FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 2004
REGISTRATION NO. 333-116317
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3/A
(PRE-EFFECTIVE AMENDMENT NO. 1)
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
DOCUMENT SECURITY SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 424100 16-1229730
STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
36 West Main Street, Suite 710
Rochester, New York 14614
(585) 232-1500
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
PATRICK WHITE
CHIEF EXECUTIVE OFFICER
DOCUMENT SECURITY SYSTEMS, INCORPORATED
36 WEST MAIN STREET
ROCHESTER, NEW YORK 14614
(585) 232-1500
(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
BRIAN C. DAUGHNEY, ESQ.
GOLDSTEIN & DIGIOIA LLP
45 BROADWAY - 11TH FLOOR
NEW YORK, NEW YORK 10006
PHONE: (212) 599-3322
FAX: (212) 557-0295
APPROXIMATE DATE OF COMMENCEMENT OF SALE TO THE PUBLIC:
as soon as practicable after the effective date of this registration statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check here. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. |X|
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If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act Registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |X|
CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE OFFERING PRICE REGISTRATION FEE
Shares of common stock $.02 par value 1,565,000 $8.27 $12,942,550 (1) $1,634.00
Shares of common stock $.02 par value
underlying warrants with $5.00
exercise price 362,500 $5.00 $1,812,500 (2) $230.00
Shares of common stock $.02 par value
underlying warrants with $4.80
exercise price 362,500 $4.80 $1,740,000 (3) $220.00
Shares of common stock $.02 par value
underlying warrants with $2.00
exercise price 100,000 $2.00 $200,000 (4) $25.00
Shares of common stock $.02 par value
underlying warrants with $4.40
exercise price 10,000 $4.40 $44,000 (5) $6.00
Shares of common stock $.02 par value
underlying warrants with $3.00
exercise price 100,000 $3.00 $300,000 (6) $38.00
Shares of common stock $.02 par value
underlying warrants with $2.50
exercise price 500,000 $2.50 $ 1,250,000(7) $160.00
3,000,000 (8) $18,289,050 $2,318.00
Totals(8)
<FN>
(1) Calculated pursuant to Rule 457(c), based upon the average of the high
($8.28) and low (8.25) price of our common stock on the American Stock
Exchange on July 20, 2004 ($8.27 per share). The sum of $2,226 has
previously been paid.
(2) Calculated based upon the exercise price of the warrants at $5.00 per share.
(3) Calculated based upon the exercise price of the warrants at $4.80 per share.
(4) Calculated based upon the exercise price of the warrants at $2.00 per share.
(5) Calculated based upon the exercise price of the warrants at $4.40 per share.
</FN>
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(6) Calculated based upon the exercise price of the warrants at $3.00 per share.
(7) Calculated based upon the exercise price of the warrants at $2.50 per share
(8) This Registration Statement shall also cover an indeterminate number of
shares of common stock pursuant to Rule 416, which may become issuable by reason
of any stock dividend, stock split or other similar transaction, which may
result in an increase in the number of the outstanding shares of common stock of
Document Security Systems. In addition, this registration statement shall
include any additional shares of common stock which may become issuable as a
result of the anti-dilution provisions of the warrants which provides for
adjustment in the number of shares issuable in the event of stock dividends,
stock splits or other similar transaction.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT AS FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION IS
DECLARED EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THE SECURITIES AND
IS NOT SOLICITING AN OFFER TO BUY THE SECURITIES IN ANY STATE OR OTHER
JURSIDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to completion, dated July __, 2004
PROSPECTUS
DOCUMENT SECURITY SYSTEMS, INC.
3,000,000 SHARES
OF COMMON STOCK
This is a public offering of 3,000,000 shares of our common stock by
certain of our shareholders. The selling shareholders own 1,565,000 shares of
our common stock and warrants to purchase an additional 1,435,000 shares of
common stock. We are not offering any shares for sale and we will not receive
any of the proceeds from the sale of these shares. The shares will be sold, if
at all, at prevailing market prices for our common stock or at prices negotiated
by the selling shareholders.
Of the shares which may be offered for resale, 1,435,000 shares will be
issued to the selling shareholders only if they exercise warrants for the
purchase of shares of our common stock. The warrants have exercise prices
ranging from $2.00 to $5.00 per share. If the selling shareholders exercise
their warrants, we will receive proceeds in the amount of the exercise price of
the warrant being exercised or up to $5,346,500 if all warrants are exercised.
See "Selling Shareholders" on page 15.
Until April 21, 2004, our common stock was quoted on the Over the
Counter Bulletin Board under the symbol DCSS OB. On April 22, 2004, our Common
Stock commenced trading on the American Stock Exchange under the symbol DMC. On
July 20, 2004, the closing price of our common stock was $8.10 per share.
Investing in our common stock involves Risks. See "Risk Factors" on
pages 7 to 12. You should rely only on the information contained in this
Prospectus. We have not authorized anyone to provide you with any different
information.
NEITHER THE SECURITIES EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION NOR ANY FOREIGN SECURITIES AUTHORITY HAS APPROVED OR DISAPPROVED OF
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus is dated [ ], 2004
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Table of Contents
Prospectus Summary 3
Risk Factors 7
Forward-Looking Statements 13
Use of Proceeds 14
Selling Shareholders 15
Plan of Distribution 19
Where You Can Find More Information 22
Indemnification of Officers and Directors 23
Legal Matters 23
Experts 23
Transfer Agent and Warrant Agent 23
Document Security Systems has not authorized anyone to give any
information or make any representation about the offering that differs from, or
adds to, the information in this Prospectus or the documents that are publicly
filed with the SEC. Therefore, if anyone does give you different or additional
information, you should not rely on it. The delivery of this Prospectus does not
mean that there have not been any changes in Document Security Systems'
condition since the date of this Prospectus. If you are in a jurisdiction where
it is unlawful to offer to purchase or exercise the securities offered by this
Prospectus, or if you are a person to whom it is unlawful to direct such
activities, then the offer presented by this Prospectus does not extend to you.
This Prospectus speaks only as of its date except where it indicates that
another date applies. Documents that are incorporated by reference in this
Prospectus speak only as of their date, except where they specify that other
dates apply. The information in this Prospectus may not be complete and may be
changed. The selling shareholders may not sell any securities until the
registration statement filed with the SEC is effective. This Prospectus is not
an offer to purchase or exercise these securities and it is not soliciting an
offer to purchase or exercise these securities in any state or other
jurisdiction where the purchase or exercise is not permitted.
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PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS ONLY SELECTED INFORMATION CONTAINED ELSEWHERE
IN THIS PROSPECTUS. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT
TO YOU BEFORE INVESTING IN OUR COMMON STOCK. TO UNDERSTAND THIS OFFERING FULLY,
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE RISK FACTORS AND
FINANCIAL STATEMENTS INCLUDED OR INCORPORATED BY REFERENCE HEREIN.
Business of the Company
Document Security Systems, Inc. develops, licenses and sells
anti-counterfeiting technology and products. We are a reporting company under
the Securities and Exchange Act of 1934 and our Common Stock trades on the
American Stock Exchange under the symbol "DMC". Prior to April 22, 2004, our
Common Stock traded on the over the Counter Bulletin Board under the symbol
DCSS. Until the third calendar quarter of 2002, as New Sky Communications, Inc.
(trading symbol: NSCI) the Company developed and produced theatrical motion
pictures and home video cassettes. The Company was originally organized in 1984
in New York State under the original name Thoroughbreds U.S.A., Incorporated.
We operate through three wholly-owned subsidiaries, Thomas A. Wicker
Enterprises, Inc., Lester Levin Inc. and Document Security Consultants Corp, and
one 51% owned subsidiary, Imperial Encryptions, Inc., all of which were acquired
in the third and fourth quarters of calendar year 2002. We entered into the
anti-counterfeiting and document security businesses as a result of these
acquisitions. To date we have generated minimal revenue through several sources
which are:
o Royalties and Licensing fees
o Printing and Copying Sales
o Legal Supply Sales
o Safety Paper Sales
We consider our company to be a technology leader in counterfeit
document prevention, including government issued documents, currency, private
corporate records and securities and our business plan will be aimed at
exploiting our technologies and trade secrets. We currently have non- exclusive
ownership interests in three U.S. patents, a European Patent Office patent that
covers 13 European countries and one Canadian patent for document
anti-counterfeit and anti-fraud technology. The technology applies to both
analog and digital copiers and scanners. We have rights to eight
anti-counterfeiting technologies that prevent counterfeiting of original
documents through copiers, scanners, and computers. The eight
anti-counterfeiting technologies are:
o the Block-out technology;
o the Laser Moire' technology;
o the Prism technology;
o the Concentric Fine Line Printing technology;
o the Scan-Cop technology;
o the Safety Paper technology;
o the Digital Pantograph technology; and
o the Software Verification System technology.
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As the partial owner of the patents and related technology, we cannot
be assured that others may not develop the technology and exploit it in direct
competition with us. Management believes, however, that our research and
development efforts have resulted in trade secrets which provide us with
competitive advantages in the development of products, and two of our executive
officers, Thomas Wicker and David Wicker, have been intimately involved with
development of the patents and technologies and have entered into employment and
non-competition agreements with us. See "Risk Factors - "We are not the
exclusive owner of certain of our technology, including patented technology and
others may develop competing products or claim rights to license fees or
royalties" and "Current Litigation May Effect Our Technology Rights and Plan of
Operation."
We expect to exploit our anti-counterfeiting technology and trade
secrets through licensing arrangements with potential customers, including
government entities and private companies. Our technology can be utilized in
protecting against counterfeiting and unauthorized copying or creation of many
different forms of documents, including corporate documents such as internal
reports or memorandums, paper currency, identification records and securities.
We have, for example, entered into a License Agreement with Bristol ID
Technologies, Inc. where we granted Bristol a non- exclusive license to use
certain of our products for a ten year term in exchange for royalty payments.
The Company's principal address is 36 W. Main Street, Suite 710,
Rochester, New York 14614.
RECENT EVENTS
In October, 2003, we agreed to issue an aggregate of 500,000 Common
Stock warrants and 100,000 shares of Common Stock to IDT Venture Capital
Corporation in exchange for IDT Venture Capital's assistance, including the use
of its legal counsel, with certain patent applications, an audit of our
intellectual property rights and potential enforcement issues. IDT Venture
Capital is affiliated with IDT Corporation.
On December 29, 2003, we announced that we had completed a private
placement offering through which Fordham Financial Management, Inc., an NASD
registered broker dealer, served as placement agent. We completed the original
offering amount of $5,000,000 and an additional $800,000 representing over
subscriptions for total gross proceeds of $5,800,000. We offered for sale units
for a purchase price of $50,000 per unit, comprised of 12,500 shares of common
stock and 3,125 common stock Series A warrants. The warrants have an exercise
price of $5.00 per share and an exercise term of five years. The number of
shares issuable upon exercise of warrants is subject to adjustment in the event
of stock dividends, stock splits and other similar corporate transactions. The
net proceeds to the Company from the offering, after deduction of commissions
and offering expenses and the consulting fee was approximately $5,025,000. We
expect to use the net proceeds for working capital, additional intellectual
property protection and research, debt reduction and expansion of our sales and
marketing efforts. The placement was intended to comply with the exemptions from
registration provided under Section 506 of Regulation D and offers and sales
were made solely to "accredited investors" as defined in Regulation D. The
securities in the offering were offered without registration in reliance on rule
506 of Regulation D promulgated under Section 4(2) of the Securities Act of 1933
and/or Regulation D promulgated thereunder.
This registration statement of which this Prospectus forms a part
includes the shares of common stock and shares underlying the warrants sold in
the completed offering.
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On January 5, 2004, we expanded our Board of Directors to four persons.
The Board appointed Timothy Ashman to fill the vacancy created by the expansion.
The Board is comprised of Patrick White, Thomas Wicker, Alan Harrison and
Timothy Ashman. Mr. Ashman and Mr. Harrison serve as our independent directors.
On April 22, 2004 our application for the listing of our Common Stock
was accepted by the American Stock Exchange and our common Stock commenced
trading on the American Stock Exchange under the symbol DMC.
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The Offering
Common Stock offered by selling shareholders 1,565,000 shares
-------------
Shares issuable upon exercise of warrants
held by selling shareholders and offered 1,435,000 shares
-------------
Common Stock to be outstanding after the offering
(assuming exercise of all warrants),
based on shares outstanding on July 20, 2004 12,318,818 shares
------------
American Stock Exchange Symbol DMC
Risk Factors An investment in our securities is
subject to numerous risks.
Investors should be able to bear
the loss of their entire investment.
See "Risk Factors".
The total of 12,318,818 shares of common stock to be outstanding after this
offering is based on 10,883,818 shares outstanding on July 20, 2004 and assumes
the exercise of all warrants but excludes:
o 200,000 shares reserved for issuance under our 2004 Employee Option
Plan, of which no options have been issued.
o 100,000 shares reserved for issuance under our Director Option Plan,
of which 10,000 options have been issued.
This is a continuous offering and is not being underwritten by any
securities brokerage firm. We cannot predict when or if any of the selling
shareholders will sell their shares or exercise warrants that entitle them to
purchase and possibly sell shares underlying the warrants. This offering assumes
that the selling shareholders will exercise all warrants they hold for purchase
of our common stock.
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RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY
CONSIDER THE RISKS DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS PROSPECTUS
BEFORE DECIDING WHETHER TO INVEST IN OUR COMMON STOCK.
WE HAVE A LIMITED OPERATING HISTORY WITH OUR NEW BUSINESS MODEL, WHICH LIMITS
THE INFORMATION AVAILABLE TO YOU TO EVALUATE OUR BUSINESS.
Since our inception in 1983, we have accumulated deficits from
historical operations of approximately $7,800,000 at December 31, 2003. Our
current business is based upon technology and assets that we have acquired only
since July 2002. We have had minimal revenues generated to date from this
technology. We have continued to incur losses since we began these new
operations. Also, you have limited operating and financial information relating
to this new business to evaluate our performance and future prospects. Due to
the change in our business model, we do not view our historical financials as
being a good indication of our future. We face the risks and difficulties of a
company going into a new business including the uncertainties of market
acceptance, competition, cost increases and delays in achieving business
objectives. There can be no assurance that we will succeed in addressing any or
all of these risks, and the failure to do so could have a material adverse
effect on our business, financial condition and operating results.
WE ARE NOT THE EXCLUSIVE OWNER OF CERTAIN OF OUR TECHNOLOGY, INCLUDING PATENTED
TECHNOLOGY AND OTHERS MAY DEVELOP COMPETING PRODUCTS OR CLAIM RIGHTS TO LICENSE
FEES OR ROYALTIES.
As of the date of this Prospectus, we have non-exclusive ownership
interests in United States patents No. 5,707,083, 5,735,547 and 5,018,767 and
the European patent No. 0455750. These patents were originally developed by the
Wicker Group, which was founded by Mr. Ralph Wicker, the father of Thomas and
Dave Wicker. Other persons own "gross" and "net" ownership interests in these
patents. Although we have recently negotiated with some of these persons a
"buyout" of the royalty obligations owed to them commencing as of January 1,
2004, no ownership interests were changed. As a result, other persons may
develop competing products and services based upon certain of the technology
that we utilize. These persons may also claim that they are entitled to
royalties or license fees from products developed by us. The development and
marketing of other products may adversely impact our ability to compete in the
market place, or to successfully obtain preferential pricing on our products.
Further, claims by other owners of the patents could result in litigation
against us, increase costs of litigation, or reduce our profitability. There can
be no assurance that others may not be successful in their claims.
CURRENT LITIGATION MAY EFFECT OUR TECHNOLOGY RIGHTS AND PLAN OF OPERATION.
On January 31, 2003, the Company commenced an action entitled "NEW SKY
COMMUNICATIONS, INC., AS SUCCESSOR-IN-INTEREST TO THOMAS M. WICKER, THOMAS M.
WICKER ENTERPRISES, INC. AND DOCUMENT SECURITY CONSULTANTS V. ADLER
TECHNOLOGIES, INC. N/K/A ADLERTECH INTERNATIONAL, INC. AND ANDREW MCTAGGERT"
(United States District Court, Western District of New York Case No.
03-CV-6044T(F)) regarding certain intellectual property in which the Company has
an interest. The suit was commenced by the Company alleging various causes of
action against Adler Technologies, Inc. ("Adler") and Andrew McTaggert
("McTaggert") for breach of contract,
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breach of the duty of good faith and fair dealing and various business torts.
Adler distributes and supplies anti-counterfeit currency devices and
McTaggert is a principal of, and the primary contact at, Adler. Adler had
entered into several agreements with Thomas M. Wicker Enterprises and Domestic
Security Consultants, both of which were acquired by the Company in July and
August of 2002. These agreements, generally, authorized Adler to manufacture in
Canada the Company's "Checkmate(R)" patented system for verifying the
authenticity of currency and documents. Other agreements were entered into
between the parties and Thomas Wicker regarding other technology owned by Wicker
and assigned to the Company including "Archangel", an anti-copy technology and
"Blockade" which creates a wave pattern on documents when they are reproduced or
scanned. It is the Company's contention that Adler has breached these
agreements, failed to make an appropriate accounting and may have exceeded the
scope of its license. Adler has denied the material allegations of the complaint
and has counterclaimed against the Company, claiming it (Adler) owns or co-owns
or has a license to use certain of the Company's technology, including several
U.S. patents. If Adler is successful it may materially affect the Company, its
financial condition, and its ability to market certain technology.
IF WE ARE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, OUR
COMPETITIVE ADVANTAGE MAY DISAPPEAR.
Our success will be determined in part by our ability to obtain United
States and foreign patent protection for our technology and to preserve our
trade secrets. Because of the substantial length of time and expense associated
with developing new document security technology, we place considerable
importance on patent and trade secret protection. Our ability to compete and to
grow our business could suffer if these rights are not adequately protected.
There can be no assurance that our patent applications will result in patents
being issued or that current or additional patents will afford protection
against competitors. We also rely on trade secrets that are not patented. No
guarantee can be given that others will not independently develop substantially
equivalent proprietary information or techniques, or otherwise gain access to
our proprietary technology.
WE MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT OR OTHER CLAIMS AGAINST US OR OUR
CUSTOMERS THAT COULD BE COSTLY TO DEFEND AND RESULT IN OUR LOSS OF SIGNIFICANT
RIGHTS.
Although we have received U.S. Patents and a European Patent with
respect to certain of our technology, there can be no assurance that these
patents will afford us any meaningful protection. We intend to rely primarily on
a combination of trade secrets, technical measures, copyright protection and
nondisclosure agreements with our employees to establish and protect the ideas,
concepts and documentation of software and trade secrets developed by us. Such
methods may not afford complete protection, and there can be no assurance that
third parties will not independently develop such technology or obtain access to
the software we have developed. Although we believe that our use of the
technology and products we developed and other trade secrets used in our
operations does not infringe upon the rights of others, our use of the
technology and trade secrets we developed may infringe upon the patents or
intellectual property rights of others. In the event of infringement, we could,
under certain circumstances, be required to obtain a license or modify aspects
of the technology and trade secrets we developed or refrain from using same. We
may not have the necessary financial resources to defend any infringement claim
made against us or be able to successfully terminate any infringement in a
timely manner, upon acceptable terms and conditions or
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at all. Failure to do any of the foregoing could have a material adverse effect
on us. Moreover, if the patents, technology or trade secrets we developed or use
in our business is deemed to infringe upon the rights of others, we could, under
certain circumstances, become liable for damages, which could have a material
adverse effect on us. As we continue to market our products, we could encounter
patent barriers that are not known today. A patent search will not disclose
applications that are currently pending in the United States Patent Office; and
there may be one or more such pending applications that would take precedence
over our applications.
Furthermore, since the date of invention (and not the date of
application) governs under U.S. patent law, future applications could be filed
by another party, which would preempt our position. While we have taken and
continue to take steps to become aware of related technical developments, there
can be no assurance that we will not encounter an unfavorable patent situation.
Other parties may assert intellectual property infringement claims against us or
our customers, and our products may infringe the intellectual property rights of
third parties. If we become involved in litigation, we could lose our
proprietary rights, be subject to damages and incur substantial unexpected
operating expenses. Intellectual property litigation is expensive and
time-consuming, even if the claims are subsequently proven unfounded, and could
divert management's attention from our business. If there is a successful claim
of infringement, we may not be able to develop non-infringing technology or
enter into royalty or license agreements on acceptable terms, if at all. This
could prohibit us from providing our products and services to customers.
IF OUR PRODUCTS AND SERVICES DO NOT ACHIEVE MARKET ACCEPTANCE, WE MAY NOT
ACHIEVE OUR REVENUE AND NET INCOME GOALS IN THE TIME PRESCRIBED OR AT ALL.
We are at the very early stage of introducing our document security
technology and products to the market. If we are unable to operate our business
as contemplated by our business model or if the assumptions underlying our
business model prove to be unfounded, we could fail to achieve our revenue and
net income goals within the time we have projected, or at all, which could have
a material adverse effect on our business. As a result, the value of your
investment could be significantly reduced or completely lost.
We cannot assure you that a sufficient number of such companies will
demand our products or services or other documents security products. In
addition, we cannot predict the rate of market's acceptance of our document
security solutions. Failure to maintain a significant customer base may have a
material adverse effect on our business.
THE RESULTS OF OUR RESEARCH AND DEVELOPMENT EFFORTS ARE UNCERTAIN AND THERE CAN
BE NO ASSURANCE OF THE COMMERCIAL SUCCESS OF OUR PRODUCTS.
We believe that we will need to continue to incur research and
development expenditures to remain competitive. The products we currently are
developing or may develop in the future may not be technologically successful.
In addition, the length of our product development cycle may be greater than we
originally expect and we may experience delays in future product development. If
our resulting products are not technologically successful, they may not achieve
market acceptance or compete effectively with our competitors' products.
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CHANGES IN DOCUMENT SECURITY TECHNOLOGY AND STANDARDS COULD RENDER OUR
APPLICATIONS AND SERVICES OBSOLETE.
The market for document security products, applications, and services
is fast-moving and evolving. Identification and authentication technology is
constantly changing as we and our competitors introduce new products,
applications, and services, and retire old ones as customer requirements quickly
develop and change.
In addition, the standards for document security are continuing to
evolve. If any segments of our market adopt technologies or standards that are
inconsistent with our applications and technology, sales to those market
segments could decline.
THE MARKET IN WHICH WE OPERATE IS HIGHLY COMPETITIVE, AND WE MAY NOT BE ABLE TO
COMPETE EFFECTIVELY, ESPECIALLY AGAINST ESTABLISHED INDUSTRY COMPETITORS WITH
GREATER MARKET PRESENCE AND FINANCIAL RESOURCES.
Our market is highly competitive and characterized by rapid
technological change and product innovations. Our competitors may have
advantages over us because of their longer operating histories, more established
products, greater name recognition, larger customer bases, and greater
financial, technical and marketing resources. As a result, they may be able to
adapt more quickly to new or emerging technologies and changes in customer
requirements, and devote greater resources to the promotion and sale of their
products. Competition may also force us to decrease the price of our products
and services. We cannot assure you that we will be successful in developing and
introducing new technology on a timely basis, new products with enhanced
features, or that these products, if introduced, will enable us to establish
selling prices and gross margins at profitable levels. Although several
potential competitors have expressed an interest to us in forming marketing
alliances, there can be no assurance that we will undertake such efforts or if
undertaken, such efforts will prove profitable.
IF WE FAIL TO RETAIN OUR KEY PERSONNEL AND ATTRACT AND RETAIN ADDITIONAL
QUALIFIED PERSONNEL, WE MIGHT NOT BE ABLE TO PURSUE OUR GROWTH STRATEGY.
Our future success depends upon the continued service of our executive
officers and other key sales and research personnel who possess longstanding
industry relationships and technical knowledge of our products and operations.
The loss of any of our key employees, in particular: Patrick White, our
President and Chief Executive Officer and Chief Financial Officer; Thomas
Wicker, our Vice-President of Research and Development; and David Wicker, our
Vice-President of Sales and Business Development, could negatively impact our
ability to pursue our growth strategy and conduct operations. Although we
believe that our relationship with these individuals is positive, there can be
no assurance that the services of these individuals will continue to be
available to us in the future. We have entered into employment agreements with
David Wicker and Patrick White which expire in July 2004 and there can be no
assurance that these persons will continue to agree to be employed by us after
such dates.
We intend to hire a Chief Financial Officer for our company in the next
three to six months. We also must continue to hire other highly qualified
individuals, including sales personnel and persons wh can assist in developing
our technology. Our failure to attract, train and retain
10
management and technical personnel could adversely affect our ability to grow
our business and to develop new products or product enhancements now and in the
future.
IF WE DO NOT SUCCESSFULLY EXPAND OUR SALES FORCE, WE MAY BE UNABLE TO INCREASE
OUR REVENUES.
We must expand the size of our marketing activities and sales force to
increase revenues. We continue to evaluate various methods of expanding our
marketing activities, including the use of outside marketing consultants and
representatives and expanding our in-house marketing capabilities. Going
forward, we anticipate an increasing percentage of our revenues to come from the
licensing of our newer technologies, where profit margins are significantly
higher than those provided by Safety Paper. If we are unable to hire or retain
qualified sales personnel, if newly hired personnel fail to develop the
necessary skills to be productive, or if they reach productivity more slowly
than anticipated, our ability to increase our revenues and grow our business
could be compromised. The challenge of attracting, training and retaining
qualified candidates may make it difficult to meet our sales growth targets.
Further, we may not generate sufficient sales to offset the increased expense
resulting from growing our sales force or we may be unable to manage a larger
sales force.
FUTURE GROWTH IN OUR BUSINESS COULD MAKE IT DIFFICULT TO MANAGE OUR RESOURCES.
Our anticipated business expansion could place a significant strain on
our management, administrative and financial resources. Significant growth in
our business may require us to implement additional operating, product
development and financial controls, improve coordination among marketing,
product development and finance functions, increase capital expenditures and
hire additional personnel. There can be no assurance that we will be able to
successfully manage any substantial expansion of our business, including
attracting and retaining qualified personnel. Any failure to properly manage our
future growth could negatively impact our business and operating results.
WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS AND WE MAY NOT BE ABLE TO SECURE
ADDITIONAL FINANCING.
We may need to raise additional funds in the future to fund more
aggressive expansion of our business, complete the development, testing and
marketing of our products, or make strategic acquisitions or investments. We may
require additional equity or debt financings, collaborative arrangements with
corporate partners or funds from other sources for these purposes. No assurance
can be given that these funds will be available for us to finance our
development on acceptable terms, if at all. Such additional financings may
involve substantial dilution of our stockholders or may require that we
relinquish rights to certain of our technologies or products. In addition, we
may experience operational difficulties and delays due to working capital
restrictions. If adequate funds are not available from operations or additional
sources of financing, we may have to delay or scale back our growth plans.
THERE ARE RESTRICTIONS ON THE TRANSFERABILITY OF, AND THERE IS A LIMITED PUBLIC
MARKET FOR, OUR COMMON STOCK.
You should be aware of the long-term nature of your investment. There
is a limited public trading market for the common stock. The registration for
resale of a large number of additional
11
shares, such as the shares being sold pursuant to this Prospectus, could
adversely impact the prices for our Common Stock. Accordingly, you may be
required to bear the economic risks of an investment in our securities for an
indefinite period of time.
WE DO NOT INTEND TO PAY CASH DIVIDENDS.
We do not intend to declare or pay cash dividends on our common stock
in the foreseeable future. We anticipate that we will retain any earnings and
other cash resources for investment in our business. The payment of dividends on
our common stock is subject to the discretion of our Board of Directors and will
depend on our operations, financial position, financial requirements, general
business conditions, restrictions imposed by financing arrangements, if any,
legal restrictions on the payment of dividends and other factors that our Board
of Directors deems relevant.
PROVISIONS OF OUR ARTICLES OF INCORPORATION AND AGREEMENTS COULD DELAY OR
PREVENT A CHANGE IN CONTROL OF OUR COMPANY.
Certain provisions of our articles of incorporation may discourage,
delay, or prevent a merger or acquisition that a shareholder may consider
favorable. These provisions include:
o Authority of the board of directors to issue preferred stock.
o Prohibition on cumulative voting in the election of directors.
12
FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements that
involve risks and uncertainties. These statements refer to objectives,
expectations, intentions, future events, or our future financial performance,
and involve known and unknown risks, uncertainties, and other factors that may
cause our actual results, level of activity, performance, or achievements to be
materially different from any results expressed or implied by these
forward-looking statements. In some cases, you can identify forward-looking
statements by words such as "may," "will," "should," "could," "expect,"
"anticipate," "intend," "plan," "believe," "estimate," "predict," "potential,"
and similar expressions. Our actual results could differ materially from those
included in forward-looking statements. Factors that could contribute to these
differences include those matters discussed in "Risk Factors" and elsewhere in
this prospectus.
In addition, such forward-looking statements necessarily depend on
assumptions and estimates that may prove to be incorrect. Although we believe
the assumptions and estimates reflected in such forward-looking statements are
reasonable, we cannot guarantee that our plans, intentions, or expectations will
be achieved. The information contained in this prospectus, including the section
discussing risk factors, identifies important factors that could cause such
differences.
The cautionary statements made in this prospectus are intended to be
applicable to all forward-looking statements wherever they appear in this
prospectus. We assume no obligation to update such forward-looking statements or
to update the reasons that actual results could differ materially from those
anticipated in such forward-looking statements.
13
USE OF PROCEEDS
All of the shares sold in this offering will be sold by certain holders
of our common stock or of warrants to purchase shares of our common stock.
Except for the potential exercise of warrants, we will not receive any proceeds
directly from the sale of the shares offered in this prospectus.
Certain of the selling shareholders currently hold warrants to purchase
a total of 1,435,000 shares of our common stock at exercise prices ranging from
$2.00 to $5.00 per share. In the event the selling shareholders exercise all of
these warrants, we would receive proceeds of $5,346,500. We may not receive any
significant proceeds from exercise of the warrants in the near future. We intend
to use any proceeds we receive from the exercise of warrants for working capital
and general corporate purposes.
14
SELLING SHAREHOLDERS
The following list (or footnotes) provides:
o the names of the selling shareholders.
o the affiliation or material relationship we have, if any, with each
selling shareholder.
o the amount of shares beneficially owned by each selling shareholder
before this offering.
o the number of outstanding shares and shares underlying warrants being
offered for each selling shareholder's account.
o the exercise price and expiration date of warrants held by each selling
shareholder.
Beneficial ownership includes shares owned and shares that the
shareholder has the right to acquire within 60 days. Except as may be notes in a
footnote below, all of the shares listed as underlying warrants are immediately
acquirable and thus are beneficially owned by the selling shareholder holding
the respective warrants. However, we have no control over when, if ever, a
selling shareholder may exercise the option to convert such selling shareholders
shares of preferred stock or exercise warrants held by such selling shareholder.
SHARES WARRANT
SHARES CURRENTLY SHARES TOTAL
BENEFICIALLY OUTSTANDING BEING SHARES
OWNED AND BEING REGISTERED BEING
BEFORE REGISTERED IN REGISTERED
NAME OF SELLING SHAREHOLDER OFFERING(1) IN OFFERING OFFERING IN OFFERING(13)
- --------------------------- ----------- ----------- -------- --------------
W.A.B. Capital LLC (2) 125,000 15,000 110,000 125,000
Howard Safir (3) 100,000 100,000 100,000
Fordham Financial Management,
Inc. (4) 362,500 0 362,500 362,500
Edua Rosza (5) 15,625 12,500 3,125 15,625
Leslie Sharp(5) 7,812 6,250 1,562 7,812
David Forbes(5) 31,250 25,000 6,250 31,250
David Dundas(5) 16,625 12,500 3,125 16,625
Gordon Burns(5) 46,875 37,500 9,375 46,875
Geoffrey Adams(5) 15,625 12,500 3,125 15,625
Mark Freeman(5) 31,250 25,000 6,250 31,250
Mervyn Childs(5) 15,625 12,500 3,125 15,625
Benjamin Goldstein(5) 15,625 12,500 3,125 15,625
Jack Garven(5) 15,625 12,500 3,125 15,625
15
WARRANT
SHARES CURRENTLY SHARES TOTAL
BENEFICIALLY OUTSTANDING BEING SHARES
OWNED AND BEING REGISTERED BEING
BEFORE REGISTERED IN REGISTERED
NAME OF SELLING SHAREHOLDER OFFERING(1) IN OFFERING OFFERING IN OFFERING(13)
- --------------------------- ----------- ----------- -------- --------------
Chris Goodrem (5) 31,250 25,000 6,250 31,250
Keith Parkins(5) 15,625 12,500 3,125 15,625
John Thompson(5) 15,625 12,500 3,125 15,625
Dick Shiring(5) 15,625 12,500 3,125 15,625
Dr. Ted Staahl(5) 15,625 12,500 3,125 15,625
James M. Sylph(5) 15,625 12,500 3,125 15,625
Clive Kennedy(5) 7,812 6,250 1,562 7,812
Paul Regent(5) 7,812 6,250 1,562 7,812
Buechel Family Ltd.
Partnership(5)(7) 281,250 225,000 56,250 281,250
Jerry Magro(5) 7,812 6,250 1,562 7,812
Alexis Family Trust(5)(8) 15,625 12,500 3,125 15,625
John & Barbara Curcio (5) 15,625 12,500 3,125 15,625
Robert Sagarino(5) 85,937 68,750 17,277 85,937
Sung Soo Kim and
Hyun Kim (5) 31,250 25,000 6,250 31,250
Frank Discipio(5) 15,625 12,500 3,125 15,625
Jack Busselle(5) 15,625 12,500 3,125 15,625
Ian White(5) 15,625 12,500 3,125 15,625
Simon Mordzynski(5) 15,625 12,500 3,125 15,625
Geoffrey Goodwin(5) 15,625 12,500 3,125 15,625
Bruce Inglis(5) 15,625 12,500 3,125 15,625
David Gust(5) 31,250 25,000 6,250 31,250
Jay Belding(5) 7,812 6,250 1,562 7,812
Dr. William Bongiorno(5) 15,625 12,500 3,125 15,625
Grant Murdoch(5) 15,625 12,500 3,125 15,625
Joseph Murphy(5) 15,625 12,500 3,125 15,625
Bernard JM Pallut(5) 15,625 12,500 3,125 15,625
Susan E. Zebedee(5) 15,625 12,500 3,125 15,625
Graham Ball(5) 15,625 12,500 3,125 15,625
David Cherry(5) 15,625 12,500 3,125 15,625
Lets Go Summer School(5)(9) 7,812 6,250 1,562 7,812
John Hardwick(5) 7,812 6,250 1,562 7,812
Humphrey Johnson(5) 31,250 25,000 6,250 31,250
John Geoffrey Mould (5) 7,812 6,250 1,562 7,812
Munirali Haji(5) 31,250 25,000 6,250 31,250
David Turner(5) 15,625 12,500 3,125 15,625
Daniel Bush and Sue Bush(5) 7,812 6,250 1,562 7,812
Alphonso Russ(5) 7,812 6,250 1,562 7,812
Michael J. and Margaret Thomas
(5) 7,812 6,250 1,562 7,812
Anthony A. Obayori (5) 7,812 6,250 1,562 7,812
16
WARRANT
SHARES CURRENTLY SHARES TOTAL
BENEFICIALLY OUTSTANDING BEING SHARES
OWNED AND BEING REGISTERED BEING
BEFORE REGISTERED IN REGISTERED
NAME OF SELLING SHAREHOLDER OFFERING(1) IN OFFERING OFFERING IN OFFERING(13)
Dan Rochester(5) 15,625 12,500 3,125 15,625
Morgan Wilbur(5) 15,625 12,500 3,125 15,625
Stephen Bohlen(5) 62,500 50,000 12,500 62,500
Bruce Gibbard (5) 15,625 12,500 3,125 15,625
Jon & Elaine Proudman(5) 62,500 50,000 12,500 62,500
Neil Harris (5) 15,625 12,500 3,125 15,625
Kevin P. Rowen (5) 7,812 6,250 1,562 7,812
Ronald & Brendan Furrow (5) 7,812 6,250 1,562 7,812
George Bingham (5) 15,625 12,500 3,125 15,625
Storie Partners, L.P.(5)(12) 78,125 62,500 15,625 78,125
Walter Downey(5) 15,625 12,500 3,125 15,625
Charles S. Lipson (5) 46,875 37,500 9,375 46,875
Schottenfeld Qualified
Associates, L.P.(5)(10) 93,750 75,000 18,750 93,750
Bruce Sultan (5) 15,625 12,500 3,125 15,625
Haruhisa Tsuchitani (5) 7,812 6,250 1,562 7,812
FN Holdings Ltd.(5)(11) 15,625 12,500 3,125 15,625
Marlyn Keeble (5) 15,625 12,500 3,125 15,625
Harold & Sonja Mynster (5) 7,812 6,250 1,562 7,812
Noboru Muto (5) 7,812 6,250 1,562 7,812
Mark Brown (5) 7,812 6,250 1,562 7,812
Stuart Fitton (5) 7,812 6,250 1,562 7,812
Alexis Family Ltd.Partnership
(5)(8) 7,812 6,250 1,562 7,812
Yoshiaki Sugiyama (5) 15,625 12,500 3,125 15,625
Ronald Furrow (5) 7,812 6,250 1,562 7,812
Stanley K. Klein (5) 15,625 12,500 3,125 15,625
Steven Carothers (5) 15,625 12,500 3,125 15,625
Andy Fox (5) 7,812 6,250 1,562 7,812
David and Jenise Rabens (5) 7,812 6,250 1,562 7,812
Mary Murdoch (5) 15,625 12,500 3,125 15,625
Tony Finn (5) 15,625 12,500 3,125 15,625
Clive Beetlestone (5) 7,812 6,250 1,562 7,812
Geoffrey Adams (5) 7,812 6,250 1,562 7,812
IDT Venture Capital Corporation
(6) 600,000 100,000 500,000 600,000
Total 3,000,000 1,565,000 1,435,000 3,000,000
<FN>
(1) Figures include the shares of Common Stock and shares underlying warrants
being registered in the
17
registration statement of which this prospectus forms a part.
(2) WAB Capital has served as a consultant to the Company and received common
stock warrants and shares as compensation for its services. The warrants have an
exercise price of $2.00 per share with respect to 100,000 shares and $4.40 per
share with respect to 10,000 shares. The 100,000 warrants expire on July 7, 2008
and the 10,000 warrants expire on January 4, 2007. WAB Capital is controlled by
William Block, who has the control and power to vote and/or sell the securities.
(3) Mr. Safir and his consulting firm the November Group, are providing
consulting services to the Company pursuant to a Consulting Agreement dated as
of July 18, 2003. The warrants are exercisable at $3.00 per share and vest
pursuant to certain scheduled events. The warrants expire on a date which is
five years from the vesting date.
(4) Fordham Financial Management Inc. served as placement agent in connection
with the private placement offering recently completed by the Company in which
the Company raised $5,800,000 in gross proceeds. Fordham Financial is an NASD
member brokerage firm. Fordham Financial received 362,500 warrants as
compensation for its services as placement agent. The warrants have an exercise
price of $4.80 per share.The warrants expire on November 29, 2008. Fordham
Financial is a registered broker dealer and is controlled by William Baquette,
who has the control and power to vote and/or sell the securities.
(5) The selling shareholder purchased securities in the Company's private
placement offering completed on December 29, 2003. In the placement, the Company
raised gross proceeds of $5,800,000 and sold units for $50,000 per unit. Each
$50,000 unit was comprised of 12,500 shares of stock and Series A warrants to
purchase 3,125 shares. The warrants are exercisable at $5.00 per share, and the
number of shares issuable upon exercise is subject to adjustment under certain
events such as stock splits and stock dividends and are exercisable for a period
of five years until November 29, 2008. The form of warrant has been filed as an
Exhibit to the registration statement of which this prospectus forms a part.
(6) The selling shareholder owns 100,000 shares of Common Stock and warrants to
acquire an additional 500,000 shares. The warrants have an exercise price of
$2.50 per share and expire on February 1, 2014. We have been advised by IDT
Venture Capital that Ira Greenstein has the control and power to vote and/or
sell the securities.
(7) The selling shareholder is controlled by Frederick Buechel who has the power
and control to vote and sell the securities.
(8) The selling shareholder is controlled by Paul Cuccio who has the power and
control to vote and sell the securities.
(9) The selling shareholder is controlled by Kevin O'Brien who has the power and
control to vote and sell the securities.
(10) The selling shareholder is controlled by Richard Schottenfeld who has the
power and control to vote and sell the securities.
(11) The selling shareholder is controlled by Lionel Newton who has the power
and control to vote and sell the securities.
(12) Ned Klungelhaufer is a managing member of Storie Partners L.P. and has the
control and power to vote and/or sell the securities.
(13) The number of shares which may be resold by the selling shareholder assumes
the sale of all shares of common stock and shares underlying warrants. The
registration statement of which this Prospectus forms a part includes additional
shares pursuant to SEC Rule 41b which may be required to be issued pursuant to
the anti-dilution provisions of the warrants for stock splits, stock dividends
and similar corporate transactions.
</FN>
18
PLAN OF DISTRIBUTION
The selling shareholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. Our common stock currently trades
on the American Stock Exchange. Any sales by the selling shareholders may be at
fixed or negotiated prices. The selling shareholders may use any one or more of
the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling shareholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved. One
of the selling shareholders, Fordham Financial Management, Inc., is a registered
broker dealer and NASD member firm. Fordham Financial served as placement agent
in our recently completed private placement offering, and received, in addition
to commissions, warrants to purchase an aggregate of 362,500 shares of our
Common Stock with an exercise price of $4.80 per share. The registration
statement of which this Prospectus forms a part includes the shares underlying
the warrants held by Fordham Financial Management. In addition, Fordham
Financial Management has been retained as a financial consultant to Document
Security Systems, for which it received cash compensation of $58,000.
Any selling shareholder may from time to time pledge or grant a
security interest in some or all
19
of the shares of common stock or warrants owned by them and, if they default in
the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list of
selling shareholders to include the pledgee, transferee or other successors in
interest as selling shareholders under this prospectus.
The selling shareholders also may transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling shareholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The selling shareholders have
informed us that they do not have any agreement or understanding, directly or
indirectly, with any person to distribute the common stock, however, they may
elect to sell their shares through Fordham Financial Management, Inc. as
described below. As a broker dealer who is also a selling shareholder, Fordham
Fordham Management may be deemed an underwriter with respect to the shares it
may sell pursuant to this Prospectus.
In order to comply with the securities laws of some states, the selling
shareholders must sell the shares in those states only through registered or
licensed brokers or dealers. In addition, in some states the Selling Holders
must sell the shares only if we have registered or qualified those shares for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and the selling shareholder complies with
the exemption.
We have advised the selling shareholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling shareholders and their affiliates.
In addition, we will make copies of this Prospectus available to the selling
shareholders for the purpose of satisfying the Prospectus delivery requirements
of the Securities Act. The selling shareholders may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
liabilities, including liabilities arising under the Securities Act.
At the time a selling shareholder makes a particular offer of shares we
will, if required under applicable rules and regulations, distribute a
Prospectus supplement that will set forth:
the number of shares that the Selling Holder is offering;
the terms of the offering, including the name of any underwriter,
dealer or agent;
the purchase price paid by any underwriter;
any discount, commission and other underwriter compensation;
any discount, commission or concession allowed or reallowed or paid to
any dealer; and
the proposed selling price to the public.
20
Fordham Financial Management Inc. served as placement agent in
connection with the private placement offering recently completed by us in which
we raised $5,800,000 in gross proceeds. Fordham is a National Association of
Securities Dealers, Inc. member brokerage firm. Fordham received 362,500
warrants as compensation for its services as placement agent. The warrants have
an exercise price of $4.80 per share. The warrants expire on November 29, 2008.
The 362,500 shares of common stock issued or issuable upon conversion of
placement agent warrants received by Fordham are restricted from sale, transfer,
assignment or hypothecation for a period of 180 days from the effective date
of this Registration Statement except to officers or partners (not directors) of
Fordham.
Fordham has indicated to us its willingness to act as selling agent on
behalf of the selling shareholders named in the Prospectus under
"Selling Shareholders." that purchased our privately placed securities. All
shares sold, if any, on behalf of selling shareholders by Fordham would be in
transactions executed by Fordham on an agency basis and commissions charged to
its customers in connection with each transaction shall not exceed a maximum of
2 % of the gross proceeds. Fordham does not have an underwriting agreement
with us and/or the selling shareholders and no selling shareholders are required
to execute transactions through Fordham.
NASD Notice to Members 88-101 states that in the event a selling
shareholder intends to sell any of the shares registered for resale in this
Prospectus through a member of the NASD participating in a distribution of our
securities, such member is responsible for insuring that a timely filing is
first made with the Corporate Finance Department of the NASD and disclosing to
the NASD the following:
o it intends to take possession of the registered securities or to
facilitate the transfer of such certificates;
o the complete details of how the selling shareholders shares are and
will be held, including location of the particular accounts;
o whether the member firm or any direct or indirect affiliates thereof
have entered into, will facilitate or otherwise participate in any
type of payment transaction with the selling shareholders, including
details regarding any such transactions; and
o in the event any of the securities offered by the selling shareholders
are sold, transferred, assigned or hypothecated by any selling
shareholder in a transaction that directly or indirectly involves a
member firm of the NASD or any affiliates thereof, that prior to or at
the time of said transaction the member firm will timely file all
relevant documents with respect to such transaction(s) with the
Corporate Finance Department of the NASD for review.
We are required to pay all fees and expenses incident to the
registration of the shares. We have agreed to indemnify the selling shareholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
21
We will not receive any proceeds from sales of any shares by the
selling shareholders.
WHERE YOU CAN FIND MORE INFORMATION
You should rely only on the information provided or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
any different information. This prospectus does not constitute an offer to sell,
or a solicitation of an offer to buy, these securities in any state where the
offer or sale is prohibited. You should not assume that the information in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front of the document.
We file annual, quarterly and current reports, proxy statements, and
other information with the SEC. You may read and copy any reports, statements,
or other information on file at the SEC's public reference room in Washington,
D.C. You can request copies of those documents, upon payment of a duplicating
fee, by writing to the SEC.
We have filed a Registration Statement on Form S-3 with the SEC. This
prospectus, which forms a part of the Registration Statement, does not contain
all of the information included in the Registration Statement. Certain
information is omitted, and you should refer to the Registration Statement and
its exhibits. With respect to references made in this prospectus to any contract
or other document of ours, such references are not necessarily complete, and you
should refer to the exhibits attached to the Registration Statement for copies
of the actual contract or document. You may review a copy of the Registration
Statement at the SEC's public reference rooms at 450 Fifth Street, N.W.,
Washington, D.C. 20549; Chicago, Illinois; or New York, New York. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information
on the operation of the public reference rooms.
Our Securities and Exchange Commission filings and the Registration
Statement can also be reviewed by accessing the SEC's Web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" information that we
file with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus. Information in this prospectus supersedes
information incorporated by reference that we filed with the SEC prior to the
date of this prospectus, while information that we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
into this registration statement and prospectus the documents listed below and
any future filings we will make with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of the initial registration statement
but prior to effectiveness of the registration statement and after the date of
this prospectus but prior to the termination of the offering of the shares
covered by this prospectus. The following documents filed with the SEC are
incorporated by reference in this prospectus:
1. The description of our common stock set forth in our registration
statement on Form 8-A, filed with the SEC on May 12, 1986.
2. Our annual report on Form 10-KSB for the year ended December 31,
2003.
3. Our form 8A as filed on April 19, 2004.
4. Our report on Form 10-QSB for the fiscal quarter ended March 31,
2004.
5. Our report on Form 8-K as filed on January 9, 2004.
We will furnish without charge to you, on written or oral request, a
copy of any or all of the
22
documents incorporated by reference, including exhibits to these documents. You
should direct any requests for documents to Document Security Systems,
Incorporated, 36 West Main Street, Rochester, New York 14614, attention: Chief
Financial Officer and the telephone number is (585) 232-1500.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The New York Business Corporation Law contains provisions permitting
and, in some situations, requiring New York corporations to provide
indemnification to their officers and directors for losses and litigation
expense incurred in connection with their service to the corporation. Our bylaws
contain provisions requiring our indemnification of our directors and officers
and other persons acting in their corporate capacities.
In addition, we may enter into agreements with our directors providing
contractually for indemnification consistent with the articles and bylaws.
Currently, we have no such agreements. The New York Business Corporation Law
also authorizes us to purchase insurance for our directors and officers insuring
them against risks as to which we may be unable lawfully to indemnify them. We
have obtained limited insurance coverage for our officers and directors as well
as insurance coverage to reimburse us for potential costs of our corporate
indemnification of officers and directors.
As far as exculpation or indemnification for liabilities arising under
the Securities Act of 1933 may be permitted for directors and officers and
controlling persons, we have been advised that in the opinion of the Securities
and Exchange Commission such exculpation or indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
LEGAL MATTERS
The legality of the issuance of shares offered hereby will be passed
upon by Goldstein & DiGioia LLP located in New York, New York.
EXPERTS
The financial statements of Document Security Systems, Incorporated
appearing in Annual Report (Form 10-KSB) for the year ended December 31, 2002,
have been audited by Michael Cronin CPA , independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The financial statements of Document Security Systems, Incorporated
appearing in Annual Report (Form 10-KSB) for the year ended December 31, 2003,
have been audited by Freed Maxick & Battaglia CPA's PC, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
TRANSFER AGENT AND WARRANT AGENT
Our stock transfer agent is American Stock Transfer located at 6201
15th Avenue Brooklyn, New York 11219. We act as our own warrant agent for our
outstanding warrants.
23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
agent's commissions, payable by us in connection with the sale of common stock
being registered. All amounts are estimates except the Securities and Exchange
Commission filing fee.
Legal fees and expenses* $40,000
SEC registration fee $2,318
Accounting fees and expenses* $2,500
Transfer agent fees and expenses* -
Printing and engraving expenses* $2,500
Miscellaneous* $15,000**
Total* $62,318
* Indicates estimate for the purpose of this filing.
** The registrant may be required to make filings pursuant to the laws of
the various states in order to allow for the resale by selling
shareholders of the shares. Estimate includes filings fees and related
expenses for such blue sky filings
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The New York Business Corporation Law permits a corporation organized
under it to indemnify its directors, officers, employees, and agents for various
acts. Our articles of incorporation and Bylaws conform to the New York Business
Corporation Law. Our articles of incorporation, and their amendments, are
incorporated by reference as Exhibit 3.1 to this registration statement.
In general, we may indemnify any officer, director, employee, or agent
against expenses, fines, penalties, settlements, or judgments arising in
connection with a legal proceeding to which this person is a party, if that
person's actions were in good faith, were believed to be in our best interest,
and were not unlawful. Indemnification is mandatory with respect to a director
or officer who was wholly successful in defense of a proceeding. In all other
cases, indemnification of a director, officer, employee, or agent requires the
board of directors independent determination, independent legal counsel's
determination, or a vote of the shareholders that the person to be indemnified
met the applicable standard of conduct.
The circumstances under which indemnification is granted in connection
with an action brought on our behalf are generally the same as those mentioned
above. However, with respect to actions against directors, indemnification is
granted only with respect to reasonable expenses actually incurred in connection
with the defense or settlement of the action. In these actions, the person to be
indemnified must have acted in good faith and in a manner the person reasonably
believed was in our best interest; the person must not have been adjudged liable
to us; and the person must not have received an improper personal benefit.
Indemnification may also be granted under the terms of agreements which
may be entered into in
24
the future according to a vote of shareholders or directors. In addition, we are
authorized to purchase and maintain insurance which protects our officers and
directors against any liabilities incurred in connection with their services in
these positions. We may obtain an insurance policy in the future.
25
ITEM 16. EXHIBITS
The Exhibits listed below designated by an * are incorporated by
reference to the filings by Document Security Systems, Incorporated under the
Securities Act of 1933 or the Securities and Exchange Act of 1934, as indicated.
The Exhibits listed below designated by ** have been previously filed as part of
this registration statement. All other exhibits are filed herewith.
3.1 Registrant's Certificate of Incorporation ((incorporated by reference
to Exhibit to exhibit 3.1 to the Registrant's Registration Statement on
Form S-18 Commission File No. 2-98684-NY) *
3.1.1 Copy of the Amendment dated October 17, 2003 to Registrant's
Certificate of Incorporation, as amended (incorporated by reference to
Exhibit 3.1(ii) to the Registrant's Registration Statement on Form 8A
filed on April 19, 2004.*
3.2 Copy of the Registrant's By-Laws (incorporated by reference to Exhibit
to exhibit 3.2 to the Registrant's Registration Statement on Form S-18
Commission File No. 2-98684-NY).*
5. Opinion on legality from Goldstein & DiGioia LLP**
10.1 Agreement dated July 31, 1997 with Starr Securities, Inc. (incorporated
by reference from Company's Form 10Q for September 30, 1997).*
10.2 Agreement dated November 7, 1996 with Charles M. LaLoggia (incorporated
by reference from Company's Form 10Q for March 31, 1997).*
10.3 Agreement dated July 2, 1996 with Frank LaLoggia (incorporated by
reference from Company's Form 10Q for June 30, 1996).*
10.4 Agreement dated May 12, 1997, between New Sky Communications, Inc. and
Syracuse Film Productions, LLC (incorporated by reference from the
Company's Form 10-K for December 31, 1997). *
10.5 Promissory Note dated March 24, 1999 from New Sky Communications, Inc.
to Carl R. Reynolds (incorporated by reference form Company's Form 10K
for December 31, 1999).*
10.6 Agreement dated March 22, 1999 between New Sky Communications, Inc. and
Movieplace.com (incorporated by reference from Company's Form 10-K for
December 31, 1999).*
10.7 Employment Agreement, dated December 5, 2001 between New Sky
Communication, Inc. and E. Anthony Wilson. (incorporated by reference
from Company's Form 10-KSB for December
31, 2001).*
10.8 Agreement dated December 12, 2001 between New Sky Communications, Inc.
and Michael Cidoni, Stephen Morse, Cedric Herrera, Charles M. LaLoggia,
Carl R. Reynolds and Paul Packer (incorporated by reference from
Company's Form 10-KSB for December 31, 2001).*
10.9 Agreement dated December 12, 2001 between New Sky Communications, Inc.
and Charles M. LaLoggia, Carl R. Reynolds and Paul Packer (incorporated
by reference from Company's Form 10-KSB for December 31, 2001). *
10.10 Agreement dated July 31, 2002 between New Sky Communications, Inc. and
Patrick White (incorporated by reference from Company's Form 8-K filed
on August 8, 2002).*
10.11 Agreement dated July 31, 2002 between New Sky Communications, Inc. and
Thomas M. Wicker (incorporated by reference from Company's Form 8-K
filed on August 8, 2002).*
10.12 Agreement dated November 1, 2002 between New Sky Communications, Inc.
and David Thomas M. Wicker, Christine Wicker, Kenneth Wicker and
Michael Caton (incorporated by reference to the Registrant's Form
10-KSB for the fiscal year ended December 31, 2002). *
10.13 Employment Agreement dated November 1, 2002 between New Sky
Communications, Inc. and
26
David Wicker (incorporated by reference to the Registrant's Form 10-KSB
for the fiscal year ended December 31, 2002). *
10.14 Form of Warrant Agreement between the Registrant and Fordham Financial
Management, Inc.**
10.15 Form of Warrant Agreement between the Registrant and W.A.B. Capital for
100,000 shares.**
10.16 Form of Warrant Agreement between the Registrant and Howard Safir.
10.17 Form of Series A Warrant Agreement issued by the Registrant to
participants in its private placement offering completed on December
29, 2003.**
10.18 Form of Registration Rights Agreement issued by the Registrant to
participants in its private placement offering completed on December
29, 2003.**
10.19 Form of Warrant issued to IDT Venture Capital Corporation dated October
31, 2003.**
10.20 Form of Securities Purchase Agreement between Registrant and IDT
Venture Capital Corporation dated as of October 31, 2003.**
10.21 Form of Consulting Agreement between Fordham Financial Management and
Registrant.**
10.22 Form of Placement Agency Agreement between Fordham Financial Management
and the Registrant.**
10.23 Form of Amendment No.1 to Placement Agency Agreement between Fordham
Financial Management and the Registrant.**
10.24 Consulting Agreement between the Registrent and Howard Safir are the
November Group dated as of July 18, 2003.
16. Letter on change of Certifying Accountant (incorporated by reference to
the Registrant's Report on Form 8-K filed on January 9. 2003 as Exhibit
99.1). *
17.1 Resignation letter of Carl R. Reynolds, dated December 3, 2001
(incorporated by reference from Company's Form 10-KSB for December 31,
2001).*
17.2 Resignation letter of E. Anthony Wilson dated August 1, 2002
(incorporated by reference from Company's Form 8-K filed on August 8,
2002). *
21. Subsidiaries of the Registrant.
Thomas A. Wicker Enterprises, Inc.
Lester Levin Inc.
Document Security Consultants Corp.
Imperial Encryptions, Inc. (51% owned)
23.1 Consent of Michael Cronin CPA as certifying accountant for the
Registrant's financial statements for the fiscal year ended December
31, 2002.
23.2 Consent of Goldstein & Digioia LLP contained in Exhibit 5.*
23.3 Consent of Freed Maxick & Battaglia CPA's PC as certifying accountant
for the Registrant's financial statements for the fiscal year ended
December 31, 2003.
27
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement 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;
(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.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) 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
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.
Insofar as indemnification by the registrant for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions referenced in Item 14 of this
Registration Statement or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by a
director, officer, or controlling person in connection with the securities being
registered hereunder, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus 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
28
bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement Amendment No. 1 to be signed on its behalf by the undersigned,
thereunto duly authorized in Rochester, New York, on July 22, 2004.
DOCUMENT SECURITY SYSTEMS, INCORPORATED
Registrant
By: /s/ PATRICK WHITE
-------------------------------------
Patrick White
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below on the 22nd day of July, 2004, by the following
persons in the capacities indicated:
Name Title Signature
Patrick White Chief Executive Officer,
President, Chief Financial /s/ PATRICK WHITE
Officer and Director ------------------------------
Thomas Wicker Vice President and Director /s/ THOMAS WICKER
------------------------------
Alan Harrison Director /s/ ALAN HARRISON
------------------------------
Timothy Ashman Director /s/ TIMOTHY ASHMAN
------------------------------
29
INDEX OF EXHIBITS
The Exhibits listed below designated by an * are incorporated by
reference to the filings by Document Security Systems, Incorporated under the
Securities Act of 1933 or the Securities and Exchange Act of 1934, as indicated.
The Exhibits listed below designated by ** have been previously filed, as part
of this registration statement. All other exhibits are filed herewith.
3.1 Registrant's Certificate of Incorporation ((incorporated by reference
to Exhibit to exhibit 3.1 to the Registrant's Registration Statement on
Form S-18 Commission File No. 2-98684-NY) *
3.1.1 Copy of the Amendment dated October 17, 2003 to Registrant's
Certificate of Incorporation, as amended (incorporated by reference to
Exhibit 3.1(ii) to the Registrant's Registration Statement on Form 8A
filed on April 19, 2004.*
3.2 Copy of the Registrant's By-Laws (incorporated by reference to Exhibit
to exhibit 3.2 to the Registrant's Registration Statement on Form S-18
Commission File No. 2-98684-NY).*
5. Opinion on legality from Goldstein & DiGioia LLP**
10.1 Agreement dated July 31, 1997 with Starr Securities, Inc. (incorporated
by reference from Company's Form 10Q for September 30, 1997).*
10.2 Agreement dated November 7, 1996 with Charles M. LaLoggia (incorporated
by reference from Company's Form 10Q for March 31, 1997).*
10.3 Agreement dated July 2, 1996 with Frank LaLoggia (incorporated by
reference from Company's Form 10Q for June 30, 1996).*
10.4 Agreement dated May 12, 1997, between New Sky Communications, Inc. and
Syracuse Film Productions, LLC (incorporated by reference from the
Company's Form 10-K for December 31, 1997). *
10.5 Promissory Note dated March 24, 1999 from New Sky Communications, Inc.
to Carl R. Reynolds (incorporated by reference form Company's Form 10K
for December 31, 1999).*
10.6 Agreement dated March 22, 1999 between New Sky Communications, Inc. and
Movieplace.com (incorporated by reference from Company's Form 10-K for
December 31, 1999).*
10.7 Employment Agreement, dated December 5, 2001 between New Sky
Communication, Inc. and E. Anthony Wilson. (incorporated by reference
from Company's Form 10-KSB for December 31, 2001).*
10.8 Agreement dated December 12, 2001 between New Sky Communications, Inc.
and Michael Cidoni, Stephen Morse, Cedric Herrera, Charles M. LaLoggia,
Carl R. Reynolds and Paul Packer (incorporated by reference from
Company's Form 10-KSB for December 31, 2001).*
10.9 Agreement dated December 12, 2001 between New Sky Communications, Inc.
and Charles M. LaLoggia, Carl R. Reynolds and Paul Packer (incorporated
by reference from Company's Form 10-KSB for December 31, 2001). *
10.10 Agreement dated July 31, 2002 between New Sky Communications, Inc. and
Patrick White (incorporated by reference from Company's Form 8-K filed
on August 8, 2002).*
10.11 Agreement dated July 31, 2002 between New Sky Communications, Inc. and
Thomas M. Wicker (incorporated by reference from Company's Form 8-K
filed on August 8, 2002).*
10.12 Agreement dated November 1, 2002 between New Sky Communications, Inc.
and David Thomas M. Wicker, Christine Wicker, Kenneth Wicker and
Michael Caton (incorporated by reference to the Registrant's Form
10-KSB for the fiscal year ended December 31, 2002). *
10.13 Employment Agreement dated November 1, 2002 between New Sky
Communications, Inc. and
30
David Wicker (incorporated by reference to the Registrant's Form 10-KSB
for the fiscal year ended December 31, 2002). *
10.14 Form of Warrant Agreement between the Registrant and Fordham Financial
Management, Inc.**
10.15 Form of Warrant Agreement between the Registrant and W.A.B. Capital for
100,000 shares.**
10.16 Form of Warrant Agreement between the Registrant and Howard Safir.
10.17 Form of Series A Warrant Agreement issued by the Registrant to
participants in its private placement offering completed on December
29, 2003.**
10.18 Form of Registration Rights Agreement issued by the Registrant to
participants in its private placement offering completed on December
29, 2003.**
10.19 Form of Warrant issued to IDT Venture Capital Corporation dated October
31, 2003.**
10.20 Form of Securities Purchase Agreement between Registrant and IDT
Venture Capital Corporation dated as of October 31, 2003.*
10.21 Form of Consulting Agreement between Fordham Financial Management and
Registrant.**
10.22 Form of Placement Agency Agreement between Fordham Financial Management
and the Registrant.**
10.23 Form of Amendment No.1 to Placement Agency Agreement between Fordham
Financial Management and the Registrant.*
10.24 Consulting Agreement between the Registrent and Howard Safir are the
November Group dated as of July 18, 2003.
16. Letter on change of Certifying Accountant (incorporated by reference to
the Registrant's Report on Form 8-K filed on January 9. 2003 as Exhibit
99.1). *
17.1 Resignation letter of Carl R. Reynolds, dated December 3, 2001
(incorporated by reference from Company's Form 10-KSB for December 31,
2001).*
17.2 Resignation letter of E. Anthony Wilson dated August 1, 2002
(incorporated by reference from Company's Form 8-K filed on August 8,
2002). *
21. Subsidiaries of the Registrant.
Thomas A. Wicker Enterprises, Inc.
Lester Levin Inc.
Document Security Consultants Corp.
Imperial Encryptions, Inc. (51% owned)
23.1 Consent of Michael Cronin CPA as certifying accountant for the
Registrant's financial statements for the fiscal year ended December
31, 2002.
23.2 Consent of Goldstein & Digioia LLP contained in Exhibit 5.**
23.3 Consent of Freed Maxick & Battaglia CPA's PC as certifying accountant
for the Registrant's financial statements for the fiscal year ended
December 31, 2003.
31