PROSPECTUS
FOCUS ENHANCEMENTS, INC.
3,498,855 Shares of Common Stock
150,000 Redeemable Common Stock Purchase Warrants
This Prospectus relates to 3,498,855 shares of Common Stock, $.01 par
value per share (the "Common Stock"), and 150,000 Redeemable Common Stock
Purchase Warrants (the "Unit Warrants") of FOCUS Enhancements, Inc., a Delaware
corporation (the "Company"). The Common Stock offered hereby consists of (a) up
to 2,896,507 shares issuable by the Company upon exercise of 1,632,755
Redeemable Common Stock Purchase Warrants issued to the public (the "Public
Warrants") in May 1993 in connection with the Company's initial public offering
(the "IPO"); (b) up to 160,000 shares issuable by the Company upon exercise of
warrants (the "Private Warrants") issued in private transactions to certain
persons by the Company; (c) up to 416,100 shares issuable by the Company upon
exercise of a warrant (the "Underwriter's Warrant"), including the Unit Warrants
contained therein, sold to Thomas James & Associates, Inc. (now known as H.J.
Meyers & Co., Inc.) in connection with the IPO; and (d) 26,248 shares currently
issued and outstanding offered by certain persons, who together with the holders
of the Private Warrants, the Unit Warrants and the Underwriter's Warrant shall
be hereinafter referred to as the"Selling Stockholders." The Public Warrants are
currently exercisable at a price of $6.75 per Warrant; the Private Warrants are
exercisable at prices ranging from $1.25 to $2.07 per Warrant; the Underwriter's
Warrant is exercisable to purchase 150,000 Units at a price of $5.74 per Unit,
each Unit consisting of one share of Common Stock and one Unit Warrant; and the
Unit Warrants are exercisable at a price of $9.11 per Warrant. Hereinafter, the
Unit Warrants, the Public Warrants, the Private Warrants and the Underwriter's
Warrant shall be collectively referred to as the "Warrants." To the extent that
the Warrants are exercised, the Company will receive proceeds equal to the
exercise price of the Warrants. The Common Stock held by the Selling
Stockholders and the Common Stock issuable to the Selling Stockholders upon the
exercise of the Private Warrants is registered hereunder for resale purposes
only. The Company will not receive any proceeds from the sale of Common Stock
offered by the Selling Stockholders. See "SELLING STOCKHOLDERS AND PLAN OF
DISTRIBUTION."
The Common Stock offered by the Selling Stockholders may be offered and
sold from time to time by the Selling Stockholders, or by pledgees, donees or
transferees or other successors-in-interest, in privately negotiated
transactions directly or through brokers, or in the over-counter market and
otherwise at prices and on terms then prevailing. In connection with any sales,
the Selling Stockholders and any broker participating in such sales may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended.
The Common Stock and Public Warrants are traded on the Nasdaq Small-Cap
Market under the symbols FCSE and FCSEW, respectively. On November 19, 1997, the
last sale price of the Company's Common Stock as reported on the Nasdaq
Small-Cap Market was $4.25. See "PRICE RANGE OF COMMON STOCK."
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COM-
MISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY
INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
AT PAGES 5 THROUGH 7.
----------------------
The date of this Prospectus is November 20, 1997.
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus in connection with the offer contained in this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell or solicitation of an offer to
buy securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create an implication that there
has been no change in the affairs of the Company since the date hereof or the
information contained or incorporated by reference herein is correct at any time
subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copies obtained at the public reference facilities maintained by
the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the Commission:
Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661- 2511; and New York Regional Office, Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the Commission
at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
materials may also be accessed electronically by means of the Commission's home
page at http://www.sec.gov.
The Company has filed with the Commission a Post-Effective Amendment on
Form S-3 to its Registration Statement on Form SB-2 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"). This prospectus,
which constitutes part of a Registration Statement filed by the Company with the
Commission under the Securities Act omits certain information contained in the
Registration Statement in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and the
exhibits relating thereto for further information with respect to the Company
and the securities offered hereby. Any statements contained herein concerning
provisions of any documents are not necessarily complete, and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission
pursuant to the Exchange Act, are hereby incorporated in this Prospectus and
specifically made a part hereof by reference: (i) the Company's Annual Report on
Form 10-KSB/A-1 for the year ended December 31, 1996; (ii) the Company's Current
Report on Form 8K/A-1 filed on January 6, 1997 relating to the Company's
acquisition of TView , Inc.; (iii) the Company's Current Report on Form 8-K
filed on January 16, 1997 relating to the sale of securities pursuant to
Regulation S; (iv) the definitive Proxy Statement dated February 18, 1997
provided to stockholders in connection with a Special Meeting of Stockholders
held March 18, 1997; (v) the Company's Current Report on Form 8-K filed on March
3, 1997 relating to the sale of securities pursuant to Regulation S; (vi) the
definitive Proxy Statement filed with the Commission dated June 20, 1997
provided to stockholders in connection with the Annual Meeting of Stockholders
held on July 25, 1997; (vii) the Company's Quarterly Report on Form 10-QSB/A-1
for the period ended March 31, 1997; (viii) the Company's Quarterly Report on
Form 10-QSB/A-1 for the period ended June 30, 1997; (x) the Company's
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Quarterly Report on Form 10-QSB for the period ended September 30, 1997; and (x)
the description of the Company's Common Stock contained in the Registration
Statement on Form SB-2 File No. 33-60248-B filed with the Commission on March
29, 1993, as amended. All documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the securities
offered hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the respective dates of filing of such
documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in the applicable Prospectus Supplement), or in any
subsequently filed document that also is or is deemed to be incorporated herein
by reference, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, upon the written or oral request of such
person, a copy of any and all of the information that has been incorporated by
reference in this Prospectus (excluding exhibits unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be made to the Company at its
principal executive offices, 142 North Road, Sudbury, Massachusetts 01776,
Attention: Harry G. Mitchell, telephone (508) 371-2000.
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PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
more detailed information appearing elsewhere in this Prospectus or incorporated
herein by reference and the financial statements which are incorporated herein
by reference.
THE COMPANY.......................... FOCUS Enhancements, Inc. (the "Company"
or "FOCUS") internally develops, markets
and sells worldwide a proprietary line
of PC-to-TV video conversion products
for Windows(TM) and Mac(TM)OS based
personal computers. The Company's
proprietary PC-to-TV video conversion
products include video output devices
marketed and sold under the Company's
registered brand name, TView. All of the
Company's PC-to-TV conversion products
enable users to transmit at low-cost,
high quality, computer generated images
from any DOS, Windows or Mac OS based
personal computer to any television of
any size with a standard RCA or S-Video
interface. FOCUS's PC-to-TV technology
provides sharp, flicker-free,
computer-generated images on televisions
for multimedia/business presentations,
classroom/training sessions, game
playing or even collective viewing of
spreadsheets or internet browsing. The
Company markets and sells its FOCUS
branded consumer products globally
through a network of distributors,
volume resellers, mail order, value
added resellers ("VARs") and original
equipment manufacturers ("OEMs").
RISK FACTORS.......................... The Offering involves substantial risk.
See "RISK FACTORS".
SECURITIES OFFERED.................... 3,498,855 shares of Common Stock and
150,000 Redeemable Common Stock Purchase
Warrants (the "Unit Warrants"). The
Common Stock offered hereby consists of
(a) up to 2,896,507 shares issuable by
the Company upon exercise of 1,632,755
Public Warrants; (b) up to 160,000
shares issuable by the Company upon
exercise of the Private Warrants; (c) up
to 416,100 shares issuable upon exercise
of the Underwriter's Warrant; and (d)
26,248 shares currently issued and
outstanding offered by Selling
Stockholders. See "DESCRIPTION OF
SECURITIES."
OFFERING PRICE....................... All or part of the Shares offered hereby
may be sold from time to time in amounts
and on terms to be determined by the
Selling Stockholders at the time of
sale.
USE OF PROCEEDS...................... To the extent that the Warrants are
exercised, the Company intends to use
the net proceeds for general working
capital purposes. The Company will
receive no part of the proceeds from the
sale of the shares registered pursuant
to this Registration Statement.
NASDAQ TRADING SYMBOL................ FCSE
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RISK FACTORS
An investment in the Securities offered hereby involves a high degree
of risk and should only be purchased by investors who can afford to lose their
entire investment. The following factors, in addition to those discussed
elsewhere in the Prospectus, should be considered carefully in evaluating the
Company and its business.
Future Capital Needs. At September 30, 1997, the Company had working
capital of $5,160,342, cash and cash equivalents of $2,492,705 and was fully
drawn on its line of credit (approximately $750,000 at September 30, 1997) with
its bank and its $1.5 million term note with an unaffiliated lender.
Historically, the Company has been required to meet its short- and long-term
cash needs through debt and the sale of Common Stock in private placements in
that cash flow from operations has been insufficient. During 1996, the Company
received approximately $6,116,000 in net proceeds from the exercise of warrants,
stock options and the sale of Common Stock. During the nine month period ended
September 30, 1997, the Company received approximately $5,783,174 in net
proceeds from the exercise of warrants, stock options and the sale of Common
Stock.
The Company's future capital requirements will depend on many factors,
including cash flow from operations, continued progress in its research and
development programs, competing technological and market developments, and the
Company's ability to market its products successfully. During 1997, the Company
may be required to raise additional funds through equity or debt financing, of
which there can be no assurance. Any equity financing could result in dilution
to the Company's then-existing stockholders. Sources of debt financing may
result in higher interest expense. Any financing, if available, may be on terms
unfavorable to the Company. If adequate funds are not available, the Company may
be required to curtail its activities significantly.
Reliance on Major Customers. For the nine months ended September 30,
1997, approximately 22% of the Company's revenues were derived from sales to
Ingram Micro D ("Ingram"), a national distributor, approximately 19% of the
Company's revenues were derived from sales to SCI Systems, Inc. ("SCI"),
approximately 12% of the Company's revenues were derived from sales to Apple
Computer, Inc. ("Apple"), and approximately 11% of the Company's revenues were
derived from sales to Zenith Electronics, Inc. ("Zenith"). Management expects
that sales to Ingram, SCI and Zenith will continue to represent a significant
percentage of the Company's future revenues. In October 1996, the Company
entered into a two-year exclusive agreement with Zenith, under which Zenith must
purchase at least $12,000,000 of PC-to-TV conversion products in 1997 and at
least $30,000,000 of these products in 1998 in order to maintain exclusivity.
For the nine months ended September 30, 1997, the Company shipped approximately
$1,987,000 of PC-to-TV products to Zenith and projects that total shipments
through December 31, 1997 will be less than the $12 million contract minimum. As
a result, under the terms of the Agreement, Zenith has ceased to be an exclusive
OEM for the Company's PC to TV products in the television market.
History of Operating Losses. The Company has experienced limited
profitability since its inception and at September 30, 1997, had an accumulated
deficit of $19,763,443. Although the Company reported net income of $662,089 for
the nine-month period ended September 30, 1997, there can be no assurance that
the Company will remain profitable during the remainder of 1997.
The Company's independent auditors have included an explanatory
paragraph in their report on the Company's financial statements for the year
ended December 31, 1996 to the effect that the Company's ability to continue as
a going concern is contingent upon its ability to secure financing and attain
profitable operations. In addition, the Company's ability to continue as a going
concern must be considered in light of the problems, expenses and complications
frequently encountered by its entrance into established markets and the
competitive environment in which the Company operates.
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Limited Availability of Capital under Credit Arrangements with Lenders.
The Company maintains a line of credit with Silicon Valley Bank which was fully
drawn as of September 30, 1997. At December 31, 1996, the Company was in
violation of certain debt covenants relating to the line of credit. In March
1997, the Company received a waiver of the covenants from the bank, a revision
of the loan covenants and an agreement to extend the line until March 1998. As
of September 30, 1997, approximately $750,000 is owed to the bank under the line
of credit.
In October 1994, the Company borrowed $2,500,000 from an unaffiliated
lender to help finance its inventory and accounts receivable under its Master
Purchase Agreement with Apple. The Company issued to this unaffiliated lender
its term note in the aggregate principal amount of $2,500,000. The term note
ccrues interest at the revolving rate of prime plus 2%, is payable quarterly in
arrears at the end of December, March, June, and September, and was due February
1, 1996. In January 1996, the Company repaid approximately $1 million of the
amount owed under the term note. On June 28, 1996, the Company negotiated an
amendment to the term note with the lender to extend the due date of the term
note to March 31, 1997. Pursuant to the amendment, the Company granted the
lender a second security interest in all the assets of the Company. The Company
is currently negotiating an additional extension with the lender, however, there
can be no assurances that the term note will be extended on terms favorable to
the Company.
Market Acceptance. The Company's sales and marketing strategy is
targeted to sales of its PC-to- TV video-graphics products to the Windows, MAC
OS markets, including computer manufacturers, VGA graphic card developers and
VGA chip developers, as well as to television manufacturers. Although the
Company has to date experienced success in penetrating these markets, there can
be no assurance that the Company's marketing strategy will continue to be
effective and that current customers will continue to buy the Company's
products. Market acceptance of the Company's current and proposed products will
depend upon the ability of the Company to demonstrate the advantages of its
products over other PC-to-TV video- graphics products.
Reliance on Single Vendor. In the nine months ended September 30, 1997,
approximately 68% of the components for the Company's products were secured and
manufactured on a turnkey basis by a single vendor, Pagg Corporation. In the
event that the vendor was to cease supplying the Company, management believes
there are alternative vendors for the components for the Company's products.
However, the Company would experience short-term delays in the shipment of its
products.
Dependence on Timely Delivery of the FOCUS Scan 300 Chip. In the third
quarter of 1997, the Company completed development of an ASIC called the FOCUS
Scan 300 Chip which the Company will incorporate into all of its next generation
PC-to-TV video-graphics products. The Company is relying on an outside vendor to
manufacture its requirements for the Chip that it intends to ship in the fourth
quarter of 1997. A significant portion of the Company's anticipated revenues and
gross margins for 1997 are dependent on timely delivery of sufficient quantities
of the FOCUS Scan 300 Chip in order to fill pending orders. In the event that
the Company does not receive sufficient quantities of the Chip to fill orders,
the Company's revenues and profitability for 1997 could be adversely effected.
Technological Obsolescence. The Windows and MAC OS markets are
characterized by extensive research and development and rapid technological
change resulting in product life cycles of nine to eighteen months. Development
by others of new or improved products, processes or technologies may make the
Company's products or proposed products obsolete or less competitive. The
Company will be required to devote substantial efforts and financial resources
to enhance its existing products and to develop new products. There can be no
assurance that the Company will succeed with these efforts.
Competition. The Windows and MAC OS markets are extremely competitive.
The Company currently competes with other developers of PC-to-TV conversion
products and with video-graphic integrated circuit developers. Many of the
Company's competitors have greater market recognition and greater
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financial, technical, marketing and human resources than the Company. Although
the Company is not currently aware of any announcements by its competitors that
would have a material impact on the Company or its operations, there can be no
assurance that the Company will be able to compete successfully against existing
companies or new entrants to the marketplace.
Component Supply Problems. The Company purchases all of its parts from
outside suppliers and from time to time experiences delays in obtaining some
components or peripheral devices. The Company attempts to reduce the risk of
supply interruption by evaluating and obtaining alternative sources for various
components or peripheral devices. However, there can be no assurance that supply
shortages will not occur in the future which could significantly increase the
cost, or delay shipment of, the Company's products, which in turn could
adversely affect its results of operations.
Protection of Proprietary Information. Although the Company has filed
three patents and expects to file two additional patents in the fourth quarter
of 1997 with respect to its PC-to-TV video-graphics products, the Company does
not currently have any patents. The Company treats its technical data as
confidential and relies on internal nondisclosure safeguards, including
confidentiality agreements with employees, and on laws protecting trade secrets
to protect its proprietary information. There can be no assurance that these
measures will adequately protect the confidentiality of the Company's
proprietary information or that others will not independently develop products
or technology that are equivalent or superior to those of the Company. While it
may be necessary or desirable in the future to obtain licenses relating to one
or more of its products or relating to current or future technologies, there can
be no assurance that the Company will be able to do so on commercially
reasonable terms.
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THE COMPANY
FOCUS Enhancements, Inc. (the "Company" or "FOCUS") internally
develops, markets and sells worldwide a proprietary line of PC-to-TV video
conversion products for Windows(TM) and Mac(TM)OS based personal computers.
Based on an independent survey by PC Data Corp., the Company is an industry
leader in the development and marketing of PC-to-TV conversion products that
make personal computers "TV- ready" and televisions "PC-ready".
The Company's proprietary PC-to-TV video conversion products include
video output devices marketed and sold under the Company's registered brand
name, TView. All of the Company's PC-to-TV conversion products enable users to
transmit at low-cost, high quality, computer generated images from any DOS,
Windows or Mac OS based personal computer to any television of any size with a
standard RCA or S-Video interface. FOCUS's PC-to-TV technology provides sharp,
flicker-free, computer-generated images on televisions for multimedia/business
presentations, classroom/training sessions, game playing or even collective
viewing of spreadsheets or internet browsing.
The Company markets and sells its FOCUS branded consumer products
globally through a network of distributors, volume resellers, mail order, value
added resellers ("VARs") and original equipment manufacturers ("OEMs"). In North
America, the Company markets and sells its products through national
distributors such as Ingram Micro D, D & H, Academic and Nuvo; national volume
resellers such as CompUSA, Computer City, Micro Center, Staples and Egg Head;
and through third party mail order companies such as MicroWarehouse, Multiple
Zones, Global, PC Connection and Tiger Direct.
In addition, the FOCUS branded PC-to-TV products have been selected by
leading personal computer manufacturers to be marketed with the use of their
select brand of personal computers. Compaq, Toshiba and Apple have included the
Company's PC-to-TV products on their selected market price lists, and promote
the FOCUS PC-to-TV products in their box materials.
The Company also markets and sells its products internationally in over
30 countries by independent distributors in each country. These independent
distributors market and sell the FOCUS branded products to retailers, mail order
companies, and VARs in their respective countries.
In addition to the FOCUS branded products, the Company markets, sells
or licenses its proprietary PC-to-TV technology to television manufacturers such
as Zenith Electronics, and to personal computer manufacturers such as Apple
Computer. The Company is currently in discussions with several other PC
manufacturers, television manufacturers, VGA chip developers and VGA card
developers globally.
The Company was founded in December 1991, as a Massachusetts
corporation and was reincorporated in Delaware in April 1993. In December 1993,
the Company acquired Lapis Technologies Inc. ("Lapis"), a developer of
high-quality, low-cost Macintosh multimedia graphics products. Effective
September 30, 1996, the Company consummated the acquisition of TView, Inc., a
developer of PC-to-TV video conversion technology. This acquisition has played a
major strategic role in allowing FOCUS to gain a major technological lead over
competitors in the video scan conversion category and has positioned FOCUS as a
leader in PC-to-TV video conversion technology.
The Company's principal executive offices are located at 142 North
Road, Sudbury, Massachusetts 01776. Its research and development center is
located at 9275 SW Nimbus Drive, Beaverton, Oregon 97008. The Company's European
sales and marketing office, FOCUS Enhancements B.V., is located at Schipholweg
118, Kantorenhuis, 2316 XD Leiden, The Netherlands. The Company's general
telephone number is (508) 371-2000 and its worldwide web address is
http://www.focusinfo.com.
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USE OF PROCEEDS
The gross proceeds to be received by the Company from exercise of all
of the Warrants (assuming that all of the Warrants are exercised) are
$13,522,496, and management intends to use such proceeds for general working
capital purposes including expenditures in connection with the development,
sales and marketing of future products for the Company.
The Company will not receive any proceeds from the resale by the
Selling Stockholders of the Shares.
SELLING STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of Shares of Common Stock by the Selling Stockholders as of the date
of this Prospectus and the number of such shares included for sale in this
Prospectus assuming the exercise of Warrants held by the Selling Stockholders
and the sale of all Shares being offered by this Prospectus. To the best of the
Company's knowledge, none of the Selling Stockholders have held any office or
maintained any material relationship with the Company or its predecessors or
affiliates over the past three years, except as set forth below. The Selling
Stockholders reserve the right to reduce the number of Shares offered for sale
or to otherwise decline to sell any or all of the Shares registered hereunder.
The calculation of the number of Shares owned after the Offering assumes that
all of the Shares offered hereby are sold.
Shares to be Sold in Offering
-----------------------------
Shares Owned
Prior to Shares Shares Owned
Name of Selling Stockholder Offering Offered After Offering
--------------------------- ------------- -------- --------------
Mark Allen (1) 6,935 6,935 0
Karl Brenza (1) 4,161 4,161 0
Marshall Cox (2) 10,000 10,000 0
Culverwell & Co., Inc. 50,000 50,000 0
Highlands Group (3) 10,000 10,000 0
David Hughes (1) 4,161 4,161 0
Fred Kassner (4) 50,000 50,000 0
Jodi Ogden (1) 1,387 1,387 0
Judith M. Ott Family Limited Partnership, III (5) 16,248 16,248 0
John A. Piccione (1)(6) 72,740 72,740 0
George Salloum (1) 4,161 4,161 0
James A. Villa (1) 367,555 367,555 0
Venture Investment Management Co., L.L.C. (7) 5,000 5,000 0
- -----------------------------
(footnotes on next page)
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<FN>
(1) Represents shares issuable upon exercise of the Underwriter's Warrants originally issued to Thomas James Associates, Inc. (now
known as H.J. Meyers & Co., Inc.) in connection with the Company's initial public offering.
(2) This stockholder was a director of the Company from September 1992 until January 1996.
(3) Highlands Group is wholly-owned by Timothy Mahoney, a director of the Company.
(4) Mr. Kassner has provided a line of credit to the Company in the original principal amount of $2.5 million (currently $1.5
million).
(5) Ms. Ott, the General Partner of the Judith M. Ott Family Limited Partnership III, was the Secretary of the Company from
inception to August 1995 and a director of the Company from inception until 1993. Ms. Ott is also a partner in the law firm
that previously served as general counsel to the Company.
(6) Mr. Piccione is the Secretary of the Company and a partner at Sullivan & Worcester, LLP, the Company's general counsel.
(7) A predecessor firm of Venture Management Co., L.L.C. was formerly a principal stockholder of the Company.
</FN>
PLAN OF DISTRIBUTION
Of the 3,498,855 Shares being registered herein for sale by the Selling
Stockholders, (a) up to 2,896,507 shares are issuable by the Company upon
exercise of 1,632,755 Public Warrants; (b) up to 160,000 shares are issuable by
the Company upon exercise of the Private Warrants; (c) up to 416,100 shares are
issuable upon exercise of the Underwriter's Warrant; and (d) 26,248 shares are
currently issued and outstanding offered by Selling Stockholders. All Shares to
be registered hereby are to be offered by certain security holders of the
Company, and, other than the exercise price of the Warrants, the Company will
receive no proceeds from the sale of Shares offered hereby.
The Selling Stockholders may sell the Common Stock registered in
connection with this Offering on the NASDAQ market system or otherwise. There
will be no charges or commissions paid to the Company by the Selling
Stockholders in connection with the issuance of the Shares. It is anticipated
that usual and customary brokerage fees will be paid by the Selling Stockholders
upon sale of the Common Stock offered hereby. The Company will pay the other
expenses of this Offering. The Shares may be sold from time to time by the
Selling Stockholders, or by pledgees, donees, transferees or other successors in
interest. Such sales may be made on one or more exchanges or in the
over-the-counter market, or otherwise at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. The Shares may be sold by one or more of the following: (a) a
block trade in which the broker so engaged will attempt to sell the Shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker or dealer as principal and
resale by such broker or dealer for its account pursuant to this Prospectus; (c)
an exchange distribution in accordance with the rules of NASDAQ; and (d)
ordinary brokerage transactions. In effecting sales, brokers or dealers engaged
by the Selling Stockholders may arrange for other brokers or dealers to
participate. Brokers or dealers will receive commissions or discounts from
Selling Stockholders in amounts to be negotiated prior to the sale. Such brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Act in connection with such sales. In
addition, any securities covered by this prospectus
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which qualify for sale pursuant to Rule 144 of the Act may be sold under Rule
144 rather than pursuant to this Prospectus.
The Company has agreed to indemnify certain of the Selling Stockholders
against certain liabilities, including certain liabilities under the Act, or to
contribute to payments which a Selling Stockholder may be required to make in
respect thereof.
LEGAL MATTERS
The validity of certain of shares of Common Stock offered hereby was
passed upon for the Company by Epstein, Becker & Green, P.C., Boston,
Massachusetts 02109. At the time that the opinion was issued, John A. Piccione,
Esq., currently Secretary of the Company, was an attorney at Epstein, Becker &
Green, P.C. Mr. Piccione holds options to purchase 45,000 shares of Common Stock
and warrants to purchase 27,740 shares of Common Stock.
EXPERTS
The consolidated financial statements of the Company as of and for the
year ended December 31, 1996 appearing in the Company's Annual Report on Form
10-KSB/A-1 for the year ended December 31, 1996, have been audited by Wolf &
Company, P.C. independent accountants as set forth in their report thereon,
which report includes an explanatory paragraph regarding the Company's ability
to continue as a going concern, included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of FOCUS Enhancements, Inc. as of
and for the year ended December 31, 1995, included in the Annual Report on Form
10-KSB/A-1 of the Company for the fiscal year ended December 31, 1996 referred
to above have been audited by Coopers & Lybrand L.L.P., independent accountants,
as set forth in their report dated April 11, 1996, which included an explanatory
paragraph related to the Company's ability to continue as a going concern,
accompanying such financial statements, and are incorporated herein by reference
in reliance upon the report of such firm, which report is given upon their
authority as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in such 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 Shares 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 such Act and will
be governed by the final adjudication of such issue.
-11-
No dealer, salesman or other person has been authorized to give any
information or make any representation other than those contained in this
Prospectus. If given or made, such information or representations must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any of the
securities other than the specific securities to which it relates, or as offer
or solicitation to any person in any jurisdiction where such an offer or
solicitation would be unlawful.
TABLE OF CONTENTS
Page
Available Information....................................2
Incorporation of Certain
Documents by Reference.................................2
Prospectus Summary.......................................4
Risk Factors.............................................5
The Company............................................. 8
Use of Proceeds..........................................9
Selling Stockholders.....................................9
Plan of Distribution....................................10
Legal Matters...........................................11
Experts.................................................11
Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities ..........................................11
3,498,855 Shares of Common Stock
150,000 Redeemable Common Stock
Purchase Warrants
FOCUS ENHANCEMENTS, INC.
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PROSPECTUS
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November 20, 1997