As filed with the Securities and Exchange Commission on December 12, 2003
Registration No._____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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EQUITEX, INC.
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(Exact name of Registrant specified in its charter)
Delaware
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(State or other jurisdiction of
incorporation or organization)
84-0905189
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(I.R.S. Employer Identification No.)
7315 East Peakview Avenue
Englewood, Colorado 80111
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(Address of Principal Executive Offices) (Zip Code)
Individual Compensation Plans and
Individual Stock Option and Warrant Agreements
(Full title of the plans)
Henry Fong
President and Chief Executive Officer
Equitex, Inc.
7315 East Peakview Avenue
Englewood, Colorado 80111
(Name and address of agent for service)
(303) 796-8940
(Telephone number, including area code, of agent for service)
Copies to:
John W. Kellogg, Esq.
RaLea Sluga, Esq.
1775 Sherman Street
21st Floor
Denver, Colorado 80203
(303) 571-1400
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed
Maximum
Title of Offering Proposed Maximum Amount of
Securities to be Amount to be Price per Aggregate Registration
Registered Registered (1) Share Offering Price Fee
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Common Stock, 3,782,110 $1.20 (2) $4,538,532 $368
$.02 par value
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Total 3,782,110 $1.20 (2) $4,538,532 $368
================================================================================
(1) This Registration Statement is being filed to register 3,782,110 shares of
common stock underlying the Equitex, Inc. 2003 Stock Plan, an individual
compensation plan and individual stock option or warrant agreements
(collectively, the "Plans"). This Registration Statement shall cover any
additional shares of common stock which become issuable under the Plans by
reason of any stock dividend, stock split, recapitalization or any other
similar transaction without receipt of consideration which results in an
increase in the number of shares of the Registrant's common stock.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(h) and Rule 457(c) under the
Securities Act of 1933, as amended (the "Act"). The offering price per
share and aggregate offering price are based upon the average of the high
and low prices of Equitex, Inc.'s common stock as quoted on the Nasdaq
SmallCap market on Monday, December 8, 2003.
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
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PART I
INFORMATION REQUIRED IN THE SECTION 10(a)
PROSPECTUS
This Registration Statement relates to two separate prospectuses.
SECTION 10(A) PROSPECTUS: Items 1 and 2, from this page, and the documents
incorporated by reference pursuant to Part II, Item 3 of this prospectus,
constitute a prospectus that meets the requirements of Section 10(a) of the
Securities Act of 1933, as amended (the "Securities Act").
REOFFER PROSPECTUS: The material that follows Item 2, beginning on Page P-1
through P-23, up to but not including Part II of this Registration Statement,
beginning on Page 2, of which the reoffer prospectus is a part, constitutes a
"reoffer prospectus," prepared in accordance with the requirements of Part I of
Form S-3 under the Securities Act. Pursuant to Instruction C of Form S-8, the
reoffer prospectus may be used for reoffers or resales of shares which are
deemed to be "control securities" or "restricted securities" under the
Securities Act that have been acquired by the selling securityholders named in
the reoffer prospectus.
Item 1. PLAN INFORMATION.
Equitex, Inc. (the "Registrant") will provide each stockholder, each
option holder and each warrant holder (the "Recipient") with documents that
contain information related to the Registrant's 2003 Stock Option Plan, an
individual compensation plan and individual stock option or warrant agreements
(collectively, the "Plans") which provide for its compensation shares and other
information including, but not limited to, the disclosure required by Item 1 of
Form S-8, which information is not filed as a part of this Registration
Statement (the "Registration Statement"). The foregoing information and the
documents incorporated by reference in response to Item 3 of Part II of this
Registration Statement taken together constitute a prospectus that meets the
requirements of Section 10(a) of the Securities Act. A Section 10(a) prospectus
will be given to each Recipient who receives shares of common stock covered by
this Registration Statement, in accordance with Rule 428(b)(1) under the
Securities Act.
Item 2. REGISTRANT INFORMATION.
The Registrant will provide to the Recipient a written statement advising
it of the availability of documents incorporated by reference in Item 3 of Part
II of this Registration Statement and of documents required to be delivered
pursuant to Rule 428(b) under the Securities Act without charge and upon written
or oral notice. The statement will include the address and telephone number to
which any requests for documents should be directed.
1
REOFFER PROSPECTUS
EQUITEX, INC.
3,782,110 SHARES OF COMMON STOCK TO BE OFFERED AND SOLD
BY THE SELLING SECURITYHOLDERS
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This reoffer prospectus relates to the reoffer and resale of shares of
common stock of Equitex, Inc. by the selling securityholders for shares of
common stock underlying the Equitex, Inc. 2003 Stock Option Plan, an individual
compensation plan and individual stock option or warrant agreements held as of
the date of this reoffer prospectus. 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 December 8, 2003, the last reported sale price of our common stock on
the Nasdaq SmallCap Market was $1.20 per share.
We may amend or supplement this reoffer prospectus from time to time by
filing amendments or supplements as required. You should read this entire
reoffer 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 P-8.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED THAT THIS REOFFER PROSPECTUS IS TRUTHFUL OR
COMPLETE. A REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Reoffer Prospectus is December 12, 2003
TABLE OF CONTENTS
Where You Can Find More Information..........................................P-3
Forward-Looking Statements...................................................P-4
Equitex, Inc.................................................................P-5
Recent Developments..........................................................P-8
Risk Factors.................................................................P-8
Description of Capital Stock................................................P-15
Selling Securityholders.....................................................P-16
Plan of Distribution........................................................P-18
Indemnification Provided in Connection with the Offering by the Selling
Securityholders.............................................................P-19
2
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 SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
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
reoffer prospectus, and related information that we file with the Commission
will automatically update and supersede information we have included in this
reoffer 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 reoffer prospectus is part of a
Registration Statement that we filed with the Commission (Registration No.
333-______).
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FILING PERIOD
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Annual Report on Form 10-K.......... For the year ended December 31, 2002
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Quarterly Report on Form 10-Q....... For the quarter ended March 31, 2003
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Quarterly Report on Form 10-Q....... For the quarter ended June 30, 2003
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Quarterly Report on Form 10-Q....... For the quarter ended September 30, 2003
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The Description of our Common Stock. Registration Statement on Form 8-A filed
with the Commission July 21, 1983
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Rule 425 Filing..................... Filed with the Commission on July 23, 2003
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Rule 425 Filing..................... Filed with the Commission on September
29, 2003
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Rule 425 Filing..................... Filed with the Commission on November
17, 2003
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You can request a free copy of the above filings or any filings
subsequently incorporated by reference into this reoffer 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
You should rely only on the information incorporated by reference or
provided in this reoffer prospectus or any supplement or amendment to this
reoffer 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 reoffer
prospectus, or any supplement or amendment to this reoffer prospectus, is
accurate at any date other than the date indicated on the cover page of such
documents.
3
FORWARD-LOOKING STATEMENTS
Certain statements contained in this reoffer 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."
4
EQUITEX, INC.
We are a holding company that operates through our wholly-owned
subsidiaries, Chex Services, Inc., a Minnesota corporation ("Chex Services"),
Key Financial Systems, Inc., a Florida corporation ("Key Financial Systems"),
Nova Financial Systems, Inc., a Florida corporation ("Nova Financial Systems"),
and our majority-owned subsidiary Denaris Corporation, a Delaware corporation
("Denaris").
CHEX SERVICES, INC.
Chex Services was organized in July 1992. Chex Services provides
comprehensive cash access services to casinos, and other gaming establishments,
while also marketing its products ala' carte to other establishments in the
casino, entertainment, and hospitality industries. Chex Services' total funds
transfer system allows casino patrons to access cash through check cashing,
credit/debit card cash advances, automated teller machines and wire transfers.
Chex Services' check and credit card advance systems allow it to compile
detailed demographic data about patrons that utilize these services. The
collected patron demographic data is then provided to the casino operators and
can be used in their marketing efforts. Chex Services has also commenced
marketing of its payroll card, stored value card and CHEXGUARD electronic check
authorization and guarantee system to both the gaming and retail markets.
Currently, Chex Services has contracts to provide its comprehensive
cash access service portfolio as well as ala'carte products and services to
approximately 40 locations throughout the United States. At each such location,
Chex Services places credit/debit card cash advance systems and/or automated
teller machine terminals at the facility. In locations where Chex Services
provides its comprehensive services, Chex Services actually operates its own
independent teller facility separate from the casino's cashier cage. This teller
facility is staffed by Chex Services' employees to process transactions and
disburse cash to the location's customers when they transact requests for check
cashing, credit/debit card advances, wire transfers and other services, such as
the issuance of money orders.
Chex Services provides services pursuant to the terms of a financial
services agreement entered into with each gaming establishment. The financial
services agreement specifies which cash access services will be provided by Chex
Services, the transaction fees to be charged by Chex Services to patrons for
each type of cash access transaction and the amount of compensation to be paid
by Chex Services to the casino. Pursuant to all of these agreements with the
locations serviced, Chex Services maintains the exclusive rights (with rare
exception) to provide its services for the term of the contract.
At each location where Chex Services provides its cash access services,
it must have sufficient cash available to process both check cashing and credit
card advance transactions. Additionally, at each location where it operates
automated teller machines, Chex Services must have sufficient cash available to
replenish the automated teller machine. The amount of cash required is dependent
upon transaction volume that Chex Services calculates on a location-by-location
basis to ensure sufficient reserves. To meet its cash needs, Chex Services
arranges to have the cash it maintains on deposit delivered from a local bank as
needed. Chex Services usually utilizes the same financial institution for
depositing customer checks.
CREDIT/DEBIT CARD CASH ADVANCE SERVICES.
Chex Services" credit/debit card cash advance services allow patrons to
use their VISA, MasterCard, Discover, and American Express cards to obtain cash.
The remote cash access terminals and other equipment used to provide credit card
cash advance services are provided by a vendor pursuant to cash advance service
agreements between Chex Services and the vendor. Each of the cash advance
service agreements provides that the vendor will supply, install and maintain,
at the vendor's expense, the equipment and supplies necessary to operate the
cash advance system.
Under the terms of the cash advance service agreement, the vendor
charges each patron completing a credit card advance transaction a service fee
based on the cash advance amount and pays a portion of such service fee to Chex
Services. The service fee and the credit card cash advance amount are charged
against the credit card account of the location patron effecting the transaction
and deposited by the appropriate credit card company into the vendor's account.
The vendor reimburses Chex Services for the advance amount by check and pays the
commission due to Chex Services in the month following the month the transaction
5
was completed. At the locations where Chex Services provides credit card advance
services, it pays the operator a commission for each completed credit card cash
advance transaction.
Patrons may initiate a credit card cash advance transaction at a remote
credit card cash advance terminal at Chex Services' teller facility. The remote
credit card cash advance terminals consist of a credit card reader with an
integrated keypad and a digital display. The patron initiates the credit card
cash advance transaction by swiping the credit card's magnetic strip through the
card reader and then entering the amount of cash requested. The remote terminal
automatically accesses the credit card company's authorization center for
approval of the transaction. If the transaction is approved, a cash advance
draft is automatically generated at the teller facility and the patron is
directed to go to the teller facility to obtain the cash advance. At the teller
facility, the employee verifies the patron's identity and performs certain other
security measures gathering certain demographic information, including the
patron's address and telephone number. The patron then endorses the back of the
cash advance draft, initials the front of the draft acknowledging the service
fee charge and receives the cash requested with a transaction receipt. The
vendor, pursuant to the terms of the cash advance service agreement with Chex
Services, guarantees payment to Chex Services for all transactions that are
processed in accordance with the procedures specified in the cash advance
service agreement.
For the three months ended September 30, 2003, Chex Services processed
approximately 113,000 credit/debit card transactions with approximately $39
million in advances and earned fees of approximately $1,378,000 on these
transactions. For the nine months ended September 30, 2003, Chex Services
processed 327,000 credit/debit card transactions with approximately $112 million
in advances and earned fees of approximately $3,983,000.
CHECK CASHING SERVICES.
Chex Services' check cashing services allow location patrons to access
cash by writing a check to Chex Services at its teller facility staffed by
employees of Chex Services. Chex Services' employees conduct the authorization
and verification process for check cashing transactions in accordance with
detailed procedures developed by Chex Services designed to help minimize bad
debts.
Chex Services' customers are granted check cashing limits based upon
their check cashing history that is captured and maintained by Chex Services.
The customer's ability to pay is critical in establishing their check cashing
limits.
Chex Services charges the customer a fee for cashing checks. The fee
for personal checks ranges from 3% to 10% of the amount of the cashed check. At
the locations where Chex Services provides check cashing services, Chex Services
pays the location operator a commission based upon the monthly amount of checks
cashed. Chex Services also cashes other financial instruments at varying
customer fees, such as money orders, government checks, payroll checks,
insurance checks, etc.
Chex Services' check cashing services benefit location operators by
providing demographic information on the location's patrons, relieving the
location of any risk and collection costs associated with returned checks and by
allowing the location to focus on the aspects of the business that they do best.
Chex Services mitigates its potential for returned items by
establishing check cashing limits based on the customer's history at Chex
Services locations. In addition, Chex Services utilizes national negative
databases to determine if a customer has written nonnegotiable checks in the
past. It also contacts the customer's bank to verify funds availability in the
customer's checking account. Additionally, Chex Services obtains the
fingerprints and a photo of its customers to deter potential bad checks and to
assist its efforts in collections when necessary.
For the three months ended September 30, 2003, Chex cashed over $43
million of personal checks and over $36 million of "other checks", earning fees
of approximately $2,205,000 and $266,000, respectively. For the nine months
ended September 30, 2003, Chex cashed over $122 million of personal checks and
also over $109 million of "other checks" earning fees of approximately
$6,271,000 and $807,000, respectively. For the three months ended September 30,
2003 and September 30, 2002, Chex collected fees of $131,000 and $112,000,
respectively on returned checks and had other income of approximately $12,000
and $53,000, respectively.
6
AUTOMATED TELLER MACHINE SYSTEMS.
Under the terms of the agreements with the processor (vendor), Chex
Services receives a surcharge fee for each cash withdrawal and the vendor
credits Chex Services' bank settlement account for each transaction, less any
processing fees. The surcharge, which is a charge in addition to the cash
advance, is made against the bank account of the patron effecting the
transaction and is deposited in the vendor's account. The vendor reimburses Chex
Services for the cash advance amount generally within two days of the
transaction and pays the surcharge commission due Chex Services for each
withdrawal either immediately or in the month following the month the
transactions were completed. This variance in the timing of the surcharge
payments is based upon the automated teller machine processing agreements
between Chex Services and its vendors. Chex Services generally passes on an
agreed upon percentage of the surcharge commissions to the locations where the
automated teller machines are placed.
For the three months ended September 30, 2003, Chex Services processed
approximately 940,000 automated teller machine transactions and earned
commissions or fees of $833,000 on approximately $92 million in transactions.
For the nine months ended September 30, 2003, Chex Services processed
approximately 2.7 million automated teller machine transactions and earned
commissions or fees of $2,459,000 on approximately $266 million in transactions.
MARKETING AND SALES OF SERVICES.
Chex Services' objective is to increase the number of locations at
which it provides cash access services in the gaming industry. It intends to
pursue additional contracts with new casinos, existing casinos not currently
contracting with a cash access provider and other existing casinos when such
casinos' current contracts with other cash access service providers expire. At
September 30, 2003, Chex Services had approximately 40 contracts with casinos
and other gaming establishments. As of December 31, 2002, Chex Services is the
number one provider of full service booth cash access operations to the Native
American gaming industry.
In furtherance of Chex Services' objective to increase its market
share, its marketing plan is designed to increase Chex Services' profile in the
casino industry. The marketing plan includes increasing direct personal contact
with casino management personnel responsible for decision making regarding cash
access services, including the implementation of customer service workshops that
are designed for Chex Services and the casino's employees. Chex Services has
developed a network of associates in the casino industry who are able to refer
casino management to Chex Services. It also advertises in trade publications,
attends industry trade shows and distributes sales material to casino operators
through direct mail.
Denaris Corporation was formed on August 16, 2002 to develop and market
a prepaid reloadable stored value card program. Stored value cards offer a
convenient alternative to customers, particularly immigrants, who choose not to
utilize traditional bank accounts due to language barriers and apprehension.
Initially, Denaris intends to focus on the development of marketing programs
targeting various immigrant populations that utilize international fund
remittance services to transfer funds. Additionally, we, through Denaris, intend
to market a proprietary stored value card program, with our initial focus on the
international funds remittance business between the United States and Jamaica.
KEY FINANCIAL SYSTEMS AND NOVA FINANCIAL SYSTEMS
Key Financial Systems and Nova Financial Systems are no longer
operating entities. The companies were financial companies that specialized in
selling credit card programs designed for high credit risk clients. Key
Financial Systems and Nova Financial Systems were also full service
organizations, that provided 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, its sister company, Nova Financial Systems was
formed to provide the same services as Key Financial Systems for Key Financial
Systems' second bank client.
7
While Key Financial Systems marketed the Pay As You Go credit card
program with Net 1st National Bank, on March 1, 2002, federal banking regulators
closed Net 1st National Bank and subsequently the Federal Deposit Insurance
Corporation notified all of Net 1st National Bank's credit cardholders that
their accounts would be closed. In May 2002, Key Financial Systems filed a claim
with the FDIC for all funds due from Net 1st National Bank to Key Financial
Systems under its agreement with Net 1st National Bank through the date it was
closed by federal banking regulators. The total amount of the claim was
$4,311,027.
In October 2002, the FDIC notified Key Financial Systems that it had
determined to disallow all but $111,734 of the total claim. The notification
states that as the FDIC liquidates the assets of the receivership, Key Financial
Services may periodically receive payments on the allowed portion of this claim
through dividends. We and our legal counsel do not agree with this disallowance.
On November 18, 2002, we filed a lawsuit in the United States District Court for
the Southern District of Florida seeking to recover, $4,311,027, the full amount
of our claim. The FDIC has answered the complaint, asserting a counterclaim for
$1,000,000 which the FDIC asserts is for refunds to be made to customers who did
not receive credit cards as a result of the FDIC's actions.
Closing of the Net 1st National Bank portfolio resulted in the
termination of all future credit card servicing revenues to Key Financial
Services from the Net 1st National Bank portfolio after March 4, 2002. For the
year ended December 31, 2001, the Net 1st National Bank portfolio provided 71.3%
of the total credit card servicing revenues for Key Financial Services. The Net
1st National Bank portfolio was projected to represent an even greater
percentage of 2002 revenues due to the continuing attrition of the Key Bank &
Trust and Merrick Bank portfolios that were originated in 1998 and 1999 and the
expected growth in the Net 1st National Bank portfolio.
RECENT DEVELOPMENTS
In July 2003, we announced our executaion of a definitive agreement for
the sale of our wholly-owned subsidiary, Chex Services, Inc. to Cash Systems,
Inc. ("Cash Systems"), a publicly-traded Delaware corporation. Terms of the
agreement are for Cash Systems to issue 9,000,000 shares of common stock to us
for all of the outstanding common stock of Chex. As part of the agreement we
would distribute to our stockholders the lesser of (i) the number of shares
required for us to hold less than ten percent of shares, or (ii) 1,500,000
shares, whichever is less.
In November 2003, we announced the execution of a definitive agreement
for the sale of Chex to iGames Entertainment, Inc. ("iGames"), a publicly traded
Nevada corporation. Terms of the agreement are for iGames to issue at least
62.5% of its issued and outstanding common stock to us, with the shares having a
value of at least $63 million for all of the outstanding common stock of Chex.
In addition, the agreement includes a $780,000 two-year agreement between iGames
and our majority-owned subsidiary, Denaris, for various services to be provided
by Denaris. As part of the agreement we are to distribute to our stockholders
the number of shares required for us to hold less than ten percent of iGames'
outstanding common stock following the transaction.
On December 3, 2003, Cash Systems informed us that it was terminating
its agreement to acquire Chex Services because of alleged breaches of the
agreement by us. Cash Systems has also commenced litigation against us and Chex
Services seeking unspecified damages for alleged breaches of its agreement to
acquire Chex Services. We believe Cash Systems has wrongfully terminated the
agreement and the allegations in its litigation against us and Chex are without
merit. Because of continued breaches of the agreement by Cash Systems, we have
elected to terminate the agreement with Cash Systems and have demanded payment
of the $500,000 termination fee from Cash Systems. In addition to vigorously
defending the litigation commenced by Cash Systems, we may choose to file
counterclaims against Cash Systems seeking damages for the numerous breaches and
apparent bad faith actions of Cash Systems.
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.
8
RISKS REGARDING OUR HISTORY AND THE TRANSACTIONS
WE HAD A NET LOSS IN 2002, EXPECT TO INCUR A NET LOSS IN 2003 AND THERE IS NO
ASSURANCE WE WILL HAVE A PROFIT NEXT YEAR.
We incurred a net loss of approximately $4.3 million (a loss applicable
to common stockholders of approximately $4.4 million) for the year ended
December 31, 2002, compared to a net loss of approximately $1 million and net
loss applicable to common stockholders of approximately $4.2 million for the
year ended December 31, 2001. For the nine months ended September 30, 2003, we
incurred a net loss of approximately $1,522,000 (a loss applicable to common
stockholders of approximately $1,904,000). There is no assurance that we will
have a profit for the year ending December 31, 2003.
WE CAN PROVIDE NO ASSURANCE THAT WE WILL CONSUMMATE THE PROPOSED TRANSACTION FOR
THE SALE OF CHEX SERVICES OR THAT WE MAY NOT INCUR SIGNIFICANT EXPENSE AS A
RESULT OF LEGAL ACTIONS RELATING TO THE COMPETING BIDS.
While we have signed certain agreements for the sale of Chex, we can
provide no assurance that all conditions for closing can or will be met by all
parties or that we will consummate the proposed sale of Chex to iGames
Entertainment. In addition, we have been notified by Cash Systems that they have
initiated legal action against us seeking unspecified damages for alleged breach
of their Agreement to buy Chex. We intend to vigorously defend ourselves against
the litigation commenced by Cash Systems and may choose to file counterclaims
against them for numerous breaches and apparent bad faith actions on their part.
As a result, there may be significant costs related to these legal actions and
there is no guarantee we will be successful either in defending against the Cash
Systems lawsuit or successfully pursuing any possible counterclaims.
RISKS ASSOCIATED WITH OUR SECURITIES
FAILURE TO COMPLY WITH NASDAQ'S LISTING STANDARDS COULD RESULT IN OUR COMMON
STOCK BEING DELISTED BY NASDAQ FROM THE NASDAQ SMALLCAP MARKET AND LIMIT THE
ABILITY FOR STOCKHOLDERS TO SELL OUR COMMON STOCK.
Our common stock is currently traded on the Nasdaq SmallCap Market. In
July 2002, we received notice from the Nasdaq Stock Market that for the last 30
consecutive trading days our common stock's minimum bid price has fallen below
the $1.00 per share required for continued inclusion. We regained compliance
with the minimum bid price requirement on June 25, 2003, however, we can provide
no assurance that our common stock may not fall below the $1.00 per share
required for continued inclusion at some time in the future.
If for any reason our common stock is delisted from the Nasdaq SmallCap
Market, the price of our common stock may be quoted on either the electronic
bulletin board or on pink sheets. This would make it more difficult for
securityholders to sell their shares of our common stock on the market and would
decrease our liquidity.
WE HAVE REACHED THE LIMIT FOR THE ISSUANCE OF COMMON STOCK UPON CONVERSION OF
OUR SERIES D, G AND I PREFERRED STOCK AND THERE IS NO ASSURANCE WE WILL BE ABLE
TO EITHER OBTAIN SHAREHOLDER APPROVAL FOR FURTHER ISSUANCES OR BE ABLE TO REDEEM
THE STOCK.
Pursuant to the certificate of designations for our Series D, G and I
preferred stock, we cannot issue shares of common stock upon conversion in
excess of 1,421,387 shares for the Series D preferred stock, 1,421,387 shares
for the Series G preferred stock and 1,638,503 for the Series I preferred stock,
which is 20% of the outstanding number of shares of our common stock on the date
the shares of preferred stock were issued. We must obtain stockholder approval
to issue shares in excess of this limitation, or in lieu of such approval,
redeem any shares in excess of the limitation at 135% of the stated value of
Series D and G, and 125% of the stated value of Series I preferred stock, which
is $1,250 or $1,350 per share if a holder of these shares desires to convert the
shares into our common stock. While we have redeemed a total of 1,130 shares of
Series I preferred stock, there are still 1,600 shares of Series I preferred
stock outstanding, 408 shares of Series D Preferred stock outstanding and 370
shares of Series G preferred stock outstanding at December 8, 2003. There is no
guarantee that we will be able to obtain shareholder approval for the issuance
of shares of common stock in excess of the limitation or that we will have
sufficient funds available for redemption of the shares of Series D, G or I
preferred stock in excess of the limitation.
9
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
3,048,718 shares of our common stock at an estimated average conversion price of
$0.78 per share and the exercise of warrants and options into 12,574,038 shares
of our common stock at an estimated average exercise price of $3.73 per share,
which includes the warrants to purchase an aggregate of 4,811,698 shares of our
common stock that were issued in the Nova Financial Systems and Key Financial
Systems acquisition, may be below the market price of our common stock. This
assumes that we obtain shareholder approval to issue shares upon conversion of
our outstanding Series D, G and I preferred stock in excess of 20% of our
outstanding shares of common stock, as discussed above. 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
3,048,718 shares of our common stock or 9.0% of the number of shares of common
stock currently outstanding, assuming our shareholders approve the issuance of
shares in excess of 20% of our outstanding shares of common stock, as discussed
above. Of the 1,200 shares of Series D 6% convertible preferred stock issued,
792 shares have been converted into 1,376,945 shares of our common stock through
December 8, 2003. The remaining 408 outstanding shares of Series D preferred
stock would currently convert into approximately 523,077 shares of our common
stock as of December 8, 2003, using a conversion price of 65% of the closing
price of our common stock of $1.20 at that date. Of the 1,300 shares of our
Series G convertible preferred stock issued, 930 shares have been converted into
1,353,376 shares of our common stock through December 8, 2003. The remaining 370
outstanding shares of Series G preferred stock would currently convert into
approximately 474,359 shares of our common stock as of December 8, 2003, using a
conversion price of 65% of the closing price of our common stock of $1.20 at
that date. Of the 4,000 shares of Series I convertible preferred stock issued,
1,130 shares have been redeemed and 1,270 shares have been converted into
975,993 shares of our common stock through December 8, 2003. The remaining 1,600
outstanding shares of Series I preferred stock would currently convert into
approximately 2,051,282 shares of our common stock as of December 8, 2003, using
a conversion price of 65% of the closing price of our common stock of $1.20 at
that date, however, the certificate of designations for the Series I preferred
stock prohibits us from issuing common stock in excess of 20% of the outstanding
number of shares of our common stock on the date the shares of Series I
preferred stock were issued. Since we are near this limit, only 661 shares of
common stock can be issued upon conversion of Series I preferred stock without
stockholder approval.
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 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 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 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
10
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 and I preferred stock can create
additional dilution to the existing holders of our common stock.
o The conversion of the Series D, G and I 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
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 preferred stock. The conversion
ratio for issuing shares of our common stock in exchange for Series D preferred
stock is determined by dividing the stated value of the Series D 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 preferred stock is determined by dividing the stated value of the
Series G 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
preferred stock drops to 50% of the market price.
For example and for illustrative purposes only, if the conversion date
is December 9, 2003, the closing market price of our common stock on December 8,
2003 was $1.20, 65% of $1.20 is $.78. Therefore, the lower of $6.50 and $.78 is
$.78 and $.78 (65% of $1.20) is the conversion price for our Series G preferred
stock.
The conversion ratio for issuing shares of our common stock in exchange
for Series I preferred stock is determined by dividing the stated value of the
Series I 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
preferred stock drops to 50% of the market price.
For example and for illustrative purposes only, if the conversion date
is December 9, 2003, the closing market price of our common stock on December 8,
2003 was $1.20, 65% of $1.20 is $.78. Therefore, the lower of $6.50 and $.78 is
$.78 and $.78 (65% of $1.20) is the conversion price for our Series I preferred
stock.
11
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 preferred stock, based on the closing market price of our
common stock on December 8, 2003.
- -------------- ----------- -------------- ----------- --------------- ----------- -------------- --------------
Price per Conversion Aggregate Conversion Aggregate Conversion Aggregate Percentage of
share of price of number of price of number of price of number of outstanding
common stock Series D shares of Series G shares of Series I shares of common stock
preferred common stock preferred common stock preferred common stock (5) (10)
stock (1) convertible stock (3) convertible stock (11) convertible
from all from all from all
Series D Series G Series I
preferred preferred preferred
stock (2) stock (4) stock (12)
- -------------- ----------- -------------- ----------- --------------- ----------- -------------- --------------
$1.20 $.780 523,077 $.780 474,359 $.780 2,051,282 9.00%
- -------------- ----------- -------------- ----------- --------------- ----------- -------------- --------------
$.90 (6) $.585 697,436 $.585 632,479 $.585 2,735,043 11.65%
- -------------- ----------- -------------- ----------- --------------- ----------- -------------- --------------
$.60 (7) $.390 1,046,154 $.390 948,718 $.390 4,102,564 16.51%
- -------------- ----------- -------------- ----------- --------------- ----------- -------------- --------------
$1.50 (8) $.975 418,462 $.975 379,487 $.975 1,641,026 7.33%
- -------------- ----------- -------------- ----------- --------------- ----------- -------------- --------------
$1.80 (9) $1.170 348,718 $1.170 316,239 $1.170 1,367,521 6.18%
- -------------- ----------- -------------- ----------- --------------- ----------- -------------- --------------
(1) The conversion price is 65% of the market price of our common stock.
(2) Assumes that all 408 shares of Series D preferred stock, which have a
stated value of $408,000, will be converted into common 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 preferred stock.
(4) Assumes that all 370 shares of Series G preferred stock, which have a
stated value of $370,000, will be converted into common stock.
(5) Assumes 30,830,726 outstanding shares of our common stock prior to the
conversion of the Series D, G and I preferred stock.
(6) Reflects a 25% reduction from the average closing bid price of $1.20.
(7) Reflects a 50% reduction from the average closing bid price of $1.20.
(8) Reflects a 25% increase from the average closing bid price of $1.20.
(9) Reflects a 50% increase from the average closing bid price of $1.20.
(10) The Certificates of Designation for the Series D, G and I 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 1,421,387 for the Series D
preferred stock, of which 1,420,278 shares of our common stock have already
been issued; and 1,421,387 for the Series G preferred stock, of which
1,418,336 shares of our common stock have already been issued; and
1,638,503 for the Series I preferred stock, of which 1,637,842 shares of
common stock have already been issued. We must obtain stockholder approval
to issue shares in excess of the 20% limitation, or in lieu of such
approval redeem any shares in excess of the 20% limitation at 135 % of the
stated value for Series D and G, and 125% of the stated value for Series I.
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 preferred stock.
12
12) Assumes that all 1,600 shares of Series I preferred stock, which have a
stated value of $1,600,000, will be converted into common stock. This
amount reflects the redemption by us of 1,130 shares of Series I preferred
stock.
RISKS RELATED TO THE BUSINESS OF CHEX
THE OPERATIONS OF CHEX IS SUBJECT TO THE FOLLOWING RISKS:
POTENTIAL FOR LOSSES ON RETURNED CHECKS COULD BE SIGNIFICANT
Chex estimates that it will transact approximately $305 million in
check cashing volume during 2003. Chex charges operations for potential losses
on returned checks in the period such checks are cashed, since ultimate
collection of these items is uncertain. Recoveries on returned checks are
credited in the period when the recovery is received. While Chex employs a
full-time collections specialist and has systems in place to mitigate the amount
of returned checks, the potential for losses on returned checks could be
significant and have a material negative impact on our financial condition and
results of operations in any given period.
CHEX'S BUSINESS IS HIGHLY DEPENDENT ON CHECK CASHING, CREDIT/DEBIT CARD CASH
ADVANCES AND AUTOMATED TELLER MACHINE FEES FOR ITS REVENUES WHICH COULD BE
LIMITED BY STATE AND/OR FEDERAL AUTHORITIES.
Chex's revenues are mainly comprised from fees charged to its customers
for check cashing, credit card and automated teller machine transactions. If
federal or state authorities were to limit or ban fees charged for Chex's check
cashing, credit card or automated teller machine transactions, we would see a
significant decline in revenues that could have a material adverse effect on our
business, growth, financial condition and results of operations.
CHEX'S BUSINESS IS SUBJECT TO REGULATION BY VARIOUS TRIBAL AND GOVERNMENTAL
AGENCIES.
A majority of the locations where Chex offers its services are on
tribal lands. Chex is licensed at many of the locations where it operates by the
local tribal authority and/or various state licensing organizations. All of the
tribes operate under various compacts negotiated with the states where they are
domiciled. The Bureau of Indian Affairs, that reports to the U.S. Department of
Commerce, oversees the regulatory aspects of these compacts. If a tribe were
found in violation of the regulations of the state compact, its locations could
be closed down, which would have a material adverse effect on our business,
growth, financial condition and results of operations.
CHEX RELIES ON CERTAIN NOTES PAYABLE TO FUND ITS CHECK CASHING OPERATIONS AND
GROWTH THAT ARE SUBJECT TO REPAYMENT ON 90 DAYS NOTICE.
Chex relies in part on debenture notes from private investors to
operate its business and to fund its growth. There is no assurance Chex will
continue to raise the necessary funds to support its future growth.
Additionally, these debenture notes are one year in length, but cancelable by
either party with 90 days notice. There is no assurance that Chex will be able
to replace funds in the event of the non-renewal of a note or a cancellation
notice.
CERTAIN OF CHEX'S CASINO CONTRACTS CONTAIN PROVISIONS THAT COULD BE SUBJECT TO
INTERPRETATION BY THE CONTRACTUAL PARTIES AND OPERATES AT SOME GAMING
ESTABLISHMENTS WITH UNSIGNED CONTRACTS, VERBAL AGREEMENTS OR VERBAL AGREEMENTS
TO EXISTING WRITTEN CONTRACTS.
While a majority of Chex's locations operate under written contracts,
certain of these contracts could be subject to interpretation by the contractual
parties particularly given the fact that many of these contracts are with Native
American owned casinos which have not waived their sovereign immunity. In
addition, Chex is operating at some locations with unsigned contracts, verbal
agreements or verbal amendments to written contracts which may not be
enforceable. Should any party bring challenges or claims to Chex pursuant to
these written contracts or verbal agreements, we could experience a decrease in
future revenue or be required to record an unforeseen future liability which
could have a material adverse effect on our business, growth, financial
condition and results of operations.
13
THERE IS NO ASSURANCE OF RENEWALS FOR CHEX'S CONTRACTS.
Chex operates its business at most locations through contracts
negotiated with tribal authorities and other entities that typically last for
one to five years. While Chex historically has had significant success in
renewing these contracts for successive terms, there is no assurance that future
contract renewals will be successful and that Chex will be able to maintain its
existing client base. Failure to complete a significant number of contract
renewals could have a material adverse effect on our business, growth, financial
condition and results of operations.
CHEX'S GROWTH IS DEPENDENT ON NEW CONTRACTS.
The continued expansion and development of Chex's business will depend
on the execution of new contracts with casinos and other gaming establishments.
Chex has concentrated its efforts to date on Native American owned casinos where
it has significant market penetration. In order to continue its growth, Chex may
be required to market its products to non-Native American owned casinos and
other gaming establishments in larger traditional gaming markets for which there
is no assurance it will be successful. The inability to penetrate these markets
could have a material adverse effect on our future growth, which would affect
our business, financial condition and results of operations.
In addition, Chex intends to market its new products, the FastFunds
stored value card and the pre-paid payroll card, to industries outside of the
Native American gaming industry, where it currently primarily operates. Chex can
offer no assurance that its efforts will be successful. The inability to
penetrate these markets could have a material adverse effect on its future
growth, which would affect our business, financial condition and results of
operations.
CHEX FACES INTENSE COMPETITION FOR ITS SERVICES.
Chex competes with a number of companies in its market niche. Companies
such as Game Financial Corp. (owned by American Express), Global Cash Access,
Cash Systems and Americash offer full-service booth check cashing operations. In
addition, Chex competes with Global Cash Access, Game Financial Corp., Cash
Access Systems, Inc., Cash & Win (through an alliance with Comerica Bank and
NDC), Americash and Borrego Springs Bank which offer ala carte credit card cash
advance systems and automated teller machines to the gaming and hospitality
industries. Some of these companies are much larger and better financed than
Chex. There is no assurance that Chex will be able to compete successfully with
these companies in its particular market niche.
CHEX IS DEPENDENT UPON ITS MANAGEMENT AND MAY NOT BE ABLE TO RETAIN KEY
EMPLOYEES.
Chex's growth and profitability will depend on its ability to retain
key executives and managers, attract capable employees, and maintain and develop
the systems necessary to operate its business. The loss of any one or more of
its key executives could have a material adverse effect on our business, growth,
financial condition and results of operations.
CHEX'S COMPUTER SYSTEMS ARE SUBJECT TO SECURITY RISKS WHICH, IF BREACHED, COULD
ADVERSELY EFFECT ITS BUSINESS AND FINANCIAL CONDITION.
Chex currently maintains a site on the World Wide Web at
WWW.FASTFUNDSONLINE.COM to promote, enhance and encourage customers to use its
services and to educate them on its services and products. On a secure section
of its current web site, Chex maintains its proprietary application management
software for use by its customers. Like most computer systems, Chex's systems
are subject to the risks of computer viruses and unauthorized individuals
(hackers) obtaining access to and inadvertently or purposefully damaging its
systems. We believe the security and virus detection systems and controls that
Chex has implemented significantly reduce these risks. If Chex's systems were
compromised, its customers could lose data or be unable to access its system. In
addition, sensitive information regarding its customers that is maintained on
its system may become publicly available. In such circumstances, Chex may be
exposed to liability from its customers, may lose these customers and may suffer
significant damage to its business reputation. Any of these events could have an
adverse effect on our business and financial condition.
14
CHEX INTENDS TO EXPAND ITS OPERATIONS AND MAY NOT BE ABLE TO SECURE FINANCING
FOR FUTURE OPPORTUNITIES.
Chex intends to seek to acquire other businesses in the future that are
in similar businesses or expand its operations. Any such acquisitions will
likely require it to raise additional capital through issuance of securities or
by incurring additional debt obligations. There is no assurance that Chex will
be able to secure financing to capitalize on business opportunities as they
arise.
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 25, 2003, 30,830,726 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 preferred stock
has a stated value of $1,000 per share. The Series D preferred stock
ranks prior to our common stock and pari passu with other series of
preferred stock issued prior to the Series D preferred stock and senior
to any series of preferred stock issued after the Series D preferred
stock. The Series D preferred stock entitles its holder to 6% annual
dividends, payable quarterly. The Series D 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 preferred stock
until the most recent dividend payment date of date of our liquidation,
dissolution or winding up. Lastly, the Series D 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 preferred stock is (i) the number of shares
15
to be converted, multiplied by (ii) the stated value of the Series D
preferred stock and divided by (iii) the applicable conversion price.
As of December 8, 2003, 408 shares of Series D preferred stock were
outstanding.
o SERIES G 6% CONVERTIBLE PREFERRED STOCK. The Series G preferred stock
has a stated value of $1,000 per share and bears dividends at 6% per
annum plus a 4% per annum dividend default rate, 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 preferred stock is convertible,
together with any accrued but 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 preferred stock shall be automatically converted into common stock on
August 31, 2003. However, the Company has been negotiating with the
holder to extend the terms, therefore, the holder has not elected to
convert the preferred shares into common stock. The Series G preferred
stock are redeemable at our option at any time prior to conversion at a
redemption price equal to $1,350 per share plus any accrued but unpaid
dividends. As of December 8, 2003, 370 shares of Series G preferred
stock were outstanding.
o SERIES I 6% CONVERTIBLE PREFERRED STOCK. The stated value of the Series
I preferred stock is $1,000 per share and bears dividends at 6% per
annum plus a 4% per annum dividend default rate, 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 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 $6.50 or 65% of the market price upon the
occurrence of certain material events. All outstanding shares of Series
I preferred stock will be automatically converted into common stock on
the third anniversary of the date of the Series I preferred certificate
of designations. The shares of Series I 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 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 SmallCap Market for the five trading
days immediately preceding the closing dates for the sales of the
Series I preferred stock. Accordingly, the warrants issued in
connection with the sales of Series I 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 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 preferred stock that
closed on August 8, 2001, are exercisable at $5.32 per share. As of
December 8, 2003, 1,600 shares of Series I preferred stock were
outstanding.
The Series I preferred stock is subject to a registration rights
agreement, which provides that we will use our best efforts to register
the common stock underlying the Series I preferred stock and the common
stock underlying the warrants within a specified time period. Because a
registration statement had not been declared effective by the
stipulated date, we incurred approximately $263,600 in penalties
through September 30, 2002, which is reflected in a liability account
on our balance sheet as of September 30, 2002. The penalties are
payable in cash. On May 3, 2002, we filed a Form S-3/A with the SEC to
register the shares underlying the Series I preferred stock. The
registration statement was declared effective by the SEC on May 30,
2002, and accordingly, we have not incurred additional penalties since
that date.
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 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.
SELLING SECURITYHOLDERS
Discussed below are 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.
16
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 reoffer prospectus, and because its 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 options or warrants offered by this reoffer prospectus may be
offered from time to time by the selling securityholders named below.
Up to 3,500,000 shares of common stock issued pursuant to the exercise
of stock options by officers, directors, employees or consultants who are
eligible to participate in the Equitex, Inc. 2003 Stock Option Plan (the "2003
Plan") may be sold pursuant to this reoffer prospecuts. Eligibility to
participate in the 2003 Plan is available to our officers, directors, employees
and consultants as determined solely by the compensation committee of the board
of directors. Assuming all 3,500,000 options underlying the 2003 Plan are
exercised and not sold, the selling securityholders would be the beneficial
owners of 10.17% of the outstanding shares of common stock (including the shares
of common stock offered by this reoffer prospectus). The officers, directors,
employees and consultants eligible to participate in the 2003 Plan are offering
up to 3,500,000 shares of our common stock.
Of the 3,500,000 options eligible for grant pursuant to the 2003 Plan,
1,500,000 options to purchase 1,500,000 shares of common stock have been granted
as of the date of this prospectus. Information relating to individual selling
securityholders for any options granted following the effective date of this
prospectus will be included supplementally. The following table contains
information for the selling securityholders offeing 3,500,000 shares pursuant to
the 2003 Plan.
- ------------------------ ---------------------- ------------------------- -------------------------
SHARES OF COMMON STOCK
RECEIVED AND TO BE
RECEIVED UPON EXERCISE OF
SHARES OF COMMON STOCK STOCK OPTIONS AND OFFERED PERCENTAGE OF OUTSTANDING
OWNED PRIOR TO THIS FOR SELLING COMMON STOCK OWNED UPON
SELLING SECURITYHOLDER OFFERING SECURITYHOLDERS' ACCOUNT EXERCISE OF STOCK OPTIONS
- ------------------------ ---------------------- ------------------------- -------------------------
Henry Fong 627,875 328,000 3.07%
- ------------------------ ---------------------- ------------------------- -------------------------
Russell L. Casement 146,795 100,000 0.80%
- ------------------------ ---------------------- ------------------------- -------------------------
Aaron A Grunfeld 32,700 100,000 0.43%
- ------------------------ ---------------------- ------------------------- -------------------------
Thomas B. Olson 0 100,000 0.32%
- ------------------------ ---------------------- ------------------------- -------------------------
Barry S. Hollander* 20,000 100,000 0.39%
- ------------------------ ---------------------- ------------------------- -------------------------
Doreen A. Schmidt 0 12,000 0.04%
- ------------------------ ---------------------- ------------------------- -------------------------
James P. Welbourn 337,334 282,700 1.99%
- ------------------------ ---------------------- ------------------------- -------------------------
George Connors 0 100,000 0.32%
- ------------------------ ---------------------- ------------------------- -------------------------
Ralph Klein 230,000 100,000 1.07%
- ------------------------ ---------------------- ------------------------- -------------------------
Ijaz Anwar 1,100 100,000 0.33%
- ------------------------ ---------------------- ------------------------- -------------------------
Pam Houle 0 26,500 0.09%
- ------------------------ ---------------------- ------------------------- -------------------------
Dawn Ray 0 26,500 0.09%
- ------------------------ ---------------------- ------------------------- -------------------------
Kathryn Welbourn 0 26,500 0.09%
- ------------------------ ---------------------- ------------------------- -------------------------
Deanna Moose 0 26,500 0.09%
- ------------------------ ---------------------- ------------------------- -------------------------
Chris Epple 1,000 26,500 0.09%
- ------------------------ ---------------------- ------------------------- -------------------------
Jodi Dilascio 750 26,500 0.09%
- ------------------------ ---------------------- ------------------------- -------------------------
Keli Mahowald 0 8,300 0.03%
- ------------------------ ---------------------- ------------------------- -------------------------
Vincent Ella 0 10,000 0.03%
- ------------------------ ---------------------- ------------------------- -------------------------
Unnamed option holders 0 2,000,000 6.09%
- ------------------------ ---------------------- ------------------------- -------------------------
3,500,000
======================== ====================== ========================= =========================
* Barry S. Hollander is also registering 100,000 shares of common stock
underlying common stock purchase warrants in addition to the stock options
listed.
17
Barry S. Hollander, who has provided us with consulting services, is a
selling securityholder and the beneficial owner of 20,000 shares of our common
stock, 100,000 stock options to purchase 100,000 shares common stock and 100,000
warrants to purchase 100,000 shares of our common stock. Upon the exercise of
these warrants, Barry S. Hollander is the beneficial owner of .32% of the
outstanding shares of common stock (including the shares of common stock offered
by this reoffer prospectus). Barry Hollander is offering 200,000 shares of our
common stock.
Kendra Takimoto, who has provided us with consulting services, is a
selling securityholder and the beneficial owner of warrants to purchase 5,000
shares of our common stock. Upon the exercise of these warrants, Kendra Takamoto
is the beneficial owner of .01% of the outstanding shares of common stock
(including the shares of common stock offered by this reoffer prospectus).
Kendra Takimoto is offering 5,000 shares of our common stock.
Audrey Marks, who has provided us with consulting services, is a
selling securityholder and the beneficial owner of warrants to purchase 70,000
shares of our common stock. Upon the exercise of these warrants, Audrey Marks is
the beneficial owner of .20% of the outstanding shares of common stock
(including the shares of common stock offered by this reoffer prospectus).
Audrey Marks is offering 70,000 shares of our common stock.
Friedlob Sanderson Paulson & Tourtillott, LLC, our attorney, is a
selling securityholder and the beneficial owner of 107,110 shares of common
stock, .31% of the outstanding shares of our common stock (including the shares
of common stock offered by this reoffer prospectus). Friedlob Sanderson Paulson
& Tourtillott, LLC is offering 107,110 shares of our common stock.
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the
individual selling securityholders. 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).
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 its sales in the market.
18
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
reoffer 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 reoffer prospectus and (f) other facts material to the transaction.
We are unable to predict the effect which sales of the shares of common
stock offered by this reoffer 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
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.
Of the 3,782,110 shares of common stock which may be offered pursuant
to this reoffer prospectus, 3,500,000 shares underlie stock options and 175,000
underlie warrants that currently are outstanding. If the options and warrants to
acquire all 3,675,000 share of common stock are exercised, we will receive
proceeds of approximately $1,320,000, which proceeds will be added to our
working capital.
INDEMNIFICATION PROVIDED IN CONNECTION WITH THE OFFERING BY THE SELLING
SECURITYHOLDERS
None.
19
EQUITEX, INC.
3,782,110 SHARES OF COMMON STOCK TO BE OFFERED
AND SOLD BY SELLING SECURITYHOLDERS
December 12, 2003
------------------------------------
REOFFER 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
reoffer prospectus. Any information or representations not herein contained, if
given or made, must not be relied upon as having been authorized by Equitex.
This reoffer 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 reoffer 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 reoffer prospectus. However, in the event of
a material change, this reoffer prospectus will be amended or supplemented
accordingly.
- --------------------------------------------------------------------------------
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Commission by the Registrant are
hereby incorporated into this Registration Statement by reference:
- ------------------------------------- ------------------------------------------
Filing Period
- ------------------------------------- ------------------------------------------
Annual Report on Form 10-K.......... For the year ended December 31, 2002
- ------------------------------------- ------------------------------------------
Quarterly Report on Form 10-Q....... For the quarter ended March 31, 2003
- ------------------------------------- ------------------------------------------
Quarterly Report on Form 10-Q....... For the quarter ended June 30, 2003
- ------------------------------------- ------------------------------------------
Quarterly Report on Form 10-Q....... For the quarter ended September 30, 2003
- ------------------------------------- ------------------------------------------
The Description of our Common Stock. Registration Statement on Form 8-A filed
with the Commission July 21, 1983
- --------------------------------------------------------------------------------
Rule 425 Filing..................... Filed with the Commission on July 23, 2003
- ------------------------------------- ------------------------------------------
Rule 425 Filing..................... Filed with the Commission on September
29, 2003
- ------------------------------------- ------------------------------------------
Rule 425 Filing..................... Filed with the Commission on November
17, 2003
- ------------------------------------- ------------------------------------------
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act"), prior to the filing of a post-effective amendment which indicates that
all shares offered hereunder have been sold or de-registers all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be a part hereof from the date of filing of such
documents.
II-1
Item 4. DESCRIPTION OF SECURITIES.
Not Applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The law firm of Friedlob Sanderson Paulson and Tourtillott, LLC, is
providing its opinion as to the shares being offered pursuant to this
Registration Statement on Form S-8. Of the 3,782,110 shares of Common Stock
being registered, 107,110 shares are being registered for the benefit of
Friedlob Sanderson Paulson and Tourtillott, LLC.
Item 6. 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
II-2
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.
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.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED.
Of the 3,782,110 shares being registered, 107,110 shares of common
stock were issued pursuant to an individual compensation plan in exchange for
legal services valued at $160,665 and performed in connection with our general
corporate activities and not in relation to any offering of securities. We
relied upon exemptions from registration provided by Sections 4(6) or 4(2) of
the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder
based upon (i) representations from the securityholder that he is an accredited
or sophisticated investor with experience in investing in securities such that
II-3
he could evaluate the merits and risks related to the securities; (ii) that no
general solicitation of the securities was made by us; (iii) the securityholder
represented to us that he was acquiring the securities for his own account and
not with a view towards further distribution; (iv) the securities were
"restricted securities" as that term is defined under Rule 144 promulgated under
the Securities Act; (iv) we placed appropriate restrictive legends on the
certificates representing the securities regarding the restricted nature of
these securities; and (v) prior to completion of the transaction, the
securityholder was informed in writing of the restricted nature of the
securities, provided with all information regarding us as required under Rule
502 of Regulation D and was given the opportunity to ask questions of and
receive additional information from us regarding our financial condition and
operations.
Item 8. EXHIBITS.
The following is a complete list of exhibits filed as a part of this
Registration Statement, which Exhibits are incorporated herein.
NO. DESCRIPTION
--- -----------
5.1 Opinion of Counsel and Consent of Friedlob Sanderson Paulson &
Tourtillott, LLC
24.1 Power of Attorney - Included on Signature Page
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 Independent Auditor's Consent, McGladrey & Pullen, LLP (Filed
herewith)
23.5 Independent Auditor's Consent, McGladrey & Pullen, LLP (Filed
herewith)
Item 9. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) (1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement to include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
II-4
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(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.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
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 that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant 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 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are 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.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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 all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Englewood, State of Colorado, on this 12th day of
December, 2003.
Equitex, Inc.
By /s/ Henry Fong
---------------------------
Henry Fong, President
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and/or
directors of Equitex, Inc., by virtue of their signatures appearing below,
hereby constitute and appoint Henry Fong and Thomas B. Olson, each with full
power of substitution, as attorneys-in-fact in their names, places and steads to
execute any and all amendments to this Registration Statement on Form S-8 in the
capacities set forth opposite their names below and hereby ratify all that said
attorneys-in-fact may do by virtue thereof.
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 December 12, 2003
------------------------ and Accounting
Henry Fong Officer and Director
/s/ Russell L. Casement Director December 12, 2003
------------------------
Russell L. Casement
/s/ Aaron A. Grunfeld Director December 12, 2003
------------------------
Aaron A. Grunfeld
II-6