As filed with the Securities and Exchange Commission on October 29, 2003
Registration No. 333-108793
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VASCO DATA SECURITY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
1901 SOUTH MEYERS ROAD, SUITE 210, OAKBROOK TERRACE, IL 60181
(630) 932-8844
(Address of principal executive offices)
DELAWARE 36-416320
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
------------
T. Kendall Hunt
Chairman and Chief Executive Officer
VASCO Data Security International, Inc.
1901 South Meyers Road, Suite 210
Oakbrook, Illinois 60181
(630) 932-8844
(Name, address, including zip code and telephone number,
including area code of agent for service)
COPIES TO:
Robert B. Murphy, Esq.
Enger McCartney-Smith, Esq.
Pepper Hamilton LLP
600 14th Street, NW
Washington, D.C. 20005-2004
(202) 220-1200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|___________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|___________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
===================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) SHARE(2) PRICE REGISTRATION FEE
-------------------------------------------------------------------------------------------------------------------
Common Stock, par value
$0.001 per share 7,500,000 $2.89 $21,675,000 $1753.51*
===================================================================================================================
* Previously filed.
(1) Pursuant to Rule 416 under the Securities Act, as amended, this registration
statement also covers such additional number of shares of common stock as may
become issuable under any stock split, stock dividend or similar transaction.
(2) Estimated pursuant to Rule 457(c) under the Securities Act solely for the
purpose of calculating the registration fee, based upon the average of the high
and low prices reported for such shares of common stock, as reported on the
Nasdaq SmallCap Market on September 11, 2003.
Pursuant to Rule 429 under the Securities Act, the prospectus contained in this
Registration Statement is a combined prospectus and also relates to (i) up to
6,418,595 options to purchase common stock and up to 6,418,595 shares of common
stock underlying such options and (ii) up to 1,056,922 warrants to purchase
common stock and up to 1,056,922 shares of common stock underlying such
warrants, which options, warrants and shares of common stock were registered
under a Registration Statement on Form S-4 (File No. 333-35563) previously filed
with the SEC and declared effective, and which Registration Statement, pursuant
to Rule 416, also covered such indeterminate number of shares of common stock as
may be issuable upon the exercise of the options and/or warrants pursuant to
anti-dilution provisions. This Registration Statement constitutes Post-Effective
Amendment No. 5 to Registration Statement No. 333-35563, which Post-Effective
Amendment shall hereafter become effective concurrently with the effectiveness
of this Registration Statement and in accordance with Section 8(c) of the
Securities Act. This Registration Statement covers the resale of 1,239,474
shares of common stock underlying other outstanding warrants, and 322,565 shares
of restricted common stock issued in connection with certain acquisitions,
including such indeterminate number of shares of common stock as may be issuable
pursuant to the anti-dilution provisions of such securities. Upon the
effectiveness of such Post-Effective Amendment and this Registration Statement,
this Registration Statement will relate to an aggregate of 6,418,595 options and
1,056,922 warrants to purchase common stock and 14,578,659 shares of common
stock.
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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PROSPECTUS
VASCO DATA SECURITY INTERNATIONAL, INC.
Common Stock
This prospectus relates to the sale by the selling stockholders, listed on pages
12-14, from time to time, of up to 7,500,000 shares of our common stock,
including 2,000,000 shares currently held by the selling stockholders, 4,000,000
shares issuable upon the conversion of preferred stock held by the selling
stockholders, 600,000 shares issuable upon the exercise of warrants held by the
selling stockholders and 900,000 shares issuable to the selling stockholders by
us as dividends on the preferred stock. The issuance of the shares upon exercise
of the warrants is not covered by this prospectus; only the resale of the shares
by the selling stockholders is covered. See "Selling Stockholders."
No underwriter is being used in connection with this offering of our common
stock. The selling stockholders may offer and sell their shares to or through
broker-dealers, who may receive compensation in the form of discounts,
concessions or commissions from the selling stockholders, the purchasers of the
shares, or both. The selling stockholders and any broker-dealer executing
selling orders on their behalf may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933 (the "Securities Act") in which event
commissions received by such broker-dealer may be deemed to be underwriting
commissions under the securities laws. We will not receive any direct proceeds
from the sale of shares, but will receive proceeds related to the exercise of
the warrants held by the selling stockholders.
The price of the common stock being offered under this prospectus will be
determined by the prevailing market price for our common stock or in negotiated
transactions. Our common stock is traded on the Nasdaq SmallCap Market under the
symbol VDSI. On October 17, 2003, the closing price of one share of our common
stock was $2.39.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY READ AND CONSIDER THE RISK FACTORS BEGINNING ON PAGE 6.
Neither the Securities and Exchange Commission ("SEC") nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is October 29, 2003.
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TABLE OF CONTENTS
Page
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Summary........................................................ 5
Recent Developments............................................ 5
Risk Factors................................................... 6
Forward-Looking Statements..................................... 11
Use of Proceeds................................................ 11
Selling Stockholders........................................... 12
Plan of Distribution........................................... 15
Legal Matters.................................................. 16
Experts........................................................ 16
Where You Can Find More Information............................ 17
VASCO, VACMAN and Digipass are registered trademarks in the United States. In
addition, VACMAN Optimum is a registered trademark in the Benelux countries.
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SUMMARY
This Summary highlights some information contained elsewhere in this
prospectus. You should read the entire prospectus carefully including the
section entitled "Risk Factors" before deciding to invest in our common stock.
Our Company
We design, develop, market and support patented "Identity
Authentication" products for e-business and e-commerce. Our products enable
secure financial transactions to be made over private enterprise networks and
public networks, such as the Internet. VASCO's Identity Authentication software
is delivered via its Digipass security products, small "calculator" hardware
devices carried by an end user, or in a software format on mobile phones or
other portable devices and PCs. The Digipass devices, most of which incorporate
an electronic digital signature capability, guarantee the integrity of
electronic transactions and data transmissions. For user access control, VASCO's
VACMAN Server products limit application access to designated Digipass users.
Digipass and VACMAN combine to provide greater flexibility and a more affordable
means than competing products of authenticating to any network, including the
Internet.
Our target markets are the applications and their several hundred
million users that utilize fixed passwords as security. Our time-based system
generates a "one-time" password that changes with every use. As a result, when
compared to fixed passwords, it substantially reduces the risk of unauthorized
access to the application.
Our security solutions are sold worldwide through our direct sales
force, as well as through distributors, resellers and systems integrators. We
currently have approximately 1,250 customers in more than 60 countries.
Representative customers of our products include Rabobank Nederland, ABN AMRO
Bank, Eterra Norway, ING Bank, DaimlerChrysler, Fortis Bank, Telindus, CoStar
Group, and the U.S. Government.
Our principal executive offices are located at 1901 South Meyers Road,
Suite 210, Oakbrook Terrace, Illinois 60181 and the telephone number at that
address is (630) 932-8844. Our principal offices in Europe are located at
Koningin Astridlaan 164, B-1780 Wemmel Belgium and the telephone number at that
address is 32-2-456-98-10. We maintain a website at www.vasco.com. The
information contained on our website does not constitute part of this
prospectus.
Recent Developments
Financial Results. For the six and three months ended June 30 and March
31, 2003, respectively, we reported net income of $1,202,000 and $481,000 on net
revenues from continuing operations of $11,071,000 and $5,118,000. Revenues for
the first quarter have been adjusted to exclude the net revenues from the VACMAN
Enterprise business, which was sold in July 2003 as noted below, and reported as
a discontinued operation in the second quarter of 2003. This represents the
first consecutive quarters of net income since we became a public company in
1997. In addition, we were able to add 160 new customers in the second quarter
of 2003 and for the first six months of 2003, we have added a total of 330 new
customers.
Series C Preferred Stock. On July 15, 2003, we reached an agreement
with Ubizen N.V., a Belgian Internet securities firm, to repurchase all of the
Series C Convertible Preferred Stock and Common Stock Purchase Warrants owned by
Ubizen. We paid Ubizen $3,000,000 in cash and issued 2,000,000 shares of our
common stock on July 25, 2003, and agreed to pay Ubizen an additional $1,000,000
on or before November 14, 2003. The common stock is subject to a lock-up period
that expires in increments of 500,000 shares each on October 15, 2003 and
January 15, April 15, and July 15, 2004. Upon the expiration of each lock-up,
the released shares will be subject to volume trading restrictions through
January 1, 2005.
The Series C Convertible Preferred Stock along with warrants to
purchase 1,269,474 shares of our common stock were sold to Ubizen for
$15,000,000 in July 2000. The Series C Convertible Preferred Stock was subject
to a mandatory redemption feature that would have been effective in July 2004.
At the mandatory redemption date, we would have been obligated to either redeem
the stock for $15,000,000 in cash or issue an equivalent value in common stock
at a per share price equal to the average trading price of the common stock for
the 30 trading dates prior to the redemption date less five (5) percent.
Sale of VACMAN Enterprise. In July 2003, we also announced the sale of
our VACMAN Enterprise business unit, originally known as IntelliSoft and/or
SnareWorks, to SecureD Services, Inc., a newly-organized security consulting and
managed security services company. Under the terms of the Agreement, we received
a senior secured promissory note of approximately $1,100,000 and $2,000,000 of
convertible preferred stock from SecureD Services.
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The promissory note bears a six percent (6%) interest rate and will be payable
in thirty-six (36) equal and consecutive monthly payments commencing August 1,
2003. The SecureD Services Preferred Stock includes a six percent (6%)
cumulative stock dividend, payable quarterly, and can be converted into SecureD
Services Inc. common stock at defined intervals beginning July 1, 2005. T.
Kendall Hunt, our Chairman and CEO, is one of the founders and organizers of
SecureD Services, Inc.
Series D Preferred Stock and Warrants. On September 11, 2003, we
completed a private placement of 800 shares of our Series D 5% Cumulative
Convertible Voting Preferred Stock with several investors including all of the
selling stockholders other than Ubizen N.V. The Series D preferred stock is
convertible, at the option of its holders, into shares of our common stock at a
per share conversion price of $2.00. Holders of the Series D preferred stock are
entitled to the payment of cumulative dividends quarterly, at the rate of five
percent (5%), either in cash or in shares of our common stock, in our
discretion. Each investor also purchased warrants to purchase a number of shares
of our common stock equal to fifteen percent (15%) of the number of shares of
common stock that such investor's Series D preferred stock is convertible into.
The exercise price of the warrants is $3.47 per share and may be exercised at
any time until September 11, 2008. We received a total purchase price for all
shares of Series D preferred stock and warrants equal to $8,006,000.
On October 17, 2003, after discussions with The Nasdaq Stock Market and
receipt of consent from the requisite percentage of stockholders, we amended the
voting terms of the Series D preferred stock to decrease the number of votes to
which each such stockholder is entitled prior to conversion of their Series D
preferred stock. As a result of the amendment, instead of each share of Series D
preferred stock voting as 5,000 shares of common stock (based on the $2.00
conversion rate), each will vote as 3,413 shares (based on the $2.93 closing
market price on September 11, 2003) on all matters submitted to the stockholders
for approval. No change was made to the conversion price or other terms of the
Series D preferred stock.
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should
carefully consider the following risk factors as well as other information
contained in this prospectus before deciding to invest in our common stock. If
any of the following risks were to occur, our business, financial condition or
operating results could be materially and adversely affected. In that case, the
trading price of our common stock could decline and you could lose all or part
of your investment.
We Had a History of Operating Losses and Have a Large Accumulated Deficit.
Although we have reported net income of $1,202,000 and $721,000 for the
six and three months ended June 30, 2003, respectively, we have incurred net
losses of $4,538,995, $12,033,970 and $4,161,772 for the years ended December
31, 2002, 2001 and 2000, respectively, and as of June 30, 2003, our accumulated
deficit is $41,405,905.
We Face Significant Competition and If We Lose or Fail to Gain Market Share Our
Financial Results Will Suffer.
The market for computer and network security products is highly
competitive. Our competitors include organizations that provide computer and
network security products based upon approaches similar to and different from
those that we employ such as RSA Security Inc., ActivCard, Rainbow Technologies,
and Aladdin Knowledge Systems. Many of our competitors have significantly
greater financial, marketing, technical and other competitive resources than we
do. As a result, they may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products.
Technological Changes Occur Rapidly in Our Industry and Our Development of New
Products is Critical to Maintain Our Revenues.
The introduction by our competitors of products embodying new
technologies and the emergence of new industry standards could render our
existing products obsolete and unmarketable. Our future revenue growth and
operating profit will depend in part upon our ability to enhance our current
products and develop innovative products to distinguish ourselves from the
competition and to meet customers' changing needs in the data security industry.
We cannot assure you that security-related product developments and technology
innovations by others will not adversely affect our competitive position or that
we will be able to successfully anticipate or adapt to changing technology,
industry standards or customer requirements on a timely basis.
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The Sales Cycle for Our Products and Technology is Long, and We May Incur
Substantial Expenses for Sales That Do Not Occur When Anticipated.
The sales cycle for our products, which is the period of time between
the identification of a potential customer and completion of the sale, is
typically lengthy and subject to a number of significant risks over which we
have little control. If revenue falls significantly below anticipated levels,
our business would be seriously harmed.
A typical sales cycle is often three to six months and with larger
banking transactions up to eighteen months. Purchasing decisions for our
products and systems may be subject to delay due to many factors which are not
within our control, such as:
o the time required for a prospective customer to recognize the
need for our products;
o the significant expense of many data security products and
network systems;
o customers' internal budgeting processes; and
o internal procedures customers may require for the approval of
large purchases.
We Have a Significant Dependence On Major Customers and Losing Any of These
Customers Could Result in a Significant Loss in Revenues.
If we don't find other customers who generate significant future
revenues, the unforeseen loss of one or more of our major customers, or the
inability to maintain reasonable profit margins on sales to any of these
customers, would have a material adverse effect on our results of operations and
financial condition.
Our Success Depends On Establishing and Maintaining Strategic Relationships With
Other Companies to Develop, Market and Distribute Our Technology and Products
and, in Some Cases, to Incorporate Our Technology Into Their Products.
Part of our business strategy is to enter into strategic alliances and
other cooperative arrangements with other companies in our industry. We
currently are involved in cooperative efforts with respect to incorporation of
our products into products of others, research and development efforts,
marketing efforts and reseller arrangements. None of these relationships are
exclusive, and some of our strategic partners also have cooperative
relationships with certain of our competitors. If we are unable to enter
cooperative arrangements in the future or if we lose any of our current
strategic or cooperative relationships, our business could be harmed. We do not
control the time and resources devoted to such activities by parties with whom
we have relationships. In addition, we may not have the resources available to
satisfy our commitments, which may adversely affect these relationships. These
relationships may not continue, may not be commercially successful, or may
require our expenditure of significant financial, personnel and administrative
resources from time to time. Further, certain of our products and services
compete with the products and services of our strategic partners.
We May Need Additional Capital in the Future and Our Failure to Obtain Capital
Would Interfere With Our Growth Strategy.
Our ability to obtain financing will depend on a number of factors,
including market conditions, our operating performance and investor interest.
These factors may make the timing, amount, terms and conditions of any financing
unattractive. They may also result in our incurring additional indebtedness or
accepting stockholder dilution. If adequate funds are not available or are not
available on acceptable terms, we may have to forego strategic acquisitions or
investments, defer our product development activities, or delay the introduction
of new products.
We Must Continue to Attract and Retain Highly Skilled Technical Personnel for
Our Research and Development Department.
The market for highly skilled technicians in Europe, Asia, Australia
and the United States is highly competitive. If we fail to attract, train,
assimilate and retain qualified technical personnel for our research and
development department, we will experience delays in introductions of new or
modified products, loss of clients and market share and a reduction in revenues.
We Face a Number of Risks Associated With Our International Operations, Any or
All of Which Could Result in a Disruption in Our Business and a Decrease in Our
Revenues.
Our business internationally is subject to a number of risks any or all
of which could result in a disruption in our business and a decrease in our
revenues. These include:
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o inconsistent regulations and unexpected changes in regulatory
requirements;
o difficulties and costs of staffing and managing international
operations;
o potentially adverse tax consequences;
o wage and price controls;
o uncertain protection for intellectual property rights;
o imposition of trade barriers;
o differing technology standards;
o uncertain demand for electronic commerce;
o linguistic and cultural differences;
o political instability; and
o social unrest.
We are Subject to Foreign Exchange Risks, and Improper Management of That Risk
Could Result in Large Cash Losses.
Because a significant number of our principal customers are located
outside the United States, we expect that international sales will continue to
generate a significant portion of our total revenue. We are subject to foreign
exchange risks because the majority of our costs are denominated in U.S.
dollars, whereas a significant portion of the sales and expenses of our European
operating subsidiaries are denominated in various foreign currencies. A decrease
in the value of any of these foreign currencies relative to the U.S. dollar
could affect the profitability in U.S. dollars of our products sold in these
markets. We do not currently hold forward exchange contracts or other hedging
instruments to exchange foreign currencies for U.S. dollars to offset currency
rate fluctuations.
We Have a Great Dependence On a Limited Number of Suppliers and the Loss of
Their Manufacturing Capability Could Materially Impact Our Operations.
In the event that the supply of components or finished products is
interrupted or relations with either of our principal vendors is terminated,
there could be a considerable delay in finding suitable replacement sources to
manufacture our products at the same cost or at all. The majority of our
products are manufactured by two independent vendors, one headquartered in
Europe and the other in Hong Kong. Our security tokens are assembled at
facilities in mainland China. The importation of these products from China
exposes us to the possibility of product supply disruption and increased costs
in the event of changes in the policies of the Chinese government, political
unrest or unstable economic conditions in China or developments in the United
States that are adverse to trade, including enactment of protectionist
legislation.
We Depend Significantly Upon Our Proprietary Technology and Intellectual
Property and the Failure to Protect Our Proprietary Rights Could Require Us to
Redesign Our Products or Require Us to Enter Into Royalty or Licensing
Agreements, Any of Which Could Reduce Revenue and Increase Our Operating Costs.
We currently rely on a combination of patent, copyright and trademark
laws, trade secrets, confidentiality agreements and contractual provisions to
protect our proprietary rights. We seek to protect our software, documentation
and other written materials under trade secret and copyright laws, which afford
only limited protection, and generally enter into confidentiality and
nondisclosure agreements with our employees and with key vendors and suppliers.
There has been substantial litigation in the technology industry
regarding intellectual property rights, and we may have to litigate to protect
our proprietary technology. We expect that companies in the computer and
information security market will increasingly be subject to infringement claims
as the number of products and competitors increases. Any such claims or
litigation may be time-consuming and costly, cause product shipment delays,
require us to redesign our products or require us to enter into royalty or
licensing agreements, any of which could reduce revenue and increase our
operating costs.
Our Patents May Not Provide Us With Competitive Advantages.
We hold several patents in the United States and a corresponding patent
in some European countries, which cover multiple aspects of our technology. The
U.S. patents expire between 2003 and 2010 and the patent in those European
countries expires in 2008. There can be no assurance that we will continue to
develop proprietary products or technologies that are patentable, that any
issued patent will provide us with any competitive advantages or will not be
challenged by third parties, or that patents of others will not hinder our
competitive advantage.
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We are Subject to Product Liability Risks.
A malfunction of or design defect in our products which results in a
breach of a customer's data security could result in tort or warranty claims
against us. We do not presently maintain product liability insurance for these
types of claims.
There is Significant Government Regulation of Technology Exports and to the
Extent We Cannot Meet the Requirements of the Regulations We May be Prohibited
From Exporting Some of Our Products Which Could Negatively Impact Our Revenues.
Our international sales and operations are subject to risks such as the
imposition of government controls, new or changed export license requirements,
restrictions on the export of critical technology, trade restrictions and
changes in tariffs. If we become unable to obtain foreign regulatory approvals
on a timely basis our business in those countries would no longer exist and our
revenues would decrease dramatically. Certain of our products are subject to
export controls under U.S. law. The list of products and countries for which
export approval is required, and the regulatory policies with respect thereto
may be revised from time to time and our inability to obtain required approvals
under these regulations could materially adversely affect our ability to make
international sales.
We Employ Cryptographic Technology in Our Authentication Products That Uses
Complex Mathematical Formulations to Establish Network Security Systems.
Many of our products are based on cryptographic technology. With
cryptographic technology, a user is given a key which is required to encrypt and
decode messages. The security afforded by this technology depends on the
integrity of a user's key and in part on the application of algorithms, which
are advanced mathematical factoring equations. These codes may eventually be
broken or become subject to government regulation regarding their use, which
would render our technology and products less effective. The occurrence of any
one of the following could result in a decline in demand for our technology and
products:
o any significant advance in techniques for attacking
cryptographic systems, including the development of an easy
factoring method or faster, more powerful computers;
o publicity of the successful decoding of cryptographic messages
or the misappropriation of keys; and
o increased government regulation limiting the use, scope or
strength of cryptography.
Any Acquisitions We Make Could Disrupt Our Business and Harm Our Financial
Condition.
We may make investments in complementary companies, products or
technologies. Should we do so, our failure to successfully manage future
acquisitions could seriously harm our operating results. In the event of any
future purchases, we will face additional financial and operational risks,
including:
o difficulty in assimilating the operations, technology and
personnel of acquired companies;
o disruption in our business because of the allocation of
resources to consummate these transactions and the diversion of
management's attention from our existing business;
o difficulty in retaining key technical and managerial personnel
from acquired companies;
o dilution of our stockholders, if we issue equity to fund these
transactions;
o assumption of operating losses, increased expenses and
liabilities; and
o our relationships with existing employees, customers and
business partners may be weakened or terminated as a result of
these transactions.
We Experience Variations in Quarterly Operating Results and are Subject to
Seasonality, Both of Which May Result in a Volatile Stock Price.
In the future, as in the past, our quarterly operating results may vary
significantly resulting in a volatile stock price. Factors affecting our
operating results include:
o the level of competition;
o the size, timing, cancellation or rescheduling of significant
orders;
o new product announcements or introductions by current
competitors;
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o technological changes in the market for data security products
including the adoption of new technologies and standards;
o changes in pricing by current competitors;
o our ability to develop, introduce and market new products and
product enhancements on a timely basis, if at all;
o component costs and availability;
o our success in expanding our sales and marketing programs;
o market acceptance of new products and product enhancements;
o changes in foreign currency exchange rates; and
o general economic trends.
A Small Group of Persons Control a Substantial Amount of Our Common Stock and
Could Delay or Prevent a Change of Control.
Our board of directors, our officers and their immediate families and
related entities beneficially own approximately 36%, with Mr. T. Kendall Hunt
controlling approximately 33%, of the outstanding shares of our common stock not
including the shares being registered hereunder that are issuable (a) upon
conversion of our Series D preferred stock, (b) upon exercise of warrants
purchased in conjunction with the Series D preferred stock or (c) as dividends
upon the Series D preferred stock. If the foregoing categories of shares are
included as outstanding shares, the beneficial ownership percentages are 30% and
28%, respectively. As the chairman of the board of directors and our largest
stockholder, Mr. Hunt may exercise substantial control over our future direction
and operation and such concentration of control may have the effect of
discouraging, delaying or preventing a change in control and may also have an
adverse effect on the market price of our common stock.
Our Stock Price May be Volatile and You May Not be Able to Resell Your Shares At
or Above Acceptable Prices.
The market price of our common stock may fluctuate significantly in
response to factors, some of which are beyond our control, including the
following:
o actual or anticipated fluctuations in our operating results;
o changes in market valuations of other technology companies;
o announcements by us or our competitors of significant technical
innovations, contracts, acquisitions, strategic partnerships,
joint ventures or capital commitments;
o additions or departures of key personnel;
o future sales of common stock;
o any deviations in net revenues or in losses from levels expected
by the investment community; and
o trading volume fluctuations.
We Have Not Paid and Do Not Intend to Pay Dividends.
We have not paid any dividends on our common stock, and we do not
intend to pay cash dividends in the foreseeable future.
Certain Provisions of Our Charter and of Delaware Law Make a Takeover of Our
Company More Difficult.
Our corporate charter and Delaware law contain provisions, such as a
class of authorized but unissued preferred stock which may be issued by our
board without stockholder approval, that might enable our management to resist a
takeover of our company. Delaware law also limits business combinations with
interested stockholders. These provisions might discourage, delay or prevent a
change in our control or a change in our management. These provisions could also
discourage proxy contests, and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. The existence
of these provisions could limit the price that investors might be willing to pay
in the future for shares of our common stock.
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Future Issuances of Blank Check Preferred Stock May Reduce Voting Power of
Common Stock and May Have Anti-takeover Effects That Could Prevent a Change in
Control.
Our corporate charter authorizes the issuance of up to 500,000 shares
of preferred stock with such designations, rights, powers and preferences as may
be determined from time to time by our board of directors, including such
dividend, liquidation, conversion, voting or other rights, powers and
preferences as may be determined from time to time by the board of directors
without further stockholder approval. The issuance of preferred stock could
adversely affect the voting power or other rights of the holders of common
stock. In addition, the authorized shares of preferred stock and common stock
could be utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control.
U.s. Investors May Have Difficulties in Making Claims for Any Breach of Their
Rights as Holders of Shares Because Some of Our Assets and Executives are Not
Located in the United States.
Several of our executives are residents of Belgium, and a substantial
portion of our assets and those of some of our executives are located in
Belgium. As a result, it may not be possible for investors to effect service of
process on those persons located in Belgium, or to enforce judgments against
some of our executives based upon the securities or other laws of jurisdictions
other than Belgium. Moreover, we believe that under Belgian law there exist
certain restrictions on the enforceability in Belgium in original actions, or in
actions of enforcement of judgments rendered against us in courts outside
jurisdictions that are a party to the Brussels Convention on Jurisdiction and
the Enforcement of Judgments in Civil and Commercial Matters (as amended).
Actions for enforcement of such judgments may be successful only if the Belgian
court confirms the substantive correctness of the judgment of such court, and is
satisfied:
o that the judgment is not contrary to the principles of public
policy in Belgium or rules of Belgian public law;
o that the judgment did not violate the rights of the defendant;
o that the judgment is final under applicable law;
o that the court did not accept its jurisdiction solely on the
basis of the nationality of the plaintiff; and
o as to the authenticity of the text of the judgment submitted to
it.
Judgments rendered in the courts of parties to the Brussels Convention
will be enforceable by the courts of Belgium without reexamination of the merits
of the case provided such judgment is final and otherwise satisfies all of the
conditions provided for in this Convention. If proceedings have been brought in
one country, however, new proceedings in another country may be barred.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in, and that are or will be
incorporated by reference in, this prospectus constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, including without limitation, discussions of future expectations,
projections of results of operation or financial condition and statements with
respect to other forward-looking information. Forward-looking statements can be
identified by the use of progressive terminology, such as "may," "will,"
"expect," "anticipate," "believe", "intend", "estimate," "continue" or other
similar words. These statements are subject to known and unknown risks and
uncertainties that could cause our actual results of operation or financial
condition to differ materially from those contemplated by the statements.
Factors that might cause a difference between future projections and actual
results include those discussed in the section titled "Risk Factors" beginning
on page 7. Any forward-looking statements and other information contained in
this prospectus is current only as of its date, regardless of the time of
delivery of this prospectus or of any sale of the Shares. Therefore, the
information, and any forward-looking statements based on such information, are
subject to change. You should read carefully the entire prospectus, as well as
the documents incorporated by reference in the prospectus, in order to assess
the merits of any forward-looking statements and to make an informed investment
decision. In addition, important factors to consider in evaluating such
forward-looking statements include changes in external market factors, changes
in our business or growth strategy or an inability to execute our strategy due
to changes in our industry or the economy generally, the emergence of new or
growing competitors and various other competitive factors. In light of these
risks and uncertainties, there can be no assurance that the matters referred to
in the forward-looking statements contained in this prospectus will in fact
occur.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of our
common stock by the selling stockholders. If the warrants held by the selling
stockholders are exercised for cash, we intend to use the net proceeds generated
by such warrant exercise for working capital and general corporate purposes in
the ordinary course of business. Temporarily, we may invest the net proceeds
from the exercise of the warrants, if any, in high grade short-term interest
bearing investments.
-11-
SELLING STOCKHOLDERS
Under the terms of the Series D preferred stock, no holder of Series D
preferred stock or related warrants is entitled to convert any Series D
preferred stock into, or exercise any such warrants for, common stock, to the
extent that such right to effect such conversion, exercise or disposition would
result in the holder or any of its affiliates together beneficially owning more
than (a) 4.95% of the outstanding shares of common stock or (b) 19.99% of the
outstanding shares of common stock. Therefore, while included in the number of
shares offered in the table below, shares which the selling stockholder is
prevented from acquiring as a result of these provisions are not shown as
beneficially owned by the stockholder. Similarly, shares of common stock
acquirable upon exercise of warrants that are not exercisable within 60 days of
the date of this prospectus are included in the shares being offered, but not
considered to be beneficially owned pursuant to the rules promulgated by the
SEC. As a result, the number of shares that the holders of Series D preferred
stock may sell pursuant to this prospectus may exceed the number of shares of
common stock they would otherwise be deemed to beneficially own as determined
pursuant to Section 13(d) of the Exchange Act.
The table below sets forth the beneficial ownership of our common stock
by the selling stockholders as of October 27, 2003. Beneficial ownership
includes shares of outstanding common stock as of October 27, 2003, and shares
of common stock that a selling stockholder has the right to acquire within 60
days. Unless otherwise indicated, the selling stockholders have the sole power
to direct the voting and investment over the shares owned by them.
Except as indicated above, the number of shares that may be actually
sold by any selling stockholder will be determined by the selling stockholder.
Because the selling stockholders may sell all, some or none of the shares of
common stock which they hold, and because the offering contemplated by this
prospectus is not currently being underwritten, no estimate can be given as to
the number of or percentage of total shares of common stock that will be held by
the selling stockholders upon termination of the offering.
Total Common
Stock Owned Number of Shares Common Stock
Before the of Common Stock Owned After
Name Offering to be Offered the Offering
Ubizen N.V. 2,000,000(1) 2,000,000(1)
AIG DKR SoundShore Strategic Holding Fund Ltd. 57,500(2) 57,500(2)
BayStar Capital II, L.P. 690,000(3) 690,000(3)
Cranshire Capital, L.P. 172,500(4) 172,500(4)
Crestview Capital Fund II, LP 460,000(5) 460,000(5)
E*Capital Corporation 172,500(6) 172,500(6)
Gryphon Master Fund LP 172,500(7) 172,500(7)
J R Squared, LLC 460,000(8) 460,000(8)
JAS Securities, LLC 86,250(9) 86,250(9)
JMB Capital Partners, L.P. 460,000(10) 460,000(10)
Langley Partners, LP 460,000(11) 460,000(11)
Omicron Master Trust 287,500(12) 287,500(12)
OTAPE Investments LLC 143,750(13) 143,750(13)
Platinum Partners Value Arbitrage Fund LP 57,500(14) 57,500(14)
Redwood Partners II, LLC 115,000(15) 115,000(15)
SDS Merchant Fund, LP 690,000(16) 690,000(16)
TCMP3 Partners 46,000(17) 46,000(17)
Truk Opportunity Fund, LLC 23,000(18) 23,000(18)
Tuva Financial 46,000(19) 46,000(19)
Totals 6,600,000 6,600,000
-12-
1. Ubizen N.V. is a corporation organized under the laws of Belgium and is
governed by a board of directors. Accordingly, no natural person
exercises sole or shared voting or investment power over the shares
offered by this prospectus.
2. Includes 50,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 7,500 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. DKR Capital Partners L.P.
("DKR LP") is a registered investment adviser with the Securities
Exchange Commission and as such, is the investment manager to AIG DKR
SoundShore Strategic Holding Fund Ltd. (the "Fund"). DKR LP has
retained certain portfolio managers to act as the portfolio manager to
the Fund managed by DKR LP. As such, DKR LP and certain portfolio
managers have shared dispositive and voting power over the securities.
For shares offered by this prospectus, DKR LP has retained Basso
Securities to act as the portfolio manager to the Fund. Howard Fisher
is president of Basso Securities.
3. Includes 600,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 90,000 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. BayStar Capital Management,
LLC, a Delaware limited liability company, is the general partner of
BayStar Capital II, LP, and has the sole voting and investment power
with respect to the shares of our common stock that BayStar Capital II,
LP is offering in this prospectus. By reason of such relationship,
BayStar Capital Management, LLC may be deemed beneficial owner of these
shares. However, BayStar Capital Management, LLC disclaims such
beneficial ownership of these shares. There are three independent
managing members of BayStar Capital Management, LLC. Accordingly, no
person or "group" (as that term is defined in Section 13(d) of the
Securities Exchange Act of 1934 or Regulation 13D-G) controls BayStar
Capital Management, LLC.
4. Includes 150,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 22,500 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Mr. Mitchell P. Kopin,
President of Downsview Capital, Inc., the general partner of Cranshire
Capital, L.P., exercises sole voting or investment power in respect of
the securities held by Cranshire Capital, L.P.
5. Includes 400,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 50,000 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Mr. Richard Levy and Mr.
Stewart Flink share voting and investment power over the shares to be
resold. Mr. Flink is also the principal owner of Dillon Capital, Inc.,
a broker-dealer. Crestview Capital Fund II, LP acquired the shares to
be registered in the ordinary course of business and it had no
agreements, understandings or arrangements with any other persons,
either directly or indirectly, to dispose of the securities, at the
time of acquisition. Crestview Capital Fund II, LP paid cash for the
offered shares and did not receive the shares as transaction-based
compensation for investment banking services as underwriters.
6. Includes 150,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 22,500 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. E*Capital Corporation is
affiliated with Wedbush Morgan Securities, Inc., a registered
broker-dealer. Wedbush Morgan Securities, Inc. is a corporation
organized under the laws of California and is governed by a board of
directors. Accordingly, no natural person exercises voting or
investment power over the shares offered by this prospectus. E*Capital
Corporation acquired the shares to be registered in the ordinary course
of business and it had no agreements, understandings or arrangements
with any other persons, either directly or indirectly, to dispose of
the securities, at the time of acquisition. E*Capital Corporation paid
cash for the offered shares and did not receive the shares as
transaction-based compensation for investment banking services as
underwriters.
7. Includes 150,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 22,500 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Gryphon Partners, LP is the
general partner of Gryphon Master Fund, LP. Messrs. E.B. Lyon III and
E.B. Lyon IV share voting and investment power over the shares to be
resold.
8. Includes 400,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 60,000 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Messrs. Jeffrey Markowitz,
Richard Friedman and Richard Feldman are the sole members of J R
Squared, LLC, and share voting and investment power over the shares to
be resold.
9. Includes 75,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 11,250 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Mr. Andrew Smukler, as
managing member of JAS Securities, has voting and investment power over
the shares to be resold. JAS Securities, LLC is a registered
broker-dealer and acquired the shares to be registered in the ordinary
course of business. It had no agreements, understandings or
arrangements with any other persons, either directly or indirectly, to
dispose of the securities, at the time of acquisition. JAS Securities,
LLC paid cash for the offered shares and did not receive the shares as
transaction-based compensation for investment banking services as
underwriters.
10. Includes 400,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 60,000 shares
issuable upon exercise of warrants at a price of $3.47 per share that
expire on September 11, 2008. Smithwood Partners, LLC ("Smithwood") is
the general partner of JMB Capital Partners L.P. Mr. Jonathan Brooks is
the sole member and manager of Smithwood and thereby controls the
voting or investment power over the shares offered by this prospectus.
11. Includes 400,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 60,000 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Langley Capital, LLC is the
general partner of Langley Partners, L.P., and Mr. Jeffrey Thorp is the
sole managing member of Langley Capital, LLC, and thereby controls the
voting or investment power over the shares offered by this prospectus.
-13-
12. Includes 250,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 37,500 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Omicron Capital, L.P., a
Delaware limited partnership ("Omicron Capital"), serves as investment
manager to Omicron Master Trust, a trust formed under the laws of
Bermuda ("Omicron"), Omicron Capital, Inc., a Delaware corporation
("OCI"), serves as general partner of Omicron Capital, and Winchester
Global Trust Company Limited ("Winchester") serves as the trustee of
Omicron. By reason of such relationships, Omicron Capital and OCI may
be deemed to share dispositive power over the shares of our common
stock owned by Omicron, and Winchester may be deemed to share voting
and dispositive power over the shares of our common stock owned by
Omicron. Omicron Capital, OCI and Winchester disclaim beneficial
ownership of such shares of our common stock. Omicron Capital has
delegated authority from the board of directors of Winchester regarding
the portfolio management decisions with respect to the shares of common
stock owned by Omicron and, as of September 30, 2003, Mr. Olivier H.
Morali and Mr. Bruce T. Bernstein, officers of OCI, have delegated
authority from the board of directors of OCI regarding the portfolio
management decisions of Omicron Capital with respect to the shares of
common stock owned by Omicron. By reason of such delegated authority,
Messrs. Morali and Bernstein may be deemed to share dispositive power
over the shares of our common stock owned by Omicron. Messrs. Morali
and Bernstein disclaim beneficial ownership of such shares of our
common stock and neither of such persons has any legal right to
maintain such delegated authority. No other person has sole or shared
voting or dispositive power with respect to the shares of our common
stock being offered by Omicron, as those terms are used for purposes
under Regulation 13D-G of the Securities Exchange Act of 1934, as
amended. Omicron and Winchester are not "affiliates" of one another, as
that term is used for purposes of the Securities Exchange Act of 1934,
as amended, or of any other person named in this prospectus as a
selling stockholder. Accordingly, no natural person controls Omicron or
Winchester nor exercises sole or shared voting or investment power over
the shares offered by this prospectus.
13. Includes 125,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 18,750 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Mr. Ira Leventhal, a United
States citizen, may be deemed to have voting and dispositive power with
respect to the securities offered by this prospectus. Mr. Leventhal
disclaims beneficial ownership of these shares. OTAPE Investments LLC
is owned by OTA Financial Group, which also owns OTA LLC, a registered
broker-dealer. OTAPE Investments LLC acquired the shares to be
registered in the ordinary course of business and it had no agreements,
understandings or arrangements with any other persons, either directly
or indirectly, to dispose of the securities, at the time of
acquisition. OTAPE Investments LLC paid cash for the offered shares and
did not receive the shares as transaction-based compensation for
investment banking services as underwriters.
14. Includes 50,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 7,500 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Platinum Management (NY) LLC,
as General Partner of the Platinum Partners Value Arbitrage Fund LP,
exercises sole voting power over the shares being registered for resale
which Platinum Partners Value Arbitrage Fund LP has invested in.
15. Includes 100,000 shares issuable upon conversion of Series D Preferred
Stock at a conversion price of $2.00 per share and 15,000 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Mr. Michael Schwartz is the
sole managing member of Redwood Partners II, LLC, and thereby controls
the voting and investment power over the shares offered by this
prospectus. Redwood Partners II, LLC is an affiliate of Redwood
Partners, LLC, a registered broker-dealer. Redwood Partners II, LLC
acquired the shares to be registered in the ordinary course of business
and it had no agreements, understandings or arrangements with any other
persons, either directly or indirectly, to dispose of the securities,
at the time of acquisition. Redwood Partners II, LLC paid cash for the
offered shares and did not receive the shares as transaction-based
compensation for investment banking services as underwriters.
16. Includes 600,000 shares issuable upon conversion of Series D preferred
stock at a conversion price of $2.00 per share and 90,000 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. SDS Capital Partners, LLC, a
Delaware limited liability company, is the general partner of SDS
Merchant Fund, LP, and has the sole voting and investment power with
respect to the shares of our common stock that SDS Merchant Fund, LP is
offering in this prospectus. By reason of such relationship, SDS
Capital Partners, LLC may be deemed beneficial owner of these shares.
However, SDS Capital Partners, LLC disclaims such beneficial ownership
of these shares. Mr. Steve Derby is the managing member of SDS Capital
Partners, LLC. Mr. Derby disclaims beneficial ownership of the shares
of our common stock owned by SDS Merchant Fund, LP.
17. Includes 40,000 shares issuable upon conversion of Series D Preferred
Stock at a conversion price of $2.00 per share and 6,000 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Mr. Steven Slawson and Mr.
Walter Schenker, as principals of TCMP3, exercise investment and voting
control over the shares offered by this prospectus.
18. Includes 20,000 shares issuable upon conversion of Series D Preferred
Stock at a conversion price of $2.00 per share and 3,000 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008. Mr. Michael E. Fein and Mr.
Stephen E. Saltzstein, as principals of Atoll Asset Management, LLC,
the managing member of Truk Opportunity Fund, LLC, exercise investment
and voting control over the shares offered by this prospectus. Both Mr.
Fein and Mr. Saltzstein disclaim beneficial ownership of the common
stock owned by this selling stockholder.
19. Includes 40,000 shares issuable upon conversion of Series D Preferred
Stock at a conversion price of $2.00 per share and 6,000 shares
issuable upon exercise of warrants at an exercise price of $3.47 per
share that expire on September 11, 2008.
-14-
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the
selling stockholders identified on pages 12-14 of this prospectus. The shares
being registered are owned or, with respect to some of the selling stockholders,
may be acquired by the selling stockholders (a) upon exercise of warrants to
purchase common stock, (b) upon conversion of our Series D preferred stock into
shares of common stock or (c) as dividends paid by us on the preferred stock.
The selling stockholders, as used in this prospectus, includes donees, pledgees,
transferees or other successors in interest who may receive shares from the
selling stockholders after the date of this prospectus. The selling stockholders
will act independently of us in making decisions with respect to the timing,
manner and size of each sale of the common stock covered by this prospectus. The
selling stockholders may offer their shares of our common stock at various times
in one or more of the following transactions:
o in ordinary broker's transactions on the Nasdaq Small Cap Market
or any national securities exchange on which our common sStock
may be listed at the time of sale;
o in the over-the-counter market;
o in private transactions other than in the over-the-counter
market;
o in connection with short sales of other shares of our common
stock in which shares are redelivered to close out positioning;
o by pledge to secure debts and other obligations;
o in connection with the writing of non-traded and exchange-traded
call options, in hedge transactions and in settlement of other
transactions in standardized or over-the-counter options; or
o in a combination of any of the above transactions or by any
other legally available means.
The selling stockholders may sell their shares of our common stock at
market prices prevailing at the time of sale, at prices related to the
prevailing market prices, at negotiated prices or at fixed prices. The selling
stockholders may, but need not, use broker-dealers to sell their shares of our
common stock. If broker-dealers are used, such broker-dealers will either
receive discounts or commissions from the selling stockholders, or they will
receive commissions from purchasers of shares of our common stock for whom they
acted as agents. This compensation may exceed customary commissions.
The selling stockholders also may resell all or a portion of
the shares of our common stock in open market transactions in reliance upon Rule
144 under the Securities Act, provided that such selling stockholders meet the
criteria and conform to the requirements of that rule. The selling stockholders
and the broker-dealers to or through whom sale of the shares of our common stock
may be made could be deemed to be "underwriters" within the meaning of Section
2(a)(11) of Securities Act, and their commissions or discounts and other
compensation received in connection with the sale of the shares may be regarded
as underwriters' compensation, if the SEC determines that they purchased the
shares in order to resell them to the public. To the extent that any selling
stockholder is an affiliate of a broker-dealer, and such selling stockholder did
not acquire their securities in the ordinary course of business or had an
agreement or understanding to dispose of the securities, such selling
stockholder is designated as an "underwriter" within the meaning of the
Securities Act.
The selling stockholders have not advised us of any specific plans for
the distribution of the shares of our common stock covered by this prospectus.
When and if we are notified by any selling stockholder that any material
arrangement has been entered into with a broker-dealer or underwriter for the
sale of a material portion of the shares covered by this prospectus, a
post-effective amendment to the registration statement will be filed with the
SEC. This amendment will include the following information:
o the name of the participating broker-dealer(s) or underwriters;
o the number of shares involved;
o the price or prices at which the shares were sold by the selling
stockholder;
o the commissions paid or discounts or concessions allowed by the
selling stockholder to the broker-dealers or underwriters; and
o other material information.
Under agreements which may be entered into by the selling security
holders, underwriters who participate in the distribution of shares may be
entitled to indemnification by the selling security holders against certain
liabilities, including liabilities under the Securities Act. We have also agreed
to indemnify, in certain circumstances, the selling security holders and certain
control and other persons related to the foregoing persons against certain
liabilities, including liabilities under the Securities Act. The selling
security holders have agreed to indemnify us in certain circumstances, as well
as certain related persons, against certain liabilities, including liabilities
under the Securities Act.
-15-
We have advised the selling stockholders that the anti-manipulation
rules promulgated under the Securities Exchange Act, including Regulation M, may
apply to sales of the shares offered by the selling stockholders. We have agreed
to pay all costs relating to the registration of the shares. Any commissions or
other fees payable to broker-dealers or otherwise in connection with any sale of
the shares will be paid by the selling stockholders or other party selling the
shares.
LEGAL MATTERS
The validity of the shares of common stock offered was passed upon for
us by Pepper Hamilton LLP.
EXPERTS
Our consolidated financial statements appearing in our annual report on
Form 10-K for the year ended December 31, 2002, have been audited by KPMG LLP,
independent accountants, as set forth in their report thereon (the "KPMG
Report") included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon the KPMG Report upon the authority of KPMG LLP as experts in
accounting and auditing.
-16-
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"). We file annual, quarterly and special
reports, proxy statements and other information with the SEC. You may read and
copy any document we file at the SEC's public reference room at the SEC's
principal office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of this public reference room
by calling 1-800-SEC-0330. Our SEC filings are also available to the public from
the SEC's web site at http://www.sec.gov. In addition, any of our SEC filings
may also be inspected and copied at the offices of The Nasdaq Stock Market,
Inc., 9801 Washingtonian Blvd., Gaithersburg, MD 20878.
We have filed with the SEC a registration statement on Form S-3/A
covering the securities offered by this prospectus. You should be aware that
this prospectus does not contain all of the information contained or
incorporated by reference in that registration statement and its exhibits and
schedules, particular portions of which have been omitted as permitted by the
SEC rules. For further information about us and our securities, we refer you to
the registration statement and its exhibits and schedules. You may inspect and
obtain the registration statement, including exhibits, schedules, reports and
other information we have filed with the SEC, as described in the preceding
paragraph. Statements contained in this prospectus concerning the contents of
any document to which we refer you are not necessarily complete and in each
instance we refer you to the applicable document filed with the SEC for more
complete information.
The SEC allows us to incorporate by reference the information we file
with them, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is
considered to be part of this prospectus, and the information that we file at a
later date with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below as well as
any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act:
o our annual report on Form 10-K for the fiscal year ended
December 31, 2002;
o our quarterly reports on Form 10-Q for the quarters ending March
31 and June 30, 2003; and
o the description of our Common Stock which is contained in our
registration statement on Form S-4 (SEC File No. 333-35563)
filed under the Exchange Act, including any amendment or reports
filed for the purpose of updating this description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: VASCO Data Security International,
Inc., 1901 South Meyers Road, Suite 210, Oakbrook Terrace, Illinois 60181,
Attention: Corporate Secretary, (630) 932-8844.
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT AUTHORIZED
ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE SELLING
SECURITYHOLDERS ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE
THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF THE DOCUMENT.
DEALER PROSPECTUS DELIVERY OBLIGATION
Until twenty-five days after the date of this prospectus, all dealers
that effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealer's obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
-17-
VASCO DATA SECURITY INTERNATIONAL, INC.
----------------------------------------------------------------
PROSPECTUS
----------------------------------------------------------------
7,500,000 SHARES
COMMON STOCK
October 29, 2003
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND
DISTRIBUTION
The following table sets forth the various expenses payable by us in connection
with the sale and distribution of the securities offered in this offering. All
of the amounts shown are estimated except the Securities and Exchange Commission
registration fee.
Securities and Exchange Commission
Registration fee $ 1,753.51
Printing expenses 800.00
Legal fees and expenses 15,000.00
Accounting fees and expenses 4,000.00
Miscellaneous expenses 500.00
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Total $22,053.51
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ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify directors, officers, employees and agents against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement in connection with specified actions, suits, or proceedings whether
civil, criminal, administrative, or investigative (other than an action by or in
the right of the corporation--a "derivative action"), if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard is applicable in the case of derivative actions, except that
indemnification is permitted only for expenses (including attorneys' fees)
incurred in connection with the defense or settlement of such action, and the
statute requires court approval before there can be any indemnification for
expenses where the person seeking indemnification has been found liable to the
corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, bylaws,
disinterested director vote, stockholder vote, agreement, or otherwise.
Article V of the Bylaws of Registrant provides that Registrant shall indemnify
and hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person (an "Indemnitee") who
was or is made or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director or officer of the
Registrant or, while a director or officer of the Registrant, is or was serving
at the written request of the Registrant as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or nonprofit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses (including
attorneys' fees) reasonably incurred by such Indemnitee. Notwithstanding the
preceding sentence, except as otherwise provided in Section 3 of Article V of
such Bylaws, the Registrant shall be required to indemnify an Indemnitee in
connection with a proceeding (or part thereof) commenced by such Indemnitee only
if the commencement of such proceeding (or part thereof) by the Indemnitee was
authorized by the Board of Directors.
ITEM 16. EXHIBITS
-----------------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION
-----------------------------------------------------------------------------------------------------------------------------
3.1 (1) Certificate of Incorporation
-----------------------------------------------------------------------------------------------------------------------------
3.2 (1) Bylaws, as amended
-----------------------------------------------------------------------------------------------------------------------------
3.3 (2) Certificate of Designations, Rights and Preferences of the Series D Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------
3.4 (2) Certificate of Amendment to the Certificate of Designations, Rights and Preferences of the Series D
Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------
3.5 (2) Form of Series D Warrant
-----------------------------------------------------------------------------------------------------------------------------
5.1 (3) Opinion of Pepper Hamilton LLP
-----------------------------------------------------------------------------------------------------------------------------
23.1 (3) Consent of KPMG LLP
-----------------------------------------------------------------------------------------------------------------------------
23.2 (3) Consent of Pepper Hamilton LLP
-----------------------------------------------------------------------------------------------------------------------------
24.1 (2) Power of Attorney (included in signature page)
-----------------------------------------------------------------------------------------------------------------------------
(1) Incorporated by reference to the Registrant's Registration Statement on Form
S-4 (File No. 333-35563) filed on September 12, 1997
(2) Filed herewith.
(3) Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in the registration statement; provided,
however, that the undertakings set forth in paragraphs (i) and (ii) above do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered hereby which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3/A and has duly caused this amended
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in DuPage County, State of Illinois, on the 29th day of
October, 2003.
VASCO DATA SECURITY INTERNATIONAL, INC.
By: /s/ T. Kendall Hunt
---------------------------------------
T. Kendall Hunt
Chief Executive Officer and Chairman of
the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the date indicated.
Each person in so signing also makes and constitutes T. Kendall Hunt, Chairman
of the Board of Directors, his true and lawful attorney-in-fact, in his name,
place and stead, to execute and cause to be filed with the Securities and
Exchange Commission, any or all amendment to this Registration Statement.
NAME TITLE DATE
---- ----- ----
/s/ T. Kendall Hunt Chief Executive Officer and Chairman of
--------------------------- the Board of Directors
T. Kendall Hunt (Principal Executive
Officer)
/s/ Clifford K. Bown Executive Vice President and Chief
----------------------- Financial Officer
Clifford K. Bown (Principal Financial and
Accounting Officer)
/s/ Michael P. Cullinane Director
---------------------------
Michael P. Cullinane
/s/ Michael A. Mulshine Director
-----------------------
Michael A. Mulshine
/s/ Forrest D. Laidley Director
---------------------------
Forrest D. Laidley
/s/ John R. Walter Director
---------------------------
John R. Walter
EXHIBIT INDEX
-----------------------------------------------------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION
-----------------------------------------------------------------------------------------------------------------------------
3.1 (1) Certificate of Incorporation
-----------------------------------------------------------------------------------------------------------------------------
3.2 (1) Bylaws, as amended
-----------------------------------------------------------------------------------------------------------------------------
3.3 (2) Certificate of Designations, Rights and Preferences of the Series D Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------
3.4 (2) Certificate of Amendment to the Certificate of Designations, Rights and Preferences of the Series D
Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------
3.5 (2) Form of Series D Warrant
-----------------------------------------------------------------------------------------------------------------------------
5.1 (3) Opinion of Pepper Hamilton LLP
-----------------------------------------------------------------------------------------------------------------------------
23.1 (3) Consent of KPMG LLP
-----------------------------------------------------------------------------------------------------------------------------
23.2 (3) Consent of Pepper Hamilton LLP
-----------------------------------------------------------------------------------------------------------------------------
24.1 (2) Power of Attorney (included in signature page)
-----------------------------------------------------------------------------------------------------------------------------
(1) Incorporated by reference to the Registrant's Registration Statement on Form
S-4 (File No. 333-35563) filed on September 12, 1997
(2) Filed herewith.
(3) Previously filed.