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Registration No. 333-62544
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
South Carolina 57-0910139
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
115 Atrium Way, Suite 228
Columbia, South Carolina 29223
(803) 736-5595
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Harry P. Langley
Chief Executive Officer
115 Atrium Way, Suite 228
Columbia, South Carolina 29223
(803) 736-5595
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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, check the following box and list the
Securities Act registration statement number of earlier effective registration
statement for the same offering. [ ] _____________________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, 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 Amount of
TITLE OF EACH CLASS OF Amount to be Offering Price Per Aggregate Offering Registration
SECURITIES TO BE REGISTERED Registered (1) Unit (2) Price (2) Fee (3)
Common Stock................... 536,560 $3.50 $1,804,460 $452
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(1) The number of shares of common stock registered hereunder includes the
sum of 210,000 shares included in the initial filing of this Form S-3
on June 7, 2001 (comprised of 140,000 currently outstanding shares, and
70,000 shares issuable upon exercise of currently outstanding common
stock purchase warrants) and 326,560 additional shares included in this
Amendment No. 1 to the Form S-3, all of which are issuable upon
exercise of currently outstanding common stock purchase warrants.
Pursuant to Rule 416(a), this registration statement also registers
such indeterminate number of additional shares as may become issuable
under such common stock purchase warrants in connection with shares
splits, share dividends, and similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, based on the
average of the high and low prices of 210,000 shares the Registrant's
common stock reported on the Nasdaq National Market on June 6, 2001
(included in the initial filing of this Form S-3 on June 7, 2001), and
the high and low prices of 326,560 shares of the Registrant's common
stock reported on the Nasdaq National Market on August 3, 2001
(included in this Amendment No. 1 to the Form S-3).
(3) Comprised of the sum of $166 paid upon the initial filing of this Form
S-3 on June 7, 2001, and an additional $286 paid in conjunction with
the filing of this Amendment No. 1 to the Form S-3.
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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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, dated August 6, 2001
PROSPECTUS
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
536,560
SHARES OF COMMON STOCK
Integrated Business Systems and Services, Inc. ("IBSS") has issued
140,000 shares of IBSS common stock and warrants for the purchase of 70,000
shares of IBSS common stock in a private placement. We have also issued warrants
for the purchase of 326,560 shares of IBSS common stock. In each case, we issued
the securities under one or more exemptions from the registration requirements
of the Securities Act of 1933 and applicable state securities laws.
These 140,000 currently outstanding shares of common stock and the
396,560 shares that may be purchased upon exercise of the warrants are held by
the security holders listed in the Selling Shareholders table located on page 14
of this prospectus. Some of these shareholders may wish to sell these shares in
the future, and this prospectus allows them to do so. We will not receive any of
the proceeds from any sale of any of these shares by these shareholders, but we
have agreed to bear the expenses of registration of the shares by this
prospectus.
Our common stock is listed on the Nasdaq National Market under the
symbol "IBSS." The last sale price of our common stock as reported on the Nasdaq
National Market on August 3, 2001, was $3.50 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH LEVEL OF INVESTMENT RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
August 8, 2001.
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TABLE OF CONTENTS
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The Company...................................................................3
Risk Factors..................................................................4
Advisory Note Regarding Forward-Looking Statements...........................13
Use of Proceeds..............................................................13
Selling Shareholders.........................................................13
Plan of Distribution.........................................................14
Experts......................................................................15
Legal Matters................................................................15
Available Information........................................................15
Incorporation of Certain Documents by Reference..............................16
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION THAT IS DIFFERENT. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED. THE INFORMATION IN THIS PROSPECTUS IS COMPLETE AND ACCURATE AS OF THE
DATE ON THE COVER, BUT THE INFORMATION MAY CHANGE IN THE FUTURE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN
CONNECTION WITH THIS OFFERING, AND, IF GIVEN OR MADE, THAT INFORMATION OR THOSE
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY INTEGRATED
BUSINESS SYSTEMS AND SERVICES, INC. OR BY THE SELLING SHAREHOLDERS. THIS
PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS. THIS PROSPECTUS
IS NOT AN OFFER OR A SOLICITATION IN ANY JURISDICTION WHERE THE OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR
SOLICITATION. THE DELIVERY OF THIS PROSPECTUS AND ANY SALE MADE UNDER THIS
PROSPECTUS SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF INTEGRATED BUSINESS SYSTEMS AND SERVICES,
INC. OR THE SELLING SHAREHOLDERS SINCE THE DATE OF THIS PROSPECTUS OR THE DATE
OF ANY DOCUMENT INCORPORATED IN THIS PROSPECTUS.
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THE COMPANY
Integrated Business Systems and Services, Inc. is a national provider
of infrastructure software that applies a new, more cost-effective approach in
systems integration and application development technologies for large
manufacturing and service industries. Our software is currently enabling
businesses in multiple industries throughout the country to monitor and
integrate the real-time flow of their mission-critical operating information
more rapidly and cost-effectively than any other currently available integration
products.
Synapse is our internally-developed, patent-pending software that is
the core of our ever expanding suite of Synapse-based products. We generate our
revenues primarily through the licensing, installation and servicing of these
products. Unlike the traditional object-oriented custom programming associated
with our competitors' products, Synapse utilizes a novel, highly flexible and
adaptable, rules-based architecture. We believe this architecture makes Synapse
especially well-suited for the growing number of businesses that have been
unable to effectively overcome the substantial time and cost hurdles they face
in attempting to streamline and monitor their flow of real-time transaction
information. Most large enterprises need this information flow to occur
seamlessly and instantaneously, both internally, through their already installed
and typically incompatible, multi-system operations, and externally, through the
systems of their vendors, customers and other trading partners. Using our
specially-developed Synapse applications, we provide turn-key solutions to
address these needs.
In addition to being more easy-to-implement, more flexible, and more
fully scalable than the systems currently offered by our competitors, we believe
that one of Synapse's most distinguishing advantages is its demonstrated ability
to allow businesses to avoid the significant time and expense of having to
change their existing business processes and legacy systems solely in order to
accommodate the installation of the applications offered by our competitors.
Our growth strategy seeks to use Synapse to rapidly capitalize on the
absence in the current technology markets of a connectivity and tracking
solution that is as affordable, as easy-to-implement, and as fully-scalable as
our Synapse software engine. Our current line of Synapse-based products
includes:
o SYNAPSE MANUFACTURING (TM) - providing manufacturing plant
automation, such as shop floor tracking and data collection,
for customers that have already installed or may be planning
to install enterprise resource planning (ERP) systems.
o SYNAPSE B2X (TM) - providing seamless integration between
disparate systems and applications, making it especially
suited for application service provider (ASP) enablement and
for integrating a customer's internal applications with its
external supply chain.
o SYNAPSE FOR PRINTING (TM) - providing a fully integrated,
turn-key approach for the printing industry's publishing and
distribution processes, including web-based, front-end
ordering and interface capabilities with any high volume
printing equipment and legacy application software.
o SYNAPSE EAI+ (TM) - providing enterprise modeling and
application integration suitable for multiple industries.
During the past twenty-two months, we have won contracts with
organizations in multiple industries, including the following:
o FURNITURE - Berkline Corporation, a subsidiary of Lifestyles
Furnishings International, Ltd.
o AUTOMOTIVE - Reeves Brothers and BRAIN North America, Inc.
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o TEXTILE AND APPAREL - Fruit of the Loom and Americal
Corporation
o HUMAN RESOURCES - WilCam Systems
o PRINTING - Oregon State Printing
While we remain pleased by the strong acceptance of our Synapse
software by these organizations, we recognize that its capabilities extend far
beyond their respective industry groups.
During the same twenty-two month period, we have also established or
strengthened our strategic relationships with a variety of national systems
integrators (The Thomas Group and The Silenas Group), application software
vendors (Eigner+Partner and BRAIN North America, Inc.), infrastructure
technology vendors (Symbol Technologies, Inc., AT&T and Sun Microsystems, Inc.),
and automotive engineering research institutions (Oakland University in
Detroit).
Our common stock is listed on the Nasdaq National Market under the
symbol "IBSS". We were founded as a South Carolina corporation in 1990 to
provide software consulting and related services to the manufacturing industry.
Since that time, we have evolved from being a pure service provider to becoming
a much more product oriented enterprise. In this connection, we note that the
Synapse systems which comprise the fundamental core of our current
product-driven revenues were only released to the market in late 1999.
Our principal executive offices are located at 115 Atrium Way, Suite
228, Columbia, South Carolina, 29223 where our telephone number is (803)
736-5595. We also maintain an office in Detroit, Michigan.
RISK FACTORS
An investment in our common stock involves a significant degree of
risk. You should not invest in our common stock unless you can afford to lose
your entire investment. You should consider carefully the following risk factors
and other information included in this prospectus before you decide to purchase
any securities issued by us. You should also carefully read the cautionary
statement following the "Risk Factors" regarding the use of forward looking
statements.
RISKS RELATED TO OUR COMPANY
WE HAVE A LARGE ACCUMULATED DEFICIT, WE EXPECT FUTURE LOSSES, AND WE MAY NEVER
ACHIEVE OR MAINTAIN PROFITABILITY.
We have experienced operating losses in each of our fiscal years since
January 1, 1995. As of March 31, 2001, we had an accumulated deficit of
$10,537,806. In addition, since 1997, we have continued to allocate an
increasing proportion of our internal resources to research and development
activities associated with the development of our current suite of new software
products. During the same period, we also undertook a complete restructuring of
our sales and marketing organization and commenced several new customer
acquisition strategies. The execution of these marketing initiatives required
additional staffing resources and other related expenditures. This strategy of
increased emphasis on new product development and the suspension of much of our
traditional sales activities while we began implementing our sales team
reorganization resulted in a substantial reduction in our traditional service
revenues during the affected periods. Despite our history of losses, we believe
it is vital to our future success that we continue to invest heavily in sales
and marketing, although at a lower percentage of revenue than our investment in
this area during our most recent fiscal years. Nevertheless, if expenditures
related to our sales and marketing and the expansion of our operations are not
accompanied or shortly followed by significantly increased revenue, our losses
could be even greater than expected until we are
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able to delay or reduce these expenditures. While we believe profitability is
achievable in 2002, many factors, including the factors described in this
prospectus, may result in our incurring of losses in 2001 and 2002. We will need
to significantly increase our quarterly revenues to achieve profitability. We
cannot predict when we will operate profitably, if at all.
SIGNIFICANT UNANTICIPATED FLUCTUATIONS IN OUR ACTUAL OR ANTICIPATED QUARTERLY
REVENUES AND OPERATING RESULTS MAY CAUSE US NOT TO MEET SECURITIES ANALYSTS' OR
INVESTORS' EXPECTATIONS AND MAY RESULT IN A DECLINE IN OUR STOCK PRICE.
Our quarterly operating results have fluctuated significantly in the
past and may vary significantly in the future. Moreover, as a result of our
limited operating history with our new suite of Synapse-based software products
and the evolving nature of the markets in which we compete, we may have
difficulty accurately forecasting our revenue in any given period. If our
revenues, operating results, earnings or future projections are below the levels
expected by investors or securities analysts, our stock price is likely to
decline. As a result of the factors discussed below, we believe that quarterly
revenues and operating results are difficult to forecast, and period-to-period
comparisons of our historical results of operations are not necessarily
meaningful and should not be relied upon as indications of trends or of future
performance.
Our stock price is subject to the volatility generally associated with
Internet, software and technology stocks in general, and may also be affected by
broader market trends unrelated to our performance. We also expect to experience
significant fluctuations in our future quarterly revenues and operating results
as a result of many factors specific to our operations, including:
o the difficulty in predicting the size and timing of our customer orders
o the mix of our products and services sold, and the mix of our
distribution channels
o the lengthy sales cycle for some of our products
o the market acceptance of our products
o the terms and timing of our financing activities
o whether we are able to successfully expand our sales and marketing
programs
o the possible loss of our key personnel
o the difficulty in predicting the amount and timing of employee stock
option exercises
Our revenues and operating results depend upon the volume and timing of
customer orders and payments, and the date of product delivery. New software
licensing, service and maintenance contracts may not result in revenues in the
quarter in which the contracts are signed, and we may not be able to predict
accurately when revenues from these contracts will be recognized. Historically a
substantial portion of our revenues has been derived from large licensing and
software implementation orders. We expect this trend to continue for the
foreseeable future. We also expect that increases in the dollar size of
individual license transactions will increase the risk of fluctuation in future
quarterly results. We realize substantially higher gross margins on our license
revenues compared to our services and maintenance revenues. Consequently, our
margins for any particular quarter will be highly dependent on the mix of
license, service and maintenance revenues in that quarter. If we cannot generate
large customer orders, or customers delay or cancel such orders in a particular
quarter, it will have a material adverse effect on our revenues and, more
significantly on a percentage basis, on our net income or loss in that quarter.
In addition, we are subject to employer payroll taxes when our
employees exercise their stock options. The employer payroll taxes are assessed
on each employee's gain, which is the difference between the price of our common
stock on the date of exercise and the exercise price. During a particular
period, these payroll taxes could be material. These employer payroll taxes
would be recorded as an expense and are assessed at tax rates that vary
depending upon the employee's taxing jurisdiction in the period such options are
exercised based on actual gains realized by employees. However, because we are
unable to predict how many stock options will be exercised and at what price
during any particular period, we cannot predict, the amount, if any, of employer
payroll expense that may be recorded in a future period or the impact on our
future financial results.
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VARIATIONS IN THE TIME IT TAKES US TO SELL OUR PRODUCTS MAY CAUSE FLUCTUATIONS
IN OUR OPERATING RESULTS.
Our customers generally consider a wide range of issues before
committing to purchase our products, including product benefits, the ability to
operate with existing and future computer systems, the ability to accommodate
increased transaction volumes, and product reliability. Some of our customers
are addressing these issues for the first time when they consider whether to buy
our products and services. As a result, we or other parties must educate
potential customers on the use and benefits of our products and services. In
addition, the purchase of our products generally involves a significant
commitment of capital and other resources by a customer. This commitment often
requires significant technical review, assessment of competitive products and
approval at a number of management levels within a customer's organization. Our
sales cycles may vary based on the industry in which the potential customer
operates, and is difficult to predict for any particular license transaction.
Because of the number of factors influencing the sales process, the period
between our initial contact with a new customer and the time when we recognize
revenue from that customer varies widely in length. Our sales cycles typically
range from two to six months. For larger opportunities with new customers,
however, these cycles can be longer. The length and variability of our sales
cycle makes it difficult to predict whether particular sales will be concluded
in any given quarter. If one or more of our license transactions are not
consummated in a given quarter, our results of operations for that quarter may
be below our expectations and the expectations of analysts and investors.
WE HAVE HISTORICALLY DERIVED SUBSTANTIALLY ALL OF OUR REVENUE FROM A SMALL
NUMBER OF CUSTOMERS IN THE MANUFACTURING INDUSTRY, AND OUR REVENUE COULD DECLINE
IF WE LOSE A MAJOR CUSTOMER OR SIGNIFICANT DOWNTURNS OCCUR IN ANY OF OUR
CUSTOMER'S INDUSTRIES.
We have generated a substantial portion of our revenue from a limited
number of customers, substantially all of which are in the manufacturing
industry. We have recently begun directing a significant amount of our sales and
marketing efforts toward companies in other industries and other vertical
markets, particularly for business-to-business integration and enablement of
application service providers. Nevertheless, we expect that a small number of
customers in the manufacturing industry will continue to account for a
substantial portion of our revenue for the foreseeable future. Any significant
decline in the demand for, and market acceptance of, our software in the
manufacturing industry of any of our customers would hurt what we anticipate for
our 2001 results of operations. We believe that many of our current customers
will continue to provide a substantial portion of our revenue through additional
license, implementation services and maintenance fees. In 2000, our largest
customer accounted for more than 46% of our revenue and our second largest
customer accounted for more than 36% of our revenue. Consequently, the loss of
even one customer could have a material adverse effect on our revenue. Moreover,
as we continue to market our products in new vertical markets, we expect that
customers in some of those new vertical markets are likely to have different
requirements and may require us to change our product design or features, sales
methods, support capabilities or pricing policies. If we fail to successfully
address these new vertical markets, we may experience decreased sales in future
periods.
IF WE DO NOT EFFECTIVELY COMPETE WITH NEW AND EXISTING COMPETITORS, OUR REVENUES
AND OPERATING MARGINS WILL DECLINE.
The market for our products is intensely competitive, evolving and
subject to rapid technological change. We expect the intensity of competition to
increase in the future. As a result of increased competition, we may have to
reduce the price of our products and services, and we may experience reduced
gross margins and loss of market share, any one of which could significantly
reduce our future revenues and operating results. Our company and our products
are not well known in the marketplace, and we face intense competition from a
variety of competitors with greater market visibility. Our current competitors
include vendors offering enterprise application integration, or EAI,
business-to-business integration, or B2B, business-to-customer integration, or
B2C, and traditional manufacturing enterprise systems, or MES, software
products. A number of other companies are offering products that address
different aspects of our solution, including CamStar Systems, Inc., Apriso
Corporation (formerly CIM Vision International), DataSweep, Inc., and SynQuest,
Inc. Our B2X products compete against BEA
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Systems, Inc., NEON Systems, Inc. (to be acquired by Sybase, Inc.), SeeBeyond
Technology Corporation, TIBCO Software Inc., and Vitria Technology, Inc.
Additional competition is expected from other established and emerging
companies. Also, we may face pricing issues posed by our current competitors and
new entrants in the future.
We believe that the primary competitive factors which affect the market
for our products and services include product function and features; quality of
service offered; performance and cost; ease of implementation; the
"time-to-benefit" factor (the time period from identification of technology need
or "fix" to delivery of the application solution); quality of customer support
services; customer training and documentation; and product reputation. The
relative weight of each of these factors is customer-specific. Although we
believe that our products and services carry the most competitive advantage with
respect to each of these factors, we may not be able to maintain our position
against current and future competition.
Our current suite of software products and our markets are relatively
new and are evolving rapidly. Because we have from inception primarily focused
on product development, we have less experience than many of our competitors in
marketing and selling our products. During the past twelve months, we have
undertaken a substantial restructuring of our sales and marketing team, and have
begun a more direct sales and marketing strategy. There can be no assurance that
we will be successful in marketing and selling our products under our new
strategies or that our products will continue to achieve market acceptance. Even
if they do continue to achieve market acceptance, there can be no assurance that
our products and services can be sold at prices that are sufficient to enable us
to sustain and expand our operations. We also may not be able to maintain our
competitive position against current and potential competitors, especially those
with significantly greater resources.
WE MUST EXPAND OUR SALES FORCE AND OUR NETWORK OF DISTRIBUTION PARTNERS IN ORDER
TO SUCCESSFULLY SELL OUR PRODUCTS.
We have recently implemented a direct sales model under which we sell
our products both through our direct sales force and through indirect sales
channels such as resellers, systems integrators, application software vendors
and infrastructure software companies. We are currently investing, and plan to
continue investing significant resources to expand our direct sales force and
our relationships with these third parties. We may not be successful in
expanding our direct sales force or other distribution channels, and even if we
are, such expansion might not result in an increase in our revenues. If we fail
to maintain our existing relationships with indirect sales channel arrangements
or fail to establish new ones, or if our revenue does not increase
correspondingly with the expenses we incur in pursuing such relationships, our
business will suffer.
IF WE DO NOT RETAIN OUR KEY MANAGEMENT PERSONNEL AND ATTRACT AND RETAIN OTHER
HIGHLY SKILLED EMPLOYEES, OUR BUSINESS WILL SUFFER.
Our future success depends on the skills, experience and performance of
our senior management team, other key personnel, and their ability to operate
effectively, both individually and as a group. Each of these persons is bound by
an employment agreement with the company, and we maintain "key man" insurance in
the amount of $1 million on the lives of each of Harry P. Langley, President and
Chief Executive Officer, George E. Mendenhall, Executive Vice President, and
Stuart E. Massey, Vice President of Engineering. Nevertheless, recovery under
such insurance may not be adequate to compensate us for the full impact
resulting from the death of any one or more these officers. If any of our senior
management or other key research, engineering and development or sales and
marketing personnel were to leave the company, it would be difficult to replace
them, and our business would be harmed. Our success also depends on our ability
to recruit, retain and motivate highly skilled sales, marketing and engineering
personnel. We face significant competition for individuals with the skills
required to develop, market and support our products and services. We believe
that attracting and retaining these personnel is particularly difficult for us
because:
o the market for connectivity infrastructure software is still
emerging
o our company and our products are not yet widely known in the
marketplace
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o the relative scarcity of qualified technical personnel in the
Columbia, South Carolina metropolitan area makes it difficult
to attract and retain technical personnel.
We cannot provide assurance that we will be able to recruit and retain
sufficient numbers of these highly skilled employees. If we fail to do so, our
ability to compete will be significantly harmed.
THE RAPID GROWTH OF OUR OPERATIONS COULD STRAIN OUR RESOURCES AND CAUSE OUR
BUSINESS TO SUFFER.
Our ability to successfully offer products and services and implement
our business plan in a rapidly evolving market requires an effective planning
and management process. We are increasing the scope of our operations and the
size of our direct sales force. We have recently increased our headcount
substantially.
Between September 30, 1999 and March 31, 2001, our total number of
employees more than doubled, increasing from 25 to 54 people. The growth
necessitated by our need to properly staff and direct appropriate resources
toward our business growth strategy has placed and will continue to place a
significant strain on our management systems, infrastructure and resources. We
expect that we will need to continue to improve our financial and managerial
controls, reporting systems and procedures. We will also need to expand, train
and manage our workforce. Furthermore, we expect that we will be required to
manage an increasing number of relationships with various customers, strategic
alliance partners and other third parties. Failure to expand any of the
foregoing areas efficiently and effectively could interfere with the growth of
our business as a whole.
DEFECTS IN OR SLOW PERFORMANCE OF OUR SOFTWARE PRODUCTS COULD DIMINISH DEMAND
FOR OUR PRODUCTS AND CAUSE COSTLY LIABILITY, WHICH WOULD ADVERSELY AFFECT OUR
OPERATING RESULTS.
The Synapse software products we offer are internally complex. Complex
software may contain errors or defects, particularly when first introduced or
when new versions or enhancements are released. Although we conduct extensive
testing, we may not discover software defects that affect our current or new
products or enhancements until after they are sold. Although we have not
experienced any material software defects to date, any errors, defects or slow
performance that is discovered could result in:
o loss of revenue
o product returns or order cancellations
o delay in market acceptance of our products
o diversion of our development resources
o distraction of our management
o damage to our customer relationships and our reputation
o increased service and warranty costs
o costly litigation defense
Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in our
license agreements may not be effective as a result of existing or future
federal, state or local laws or ordinances or unfavorable judicial decisions.
Although we have not experienced any product liability claims to date, sale and
support of our products entails the risk of such claims, which could be
substantial in light of customers' use of many of our products in
mission-critical applications. We do not maintain product liability insurance.
If a claimant brings a product liability claim against us, it could have a
material adverse effect on our business, results of operations and financial
condition.
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RISKS RELATED TO OUR INDUSTRY
IF WE FAIL TO ADAPT TO THE RAPID TECHNOLOGICAL CHANGE WHICH CHARACTERIZES OUR
MARKETS, WE COULD LOSE MARKET SHARE OR OUR PRODUCTS COULD BECOME OBSOLETE.
The market for our current suite of software products is characterized
by:
o rapid technological change
o frequent new product introductions and enhancements
o uncertain product life cycles
o changing customer requirements
o evolving industry standards
The introduction of products embodying new technologies, the emergence
of new industry standards or changes in customer requirements could render some
or all of our existing products obsolete and unmarketable. Moreover, decreases
in the cost of existing products or services could enable our current or
potential customers to fulfill their own needs for transaction processing and
integration systems and services in a more cost efficient manner than through
the purchase of our products and services. As a result, our success depends upon
our ability to respond to changing customer requirements and enhance existing
products and services that keep pace with technological developments and
emerging industry standards. We have invested significantly in technology and
anticipate that it will be necessary for us to continue to do so. Failure to
develop and introduce enhancements to our existing products and services in a
timely manner in response to changing market conditions or customer requirements
will materially and adversely affect our business, results of operations and
financial condition.
BECAUSE OUR PRODUCTS COULD INTERFERE WITH OUR CUSTOMERS' OTHER SOFTWARE
APPLICATIONS AND HARDWARE, WE MAY BE SUBJECT TO CLAIMS BY THESE CUSTOMERS, WHICH
MAY BE COSTLY AND MAY NOT BE ADEQUATELY COVERED BY INSURANCE.
Our products interoperate with many parts of complicated computer
systems, such as mainframes, servers, personal computers, application software,
databases, operating systems and data transformation software. Failure of any
one of these parts could cause all or large parts of computer systems to fail.
In such circumstances, it may be difficult to determine which part failed, and
it is likely that customers will bring a lawsuit against several suppliers. Even
if our software is not at fault, we could suffer material expense and material
diversion of management time in defending any such lawsuits.
IF WE FAIL TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, WE MAY LOSE THESE
RIGHTS AND OUR BUSINESS MAY BE SERIOUSLY HARMED.
Our success depends upon our proprietary technology. To establish and
protect our proprietary rights, we rely primarily on a combination of:
o patent law
o copyright law
o trademark and trade secret laws
o confidentiality procedures and agreements
o licensing arrangements
o the complex nature of our technologies
As part of our confidentiality procedures, we generally enter into
non-disclosure agreements with our employees, customers, and strategic partners
and we enter into license, service and maintenance agreements that include
confidentiality obligations with respect to our software, documentation and
other proprietary information. Despite these precautions, third parties could
copy or otherwise obtain and use our products or technologies without
authorization, or develop similar technologies independently. It is difficult
for us to police unauthorized use of our products. Because of this difficulty in
determining the extent to which piracy of our software products exists, software
piracy is a persistent problem. Expensive
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litigation may be necessary in the future to enforce our intellectual property
rights. Moreover, effective protection of intellectual property rights is
unavailable or limited in certain foreign countries. While we believe that our
products and technologies are adequately protected against infringement,
existing laws afford only limited protection. Consequently, the protection of
our proprietary rights may not be adequate, and our competitors could
independently develop similar technologies, duplicate our products, reverse
engineer or design around the intellectual property rights we hold.
OUR PRODUCTS MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH MAY
CAUSE US TO INCUR UNEXPECTED COSTS OR PREVENT US FROM SELLING OUR PRODUCTS.
The commercial success of our business depends upon our products not
infringing any intellectual property rights of others and upon no claims for
infringement being made against us. We have conducted periodic patent searches
to determine whether or not we may be infringing the patent or trademark rights
of any third parties and have recently applied for patent protection of our
proprietary Synapse software. Because patent applications in the United States
are not publicly disclosed until the patent is issued, applications of which we
are not aware may have been filed which relate to our software products. We may
be subject to legal proceedings and claims from time to time in the ordinary
course of our business, including claims of alleged infringement of the patents,
trademarks and other intellectual property rights of third parties by us or our
licensees in connection with their use of our products. Intellectual property
litigation is expensive and time-consuming, and could divert our management's
attention away from running our business. If we were to discover that our
products violated the intellectual property rights of others, we would have to
obtain licenses from these parties in order to continue marketing our products
without substantial re-engineering. We might not be able to obtain the necessary
licenses on acceptable terms or at all. If we could not obtain such licenses, we
might not be able to re-engineer our products successfully or in a timely
fashion. We believe that we are not infringing any intellectual property rights
of third parties, but there can be no assurance that such infringement will not
occur. If we fail to address any infringement issues successfully, we will be
forced to incur significant costs and could be prevented from selling our
products.
OTHER RISKS
THE PRICE OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY.
The market price for our common stock may be affected by a number of
factors, including developments in the middleware, software or technology
industry, general market conditions and other factors, including factors
unrelated to our operating performance or our competitors' operating
performances. In addition, our stock price and the stock prices of many other
companies in the technology and emerging growth sectors have experienced wide
fluctuations, including recent rapid rises and declines in their stock prices,
that have often been unrelated to the operating performance of such companies.
These factors and fluctuations, as well as general economic, political and
market conditions, such as recessions, may materially adversely affect the
market price of our common stock.
THE SUBSTANTIAL NUMBER OF SHARES THAT ARE CURRENTLY ELIGIBLE FOR SALE UNDER THIS
PROSPECTUS, PRIOR PROSPECTUSES AND SHARES THAT WILL BE ELIGIBLE FOR SALE IN THE
NEAR FUTURE MAY CAUSE THE MARKET PRICE FOR OUR COMMON STOCK TO DECLINE
SIGNIFICANTLY, EVEN IF OUR BUSINESS IS DOING WELL.
Trading in our common stock has historically been very limited which
has made the market price of our common stock vulnerable to significant
fluctuations. 210,000 of the shares of common stock to which this prospectus
relates are covered by lock-up agreements between us and the respective holders
of the securities, each of whom has committed not to make any offer to sell or
to undertake any public sale of any of the holder's respective shares during the
six-month period following the date of purchase of the shares from us. November
23, 2001 is the earliest date upon which any of the private placement agreements
permit any public sale of the 210,000 shares of common stock covered by this
prospectus that were issued or were issuable pursuant to the recent private
placements. Of the additional 326,560 shares covered by this prospectus that are
issuable under previously issued warrants, 251,560 shares may be sold
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on the date of this prospectus if the holders elected to exercise all of their
currently exercisable warrants. If the selling shareholders identified in this
prospectus sell substantial amounts of their common stock in the public market
during a short period of time, or if the holders of these shares are perceived
by the market as intending to sell them, our stock price may decline
significantly. These sales also might make it more difficult for us to sell
equity or equity-related securities in the future at a time and price that we
deem appropriate and could threaten the listing of our common stock on the
Nasdaq Stock Market.
As of the date of this prospectus, we had 16,842,294 outstanding shares
of common stock. This prospectus covers the public offer and sale of 140,000
(slightly less than one percent) of these outstanding shares and the public
offer and sale of 396,560 shares of common stock issuable upon exercise of
warrants. Prior to the date of this prospectus, these shares of common stock
were restricted from sale in the public market because of limitations under
federal and state securities laws and commitments made to us by the selling
shareholders in their respective purchase agreements with us for these
securities. Prior to the date of this prospectus, the only means by which the
selling shareholders could offer and sell these securities was under an
effective registration statement, or under an exemption from applicable state
and federal registration requirements.
In connection with our sales of these outstanding shares and warrants
in an earlier private placement, we agreed to register the public resale of the
shares covered by this prospectus. As a consequence of the registration
statement on Form S-3 of which this prospectus forms a part, unless such shares
are held by our affiliates, all of the currently outstanding shares covered by
this prospectus and all of the shares issuable upon exercise of the warrants are
now freely tradeable in the public market. Although we have registered the
shares for sale, the registration of these shares does not necessarily mean that
any of these shares will be offered or sold by the selling shareholders
identified in this prospectus.
Even if we had not registered the sale of these shares, on the dates
one year following the respective dates of payment to us for these shares, the
holders of these shares would nevertheless become eligible to make sales of
these shares in the public market in accordance with the Securities and Exchange
Commission's Rule 144, with certain volume and manner of sale limitations
continuing only for one additional year, except as to shares held by persons
deemed to be our affiliates.
In addition to the shares of common stock covered by this prospectus,
we previously filed in late 2000 a registration statement on Form S-3 with the
Securities and Exchange Commission covering the public offer and sale of
4,540,680, or approximately 27% of our currently outstanding shares, and the
public offer and sale of 3,362,535 shares of common stock issuable upon exercise
of common stock purchase warrants and upon the conversion of a convertible
debenture. That registration statement went effective on December 1, 2000, upon
which date the aggregate of 7,903,215 shares covered by that registration
statement became eligible for sale in the public market. Prior to that effective
date of December 1, 2000, those shares had been restricted from public sale
because of limitations under federal and state securities laws and commitments
made to us in the purchase documents executed in connection with the private
purchases of those securities by the various shareholders who beneficially owned
those shares.
To our knowledge, a substantial number of the shares covered by our
Form S-3 filing in late 2000 have now been sold into the public market. However,
we can not verify definitively the actual number of such shares that have been
sold. Consequently, a substantial number of such shares may still be held by
certain of those shareholders. As noted above in our discussion of the shares
covered by this prospectus, if the shareholders for whom our previous Form S-3
registration statement were to sell substantial amounts of those shares into the
public market during a short period of time, or if those shareholders are
perceived by the market as intending to sell them, we could suffer the same
adverse consequences as noted above in the first paragraph of this risk factor.
In addition to the two registration statements on Form S-3 referenced
above, in 1998 we filed a registration statement on Form S-8 with the Securities
and Exchange Commission covering 960,000 shares reserved for issuance under our
stock option plan. We intend to file another registration statement on Form S-8
covering 900,000 additional shares reserved for issuance under this same plan
and more shares
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under a similar stock incentive plan that was approved by our shareholders at
our recent annual shareholders meeting on May 18, 2001. Issuance of additional
shares upon exercise of options and warrants could result in dilution to our
shareholders and a decline in the market price of our common stock.
FAILURE TO RAISE ADDITIONAL CAPITAL OR GENERATE THE SIGNIFICANT CAPITAL
NECESSARY TO EXPAND OUR OPERATIONS AND INVEST IN NEW PRODUCTS COULD REDUCE OUR
ABILITY TO COMPETE AND RESULT IN LOWER REVENUES.
We expect that our currently held cash and cash from expected customer
revenues and capital raising activities will be sufficient to meet our working
capital and capital expenditure needs for at least the next 12 months. Even if
we are successful in realizing our expected 2001 sales revenue, we expect that
we will still require additional financing to implement our growth strategies
and achieve our long term objectives. We cannot be certain that we will be able
to obtain additional debt or equity financing on favorable terms, or at all. If
we raise additional equity financing, our shareholders may experience
significant dilution of their ownership interests and the per share value of our
common stock could decline. If we engage in debt financing, we may be required
to accept terms that restrict our ability to incur additional indebtedness and
that force us to maintain specified liquidity or other ratios, any of which
could harm our business. If we need additional capital and cannot raise it on
acceptable terms, we may not be able to, among other things:
o develop or enhance our products and services
o continue to expand our sales and marketing organizations
o acquire complementary technologies, products or businesses
o expand operations, in the United States or internationally
o hire, train and retain employees
o respond to competitive pressures or unanticipated working
capital requirements
Our failure to do any of these things could result in lower revenues and could
seriously harm our business.
ANTI-TAKEOVER PROVISIONS IN OUR ARTICLES OF INCORPORATION AND STATE CORPORATE
LAWS COULD DISCOURAGE OR PREVENT A TAKEOVER, EVEN IF AN ACQUISITION WOULD BE
BENEFICIAL TO OUR SHAREHOLDERS.
In many cases, shareholders receive a premium for their shares when a
company is purchased by another. Various provisions in our articles of
incorporation and bylaws and South Carolina corporate laws could deter and make
it more difficult for a third party to bring about a merger, sale of control, or
similar transaction without approval of our board of directors, even if the
transaction would be beneficial to our shareholders. These provisions tend to
perpetuate existing management. As a result, you may be deprived of
opportunities to sell some or all of your shares at prices that represent a
premium over market prices. These provisions, which could make it less likely
that a change in control will occur, include:
o provisions in our articles of incorporation establishing three classes
of directors with staggered terms, which means that only one-third of
the members of the board of directors is elected each year and each
director serves for a term of three years
o provisions in our articles of incorporation authorizing the board of
directors to issue a series of preferred stock without shareholder
action, which issuance could discourage a third party from attempting
to acquire, or make it more difficult for a third party to acquire, a
controlling interest in us
o provisions in our articles of incorporation prohibiting cumulative
voting in the election of directors, which would otherwise allow less
than a majority of stockholders to elect director candidates
o provisions in our bylaws relating to meetings of shareholders which
limit who may call a meeting and what matters will be voted upon
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o provisions in our bylaws establishing advance notice requirements for
nominations for election to the board of directors or for proposing
matters that can be acted upon by stockholders at stockholder meetings
o state law provisions that require two-thirds of the shareholders to
approve mergers and similar transactions, and amendments to the
articles of incorporation
In addition, the South Carolina Business Combination Act, the South
Carolina Control Share Acquisition Act and the vesting terms of our stock option
plan may discourage, delay or prevent a change in control of our company.
ADVISORY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus, as well as the
documents incorporated by reference into this prospectus, discuss future
expectations or state other "forward-looking" information. Such statements can
be identified by the use of forward-looking words such as "may," "will,"
"expect," "believe," "anticipate," "estimate," "plans," "estimates,"
"potential," "continue," or other similar words. Those statements could be
affected by known or unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. When considering such forward-looking statements, you should keep in
mind the preceding risk factors and other cautionary statements in this
prospectus. All forward-looking statements and reasons why actual results may
differ included in this prospectus are made as of the date of this prospectus,
and unless required by law, we assume no obligation to publicly revise or update
any forward-looking statements or reasons why actual results might differ,
whether as a result of new information, future events or otherwise.
USE OF PROCEEDS
All of the shares, including the shares underlying the warrants, being
offered under this prospectus are being offered by the selling shareholders. We
will not receive any of the proceeds from the sale of the shares. This
registration statement is intended to satisfy obligations we have under
agreements with the selling shareholders. Under those agreements, we have agreed
to pay the expenses of the registration of these shares under federal and state
securities laws.
SELLING SHAREHOLDERS
The following table provides the number of shares of common stock,
including the number of shares of common stock underlying currently outstanding
common stock purchase warrants, that are, to our knowledge, beneficially owned
by each of the identified selling shareholders. We have assumed that, upon
completion of the offering or offerings under this prospectus, each selling
shareholder listed below will have sold all of that shareholder's respective
shares offered under this prospectus, including shares underlying unexercised
warrants. However, selling shareholders may offer and sell all, some, or none of
the shares offered under this prospectus. Under some circumstances, the
respective donees, pledges, and transferees or other successors in interest of
the selling shareholders, may also sell the shares listed below as being held by
the selling shareholders and offered under this prospectus.
The following information is based on information reflected in
agreements with the selling shareholders, information reflected in our stock
records and in schedules filed with the Securities and Exchange Commission, as
well as information provided to us by some of the selling shareholders. None of
the selling shareholders has held a position or office or, to our knowledge,
otherwise had a control or other material relationship with us within the past
three years.
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SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED PRIOR TO THE BENEFICIALLY OWNED AFTER
OFFERING (1) THE OFFERING (2)
------------------------------------ ----------------------------
CURRENTLY
OUTSTANDING COMMON TOTAL SHARES OF
SHARES OF STOCK ISSUABLE COMMON STOCK
COMMON UNDER OFFERED UNDER
NAME OF SELLING SHAREHOLDER STOCK WARRANTS THIS PROSPECTUS SHARES PERCENTAGE
--------------------------------------------------------------------------------------------------------------------------
Buckman, Buckman & Reid, Inc. -0- 8,000 8,000 -0- -0-
Coffin Communications Group -0- 30,000 30,000 -0- -0-
Michael L. Davis -0- 17,000 17,000 -0- -0-
Dian Griesel 50,000 50,000 50,000 50,000 *
Roger Kazanowski 273,120 156,560 256,560 173,120 1.0%
Joseph Marsh 290,000 175,000 60,000 405,000 2.4%
Shanker Merchant -0- 115,000 115,000 -0- -0-
------------------------------------------------------------------------------------
TOTAL 551,560 536,560 3.7%
====================================================================================
* Amount represents less than 1.0%.
(1) Beneficial ownership reflected in the table is determined in accordance
with the rules and regulations of the Securities and Exchange
Commission and generally includes voting or investment power with
respect to securities. Except as otherwise specified, each of the
shareholders named in the table has indicated to us that the
shareholder has sole voting and investment power with respect to all
shares of common stock beneficially owned by that shareholder.
(2) These numbers assume that all shares offered under this prospectus are
sold.
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the
holders of up to 140,000 currently outstanding shares of common stock and the
sale from time to time of up to 396,560 shares of common stock that currently
may be purchased by the holders of common stock purchase warrants. These
securities were issued in a private placement under one or more exemptions from
registration under federal and state securities laws. This prospectus has been
prepared in connection with registering the future sale of these currently
outstanding shares, and the shares that may be purchased under the warrants. We
have undertaken to register the sales of the shares by the applicable selling
shareholders to the public as required by the terms of the agreements between us
and the selling shareholders executed in connection with the private placement.
Although we have registered the shares for sale under the terms of these
agreements, the registration of these shares does not necessarily mean that any
of these shares will be offered or sold by the holders identified above.
We will not receive any proceeds from this offering. The shares may be
sold from time to time to purchasers directly by any of the selling
shareholders, or under some circumstances, donees, pledgees, transferees or
other successors in interest of the selling shareholders. Alternatively, the
selling shareholders, or their transferees, may from time to time offer the
shares through dealers or agents, who may receive compensation in the form of
commissions from the selling shareholders, or their transferees, and/or the
purchasers of the shares for whom they may act as agent. The selling
shareholders, or their transferees, and any dealers or agents that participate
in the distribution of the shares may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, and any profit on the sale of the shares
by them and any commissions received by any dealers or agents might be deemed to
be underwriting commissions under the Securities Act of 1933.
At a time a particular offer of the shares is made, a prospectus
supplement, if required, will be distributed that will set forth the name and
names of any dealers or agents and any commissions and other terms constituting
compensation from the selling shareholders, or their transferees, and any other
required information. The shares may be sold from time to time at varying prices
determined at the time of sale or at negotiated prices.
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In order to comply with the securities laws of certain states, if
applicable, some of the shares may be sold only through registered or licensed
brokers or dealers. In addition, in some states, the shares may not be sold
unless they have been registered or qualified for sale in that state or an
exemption from that state's registration or qualification requirement is
available and is complied with.
The shares may also be sold in one or more of the following
transactions: (a) block transactions (which may involve crosses) in which a
broker-dealer may sell all or a portion of such stock as agent but may position
and resell all or a portion of the block as principal to facilitate the
transaction; (b) purchases by any such broker-dealer as principal, and resale by
such broker-dealer for its own account pursuant to a prospectus supplement; (c)
ordinary brokerage transactions and transactions in which any such broker-dealer
solicits purchasers; (d) sales "at the market" to or through a market maker or
into an existing trading market, on an exchange or otherwise, for such shares;
and (e) sales in other ways not involving market makers or established trading
markets, including direct sales to purchasers. In effecting sales,
broker-dealers engaged by the selling shareholders may arrange for other
broker-dealers to participate.
EXPERTS
Scott McElveen, L.L.P., our independent auditors, have audited our
financial statements and schedule included in our Annual Report on Form 10-KSB
for the year ended December 31, 2000, as set forth in their report dated April
13, 2001, which is incorporated by reference in this prospectus. Our financial
statements and schedule are incorporated by reference in reliance on Scott
McElveen, L.L.P.'s report, given on their authority as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered
under this prospectus will be passed upon for us by Nexsen Pruet Jacobs &
Pollard, LLP, Columbia, South Carolina. William S. McMaster, special counsel
with Nexsen Pruet Jacobs & Pollard, LLP, is also our Chief Financial Officer and
General Counsel.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, and in accordance with that act we file reports, proxy
statements and other information with the Securities and Exchange Commission.
These reports, proxy statements and other information filed can be inspected and
copied at the Securities and Exchange Commission's Public Reference Section, 450
Fifth Street, N.W., Washington, D.C., 20549, and at the following regional
offices of the Securities and Exchange Commission: Seven World Trade Center,
13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of this material can also be obtained from
the Public Reference Section of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Securities
and Exchange Commission maintains a web site (http://www.sec.gov) containing
reports, proxy and information statements and other information of registrants,
including ours, that file electronically with the Securities and Exchange
Commission. In addition, our common stock is listed on the Nasdaq National
Market and similar information concerning us can be inspected and copied at the
offices of the National Association of Securities Dealers, Inc., 9513 Key West
Avenue, Rockville, Maryland 20850.
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3 (of which this prospectus is a part) under
the Securities Act of 1933, with respect to the shares being
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offered by this prospectus. This prospectus does not contain all of the
information set forth in this registration statement, some portions of which
have been omitted as permitted by the rules and regulations of the Securities
and Exchange 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 other document
filed as an exhibit to the registration statement, each of these statements are
qualified in all respects by this reference and the exhibits and schedules
thereto. For further information regarding us and the shares being offered by
this prospectus, reference is hereby made to the registration statement and such
exhibits and schedules which may be obtained from the Securities and Exchange
Commission at its principal office in Washington, D.C. upon payment of the fees
prescribed by the Securities and Exchange Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by IBSS under the Securities
Exchange Act of 1934 with the Securities and Exchange Commission and are
incorporated by reference into this prospectus:
(a) Our annual report on Form 10-KSB for the year ended December
31, 2000;
(b) Our quarterly report on Form 10-QSB for the quarter ended
March 31, 2001; and
(c) The description of our common stock contained in our
registration statement on Form 8-A (File No.333-43437).
Each document we file pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the date of this prospectus
and prior to the termination of this offering shall be deemed to be incorporated
by reference in this prospectus and to be a part of this prospectus from the
date of filing of such documents. Any statement contained in this prospectus in
a document incorporated or deemed to be incorporated in this prospectus by
reference shall be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained in this prospectus (or in
the applicable prospectus supplement) or in any subsequently filed document
which also is or is deemed to be incorporated by reference in this prospectus
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
COPIES OF THE ABOVE DOCUMENTS WHICH ARE INCORPORATED HEREIN BY
REFERENCE (NOT INCLUDING THE EXHIBITS TO SUCH INFORMATION, UNLESS SUCH EXHIBITS
ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH INFORMATION) WILL BE
PROVIDED WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST. REQUESTS SHOULD BE
DIRECTED TO WILLIAM S. MCMASTER, CHIEF FINANCIAL OFFICER, 115 ATRIUM WAY, SUITE
228, COLUMBIA, SOUTH CAROLINA 29223, TELEPHONE NUMBER (803) 736-5595.
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================================================================================
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
536,560 SHARES
OF
COMMON STOCK
-------------
PROSPECTUS
-------------
August , 2001
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered, all of which will be paid by IBSS, are estimated as
follows:
SEC Registration Fee..................................$ 452
Printing Expenses..................................... 3,000
Legal Fees and Expenses............................... 10,000
Accounting Fees and Expenses.......................... 1,000
Miscellaneous Expenses................................ 600
----------
*Total.......................................$ 15,052
==========
* None of the above expenses will be borne by the selling shareholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as hereinafter set forth, there is no statute, charter
provision, bylaw, contract or other arrangement under which any controlling
person, director or officer of the Registrant is insured or indemnified in any
manner against liability which such person may incur in such person's capacity
as such.
The bylaws of the Registrant provide that the Registrant shall
indemnify its directors to the maximum extent provided by the South Carolina
Business Corporation Act. This protection is broader than the protection
expressly mandated in Section 33-8-520 of the South Carolina Business
Corporation Act. That statutory section provides that IBSS must indemnify a
director or an officer only to the extent that the director has been wholly
successful, on the merits or otherwise, in the defense of any action or
proceeding brought by reason of the fact that the person was a director or
officer. This requirement would include indemnifying directors against expenses,
including attorney's fees, actually and reasonably incurred in connection with
the matter.
In addition to this mandatory indemnification right, the Registrant's
bylaws make mandatory the indemnification permitted, but not mandated, by
Section 33-8-510 of the South Carolina Business Corporation Act. Accordingly,
under our bylaws, the Registrant shall indemnify a director where (a) the
director conducted himself or herself in good faith, (b) the director reasonably
believed that conduct in the director's official capacity with the Registrant
was either in the Registrant's best interest or was not opposed to the best
interest of the Registrant; and (c) in the case of any criminal proceeding, the
director had no reasonable cause to believe the director's conduct was unlawful.
The Securities and Exchange Commission has informed the Registrant that
indemnification for officers, directors, and controlling persons for liabilities
arising under the Securities Act of 1933 is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable.
II - 1
20
The Registrant has the power to purchase and maintain insurance on
behalf of any person who is or was a director or officer against any liability
asserted against him or incurred by him in any such capacity, whether or not we
would have the power to indemnify him against such liability under the bylaws.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
5 -- Opinion of Nexsen Pruet Jacobs & Pollard, LLP.
23.1 -- Consent of Scott McElveen, L.L.P.
23.2 -- Consent of Nexsen Pruet Jacobs & Pollard (included in their
opinion filed as Exhibit 5).
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933 (the
"Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 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
the Registration Statement or any material change to
such information set forth in the Registration
Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the Registration Statement is on Form S-3, Form
S-8 or Form F-3, and the information required to be included
in a post-effective amendment by those paragraphs is contained
in periodic reports filed with or furnished to the Commission
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, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
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21
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of this Offering.
(b) Insofar as indemnification for liabilities under the Securities Act may
be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, 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 is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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22
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Columbia, State of South Carolina, on August 3, 2001.
INTEGRATED BUSINESS SYSTEMS AND SERVICES, INC.
By: /s/ HARRY P. LANGLEY
-----------------------------------------
Harry P. Langley
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ HARRY P. LANGLEY President, Chief Executive Officer, and August 3, 2001
----------------------------------- Director
Harry P. Langley
/s/ J. R. DUNKLEY Chief Operating Officer August 3, 2001
-----------------------------------
J. R. Dunkley
/s/ WILLIAM S. MCMASTER Chief Financial Officer and General August 3, 2001
----------------------------------- Counsel (principal financial and
William S. McMaster accounting officer)
/s/ GEORGE E. MENDENHALL Executive Vice President and August 3, 2001
----------------------------------- Director
George E. Mendenhall
/s/ STUART E. MASSEY Vice President of Engineering and August 3, 2001
----------------------------------- Director
Stuart E. Massey
/s/ RICHARD M. CAMPBELL Director August 3, 2001
-----------------------------------
Richard Michael Campbell
/s/ RUSSELL C. KING, JR. Director August 3, 2001
-----------------------------------
Russell C. King, Jr.
/s/ CARL JOSEPH BERGER, JR. Director August 3, 2001
-----------------------------------
Carl Joseph Berger, Jr.
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23
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
5 * -- Opinion of Nexsen Pruet Jacobs & Pollard, LLP.
23.1 * -- Consent of Scott McElveen, L.L.P.
23.2 * -- Consent of Nexsen Pruet Jacobs & Pollard (included in their
opinion filed as Exhibit 5).
----------------------------
* - Filed previously.
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