant and Barington Capital Group,
L.P. (Incorporated by reference to Exhibit 10.8 forming a
part of the Registrant's Current Report on Form 10-KSB
for the year ended December 31, 1997).
4.6 Specimen certificate evidencing shares of Common Stock of
the Registrant (Incorporated by reference to Exhibit 4.2
to the Registrant's Registration Statement on Form SB-2.
(File No. 333-20625) filed with the Securities and
Exchange Commission under the Securities Act of 1933, as
amended).
5 Opinion of Shaw, Pittman, Potts & Trowbridge as to the
legality of the securities being registered.
23.1 Consent of Shaw, Pittman, Potts & Trowbridge (included as
part of Exhibit 5).
23.2 Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney.
</TABLE>
<PAGE> 1
EXHIBIT 5
March 24, 1997
Objective Communications, Inc.
50 International Drive
Portsmouth, New Hampshire 03801
Ladies and Gentlemen:
We have acted as counsel for Objective Communications, Inc., a Delaware
corporation (the "Company"), in connection with preparation and filing by the
Company with the Securities and Exchange Commission of the Registration
Statement on Form S-3 under the Securities Act of 1933, as amended (No.
333-20625) (the "Registration Statement"), relating to the sale, from time to
time, by certain selling stockholders identified in such Registration Statement
(the "Selling Stockholders"), or pledgees, donees, transferees or other
successors in interest, in the manner described in the prospectus (the
"Prospectus") which forms a part of the Registration Statement, of up to an
aggregate of 1,130,000 shares of common stock, par value $.01 per share, of the
Company (the "Common Stock").
Based upon our examination of the originals or copies of such
documents, corporate records, certificates of officers of the Company and such
other instruments as we have deemed necessary, and upon the laws as presently in
effect, we are of the opinion that the shares of Common Stock to be sold by the
Selling Stockholders in the manner described in the Prospectus under the
captions "Selling Stockholders" and "Plan of Distribution" have been duly
authorized for issuance by the Company and, upon issuance and delivery in
accordance with the terms described in the Prospectus, will be validly issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus.
Sincerely,
/s/ Shaw Pittman Potts & Trowbridge
-------------------------------------
SHAW PITTMAN POTTS & TROWBRIDGE
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
Objective Communications, Inc. (a development stage enterprise) on Form S-3
(File No. 333-20625) of our report dated February 20, 1998 which includes an
explanatory paragraph on the Company's ability to continue as a going concern,
on our audits of the financial statements of Objective Communications, Inc. as
of December 31, 1997 and 1996, and for each of the three years in the period
ended December 31, 1997 and for the period October 5, 1993 (date of inception)
to December 31, 1997, which report is included in Objective Communications, Inc.
Annual Report on Form 10-KSB. We also consent to the reference to our firm under
the caption "Experts."
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 3, 1998
