As filed with the Securities and Exchange Commission on November 13, 2001
Registration No. 333-___
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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EQUITEX, INC.
(Exact name of Registrant specified in charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
84-0905189
(I.R.S. Employer Identification No.)
7315 EAST PEAKVIEW AVENUE
ENGLEWOOD, COLORADO 80111
(303) 796-8940
(Address, including zip code, and telephone number, including area code,
Registrant's principal executive offices)
HENRY FONG, PRESIDENT, TREASURER AND
CHIEF FINANCIAL OFFICER
7315 EAST PEAKVIEW AVENUE
ENGLEWOOD, COLORADO 80111
(303) 796-8940
(Name, address and telephone number, including area code, of agent for service)
Copies of communication, including all communication sent to the
agent for service, should be sent to:
JOHN W. KELLOGG, ESQ.
RACHANA SASTRY, ESQ.
FRIEDLOB SANDERSON PAULSON & TOURTILLOTT, LLC
1400 GLENARM PLACE, SUITE 300
DENVER, COLORADO 80202
(303) 571-1400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement as determined by
market conditions.
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If the only securities being registered on this Form are to be offered pursuant
to dividend or interest reinvestment plans, please check the following box: |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check this following box and
list the Securities Act registration 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. |_|
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CALCULATION OF REGISTRATION FEE
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Title of each class of securities to Amount to be Proposed Proposed Amount of
be registered registered (1) maximum maximum registration
offering price aggregate fee
per share offering price
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Common Stock 9,671,848 (2) $4.00 (3) $38,687,392 $9,672
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Common Stock Underlying
Weighted Average Warrants
Granted in Connection with the
Acquisitions of Nova Financial
Systems, Inc. and Key Financial 3,933,350 $5.65 (4) $22,223,428 $5,556
Systems, Inc.
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Common Stock Underlying Nominal
Warrants Granted in Connection
with the Acquisitions of Nova
Financial Systems, Inc. and Key 990,134 $0.02 (5) $19,803 $5
Financial Systems, Inc.
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Common Stock Underlying
Warrants Granted in Connection
with the Series H 8% Convertible 471,800 $5.78 $2,727,004 $682
Preferred Stock Issuance
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Common Stock to be Issued Upon
Conversion of Series I 6% 2,057,142 $4.00 (3) $8,228,568 $2,057
Convertible Preferred Stock
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Common Stock Underlying
Warrants Granted in Connection
with the Issuance of Series I 6%
Convertible Preferred Stock of 292,500 $5.25 (6) $1,535,625 $384
August 3, 2001
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Common Stock Underlying
Warrants Granted in Connection
with the Issuance of Series I 6%
Convertible Preferred Stock of 17,500 $5.25 (6) $91,875 $23
August 6, 2001
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Common Stock Underlying
Warrants Granted in Connection
with the Issuance of Series I 6%
Convertible Preferred Stock of 90,000 $5.32 (7) $478,800 $120
August 8, 2001
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TOTAL 17,524,274 $73,992,495 $18,499
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(1) Plus such indeterminable number of shares of common stock as may be
issuable by reason of the anti-dilution provisions of such warrants.
-ii-
(2) Shares of common stock issued pursuant to the acquisitions of Nova
Financial Systems, Inc. and Key Financial Systems, Inc., the conversions of
2,359 shares of Series H 8% Convertible Preferred Stock and 400 shares of
Series I 6% Convertible Preferred Stock.
(3) Pursuant to Rule 457(c) the offering price per share and aggregate offering
price are based upon the average closing bid price of Equitex's common
stock as quoted on the Nasdaq SmallCap Market on November 9, 2001.
(4) Pursuant to the warrant agreements executed between Equitex and the selling
securityholders dated August 3, 2001, the exercise price of the weighted
average warrants issued in connection with the acquisitions of Nova
Financial Systems, Inc. and Key Financial Systems, Inc. is $5.65.
(5) Pursuant to the warrant agreements executed between Equitex and the selling
securityholders dated August 3, 2001, the exercise price of the nominal
warrants issued in connection with the acquisitions of Nova Financial
Systems, Inc. and Key Financial Systems, Inc. is $0.02.
(6) Pursuant to the registration rights agreement executed between Equitex and
the selling securityholders, the warrant exercise price is equal to the
average of the closing bid prices of our common stock in a regular day
session as reported on the Nasdaq National SmallCap Market for the five
trading days immediately preceding the closing dates for the sales of the
Series I Convertible Preferred Stock. Accordingly, the warrants issued in
connection with the sales of Series I Convertible Preferred Stock that
closed on August 3, 2001 and August 6, 2001 are exercisable at $5.25 per
share.
(7) Pursuant to the registration rights agreement executed between Equitex and
the selling securityholders, the warrant exercise equal to the average of
the closing bid prices of our common stock in a regular day session as
reported on the Nasdaq National SmallCap Market for the five trading days
immediately preceding the closing dates for the sales of the Series I
Convertible Preferred Stock. Accordingly, the warrants issued in connection
with the sales of Series I Convertible Preferred Stock that closed on
August 8, 2001 are exercisable at $5.32 per share.
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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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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Subject to Completion Dated November __, 2001
EQUITEX, INC.
17,524,274 SHARES OF COMMON STOCK TO BE OFFERED AND SOLD
BY THE SELLING SECURITYHOLDERS
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This is a public offering of shares of common stock of Equitex, Inc. by the
selling securityholders. The selling securityholders will offer the shares from
time to time at prevailing market prices. Equitex will not receive any of the
proceeds from the offering, except for any proceeds from the cash exercise of
warrants owned by the selling securityholders.
Our common stock trades on the Nasdaq SmallCap Market under the symbol
EQTX. On November 9, 2001, the last reported sale price of our common stock on
the Nasdaq SmallCap Market was $4.00 per share.
We may amend or supplement this prospectus from time to time by filing
amendments or supplements as required. You should read this entire prospectus
and any amendments or supplements carefully before you make your investment
decision.
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AN INVESTMENT IN THE STOCK OF EQUITEX INVOLVES A HIGH DEGREE OF RISK. THE
SHARES SHOULD ONLY BE PURCHASED BY PERSONS WHO CAN AFFORD A COMPLETE LOSS. SEE
"RISK FACTORS" BEGINNING ON PAGE 8.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. A
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is November __, 2001
Table of Contents
Where You Can Find More Information.................................-3-
Forward-Looking Statements..........................................-4-
Equitex, Inc........................................................-5-
Recent Developments.................................................-5-
Risk Factors........................................................-8-
Description of Capital Stock.......................................-15-
Selling Securityholders............................................-17-
Plan of Distribution...............................................-21-
Indemnification Provided in Connection with the
Offering by the Selling Securityholders...........................-22-
Legal Matters......................................................-22-
Experts............................................................-22-
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WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires us to file information with the
Securities and Exchange Commission concerning our business and operations.
Accordingly, we file annual, quarterly, and special reports, proxy statements
and other information with the Commission. You can inspect and copy this
information at the Public Reference Facility maintained by the Commission at
Judiciary Plaza, 450 5th Street, N.W., Room 1024, Washington, D.C. 20549. You
can also do so at the following regional offices of the Commission:
o New York Regional Office, 7 World Trade Center, Suite 1300,
New York, New York 10048; or
o Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661.
You can receive additional information about the operation of the
Commission's Public Reference Facilities by calling the Commission at
1-(800)-SEC-0330. The Commission also maintains a website at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding companies that, like us, file information electronically with the
Commission.
The Commission allows us to "incorporate by reference" the information
we file with them, which means we can disclose important information to you by
referring you to the other information we have filed with the Commission. The
information that we incorporate by reference is considered to be part of this
prospectus, and related information that we file with the Commission will
automatically update and supersede information we have included in this
prospectus. We incorporate by reference the documents listed below and any
future filings we make with the Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, until the selling
securityholders sell all of their shares or until the registration rights of the
selling securityholders expire. This prospectus is part of a Registration
Statement that we filed with the Commission (Registration No. 333-_____).
FILING PERIOD
Annual Report on Form 10-K/A........ For the Year ended December 31, 2000
The Description of our Common Stock. Registration Statement on Form 8-A filed
with the Commission July 21, 1983
Quarterly Report on Form 10-Q....... For the Quarter ended March 31, 2001
Quarterly Report on Form 10-Q/A-2... For the Quarter ended June 30, 2001
Definitive Proxy Statement for
Special Meeting on Schedule 14A .... Filed with the Commission on May 16, 2001
Current Report on Form 8-K/A........ Filed with the Commission on October 22,
2001
You can request a free copy of the above filings or any filings
subsequently incorporated by reference into this prospectus by writing or
calling us at the following address:
Equitex, Inc.
7315 East Peakview Avenue
Englewood, Colorado 80111
Telephone: (303) 796-8940
Facsimile: (303) 796-9762
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You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement or amendment to this prospectus.
We have not authorized anyone else to provide you with different information or
additional information. The selling securityholders will not make an offer of
Equitex's common stock in any state where the offer is not permitted. You should
not assume that the information in this prospectus, or any supplement or
amendment to this prospectus, is accurate at any date other than the date
indicated on the cover page of such documents.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus and in the documents
incorporated by reference herein, constitute "forward-looking statements" within
the meaning of Section 27A of the Securities Act, as amended, and Section 21E of
the Exchange Act, as amended. These forward-looking statements can be identified
by the use of predictive, future-tense or forward-looking terminology, such as
"believes," "anticipates," "expects," "estimates," "may," "will" or similar
terms. Forward-looking statements also include projections of financial
performance, statements regarding management's plans and objectives and
statements concerning any assumption relating to the foregoing. Certain
important factors regarding our business, operations and competitive environment
which may cause actual results to vary materially from these forward-looking
statements are discussed below under the caption "Risk Factors."
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EQUITEX, INC.
We are a holding company that operates through our wholly-owned
subsidiaries, Key Financial Systems, Inc., a Florida corporation, and Nova
Financial Systems, Inc., a Florida corporation. Key Financial Systems and Nova
Financial Systems are financial companies that specialize in selling credit card
programs designed for high credit risk clients. Key Financial Systems and Nova
Financial Systems are also full service organizations, that provide credit card
portfolio management services, including automated application processing,
customer service, mediation, collection services, risk management, accounting
and management information systems.
Key Financial Systems was established in Clearwater, Florida in June
1997 to design, market and service credit card products aimed at the sub-prime
credit market. In late 1998, the sister company, Nova Financial Systems was
formed to provide the same services as Key Financial Systems for Key Financial
Systems' second bank client.
Key Financial Systems actively markets the Pay As You Go credit card
program with Net 1st National Bank. Under its contracts with Key Bank & Trust
and Net 1st National Bank, Key Financial Systems has 100 percent loan
participation interest in the Pay As You Go portfolios. The net loan balances on
each portfolio is recorded by Key Financial Systems and all credit card income
associated with each portfolio flows to Key Financial Systems under the
agreement. Key Financial Systems is responsible for all losses and servicing
costs including processing costs incurred on the portfolio with third party
service providers and the bank client. Nova Financial Systems has the same type
of relationship with Merrick Bank, with which Nova Financial Systems marketed
the Pay As You Go until September of 1999.
As of June 30, 2001, Key Financial Systems and Nova Financial Systems
have processed over 1,043,000 credit card applications and have 112,782 active
credit card accounts.
As a holding company, from time to time we evaluate opportunities for
strategic investments or acquisitions that would complement our current services
and products, enhance our technical capabilities or otherwise offer growth
opportunities. As a result, acquisition discussions and, in some cases,
negotiations may take place and future investments or acquisitions involving
cash, debt or equity securities or a combination thereof may result.
RECENT DEVELOPMENTS
NOVA FINANCIAL SYSTEMS AND KEY FINANCIAL SYSTEMS
Subsequent to the completion of the spin-off and distribution, on
August 6, 2001, we acquired Nova Financial Systems and Key Financial Systems,
both companies that were under common control with nearly an identical ownership
structure, in exchange for (i) 9,084,773 shares of our common stock, (ii) cash
consideration of $5 million, (iii) warrants to acquire an aggregate of 990,134
shares of our common stock exercisable at $0.02 per share, and (iv) warrants to
acquire an aggregate of 3,933,350 shares of our common stock exercisable at
$5.65 per share.
We operate Nova Financial Systems and Key Financial Systems as our
subsidiaries.
SPIN-OFF AND DISTRIBUTION
On August 6, 2001, we completed the distribution of all of our assets
and liabilities into escrow for Equitex 2000, Inc. We concurrently distributed
all of the outstanding shares of common stock of Equitex 2000 into escrow for
our shareholders on the basis of one share of common stock of Equitex 2000 for
each share of common stock of Equitex owned as of the record date for the
distribution of July 20, 2001. The shares of Equitex 2000 common stock will be
released from escrow upon the effectiveness of the Form 10 registration
statement for Equitex 2000.
-5-
SERIES H 8% CONVERTIBLE PREFERRED STOCK
On July 19, 2001, we completed a private placement for the issuance of
2,359 shares of Series H 8% Convertible Preferred Stock at a price of $1,000 per
share for net proceeds of $2,359,000. On July 19, 2001, the outstanding 2,359
shares of Series H Convertible Preferred Stock converted into 471,800 shares of
our common stock, $0.02 par value, and 471,800 warrants, each warrant to
purchase one share of our common stock. Each warrant issued in connection with
the Series H Convertible Preferred Stock private placement is exercisable until
July 19, 2004 at an exercise price of $5.78. The proceeds from the Series H
Convertible Preferred Stock offering were used to fund the cash portion of the
purchase price for the Nova Financial and Key Financial acquisitions.
SERIES I 6% CONVERTIBLE PREFERRED STOCK
On August 8, 2001 we completed a private placement for the issuance of
4,000 shares of our Series I 6% Convertible Preferred Stock and a warrant to
purchase 400,000 shares of our common stock, $0.02 par value, at an aggregate
price of $1,000 per share.
The stated value of the Series I 6% Convertible Preferred Stock is
$1,000 per share and bears dividends at 6% per annum, payable quarterly
commencing September 30, 2001, when, as and if declared by our board of
directors. Dividends may be payable by us in cash or, at our option, shares of
common stock. The Series I Convertible Preferred Stock is convertible, together
with any accrued but unpaid dividends, at any time and from time to time into
shares of our common stock at a conversion price per share equal to the lesser
of $5.98 or 65% of the market price upon the occurrence of certain material
events. All outstanding shares of Series I Convertible Preferred Stock will be
automatically converted into common stock on the third anniversary of the date
of the Series I 6% Convertible Preferred Certificate of Designations. The shares
of Series I 6% Convertible Preferred Stock are redeemable at our option at any
time at a redemption price 125% above the stated value per share plus any
accrued but unpaid dividends.
The warrants issued in connection with the Series I Convertible
Preferred Stock offering will be exercisable until August 2, 2004 at an exercise
price equal to the average of the closing bid prices of our common stock in a
regular day session as reported on the Nasdaq National SmallCap Market for the
five trading days immediately preceding the closing dates for the sales of the
Series I Convertible Preferred Stock. Accordingly, the warrants issued in
connection with the sales of Series I Convertible Preferred Stock that closed on
August 3, 2001 are exercisable at $5.25 per share; the warrants issued in
connection with the sales of Series I Convertible Preferred Stock that closed on
August 6, 2001 are exercisable at $5.25 per share; and the warrants issued in
connection with the sales of Series I Convertible Preferred Stock that closed on
August 8, 2001 are exercisable at $5.32 per share.
The proceeds from the Series I Convertible Preferred Stock offering
were used to fund a portion of the cash portion of the purchase price for the
acquisitions of Nova Financial Systems and Key Financial Systems, and all
proceeds in excess of the amount required to complete the acquisitions were
transferred to Equitex 2000 (see "Spin-Off and Distribution" above).
PROPOSED TRANSACTION WITH CHEX SERVICES, INC.
On September 5, 2001, we signed a definitive agreement with Chex
Services, Inc., the effectiveness of which is subject to the completion and
acceptance of the related exhibits, disclosure schedules, final documentation
and other customary pre-closing conditions. Pursuant to the definitive
agreement, if the acquisition is consummated, we will acquire all of the capital
stock of Chex Services in an all stock transaction. Chex Services is a financial
services company that provides check cashing, automated teller machines, wire
transfers, and credit/debit card cash advances to customers primarily at gaming
establishments. Chex Services has been in business since 1992 with operations in
more than 30 casinos and other gaming establishments.
-6-
PROPOSED TRANSACTION WITH MONEY CENTERS OF AMERICA, INC.
On September 17, 2001, we signed a letter of intent to acquire Money
Centers of America, Inc. from its current stockholders. Money Centers of America
provides cash access, technology, and marketing services to the gaming and
retail markets. Money Centers of America funds transfer systems allow casino
patrons to access cash through check cashing, credit/debit card advances,
automated teller machines and wire transfers. Money Centers of America owns a
proprietary Cash Access System, which processes check, credit and debit card
transactions, thereby reducing the need for third party vendors.
Money Centers of America's Cash Access System would allow Chex Services
(see "Proposed Transaction with Chex Services, Inc." above) to process its debit
and credit card transactions in-house, thus eliminating the need for third party
processors and their related fees.
-7-
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK
FACTORS, AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE
MAKING AN INVESTMENT IN OUR COMMON STOCK. YOU SHOULD BE AWARE THAT THE OWNERSHIP
OF OUR COMMON STOCK INVOLVES RISKS, INCLUDING THOSE DESCRIBED BELOW AND
ELSEWHERE IN THIS REGISTRATION STATEMENT, THAT COULD ADVERSELY AFFECT THE VALUE
OF YOUR HOLDINGS. WE ARE NOT MAKING, AND NO OTHER PERSON IS AUTHORIZED TO MAKE,
ANY REPRESENTATION AS TO THE FUTURE MARKET VALUE OF OUR COMMON STOCK.
RISKS REGARDING OUR HISTORY AND ACQUISITIONS
WE HAVE HAD NET LOSSES IN THE PAST TWO YEARS AND THERE IS NO ASSURANCE WE WILL
HAVE A PROFIT THIS YEAR.
We incurred a net loss of approximately $12.5 million (a loss
applicable to common stockholders of approximately $13.7 million) for the year
ended December 31, 2000, compared to a loss of approximately $7.7 million (a
loss applicable to common stockholders of approximately $11 million) for the
year ended December 31, 1999, and recorded a net decrease in net assets
resulting from operations of approximately $2 million for the year ended
December 31, 1998 as a business development company. In addition, we had a net
loss of approximately $3,981,000 for the six months ended June 30, 2001 (a loss
applicable to common stockholders of approximately $4,264,000). There is no
assurance that we will have a profit for the year ended December 31, 2001.
WE HAVE NOT CONSUMMATED CERTAIN RECENT MERGERS AND ACQUISITIONS AND WE CAN
PROVIDE NO ASSURANCE THAT WE WILL SUCCEED WITH OUR RECENT ACQUISITIONS.
We recently failed to consummate two acquisitions and one merger. On
August 2, 2000, we announced that our agreement for the acquisition of First
TeleBanc Corp. had expired. In addition, as a result of certain deficiencies
noted in the operations of First TeleBanc Corp.'s operating bank, Net 1st
National Bank, we withdrew our application with the Federal Reserve to become a
bank holding company. On September 21, 2000, we agreed to terminate our
agreement and plan of merger with Innovative Gaming Corporation of America.
While we acquired First Bankers Mortgage Services, Inc. on August 23, 1999, we
reached an agreement to rescind the acquisition on August 15, 2000, effective
June 28, 2000. We can provide no assurance that the acquisitions of Nova
Financial Systems and Key Financial Systems will prove to be successful.
WE HAVE ACQUIRED TWO COMPANIES THAT HAVE ENTERED US INTO NEW BUSINESSES AND
THERE IS NO ASSURANCE THAT WE WILL SUCCEED IN THEIR CONTINUED MANAGEMENT AND
OPERATIONS.
Upon the acquisitions of Nova Financial Systems and Key Financial
Systems, we entered into a new business that requires the investment of
additional capital and the continuous involvement of senior management. Our
entry into this new business has resulted in increased demands on our personnel
and systems. An inability to customize and manage our new businesses could have
a material adverse effect on our financial condition, results of operations and
business prospects. Our ability to support and manage continued growth is
dependent upon, among other things, our ability to attract and retain senior
management for each our business, and our ability to hire, train, and manage our
workforce successfully. We may not be able to successfully meet all of these
challenges.
RISKS ASSOCIATED WITH OUR SECURITIES
THE CONVERSION OF OUTSTANDING PREFERRED STOCK AND THE EXERCISE OF WARRANTS AND
OPTIONS AT PRICES BELOW THE MARKET PRICE OF OUR COMMON STOCK COULD CAUSE A
DECREASE OR CREATE A CEILING ON OUR MARKET PRICE.
The conversion of outstanding preferred stock into approximately
2,086,538 shares of our common stock at an estimated average conversion price of
$2.60 per share and the exercise of warrants and options into 8,916,834 shares
of our common stock at an estimated average exercise price of $5.03 per share,
which includes the warrants to purchase an aggregate of 4,923,484 shares of our
common stock that were issued in the Nova Financial Systems
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and Key Financial Systems acquisition, may be below the market price of our
common stock. Depending on the market price of our common stock at the time of
the conversion or exercise, this may cause a decrease or create a ceiling on the
market price of our common stock.
THERE MAY BE SUBSTANTIAL DILUTION FROM THE CONVERSION OF OUTSTANDING PREFERRED
STOCK TO OUR CURRENT STOCKHOLDERS.
Our stockholders may experience dilution from the conversion of shares
of our Series D, G and I Convertible Preferred Stock into approximately
2,086,538 shares of our common stock or 11.31% of the number of shares of common
stock currently outstanding. The 725 outstanding shares of Series D 6%
Convertible Preferred Stock would currently convert into approximately 278,846
shares of our common stock as of November 9, 2001, using a conversion price of
65% of the closing price of our common stock of $4.00 at that date. The 1,100
outstanding shares of Series G Convertible Preferred Stock would currently
convert into approximately 423,077 shares of our common stock as of November 9,
2001, using a conversion price of 65% of the closing price of our common stock
of $4.00 at that date. The 3,600 outstanding shares of Series I Convertible
Preferred Stock would currently convert into approximately 1,384,615 shares of
our common stock as of November 9, 2001, using a conversion price of 65% of the
closing price of our common stock of $4.00 at that date.
WE HAVE OUTSTANDING CONVERTIBLE SECURITIES THAT MAY CAUSE SUBSTANTIAL DILUTION
TO HOLDERS OF OUR COMMON STOCK.
The conversion terms of our outstanding Series D, G and I Convertible
Preferred Stock may cause substantial dilution in the book value per share of
our common stock. The conversion features in the Series D, G and I Convertible
Preferred Stock allow the holders to purchase increasing shares of common stock
as a result of a decreasing market price of our common stock price including but
not limited to the following circumstances:
o To the extent that the selling securityholders exercise their
warrants and then sell common stock, the common stock price
may decrease due to the additional shares in the market. This
could allow the holders to convert or exercise remaining
Series D, G or I Convertible Preferred Stock into greater
amounts of common stock, the sales of which would further
depress the stock price.
o The significant downward pressure on the price of the common
stock could encourage short sales and consequently place
further downward pressure on the price of the common stock.
o Under the terms of our Series D, G and I Convertible Preferred
Stock, holders of these shares must own less than 5% of our
outstanding shares of common stock. Holders of these shares
may circumvent this restriction by converting an amount of
preferred stock to common stock in an amount less than 5% of
our outstanding shares of common stock, then selling those
shares of common stock into the market and then converting
another block of preferred stock into common stock. By doing
the foregoing, holders of our Series D, G or I Convertible
Preferred Stock can create additional dilution to the existing
holders of our common stock.
o The conversion of the Series D, G and I Convertible Preferred
Stock may result in substantial dilution to the interests of
other holders of common stock.
Since we cannot know the conversion price of the Series D, G or I
Convertible Preferred Stock until notice of conversion has been provided by the
holder, we cannot currently determine how many shares of common stock we will
actually issue upon conversion of the Series D, G or I Convertible Preferred
Stock. The conversion ratio for issuing shares of our common stock in exchange
for Series D 6% Convertible Preferred Stock is determined by dividing the stated
value of the Series D 6% Convertible Preferred Stock by the conversion price,
which is 65% of the market price of our common stock.
The conversion ratio for issuing shares of our common stock in exchange
for Series G Convertible Preferred Stock is determined by dividing the stated
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value of the Series G Convertible Preferred Stock by the conversion price. The
conversion price will be the lowest of:
o $6.50; or
o 65% of the market price of our common stock provided that if
our common stock is delisted from the Nasdaq stock market for
any reason, then the conversion price for the remaining
outstanding shares of Series G Convertible Preferred Stock
drops to 50% of the market price.
For example and for illustrative purposes only, if the conversion date
is November 9, 2001, the closing market price of our common stock on November 9,
2001 was $4.00, 65% of $4.00 is $2.60. Therefore, the lower of $6.50 and $2.60
is $2.60 and is the conversion price for our Series G Convertible Preferred
Stock.
The conversion ratio for issuing shares of our common stock in exchange
for Series I Convertible Preferred Stock is determined by dividing the stated
value of the Series I Convertible Preferred Stock by the conversion price. The
conversion price will be the lowest of:
o $5.98; or
o 65% of the market price of our common stock provided that if
our common stock is delisted from the Nasdaq stock market for
any reason, then the conversion price for the remaining
outstanding shares of Series I Convertible Preferred Stock
drops to 50% of the market price.
For example and for illustrative purposes only, if the
conversion date is November 9, 2001, the closing market price of our common
stock on November 9, 2001 was $4.00, 65% of $4.00 is $2.60. Therefore, the lower
of $5.98 and $2.60 is $2.60 and would be the conversion price for our Series I
Convertible Preferred Stock.
The following table sets forth, for illustrative purposes only, the
effect of increasing and decreasing stock prices and its result on the
conversion price per share and number of shares issued upon conversion of the
Series D, G and I Convertible Preferred Stock, based on the closing market price
of our common stock on November 9, 2001.
- ----------------------------------------------------------------------------------------------------------------------------
Price per Conversion Aggregate Conversion Aggregate Conversion Aggregate Percentage
share of price of number of price of number of price of number of of
common Series D shares of Series G shares of Series I shares of outstanding
stock Convertible common stock Convertible common stock Convertible common stock common
Preferred convertible Preferred convertible Preferred convertible stock (5)
Stock (1) from all Series Stock (3) from all Series Stock (11) from all Series (10)
D Convertible G Convertible I Convertible
Preferred Preferred Stock Preferred
Stock (2) (4) Stock (12)
- ----------------------------------------------------------------------------------------------------------------------------
$4.00 $2.60 278,846 $2.60 423,077 $2.60 1,384,615 11.31%
- ----------------------------------------------------------------------------------------------------------------------------
$3.00 $1.95 371,795 $1.95 564,103 $1.95 1,846,154 15.08%
(6)
- ----------------------------------------------------------------------------------------------------------------------------
$2.00 (7) $1.30 557,692 $1.30 846,154 $1.30 2,769,231 22.62%
- ----------------------------------------------------------------------------------------------------------------------------
$5.00 $3.25 223,077 $3.25 338,462 $3.25 1,107,692 9.05%
(8)
- ----------------------------------------------------------------------------------------------------------------------------
$6.00 $3.90 185,897 $3.90 282,051 $3.90 923,077 7.54%
(9)
- ----------------------------------------------------------------------------------------------------------------------------
-10-
(1) The conversion price is 65% of the market price of our common stock.
(2) Assumes that all 725 shares of Series D Convertible Preferred Stock,
which have a stated value of $725,000, will be converted into common
stock and there have been no prior conversions of the Series D
Convertible Preferred Stock.
(3) The conversion price is the lesser of (a) $6.50 or (b) 65% of the
market price of our common stock for our Series G Convertible Preferred
Stock.
(4) Assumes that all 1,100 shares of Series G Convertible Preferred Stock,
which have a stated value of $1,100,000, will be converted into common
stock and there have been no prior conversions of the Series G
Convertible Preferred Stock.
(5) Assumes 18,449,188 outstanding shares of our common stock prior to the
conversion of the Series D, G and I Convertible Preferred Stock.
(6) Reflects a 25% reduction from the average closing bid price of $4.00.
(7) Reflects a 50% reduction from the average closing bid price of $4.00.
(8) Reflects a 25% increase from the average closing bid price of $4.00.
(9) Reflects a 50% increase from the average closing bid price of $4.00.
(10) The Certificates of Designation for the Series D, G and I Convertible
Preferred Stock limit us from issuing shares of common stock exceeding
20% of the outstanding number of shares of our common stock on the date
the shares of preferred stock were issued. The limit is 1,404,489 for
the Series D Convertible Preferred Stock and 1,421,389 for the Series G
Convertible Preferred Stock. We must obtain stockholder approval to
issue shares in excess of the 20% limitation or redeem any shares in
excess of the 20% limitation at 125% of the stated value of those
shares.
(11) The conversion price is the lesser of (a) $5.98 or (b) 65% of the
market price of our common stock for our Series I Convertible Preferred
Stock.
(12) Assumes that all 3,600 shares of Series I Convertible Preferred Stock,
which have a stated value of $3,600,000, will be converted into common
stock and there have been no prior conversions of the Series I
Convertible Preferred Stock.
RISKS RELATED TO THE BUSINESS OF
NOVA FINANCIAL SYSTEMS AND KEY FINANCIAL SYSTEMS
THE RECENT ACQUISITIONS OF NOVA FINANCIAL SYSTEMS AND KEY FINANCIAL
SYSTEMS SUBJECT US TO THE FOLLOWING RISKS:
ONLY ONE BANK CURRENTLY OFFERS THE PAY AS YOU GO CREDIT CARD AND LOSS OF THAT
RELATIONSHIP WOULD HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS.
The Pay As You Go Credit card is currently marketed only by Net 1st
National Bank. If Net 1st National Bank ceases to market our card for any
reason, we will have no ability to market the program, which will have a
material adverse effect on our business and results of operations. Although we
are seeking to obtain additional banks to market the program, we have been
unsuccessful in these efforts and there is no assurance that we will be able to
consummate or maintain additional marketing arrangements for the program.
-11-
SOCIAL, ECONOMIC AND GEOGRAPHIC FACTORS MAY AFFECT OUR RETENTION OF CREDIT CARD
ACCOUNTS.
The ability or willingness of cardholders to prepay credit cards may
change from a variety of social, economic and geographic factors. Social factors
include changes in consumer confidence levels, the public's perception of the
use of credit cards and changing attitudes about incurring debt and the stigma
of personal bankruptcy. Economic factors include the rates of inflation,
unemployment rates and relative interest rates offered for various types of
loans. As a result of these factors, our rate of retention of credit card
accounts may vary.
CONSUMER PROTECTION LAWS MAY RESTRICT OUR ABILITY TO COLLECT RECEIVABLES AND
MAINTAIN YIELD ON OUR PORTFOLIO.
Federal and state consumer protection laws regulate the creation and
enforcement of consumer loans. Congress and the states may enact additional laws
and amend existing laws to regulate further the credit card and consumer
revolving loan industry or to reduce finance charges or other fees or charges.
These laws, as well as many new laws, regulations or rulings which may be
adopted, may materially adversely affect our ability to collect the receivables
or to maintain previous levels of finance charges or fees.
Receivables also may be written off as uncollectible if a debtor seeks
relief under federal or state bankruptcy laws.
OUR ABILITY TO GENERATE CREDIT CARD REVENUE IS DEPENDENT UPON RETAINING OLD
CUSTOMERS AND OBTAINING NEW CUSTOMERS, AND THERE IS NO ASSURANCE WE WILL BE
SUCCESSFUL IN OUR EFFORTS.
A significant portion of our revenue is derived from credit card fees
charged on accounts. This revenue is directly tied to the number of active
accounts in the portfolio. Continued generation of new fee revenue depends, in
part, on the number of accounts or account balances lost to competing card
issuers and our ability to designate new accounts. The credit card industry is
highly competitive and we will compete with numerous other credit card providers
for new accounts and for use of the credit cards.
Credit card customers choose their credit card issuers largely on the
basis of price, credit limit and other product features and once an account is
originated, customer loyalty may be limited. Customers can and frequently do
move accounts from one credit card issuer to another, or cease or limit use of
one credit card in favor of another.
The credit card and consumer revolving loan industry is highly
competitive and operates in a legal and regulatory environment increasingly
focused on the cost of services charged to consumers. There is increased use of
advertising, target marketing, pricing competition, incentive programs and new
credit card issuers seeking to expand or to enter the market and compete for
customers. In addition, some of our competitors are now attempting to employ
programs similar to the specialized marketing programs and information based
strategies through which we have solicited new accounts.
MARKETING OF THE PAY AS YOU GO CREDIT CARD AND NET 1ST NATIONAL BANK WAS
SUSPENDED FOR ONE MONTH AND THERE IS NO GUARANTEE THAT ANOTHER SUSPENSION WILL
NOT OCCUR.
On November 15, 2000, Key Financial Systems temporarily suspended
marketing for Net 1st National Bank. This suspension was at the request of Net
1st National Bank to conform to the requirements of a Consent Order between Net
1st National Bank and the Office of the Comptroller of the Currency. Net 1st
National Bank was required to obtain legal opinions that Key Financial Systems's
credit card marketing and Pay As You Go program conform to all federal and state
laws. The necessary opinions have been prepared and have been forwarded to the
Office of the Comptroller of the Currency. On December 15, 2000, Net 1st
National Bank notified Key Financial Systems to resume marketing the Pay As You
Go credit card program. Despite Net 1st National Bank's compliance with all
requirements, there is no assurance that the Office of the Comptroller of the
Currency will not suspend marketing of this product in the future.
-12-
OUR EARNINGS ARE DEPENDENT UPON THE MARKETING AND ACCEPTANCE OF ONE PRODUCT.
Nova Financial Systems and Key Financial Systems currently market one
product, the Pay As You Go credit card. Our product may not be able to be
successfully marketed or achieve customer acceptance. If revenue from new
products or enhancements does not replace declining revenues from existing
products, we may experience lower operating revenues, lower net revenues, lower
cash flows and less liquidity.
TIMING OF PAYMENTS IS NOT CERTAIN.
The receivables may be paid at any time. We cannot assure you that any
particular pattern of accountholder payments will occur. In addition to other
factors discussed above in this "Risk Factors" section, changes in finance
charges can alter the monthly payment rates of accountholders.
The ability to change terms of the credit card accounts could alter payment
patterns and reduce our earnings.
As owner of a participation interest in the accounts, we have the right
to change various account terms, including the fees and the required monthly
minimum payment. If any fees are reduced, there could be a corresponding
decrease in the collection of finance charges. In addition, changes in the
account terms may alter payment patterns.
We ordinarily will not reduce any fees, unless the issuing bank of our
cards is required by law to do so or it determines that such reduction is
necessary to maintain its credit card business on a competitive basis.
We may change the terms of the accounts or our servicing practices,
including the reduction of the required minimum monthly payment and the
calculation of the amount or the timing of fees and charge offs, if we take the
same action on our other substantially similar accounts.
We have no restrictions on our ability to change the terms of the
accounts except as described above. Changes in relevant law, changes in the
marketplace, or prudent business practices could impel us to change account
terms.
WE FACE INTENSE COMPETITION AND THERE IS NO ASSURANCE THAT WE WILL ACHIEVE
MARKET ACCEPTANCE OF OUR PRODUCT.
We face intense and increasingly aggressive competition from other
consumer lenders in all of our product lines. Many competitors are substantially
larger and have greater financial resources than us, and customer loyalty is
often limited. Competitive practices, such as the offering of lower interest
rates and fees and the offering of incentives to customers, could hurt our
ability to attract and retain customers.
The Gramm-Leach- Bliley Act of 1999, which permits the affiliation of
commercial banks, securities firms and insurance companies, may increase the
number of competitors in the banking industry and the level of competition in
providing banking products, including credit cards. To the extent that the
Gramm-Leach-Bliley Act of 1999 promotes competition or consolidation among
financial service providers active in the consumer credit market, we could
experience increased competition for customers, employees and funding. However,
we are unable to predict at this time the scope or extent of any such impact.
In October 1998, the U.S. Justice Department filed a complaint against
MasterCard International Incorporated, Visa U.S.A., Inc. and Visa International,
Inc., asserting that the overlapping ownership and control of both the
MasterCard and Visa associations by the same group of banks restrains
competition between Visa and MasterCard in the market for general purpose credit
card products and networks in violation of the antitrust laws. The government
seeks as relief that only member banks "dedicated" to one association be
permitted to participate in the governance of that association. In addition, the
complaint challenges the rules adopted by both MasterCard and Visa that restrict
member banks from joining American Express, Discover/Novus or other competing
networks. MasterCard and Visa have stated that they consider the suit without
-13-
merit and have denied the allegations of the complaint. If the lawsuit succeeds,
neither the ultimate outcome of this litigation nor its effect on the
competitive environment in the credit card industry can be predicted with any
certainty.
WE COULD HAVE INCREASED DELINQUENCIES AND CREDIT LOSSES WHICH MAY REDUCE OUR
EARNINGS.
The delinquency rate on our consumer loans, as well as the rate at
which our consumer loans are charged off as uncollectible, which are referred to
as the "credit loss rate", may increase, depending on a number of factors,
including (i) an increase in new accounts, which generally experience higher
delinquency and credit loss rates, and (ii) an increase in the number of
customers seeking protection under the bankruptcy laws. Increased delinquencies
and credit losses could also occur in the event of a national or regional
economic downturn or recession, or for other reasons. Unlike a traditional
credit card portfolio, sub prime portfolios experience higher initial
delinquency and first payment default rates. An increase in new accounts can
significantly increase delinquency and loss rates.
WE ARE RELIANT ON CERTAIN VENDOR RELATIONSHIPS WHICH WE MAY NOT BE ABLE TO
MAINTAIN.
Our business depends on a number of services provided by third parties,
including marketing, data processing, nationwide credit bureaus, postal and
telephone service, bankcard associations and transaction processing services. A
major disruption in one or more of these services could significantly hurt our
operations.
OUR INDUSTRY IS HEAVILY REGULATED BY THE GOVERNMENT WHICH MAY AFFECT OUR ABILITY
TO CONDUCT BUSINESS.
Federal and state laws significantly limit the types of activities in
which we and/or our subsidiaries will be permitted to engage. In addition,
consumer protection and debtor relief laws limit the manner in which we may
offer, extend, manage and collect loans. Congress, the States, and other
jurisdictions in which we operate may enact new laws and amendments to existing
laws that further restrict consumer lending, including changes to the laws
governing bankruptcy, which could make it more difficult or expensive for us to
collect loans, or impose limits on the interest and fees that we may charge our
customers. Our earnings could also be hurt by changes in government fiscal or
monetary policies, including changes in capital requirements and rates of
taxation, and by changes in general social and economic conditions.
WE ARE DEPENDENT UPON OUR MANAGEMENT AND MAY NOT BE ABLE TO RETAIN KEY
EMPLOYEES.
Our growth and profitability depend on our ability to retain key
executives and managers, attract capable employees, maintain and develop the
systems necessary to operate our businesses and control the rate of growth of
our expenses. Expenses could significantly increase due to acquisition-related
expenses, new product development, facilities expansions, increased funding or
staffing costs and other internal and external factors.
WE FACE OTHER INDUSTRY RISKS RELATED TO THE FINANCIAL SERVICES INDUSTRY WHICH
COULD AFFECT OUR ABILITY TO ACHIEVE MARKET ACCEPTANCE.
We face the risk of fraud by accountholders and third parties, as well
as the risk that increased criticism from consumer advocates and the media could
hurt consumer acceptance of our products. The financial services industry as a
whole is characterized by rapidly changing technologies. System disruptions and
failures may interrupt or delay our ability to provide services to our
customers. In particular, we face technological challenges in the developing
online credit card market. The secure transmission of confidential information
over the Internet is essential to maintain consumer confidence in the products
and services offered by e-commerce business. Security breaches, acts of
vandalism, and developments in computer capabilities could result in a
compromise or breach of the technology we use to protect customer transaction
data. Consumers generally are concerned with security breaches and privacy on
the Internet, and Congress, individual States and other jurisdictions could
enact new laws regulating the electronic commerce market that could adversely
affect us.
-14-
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
We are authorized to issue up to 50,000,000 shares of common stock,
$.02 par value per share. As of November 9, 2001, 18,449,188 shares of common
stock were outstanding. All outstanding shares of common stock are fully paid
and non-assessable, and all shares of common stock offered in the offering, when
issued, will be fully paid and non-assessable.
PREFERRED STOCK
Our preferred stock is so-called "blank check" preferred since our
board of directors may fix or change the terms, including: (i) the division of
such shares into series; (ii) the dividend or distribution rate; (iii) the dates
of payment of dividends or distributions and the date from which they are
cumulative; (iv) liquidation price; (v) redemption rights and price; (vi)
sinking fund requirements; (vii) conversion rights; (viii) restrictions on the
issuance of additional shares of any class or series. As a result, our board of
directors are entitled to authorize the creation and issuance of up to 2,000,000
shares of preferred stock in one or more series with such terms, limitations and
restrictions as may be determined in our board of director's sole discretion,
with no further authorization by our stockholders except as may be required by
applicable laws or securities exchange listing rules.
The holders of shares of preferred stock have only such voting rights
as are granted by law and authorized by the board of directors with respect to
any series thereof. Our board of directors has the right to establish the
relative rights of the preferred stock in respect of dividends and other
distributions and in the event of the voluntary or involuntary liquidation,
dissolution or winding up of our affairs as compared with such rights applicable
to the common stock and any other series of preferred stock.
The effect of preferred stock upon the rights of holders of common
stock may include: (i) the reduction of amounts otherwise available for payment
of dividends on common stock to the extent that dividends are payable on any
issued shares of preferred stock; (ii) restrictions on dividends on common stock
if dividends on preferred stock are in arrears; (iii) dilution of the voting
power of the common stock and dilution of net income and net tangible book value
per share of common stock as a result of any such issuance, depending on the
number of shares of common stock not being entitled to share in our assets upon
liquidation until satisfaction of any liquidation preference granted to shares
of preferred stock. It is not possible to state the effect that other series of
preferred stock may have upon the rights of the holder of common stock until the
board of directors determines the terms relating to those series of preferred
stock.
Currently, we have the following series of preferred stock outstanding.
The board of directors has no present commitment, arrangement or plan that would
require the issuance of shares of preferred stock in connection with an equity
offering, merger, acquisition or otherwise:
o SERIES D 6% CONVERTIBLE PREFERRED STOCK. The Series D Convertible
Preferred Stock has a stated value of $1,000 per share. The Series D 6%
Convertible Preferred Stock ranks prior to the our common stock and
pari passu with other series of preferred stock issued prior to the
Series D 6% Convertible Preferred Stock and senior to any series of
preferred stock issued after the Series D 6% Convertible Preferred
Stock. The Series D 6% Convertible Preferred Stock entitles its holder
to 6% annual dividends, payable quarterly. The Series D 6% Convertible
Preferred Stock liquidation preference is equal to the sum of the
stated value of each share plus an amount equal to 30% of the stated
value plus the aggregate of all accrued and unpaid dividends on each
share of Series D 6% Convertible Preferred Stock until the most recent
dividend payment date of date of our liquidation, dissolution or
winding up. Lastly, the Series D 6% Convertible Preferred Stock is
convertible at any time, and from time to time at a conversion price
per share of common stock equal to 65% of the market price of the
common stock. The number of shares of common stock due upon conversion
of each share of Series D 6% Convertible Preferred Stock is (i) the
number of shares to be converted, multiplied by (ii)
-15-
the stated value of the Series D 6% Convertible Preferred Stock and
divided by (iii) the applicable conversion price. As of November 9,
2001, 725 shares of Series D 6% Convertible Preferred Stock were
outstanding.
o SERIES G 8% CONVERTIBLE PREFERRED STOCK. The Series G Convertible
Preferred Stock has a stated value of $1,000 per share and bears
dividends at 6% per annum, payable quarterly commencing September 30,
2000, when, as and if declared by our board of directors. Dividends may
be payable by us in cash or, at our option, shares of common stock. The
Series G Convertible Preferred Stock is convertible, together with any
accrued by unpaid dividends, at any time and from time to time into
shares of common stock at a conversion price per share equal to the
lesser of $6.50 or 65% of the market price upon the occurrence of
certain material events. All outstanding shares of Series G Convertible
Preferred Stock shall be automatically converted into common stock on
August 31, 2003. The Series G Convertible Preferred Stock are
redeemable at our option at any time at a redemption price equal to
$1,350 per share plus any accrued but unpaid dividends. As of November
9, 2001, 1,100 shares of Series G Convertible Preferred Stock were
outstanding.
o SERIES I 6% CONVERTIBLE PREFERRED STOCK. The stated value of the Series
I 6% Convertible Preferred Stock is $1,000 per share and bears
dividends at 6% per annum, payable quarterly commencing September 30,
2001, when, as and if declared by our board of directors. Dividends may
be payable by us in cash or, at our option, shares of common stock. The
Series I Convertible Preferred Stock is convertible, together with any
accrued but unpaid dividends, at any time and from time to time into
shares of our common stock at a conversion price per share equal to the
lesser of $5.98 or 65% of the market price upon the occurrence of
certain material events. All outstanding shares of Series I Convertible
Preferred Stock will be automatically converted into common stock on
the third anniversary of the date of the Series I 6% Convertible
Preferred Certificate of Designations. The shares of Series I 6%
Convertible Preferred Stock are redeemable at our option at any time at
a redemption price 125% above the stated value per share plus any
accrued but unpaid dividends. The warrants issued in connection with
the Series I Convertible Preferred Stock offering will be exercisable
until August 2, 2004, at an exercise price equal to the average of the
closing bid prices of our common stock in a regular day session as
reported on the Nasdaq National SmallCap Market for the five trading
days immediately preceding the closing dates for the sales of the
Series I Convertible Preferred Stock. Accordingly, the warrants issued
in connection with the sales of Series I Convertible Preferred Stock
that closed on August 3, 2001, are exercisable at $5.25 per share; the
warrants issued in connection with the sales of Series I Convertible
Preferred Stock that closed on August 6, 2001 are exercisable at $5.25
per share; and the warrants issued in connection with the sales of
Series I Convertible Preferred Stock that closed on August 8, 2001, are
exercisable at $5.32 per share. As of November 9, 2001, 3,600 shares of
Series I Convertible Preferred Stock were outstanding.
We conduct substantially all of our operations through our
subsidiaries. We are dependent upon the cash flow of our subsidiaries to meet
our obligations, including our obligations under the convertible stock. As a
result, the Series D, G and I Convertible Preferred Stock will be effectively
subordinated to all existing and future indebtedness and other liabilities and
commitments of our subsidiaries with respect to the cash flow and assets of
those subsidiaries.
-16-
SELLING SECURITYHOLDERS
The following table lists the total number of shares of our common
stock and the total number of shares of common stock assuming the exercise of
all warrants owned by the selling securityholders and registered hereunder.
Except as indicated, the selling securityholders are offering all of the shares
of common stock owned by them or received by them upon the exercise of the
warrants.
Because the selling securityholders may offer all or part of the shares
of common stock currently owned or the shares of common stock received upon
exercise of the warrants, which they own pursuant to the offering contemplated
by this prospectus, and because their offering is not being underwritten on a
firm commitment basis, no estimate can be given as to the amount of warrants
that will be held upon termination of this offering. The shares of common stock
currently owned and the shares of common stock received upon exercise of the
warrants offered by this prospectus may be offered from time to time by the
selling securityholders named below.
- --------------------------------------------------------------------------------------------------------------------------
Selling Shares of Shares of Shares of Shares of Total Amount of Percent of
securityholder common common stock common stock common stock shares of common stock outstanding
name stock to be to be received common stock owned by common stock
owned offered for received upon and to be to be offered security- owned by
prior to security- conversion of received upon for security- holder securityholder
this holder's preferred the exercise holder's after the after the
offering account stock of warrants account offering offering
- --------------------------------------------------------------------------------------------------------------------------
Anthony N. Amico 6,000 869,970 869,970 6,000 0.03%
- --------------------------------------------------------------------------------------------------------------------------
John Ablahani, as 445,153 241,250 686,403
Trustee of the
DNAA Irrevocable
Trust Agreement
dated February 7,
1996
- --------------------------------------------------------------------------------------------------------------------------
First Union 578,699 313,625 892,324
National Bank as
Trustee of the
Anthony Amico, Jr.
Irrevocable Trust
Agreement of 2001
Number 1
- --------------------------------------------------------------------------------------------------------------------------
AmSouth Bank, as 578,699 313,625 892,324
Trustee of the
Anthony Amico, Jr.
Irrevocable Trust
Agreement of 2001
Number II
- --------------------------------------------------------------------------------------------------------------------------
Thomas Little, 578,699 313,625 892,324
Esq., as Trustee of
the Anthony
Amico, Jr.
Irrevocable Trust
Agreement of 2001
Number III
- --------------------------------------------------------------------------------------------------------------------------
Laura Lipowski, 578,699 313,625 892,324
Esq., as Trustee of
the Anthony
Amico, Jr.
Irrevocable Trust
Agreement of 2001
Number IV
- --------------------------------------------------------------------------------------------------------------------------
-17-
- --------------------------------------------------------------------------------------------------------------------------
Selling Shares of Shares of Shares of Shares of Total Amount of Percent of
securityholder common common stock common stock common stock shares of common stock outstanding
name stock to be to be received common stock owned by common stock
owned offered for received upon and to be to be offered security- owned by
prior to security- conversion of received upon for security- holder securityholder
this holder's preferred the exercise holder's after the after the
offering account stock of warrants account offering offering
- --------------------------------------------------------------------------------------------------------------------------
Shauna 200,000 579,869 779,869
Hoopingarner, as
Trustee of the
Anthony Amico, Jr.
Irrevocable Trust
Agreement of 2001
Number V
- --------------------------------------------------------------------------------------------------------------------------
Brett Fisher, 90,856 49,239 140,095
Shauna
Hoopingarner and
Susan Revels, as
Co-Trustees of the
First American
Management
Irrevocable Trust
Agreement of 2001
- --------------------------------------------------------------------------------------------------------------------------
Northern Trust 90,856 49,239 140,095
Bank of Florida,
N.A., as Trustee of
the Hudson
Irrevocable Trust
Agreement of 2001
- --------------------------------------------------------------------------------------------------------------------------
Northern Trust 90,856 49,239 140,095
Bank of Florida,
N.A., as Trustee of
the Pope
Irrevocable Trust
Agreement of 2001
- --------------------------------------------------------------------------------------------------------------------------
Thomas C. Little, 90,856 49,239 140,095
Esq., as Trustee of
the Eagle One
Irrevocable Trust
Agreement
- --------------------------------------------------------------------------------------------------------------------------
Charles R. Darst 38,500 863,597 468,026 1,331,623 38,500 0.21%
- --------------------------------------------------------------------------------------------------------------------------
Dia Erickson 33,300 863,597 468,026 1,331,623 33,300 0.18%
- --------------------------------------------------------------------------------------------------------------------------
Scott A. Lucas and 1,068,367 1,068,367
Susan Lucas, as
Tenants by the
Entirety
- --------------------------------------------------------------------------------------------------------------------------
Scott A. Lucas 7,500 579,001 579,001 7,500 0.04%
- --------------------------------------------------------------------------------------------------------------------------
Patricia Jersey 89,031 48,250 137,281
- --------------------------------------------------------------------------------------------------------------------------
Robert Venniro 2,007 22,258 12,063 34,321 2,007 0.01%
- --------------------------------------------------------------------------------------------------------------------------
Frank Cantero 22,258 12,063 34,321
- --------------------------------------------------------------------------------------------------------------------------
George Lutich 133,546 72,375 205,921
- --------------------------------------------------------------------------------------------------------------------------
Richard Perez 222,577 120,625 343,202
- --------------------------------------------------------------------------------------------------------------------------
John Ablahani 89,031 48,250 137,281
- --------------------------------------------------------------------------------------------------------------------------
Marilyn Silvers 89,031 48,250 137,281
- --------------------------------------------------------------------------------------------------------------------------
-18-
- --------------------------------------------------------------------------------------------------------------------------
Selling Shares of Shares of Shares of Shares of Total Amount of Percent of
securityholder common common stock common stock common stock shares of common stock outstanding
name stock to be to be received common stock owned by common stock
owned offered for received upon and to be to be offered security- owned by
prior to security- conversion of received upon for security- holder securityholder
this holder's preferred the exercise holder's after the after the
offering account stock of warrants account offering offering
- --------------------------------------------------------------------------------------------------------------------------
David Giorgione 178,061 96,501 274,562
and Victoria
Giorgione, as
Tenants by the
Entirety
- --------------------------------------------------------------------------------------------------------------------------
Michelle Rice 178,061 96,501 274,562
- --------------------------------------------------------------------------------------------------------------------------
John Gordon 89,031 48,250 137,281
- --------------------------------------------------------------------------------------------------------------------------
Brett Fisher 178,061 96,501 274,562
- --------------------------------------------------------------------------------------------------------------------------
Leonard Solie 44,515 24,125 68,640
- --------------------------------------------------------------------------------------------------------------------------
Henry Fong (1) 596,519 90,853 49,239 140,092 596,519 (2) 3.23% (2)
(2)
- --------------------------------------------------------------------------------------------------------------------------
Ralph Klein 50,000 45,428 24,619 70,047 50,000 0.27%
- --------------------------------------------------------------------------------------------------------------------------
Other Nova and 214,800 624,127 338,244 962,371 214,800 1.16%
Key Selling
Securityholders (3)
- --------------------------------------------------------------------------------------------------------------------------
Les Boelter 1,000 2,000 2,000 4,000 1,000 0.005%
- --------------------------------------------------------------------------------------------------------------------------
Joseph Bushman 10,000 10,000 20,000
- --------------------------------------------------------------------------------------------------------------------------
F.D. Copp 45,000 10,000 10,000 20,000 45,000 0.24%
- --------------------------------------------------------------------------------------------------------------------------
Richard E. Dana 10,000 10,000 20,000
- --------------------------------------------------------------------------------------------------------------------------
Ralph & Sharon 60,000 60,000 120,000
Klein
- --------------------------------------------------------------------------------------------------------------------------
Edward J. Names 58,958 10,000 10,000 20,000 58,958 0.32%
(4) (4)
- --------------------------------------------------------------------------------------------------------------------------
Charles J. Petit 10,000 10,000 20,000
- --------------------------------------------------------------------------------------------------------------------------
Dennis Staal 14,400 10,000 10,000 20,000 14,400 0.08%
- --------------------------------------------------------------------------------------------------------------------------
W.G. Securities, 15,700 18,800 18,800 37,600 15,700 0.09%
L.P.
- --------------------------------------------------------------------------------------------------------------------------
Other Series H 8% 331,000 331,000 662,000
Convertible
Preferred Stock
Selling
Securityholders (5)
- --------------------------------------------------------------------------------------------------------------------------
Alpha Capital 628,571 110,000 738,571
Aktiengeselschaft
- --------------------------------------------------------------------------------------------------------------------------
Wayne Mills 115,275 40,000 155,275
- --------------------------------------------------------------------------------------------------------------------------
The Shaar Fund 914,286 160,000 1,074,286
- --------------------------------------------------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------------------------------------------------
Selling Shares of Shares of Shares of Shares of Total Amount of Percent of
securityholder common common stock common stock common stock shares of common stock outstanding
name stock to be to be received common stock owned by common stock
owned offered for received upon and to be to be offered security- owned by
prior to security- conversion of received upon for security- holder securityholder
this holder's preferred the exercise holder's after the after the
offering account stock of warrants account offering offering
- --------------------------------------------------------------------------------------------------------------------------
Stonestreet Limited 228,571 40,000 268,571
Partnership
- --------------------------------------------------------------------------------------------------------------------------
W.E.C. Asset 285,714 50,000 335,714
Management, LLC
- --------------------------------------------------------------------------------------------------------------------------
TOTAL 1,083,684 9,671,848 2,057,142 5,795,284 17,524,274 1,083,684 5.865%
- --------------------------------------------------------------------------------------------------------------------------
(1) Henry Fong is the President, Treasurer and Chief Financial Officer
of Equitex, Inc.
(2) Includes 390,219 shares owned by another company in which Henry
Fong is the sole member.
(3) Information concerning other selling securityholders, including
current holders of Nova Financial System, Inc. and Key Financial
Systems, Inc. common stock and common stock underlying warrants
issued in connection with the acquisitions of the Nova Financial
System, Inc. and Key Financial Systems, Inc. for which we have not
received current information regarding their holdings of such
securities. Such information will be included in supplements to
this prospectus, if required. For purposes of this table, we have
assumed that such holders do not beneficially own any other shares
of common stock.
(4) Includes 39,758 shares owned by another company in which Edward J.
Names the general partner.
(5) Information concerning other selling securityholders, including
current holders of Series H common stock issued upon conversion of
the Series H 8% Convertible Preferred Stock for which we have not
received current information regarding their holdings of the
common stock. Such information will be included in supplements to
this prospectus, if required. For purposes of this table, we have
assumed that such holders do not beneficially own any other shares
of common stock.
-20-
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the
individual selling securityholders. As used in this prospectus, "selling
securityholders" include donees and pledgees selling shares received from the
selling securityholders after the date of this prospectus. All costs, expenses
and fees in connection with the registration of the shares of common stock
offered will be borne by us. Brokerage commission and similar selling expenses,
if any, attributable to the sale of shares of common stock will be borne by the
selling securityholders. Sales of shares of common stock may be effected by the
selling securityholders from time to time in one or more types of transactions
(which may include block transactions), in the over-the-counter market, in
negotiated transactions, through put or call options transactions relating to
the shares of common stock, through short sales of shares of common stock, or a
combination of these methods of sale, at market prices prevailing at the time of
sale, or at negotiated prices. Any of these transactions may or may not involve
brokers or dealers. The selling securityholders have advised us that they have
not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities, nor is
there any underwriter or coordinating broker acting in connection with the
proposed sale of shares of common stock by the selling securityholders.
The selling securityholders may effect transactions by selling shares
of common stock directly to purchasers or to or through broker-dealers, which
may act as agents or principals. Broker-dealers may receive compensation in the
form of discounts, concessions, or commissions from the selling securityholders
and/or the purchaser(s) of shares of common stock for whom those broker-dealers
may act as agents or to whom they sell as principal, or both (which compensation
as to a particular broker-dealer might be in excess of customary commissions).
Each of the selling securityholders and any broker-dealers that act in
connection with the sale of shares of common stock might be deemed to be
underwriters within the meaning of Section 2(a)(11) of the Securities Act, and
any commissions received by those broker-dealers and any profit on the resale of
the shares of common stock sold by them while acting as principals might be
deemed to be underwriting discounts or commissions under the Securities Act. We
have agreed to indemnify the selling securityholders against liabilities,
including liabilities arising under the Securities Act. The selling
securityholders may agree to indemnify any agent, dealer or broker- dealer that
participates in transactions involving sales of the shares of common stock
against liabilities, including liabilities arising under the Securities Act.
Because the individual selling securityholders may be deemed to be
underwriters within the meaning of Section 2(a)(11) of the Securities Act, the
selling securityholders will be subject to the prospectus delivery requirements
of the Securities Act. We have informed the selling securityholders that the
anti-manipulative provisions of Regulation M issued under the Exchange Act may
apply to their sales in the market.
The selling securityholders also may resell all or a portion of the
shares of common stock in open market transactions in reliance upon Rule 144
under the Securities Act, provided they meet the criteria and conform to the
requirements of that Rule.
After the selling securityholders notify us that any material
arrangement has been entered into with a broker-dealer for the sale of shares of
common stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, under Rule 424(b) to the Securities Act,
disclosing (a) the name of the selling securityholders and of the participating
broker-dealer(s), (b) the number of shares of common stock involved, (c) the
price at which those shares of common stock were sold, (d) the commissions paid
or discounts or concessions allowed to such broker- dealer(s), where applicable,
(e) that such broker-dealer(s) did not conduct any investigation to verify the
information contained or incorporated by reference in this prospectus and (f)
other facts material to the transaction. In addition, after being notified by
the selling securityholders that a donee or pledgee intends to sell more than
500 shares of common stock, we will file a supplement to this prospectus.
We are unable to predict the effect which sales of the shares of common
stock offered by this prospectus might have upon our ability to raise further
capital.
In order to comply with states' securities laws, if applicable, the
shares of common stock will be sold in those jurisdictions only through
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registered or licensed brokers or dealers. In addition, in certain states, the
shares of common stock may not be sold unless they have been registered or
qualified for sale in those states or an exemption from registration or
qualification is available and complied with.
INDEMNIFICATION PROVIDED IN CONNECTION WITH THE OFFERING
BY THE SELLING SECURITYHOLDERS
The selling securityholders have agreed to indemnify, to the extent
permitted by law, us, our directors, certain of our officers and each person who
controls us (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact or any omission or alleged omission of a
material fact required to be stated in a registration statement or prospectus,
or any amendment thereof or supplement thereto or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information or affidavits relating to the selling
securityholders furnished by the selling securityholders to us for use therein.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, or persons controlling us pursuant
to the foregoing provisions we have been informed 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.
LEGAL MATTERS
The legality of the shares of common stock being offered will be passed
on for us by Friedlob Sanderson Paulson & Tourtillott, LLC, Denver, Colorado.
EXPERTS
The statement of operations of Equitex, Inc. for the year ended
December 31, 1998, and the related statements of changes in stockholders' equity
and cash flows for the year ended December 31, 1998, which appear in our annual
report on Form 10-K/A, incorporated by reference herein, has been so
incorporated in reliance upon the report of Davis & Co., CPAs, P.C., independent
certified public accountants, and upon the authority of said firm as experts in
auditing and accounting.
The consolidated balance sheets of Equitex, Inc. as of December 31,
2000 and 1999 and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the years in the two-year period
ended December 31, 2000, which appear in our Annual Report on Form 10-K/A,
incorporated by reference herein, have been so incorporated in reliance upon the
report of Gelfond Hochstadt Pangburn, P.C., independent certified public
accountants, and upon the authority of said firm as experts in auditing and
accounting. With respect to the unaudited condensed consolidated financial
information for the periods ended March 31, 2001 and 2000, and June 30, 2001 and
2000, incorporated herein by reference, the independent certified public
accountants have applied limited procedures in accordance with professional
standards for a review of such information. However, as stated in their separate
reports included in Equitex's Quarterly Reports on Form 10-Q for the quarter
ended March 31, 2001, and Form 10-Q/A-2 for the quarter ended June 30, 2001, and
incorporated by reference herein, they did not audit and they do not express an
opinion on that interim financial information. Because of the limited nature of
the review procedures applied, the degree of reliance on their report on such
information should be restricted. The accountants are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
report on the unaudited interim financial information because that report is not
a "report" or a "part" of the Registration Statement prepared or certified by
the accountants within the meaning of Sections 7 and 11 of the Securities Act of
1933.
The financial statements of Nova Financial Systems, Inc. as of December
31, 2000 and 1999, and the related statements of operations, stockholders'
equity, and cash flows for the years ended December 31, 2000 and 1999, and for
the period from inception, October 10, 1998, through December 31, 1998, and the
financial
-22-
statements of Key Financial Systems, Inc. as of December 31, 2000 and 1999, and
the related statements of income, stockholders' equity, and cash flows for the
years ended December 31, 2000, 1999 and 1998, both which appear in Equitex's
Definitive Proxy Statement on Schedule 14A as filed May 16, 2001, and which
appear in the Company's current report on Form 8-K/A as filed October 24, 2001,
have been incorporated by reference herein in reliance upon the reports of
McGladrey & Pullen, LLP, independent certified public accountants, and upon the
authority of said firm as experts in auditing and accounting.
-23-
Preliminary Prospectus Dated November 13, 2001
EQUITEX, INC.
17,524,274 SHARES OF COMMON STOCK TO BE OFFERED AND SOLD
BY THE SELLING SECURITYHOLDERS
November __, 2001
------------------------------------
PROSPECTUS
------------------------------------
- --------------------------------------------------------------------------------
| No dealer, salesman or other person has been authorized to give |
| any information or to make any representations other than those |
| contained in this prospectus. Any information or representations not |
| herein contained, if given or made, must not be relied upon as having |
| been authorized by Equitex. This prospectus does not constitute an |
| offer or solicitation in respect to these securities in any |
| jurisdiction in which such offer or solicitation would be unlawful. |
| The delivery of this prospectus shall not, under any circumstances, |
| create any implication that there has been no change in the affairs of |
| Equitex or that the information contained herein is correct as of any |
| time subsequent to the date of this prospectus. However, in the event |
| of a material change, this prospectus will be amended or supplemented |
| accordingly. |
- --------------------------------------------------------------------------------
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14 - OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or to be incurred by the Registrant in connection with
the issuance and distribution of the securities being offered. All expenses are
estimated except the registration fee.
Registration and filing fee $18,499
Printing and engraving 2,000
Accounting fees and expenses 7,500
Legal fees and expenses 15,000
Transfer and Warrant Agent 500
Other 469
-------
Total $43,968
-------
ITEM 15 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides for, under
certain circumstances, the indemnification of Equitex's officers, directors,
employees and agents against liabilities which they may incur in such
capacities. A summarization of the circumstances in which such indemnifications
provided for is contained herein, but that description is qualified in its
entirety by reference to the relevant Section of the Delaware General
Corporation Law.
In general, the statute provides that any director, officer, employee
or agent of a corporation may be indemnified against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, actually and
reasonably incurred in a proceeding (including any civil, criminal,
administrative or investigative proceeding) to which the individual was a party
by reason of such status. Such indemnity may be provided if the indemnified
person's actions resulting in the liabilities: (i) were taken in good faith;
(ii) were reasonably believed to have been in or not opposed to Equitex's best
interest; and (iii) with respect to any criminal action, such person had no
reasonable cause to believe the actions were unlawful. Unless ordered by a
court, indemnification generally may be awarded only after a determination of
independent members of the Board of Directors or a committee thereof, by
independent legal counsel or by vote of the stockholders that the applicable
standard of conduct was met by the individual to be indemnified.
The statutory provisions further provide that to the extent a director,
officer, employee or agent is wholly successful on the merits or otherwise in
defense of any proceeding to which he was a party, he is entitled to receive
indemnification against expenses, including attorneys' fees, actually and
reasonably incurred in connection with the proceeding.
Indemnification in connection with a proceeding by or in the right of
Equitex in which the director, officer, employee or agent is successful is
permitted only with respect to expenses, including attorneys' fees actually and
reasonably incurred in connection with the defense. In such actions, the person
to be indemnified must have acted in good faith, in a manner believed to have
been in Equitex's best interest and must not have been adjudged liable to
Equitex unless and only to the extent that the Court of Chancery or the court in
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expense which the Court of Chancery or such other court shall deem proper.
Indemnification is otherwise prohibited in connection with a proceeding brought
on behalf of Equitex in which a director is adjudged liable to Equitex, or in
connection with any proceeding charging improper personal benefit to the
director in which the director is adjudged liable for receipt of an improper
personal benefit.
II-1
Delaware law authorizes Equitex to reimburse or pay reasonable expenses
incurred by a director, officer, employee or agent in connection with a
proceeding in advance of a final disposition of the matter. Such advances of
expenses are permitted if the person furnishes to Equitex a written agreement to
repay such advances if it is determined that he is not entitled to be
indemnified by Equitex.
The statutory section cited above further specifies that any provisions
for indemnification of or advances for expenses does not exclude other rights
under Equitex's Certificate of Incorporation, Bylaws, resolutions of its
stockholders or disinterested directors, or otherwise. These indemnification
provisions continue for a person who has ceased to be a director, officer,
employee or agent of the corporation and inure to the benefit of the heirs,
executors and administrators of such persons.
The statutory provision cited above also grants the power to Equitex to
purchase and maintain insurance policies which protect any director, officer,
employee or agent against any liability asserted against or incurred by him in
such capacity arising out of his status as such. Such policies may provide for
indemnification whether or not the corporation would otherwise have the power to
provide for it. No such policies providing protection against liabilities
imposed under the securities laws have been obtained by Equitex.
Article VII Section 9 of Equitex's Bylaws provides that Equitex shall
indemnify its directors, officers, employees and agents to the fullest extent
permitted by the Delaware General Corporation Law. In addition, Equitex has
entered into agreements with its directors indemnifying them to the fullest
extent permitted by the Delaware General Corporation Law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling
Equitex pursuant to the foregoing provisions, Equitex has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
II-2
ITEM 16 EXHIBITS
- --------------------------------------------------------------------------------
The following is a complete list of exhibits filed as part of this
Registration Statement:
EXHIBIT
NUMBER DESCRIPTION
- --------------------------------------------------------------------------------
2.1 Agreement and Plan of Reorganization among Equitex, Inc., Key
Financial Systems, Inc. and Key Merger Corporation dated June 27,
2000 INCORPORATED BY REFERENCE TO THE REGISTRANT'S CURRENT REPORT
ON FORM 8-K/A AS FILED WITH THE COMMISSION ON OCTOBER 22, 2001
(FILE NO.000- 12374)
2.2 Agreement and Plan of Reorganization among Equitex, Inc., Nova
Financial Systems, Inc. and Nova Acquisition Corporation dated
June 27, 2000 INCORPORATED BY REFERENCE TO THE REGISTRANT'S
CURRENT REPORT ON FORM 8-K/A AS FILED WITH THE COMMISSION ON
OCTOBER 22, 2001 (FILE NO.000- 12374)
3(i).1 Certificate of Amendment to the Certificate of Incorporation of
Equitex, Inc. - Designation of Preferences, Limitations and
Relative Rights of the Series D Convertible Preferred Stock of
Equitex, Inc. INCORPORATED BY REFERENCE TO THE REGISTRANT'S
REGISTRATION STATEMENT ON FORM S- 3/A AS FILED WITH THE
COMMISSION ON JULY 23, 2001 (FILE NO. 333-64408)
3(i).2 Certificate of Amendment to the Certificate of Incorporation of
Equitex, Inc. - Designation of Preferences, Limitations and
Relative Rights of the Series E Convertible Preferred Stock of
Equitex, Inc. INCORPORATED BY REFERENCE TO THE REGISTRANT'S
REPORT ON FORM 8-K AS FILED WITH THE COMMISSION ON SEPTEMBER 8,
1999 (FILE NO. 814-00036)
3(i).3 Certificate of Amendment to the Certificate of Incorporation of
Equitex, Inc. - Designation of Preferences, Limitations and
Relative Rights of the Series F Convertible Preferred Stock of
Equitex, Inc. INCORPORATED BY REFERENCE TO THE REGISTRANT'S
REPORT ON FORM 10-K/A AS FILED WITH THE COMMISSION FOR THE YEAR
ENDED DECEMBER 31, 2000 (FILE NO. 000-12374)
3(i).4 Certificate of Amendment to the Certificate of Incorporation of
Equitex, Inc. - Designation of Preferences, Limitations and
Relative Rights of the Series G Convertible Preferred Stock of
Equitex, Inc. INCORPORATED BY REFERENCE TO THE REGISTRANT'S
REPORT ON FORM 10-K/A AS FILED WITH THE COMMISSION FOR THE YEAR
ENDED DECEMBER 31, 2000 (FILE NO. 000-12374)
3(i).5 Certificate of Amendment to the Certificate of Incorporation of
Equitex, Inc. - Designation of Preferences, Limitations and
Relative Rights of the Series H Convertible Preferred Stock of
Equitex, Inc. INCORPORATED BY REFERENCE TO THE REGISTRANT'S
REGISTRATION STATEMENT ON FORM S- 3/A AS FILED WITH THE
COMMISSION ON JULY 23, 2001 (FILE NO. 333-64408)
3(i).6 Certificate of Amendment to the Certificate of Incorporation of
Equitex, Inc. - Amended Certificate of Designation of Series H 8%
Convertible Preferred Stock of Equitex, Inc. INCORPORATED BY
REFERENCE TO THE REGISTRANT'S REGISTRATION STATEMENT ON FORM
S-3/A AS FILED WITH THE COMMISSION ON JULY 23, 2001 (FILE NO.
333-64408)
3(i).7 Certificate of Amendment to the Certificate of Incorporation of
Equitex, Inc. dated June 29, 2001. INCORPORATED BY REFERENCE TO
THE REGISTRANT'S REGISTRATION STATEMENT ON FORM S-3/A AS FILED
WITH THE COMMISSION ON JULY 23, 2001 (FILE NO. 333-64408)
II-3
3(i).8 Certificate of Amendment to the Certificate of Incorporation of
Equitex, Inc. - Designation of Preferences, Limitations and
Relative Rights of the Series I Convertible Preferred Stock of
Equitex, Inc. INCORPORATED BY REFERENCE TO THE REGISTRANT'S
CURRENT REPORT ON FORM 8-K/A AS FILED WITH THE COMMISSION ON
OCTOBER 22, 2001 (FILE NO.000-12374)
4.1 Form of Warrant Agreement for Warrants Exercisable at Weighted
Average Price of $5.65 INCORPORATED BY REFERENCE TO THE
REGISTRANT'S CURRENT REPORT ON FORM 8-K/A AS FILED WITH THE
COMMISSION ON OCTOBER 22, 2001 (FILE NO.000-12374)
4.2 Form of Warrant Agreement for Warrants Exercisable at Nominal
Price of $0.02 INCORPORATED BY REFERENCE TO THE REGISTRANT'S
CURRENT REPORT ON FORM 8-K/A AS FILED WITH THE COMMISSION ON
OCTOBER 22, 2001 (FILE NO.000-12374)
4.3 Registration Rights Agreement dated August 3, 2001 (FILED
HEREWITH)
5.1 Opinion of Friedlob Sanderson Paulson & Tourtillott, LLC (FILED
HEREWITH)
23.1 Consent of Friedlob Sanderson Paulson & Tourtillott, LLC - see
Exhibit 5.1
23.2 Consent of Independent Certified Public Accountants, Gelfond
Hochstadt Pangburn, P.C. (FILED HEREWITH)
23.3 Acknowledgment of Independent Certified Public Accountants,
Gelfond Hochstadt Pangburn, P.C. (FILED HEREWITH)
23.4 Consent of Independent Certified Public Accountants, Davis & Co.,
CPAs, P.C. (Filed herewith)
23.5 Independent Auditor's Consent, McGladrey & Pullen, LLP (FILED
HEREWITH)
23.6 Independent Auditor's Consent, McGladrey & Pullen, LLP (FILED
HEREWITH)
24. Power of Attorney- See Signature Page of Registration Statement
- ----------------------------
II-4
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 the 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 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 this
registration statement or any material change to such information
in this registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if 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
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the 1933
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) The undersigned hereby undertakes that, for purposes of determining
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13 (a) or 15 (d) of the Securities Exchange
Act of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15 (d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(5) The undersigned hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets 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 Palm Beach Gardens, State of Florida, on November 13,
2001.
EQUITEX, INC.
By /s/ Henry Fong
---------------------------------
Henry Fong, President, Treasurer and
Chief Financial Officer
KNOW ALL MEN BY THESE PRESENCE, THAT THE UNDERSIGNED OFFICERS AND/OR
DIRECTORS OF EQUITEX, INC., BY VIRTUE OF THEIR SIGNATURES APPEARING BELOW,
HEREBY CONSTITUTE AND APPOINT HENRY FONG, WITH FULL POWER OF SUBSTITUTION, AS
ATTORNEY- IN-FACT IN THEIR NAMES, PLACES AND STEED'S TO EXECUTE ANY AND ALL
AMENDMENTS TO THIS REGISTRATION STATEMENT ON FORM S-3 IN THE CAPACITIES SET
FORTH OPPOSITE THEIR NAMES BELOW AND HEREBY RATIFY ALL THAT SAID
ATTORNEY-IN-FACT MAY DO BY VIRTUE HEREOF.
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.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ Henry Fong Principal Financial and November 13, 2001
- ------------------------------- Accounting Officer and
Henry Fong Director
/s/ Russell L. Casement Director November 13, 2001
- -------------------------------
Russell L. Casement
/s/ Aaron A. Grunfeld Director November 13, 2001
- -------------------------------
Aaron A. Grunfeld
/s/ Joseph W. Hovorka Director November 13, 2001
- -------------------------------
Joseph W. Hovorka
II-6