Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
White Pine Software, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation or Organization)
04-3151064
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(I.R.S. Employer Identification No.)
542 Amherst Street, Nashua, New Hampshire 03063
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(Address of Principal Executive Offices) (Zip Code)
White Pine Software, Inc. Stock Option Plan (1992)
White Pine Software, Inc. Stock Option Plan (1993)
White Pine Software, Inc. Stock Option Plan (1994)
White Pine Software, Inc. Stock Option Plan (1995)
Letter Agreement between White Pine Software, Inc. and Jack Dutzy dated as of
October 13, 1995
Letter Agreement between White Pine Software, Inc. and Andrew Hally dated as of
March 25, 1996
Letter Agreement between White Pine Software, Inc. and Richard Kennerly
delivered as of April 16, 1996
Letter Agreement between White Pine Software, Inc. and Richard M. Darer dated as
of May 28, 1996
White Pine Software, Inc. 1996 Incentive and Nonqualified Stock Option Plan
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(Full Title of the Plans)
Howard R. Berke
White Pine Software, Inc.
542 Amherst Street
Nashua, New Hampshire 03063
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(Name and Address of Agent for Service)
(603) 886-9050
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(Telephone Number, Including Area Code, of Agent For Service)
WITH A COPY TO:
Mark L. Johnson, Esq.
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
(617) 832-1000
CALCULATION OF REGISTRATION FEE
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Proposed
Title of Proposed Maximum
Securities Amount Maximum Aggregate Amount of
to be to be Offering Price Offering Registration
Registered Registered Per Share(1) Price(1) Fee
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Common Stock, $.01 par value 39,789 shares $5.81(2) $ 231,274 $ 71
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Common Stock, $.01 par value 1,233,534 shares $2.73(3) $3,367,548 $1,021
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Common Stock, $.01 par value 231,900 shares $5.81(2) $1,347,919 $ 409
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Total 1,505,223 shares $4,946,741 $1,501
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(1) Estimated solely for the purpose of determining the registration fee.
(2) In accordance with Rule 457(c) under the Securities Act of 1933, the
calculations with respect to 39,789 shares issued and outstanding at
February 6, 1997 pursuant to the exercise of stock options granted under the
Plans listed above and to 231,900 shares issuable but not subject to options
granted at February 6, 1997 under such Plans are based on the average of the
high and low sale prices reported in the consolidated reporting system of
the Nasdaq National Market on February 4, 1997.
(3) In accordance with Rule 457(h) under the Securities Act of 1933, the
calculation with respect to shares issuable under stock options granted
under the Plans listed above and outstanding at February 6, 1997 is based on
the exercise prices of such options.
REOFFER PROSPECTUS
The material which follows, up to but not including the page beginning Part II
of this Registration Statement on Form S-8, constitutes a prospectus prepared in
accordance with the applicable requirements of Part I of Form S-3 under General
Instruction C to Form S-8. The reoffer prospectus is to be used in connection
with resales of restricted securities issued and outstanding under the White
Pine Software, Inc. Stock Option Plan (1992), Stock Option Plan (1993), Stock
Option Plan (1994) and Stock Option Plan (1995).
REOFFER PROSPECTUS
39,789 SHARES
WHITE PINE SOFTWARE, INC.
COMMON STOCK
THIS DOCUMENT CONSTITUTES PART OF A REGISTRATION STATEMENT COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
This Reoffer Prospectus relates to the resale, by the holders thereof (the
"Selling Stockholders"), of 39,789 shares (the "Shares") of common stock, $.01
par value per share ("Common Stock"), of White Pine Software, Inc. ("White Pine"
or the "Company") issued pursuant to the exercise of options granted under the
White Pine Software, Inc. Stock Option Plan (1992), Stock Option Plan (1993),
Stock Option Plan (1994) and Stock Option Plan (1995) (collectively, the
"Plans").
The Common Stock trades on the Nasdaq National Market under the symbol "WPNE."
On February 5, 1997, the closing sale price for the Common Stock, as reported by
the Nasdaq National Market, was $5.50 per share.
The Selling Stockholders or their pledgees, donees, transferees or other
successors in interest may offer the Shares, from time to time during the
effectiveness of this registration, for sale through the Nasdaq National Market,
in the over-the-counter market, in one or more negotiated transactions, or
through a combination of methods of sale, at prices and on terms then prevailing
or at negotiated prices. Sales may be effected to or through broker-dealers,
who may receive compensation in the form of discounts, concessions, commissions
or otherwise in connection therewith. See "Plan of Distribution."
The Company will not receive any of the proceeds from sales of Shares by the
Selling Stockholders. The Selling Stockholders will be responsible for any
discounts, concessions, commissions or other compensation due to any broker or
dealer in connection with the sale of any of the Shares offered hereby. All of
the other expenses of this offering will be paid by the Company.
__________________
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING AT PAGE 4.
__________________
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 COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS REOFFER PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Reoffer Prospectus is February 6, 1997.
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 and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information may be
inspected and copies may be obtained (at prescribed rates) at the Commission's
Public Reference Section, 450 Fifth Street, N.W., Room 1024, Washington D.C.
20549, and at the Commission's Regional Offices at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World
Trade Center, Suite 1300, New York, New York 10048. Reports and other
information concerning the Company also may be inspected at the offices of the
Nasdaq Stock Market, 1735 K Street, N.W., Washington D.C. 20006-1500.
This Reoffer Prospectus constitutes part of a Registration Statement on Form
S-8 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"). This
Reoffer Prospectus does not contain all of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Company and the securities offered hereby. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
such 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 heretofore filed by the Company with the Commission
pursuant to the Securities Act and the Exchange Act are incorporated herein by
reference: (1) certain portions of the Company's Registration Statement on Form
SB-2 (registration number 333-9525) (the "Form SB-2"); and (2) the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1996
(the "Form 10-Q").
All reports and other documents subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Reoffer Prospectus and prior to the termination of the offering made hereby
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of the filing of such reports and documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Reoffer
Prospectus to the extent that a statement contained herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Reoffer Prospectus.
Any person to whom a copy of this Reoffer Prospectus is delivered may obtain,
without charge, upon written or oral request, a copy of any of the documents
incorporated by reference herein, except for the exhibits to such documents
(other than exhibits expressly incorporated by reference into such documents).
Requests for such documents should be addressed to the Chief Financial Officer
of the Company, 542 Amherst Street, Nashua, New Hampshire 03063 or directed to
the Chief Financial Officer at telephone number (603) 886-9050.
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THE COMPANY
White Pine develops, markets and supports multiplatform desktop connectivity
software that facilitates worldwide video and audio communication and data
collaboration across the Internet, intranets and other networks that use the
Internet Protocol. The Company's desktop videoconferencing software products,
Enhanced CU-SeeMe and the White Pine Reflector, create a client-server solution
that allows users to participate in real-time, multipoint videoconferences over
the Internet and intranets. White Pine also offers its eXodus line of desktop X
Windows software, which enables seamless interoperability between local and
remote environments, and its 5PM line of terminal emulation software, which
provides desktop access to data and applications residing on enterprise legacy
systems.
Until the 1990s, videoconferencing generally required expensive hardware-based
systems that communicated through proprietary protocols. Even today, most
videoconferencing systems are proprietary hardware-based products priced between
$1,000 and $40,000. The relatively high price and limited interoperability of
these systems have impeded the widespread adoption of videoconferencing as a
means of communication. In 1992, researchers at Cornell University developed
CU-SeeMe, real-time desktop videoconferencing software that enables users to
communicate over the Internet with hardware as basic as 28.8 kbps modems and
standard videocapture boards and video cameras. CU-SeeMe is distributed as
freeware over the Internet.
In June 1995, the Company secured from Cornell Research Foundation, Inc. (the
"Cornell Foundation") the exclusive worldwide rights to license CU-SeeMe and its
related software-only multipoint conferencing server. In March 1996, the
Company introduced Enhanced CU-SeeMe, which provides real-time, one-way or two-
way audio and video communication and data collaboration over the Internet at a
suggested retail price of $99. Enhanced CU-SeeMe offers significant
improvements in features and functionality over freeware CU-SeeMe, including
color video and data collaboration through a white board, while maintaining
operability over bandwidths as low as 28.8 kbps. Enhanced CU-SeeMe is available
on multiple platforms and can be installed on most multimedia PCs without
proprietary hardware. In May 1996, the Company began shipping the White Pine
Reflector, the software-only server component of the Company's videoconferencing
solution. The White Pine Reflector enables real-time, multipoint desktop
videoconferencing, offers the ability to "cybercast" events to large audiences,
and solves the complex problem of enabling videoconferencing over the Internet
between users operating at different connection speeds. The White Pine
Reflector is offered at suggested retail prices beginning at $995. Enhanced CU-
SeeMe and the White Pine Reflector may be downloaded for evaluation, without any
purchase obligation, from the Company's World Wide Web site.
The Company markets and sells its products through a combination of
distributors, OEMs and strategic partners, through its direct sales organization
and over the Internet. The Company's customers include businesses, government
organizations, educational institutions and individual consumers.
White Pine was incorporated under the laws of Delaware in April 1992 under the
name Visual International, Inc. The Company's principal executive offices are
located at 542 Amherst Street, Nashua, New Hampshire 03063, its telephone number
is (603) 886-9050 and its e-mail address is info@wpine.com. WHITE PINE is a
trademark of the Company, and CU-SEEME is a registered trademark of the Cornell
Foundation.
3
RISK FACTORS
This Reoffer Prospectus contains and incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. The Company's actual results could differ materially
from the results contemplated in the forward-looking statements as a result of a
number of factors, including the risk factors set forth below.
RECENT OPERATING LOSSES
The Company incurred losses from operations of $3,646,000 in the fiscal year
ended December 31, 1995 (including a non-recurring write-off of purchased
research and development costs of $3,200,000) and $2,820,000 in the nine months
ended September 30, 1996. At September 30, 1996, the Company had an accumulated
deficit of approximately $12,883,000. In the fiscal year ended December 31, 1995
and the nine months ended September 30, 1996, the Company made significant
expenditures for product development and sales and marketing in support of the
product launch of Enhanced CU-SeeMe, which became commercially available in
March 1996. The Company expects that it will be required to continue to invest
heavily in product development and sales and marketing programs in order to be
competitive and capture market share, particularly in the videoconferencing
market. In addition, the Company has hired a significant number of employees
since January 1995 and expects to continue hiring additional sales, customer
service, management, software development and technical support employees during
1997 as the Company continues to develop and expand its operations. This
significant increase in its workforce may negatively impact the Company's
results of operations in the future, particularly if sales of new products fall
below expectations.
Sales to Ingram Micro, Inc. represented 21% and 16% of the Company's total
revenue in the fiscal years ended December 31, 1994 and 1995, respectively. The
loss of, or a significant curtailment of purchases by, Ingram Micro, Inc.,
including a loss or curtailment due to factors outside of the Company's control,
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business-Customers" and Note 1 of
Notes to the Company's Consolidated Financial Statements in the Form SB-2 and
Note 3 of Notes to the Company's Consolidated Financial Statements in the Form
10-Q.
As a result of the foregoing factors, the Company may incur further losses in
the future. There can be no assurance that the Company will achieve profitable
operations in any future period. In addition, as a result of the Company's
acquisition of About Software Corporation S.A. ("ASC") on a purchase accounting
basis in the fourth quarter of fiscal 1995 and the Company's decision to shift
its focus to the development, marketing and support of videoconferencing
software, the Company believes that period-to-period comparisons of its
financial results are not necessarily meaningful and should not be relied upon
as an indication of future performance. See "-Transition of Product Focus;
Dependence on New Products" and "The Company" herein; "Selected Financial Data"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Form SB-2; and "Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the Form 10-Q.
DEVELOPING MARKET; UNPROVEN ACCEPTANCE OF THE COMPANY'S NEW PRODUCTS
The market for audio and video services and related software products for the
Internet and intranets, such as Enhanced CU-SeeMe and the White Pine Reflector,
has only recently begun to develop, is evolving rapidly and is expected to be
characterized by an increasing number of market entrants. The Company's future
success will depend in large part on the continued expansion of the
videoconferencing market in general and the adoption of the Internet as a
principal medium for commercial and consumer videoconferencing in particular.
As is typical in a new and rapidly evolving industry, demand for and market
acceptance of recently introduced products, such as Enhanced CU-SeeMe and the
White Pine Reflector, are subject to a high level of uncertainty. Certain
factors, including the present inability of subscribers of certain widely used
on-line Internet access providers to use Enhanced CU-SeeMe over these providers'
networks, the present inability
4
to videoconference with users of other vendors' videoconferencing systems,
difficulties in locating people on the Internet and uncertainty regarding
vendors' willingness to adopt industry standards, may limit demand for and
market acceptance of Enhanced CU-SeeMe and the White Pine Reflector. The
continuation of such uncertainty or of such limitations may have a material
adverse effect on sales of Enhanced CU-SeeMe and the White Pine Reflector and on
the Company's business, financial condition and results of operations. Also,
enterprises that have already invested substantial resources in other means of
communicating information may be reluctant or slow to adopt videoconferencing
generally and Internet videoconferencing in particular. As a result of
networking latencies, data packet loss and significant variations in Internet
infrastructure and users' set-ups and configurations, the quality of audio
communications over the Internet is inferior to the quality of conventional
telephone conversations and the quality of video communications over the
Internet may vary from connection to connection and in certain instances may be
inferior to the quality of hardware-based videoconferencing systems. As a
result, there can be no assurance that videoconferencing communications over the
Internet and intranets will become widespread or that Enhanced CU-SeeMe or the
White Pine Reflector will become widely installed.
Moreover, the market for Internet services and software has developed only
recently. Commercial use of the Internet has been constrained by customer
demands for increased accessibility, reliability, speed, security and support,
and there can be no assurance that the infrastructure or complementary products
necessary for the Internet to become a viable medium of business communications
and activity in general, and as a medium of videoconferencing communications in
particular, will develop. In particular, there can be no assurance that access
to the Internet will continue to be available on a widespread basis, that the
Internet will not experience dramatic and unforeseen technological difficulties,
that the Internet will not be plagued by computer viruses or other destructive
technologies, that the introduction of complementary products and technologies
such as high speed modems and security procedures for commercial transactions
will not be delayed, that the development and adoption of new standards and
communications protocols will not be delayed, that the current pricing structure
for access to the Internet will continue, or that growth in the number of users
or the level of usage of the Internet will not exceed the capacity of the
Internet infrastructure to serve all potential users. Moreover, critical issues
concerning the commercial use of, distribution of information on, and
governmental regulation of the Internet (including access, security, quality of
services, price, ease of use, property ownership, and liability and other legal
issues) remain unresolved and may affect both the growth of the Internet and the
Company's business. As the Internet and the related infrastructure continue to
evolve, there can be no assurance that the Internet will not develop in
unforeseen directions that will have a material adverse effect on the Company's
business, financial condition and results of operations. For example, because
the performance of the Company's products depends on, among other things, the
availability of adequate bandwidth on network connections, any significant
reduction in the rate of improvement of the available speed of network data
transmission could have a material adverse effect on the Company's business,
financial condition and results of operations.
If for any reason the market for Internet videoconferencing services fails to
grow, grows more slowly than anticipated or becomes saturated with competitors'
products, the Company's business, financial condition and results of operations
will be materially and adversely affected.
COMPETITION
The market for videoconferencing products and services is extremely
competitive, and the Company expects that competition will intensify in the
future. The Company believes that the principal competitive factors in the
videoconferencing industry are price, video and audio quality, interoperability,
functionality, reliability, service and support, hardware platforms supported,
and vendor and product reputation. The Company believes that its ability to
compete successfully will depend on a number of factors both within and outside
its control, including the adoption and evolution of industry standards, the
pricing policies of its competitors and suppliers, the timing of the
introduction of new software products and services by the Company and others,
the Company's ability to hire and retain employees, and industry and general
economic
5
trends. The Company anticipates that in the near future the videoconferencing
market will experience intense competition in the form of product bundling or
significant price reductions. The Company currently competes, or expects to
compete, directly or indirectly with the following categories of companies: (i)
traditional hardware-based videoconferencing companies, such as PictureTel
Corporation and VTEL Corporation; (ii) emerging videoconferencing technology
companies, such as Cinecom Corporation, Connectix Corporation, Creative Labs,
Inc. and VDONet Corp.; (iii) vendors of operating systems and browsers such as
Microsoft Corporation, which introduced NetMeeting, a product that enables
point-to-point audio and data communication over the Internet, and announced
NetShow, a product that enables broadcasting by videostreaming, and Netscape
Communications Corporation, which acquired Insoft, Inc. and its audio and
videoconferencing technology; (iv) videoconferencing support companies, such as
VideoServer, Inc., Lucent Technologies, Inc. and Accord Ltd.; and (v) other
companies developing videoconferencing systems. PictureTel Corporation and Intel
Corporation each announced plans in 1996 to license products competitive with
Enhanced CU-SeeMe to manufacturers of personal computers and modems for
inclusion in prepackaged multimedia and other systems. In July 1996, Intel
Corporation also announced a cross-licensing agreement with Microsoft
Corporation to share implementations of certain industry standards and
application frameworks, which the Company expects will enhance the
competitiveness of the products offered by both companies. In addition, because
the barriers to entry in the software market are relatively low and the
potential market is large, the Company anticipates continued growth in the
industry and the entrance of new competitors in the future. Enhanced CU-SeeMe
and the White Pine Reflector also compete with videoconferencing software that
is available on the Internet and can be downloaded by users for either no charge
or extended evaluation. The Cornell Foundation makes CU-SeeMe ("Freeware CU-
SeeMe") and a related server freely available over the Internet. See "Business-
Proprietary Rights" in the Form SB-2.
In the market for X Windows products, the Company faces significant direct
competition from a number of PC X server software vendors, including Hummingbird
Communications Ltd., NetManage, Inc., Network Computing Devices, Inc. and Walker
Richer and Quinn Inc., as well as indirect competition from manufacturers of
dedicated X terminals. The Company's principal competitor in this market is
Hummingbird Communications Ltd., the largest supplier of X server software
products for the PC platform. To the extent that these and other companies
introduce new or enhanced PC X server software products, the Company will face
increased competition.
In the terminal emulation market, the Company currently competes with the
following categories of companies: (i) vendors of International Business
Machines Corporation host connectivity products, including Attachmate Corp. and
Wall Data Incorporated; (ii) vendors of TCP/IP terminal emulation products,
including FTP Software, Inc. and NetManage, Inc.; and (iii) vendors of Digital
Equipment Corporation and Hewlett-Packard Company host connectivity products,
including Walker Richer and Quinn Inc.
Many of the Company's current and potential competitors, including Hummingbird
Communications Ltd., Intel Corporation, Microsoft Corporation, Netscape
Communications Corporation and PictureTel Corporation, have significantly longer
operating histories and/or significantly greater managerial, financial,
marketing, technical and other competitive resources, as well as greater name
recognition, than the Company. As a result, the Company's competitors may be
able to adapt more quickly to new or emerging technologies and changes in
customer requirements and may be able to devote greater resources to the
promotion and sale of their products and services. There can be no assurance
that the Company will be able to compete successfully with existing or new
competitors. In addition, competition could increase if new companies enter the
market or if existing competitors expand their service offerings. An increase
in competition could result in material price reductions or loss of market share
by the Company and could have a material adverse effect on the Company's
business, financial condition and results of operations.
To remain competitive, the Company will need to continue to invest in research
and development and sales and marketing. There can be no assurance that the
Company will have sufficient resources to make such investments or that the
Company will be able to make the technological advances necessary to remain
competitive. In addition, current and potential competitors have established or
may in the future establish
6
collaborative relationships among themselves or with third parties, including
third parties with whom the Company may have relationships, to increase the
visibility and utility of their products and services. In addition, in 1996 and
1997 a number of the Company's competitors have acquired or made equity
investments in other companies in the videoconferencing and related industries,
including other competitors of the Company. Accordingly, it is possible that new
competitors or alliances may emerge and rapidly acquire significant market
shares. Such an eventuality could have a material adverse effect on the
Company's business, financial condition and results of operations.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
The Company has experienced fluctuations in its quarterly results of
operations and anticipates that such fluctuations will continue and could
increase. The Company's quarterly results of operations may vary significantly
depending on a number of factors, some of which are outside of the Company's
control. These factors include the timing of the introduction or acceptance of
new products offered by the Company or its competitors, changes in demand for
Internet services, changes in the mix of products provided by the Company,
changes in pricing strategies by the Company and its competitors, changes in the
markets served by the Company, changes in regulations affecting the industry,
changes in the Company's operating expenses, capital expenditures and other
costs relating to the expansion of operations, changes in its personnel and
general economic conditions. In addition, fluctuations in exchange rates may
render the Company's products less competitive relative to local product
offerings or result in foreign exchange losses. To date, the Company has not
engaged in exchange rate hedging activities to minimize the risks of such
fluctuations. Although the Company may seek to implement hedging techniques in
the future with respect to its foreign currency transactions, there can be no
assurance that such hedging techniques will be successful. Historically, the
Company's revenue in the third quarter of each calendar year has been adversely
affected by seasonal reductions in business activity in Europe and certain other
parts of the world during the summer months. There can be no assurance that the
Company will be able to achieve or maintain profitability in the future or that
its levels of profitability will not vary significantly among quarterly periods.
Fluctuations in results of operations may result in volatility in the price of
the Common Stock.
A significant portion of the Company's expenses are fixed and difficult to
reduce in the event that revenue does not meet the Company's expectations, thus
magnifying the adverse effect of any revenue shortfall. Furthermore,
announcements by the Company or its competitors of new products, services or
technologies could cause customers to defer or cancel purchases of the Company's
products. Any such deferral or cancellation could have a material adverse
effect on the Company's business, financial condition and results of operations.
Accordingly, revenue shortfalls can cause significant variations in results of
operations from quarter to quarter and could have a material adverse effect on
the Company's business, financial condition and results of operations.
As a result of the foregoing factors, it is possible that in some future
quarter the Company's results of operations will be below prior results or the
expectations of public market analysts and investors. In such event, the price
of the Common Stock would likely be materially and adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Form SB-2 and "Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the Form 10-Q.
ABILITY TO MANAGE CHANGE
The Company has recently experienced significant growth in the number of its
employees, the demands on its operating and financial systems, and the
geographic area of its operations. In particular, the Company acquired ASC, a
French corporation, and its California-based subsidiary in the fourth quarter of
1995. This growth has resulted in new and increased responsibilities for the
Company's administrative, operational, development and financial personnel.
Additional expansion by the Company may further strain the Company's management,
financial and other resources. Certain executive officers of the Company have
joined the Company within the last twelve months, including Brian L. Lichorowic,
its Vice President of Marketing, who joined the Company in August 1996 and
Richard M. Darer, its Chief Financial Officer and Vice President
7
of Administration, who joined the Company in May 1996. There can be no assurance
that the Company will be successful in hiring the personnel necessary to manage
its changing business. The Company's success depends to a significant extent on
the ability of its new executive officers to operate effectively, both
independently and as a group, and this ability may be impeded by past and future
geographic expansion of the Company internationally and domestically. In late
1996, the Company moved the remainder of its servers offsite to a third
party's facilities in order to decrease the likelihood of system failures. There
can be no assurance that the Company's systems, procedures and controls will be
adequate to support expansion of the Company's operations. The Company's future
results of operations will depend on the ability of its officers and key
employees to manage changing business conditions and to continue to improve its
operational and financial control and reporting systems. Any failure of the
Company's management to manage change effectively could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business-Employees," "-Facilities" and "Management" in the Form SB-2.
TRANSITION OF PRODUCT FOCUS; DEPENDENCE ON NEW PRODUCTS
Since its inception, the Company has derived a substantial portion of its
revenue from licenses of terminal emulation and X Windows software products.
These products are expected to continue to generate a significant but declining
portion of the Company's revenue for the foreseeable future. As a result, any
factor adversely affecting sales of these products, such as shifting of
management focus and Company resources, increased price competition, the
introduction of technologically superior products by competitors or the release
of competing products by companies with significantly greater resources and name
recognition, could have a material adverse effect on the Company's business,
financial condition and results of operations.
In June 1995, the Company and the Cornell Foundation entered into an Exclusive
Software License Agreement (the "License Agreement") that granted to the Company
the exclusive worldwide right to develop, modify, market, distribute and
sublicense commercial versions of Freeware CU-SeeMe and its related server.
Since that time, the Company has significantly redirected its efforts, and
particularly its product development and marketing efforts, to focus on its
videoconferencing products. As of September 30, 1996, 31 of the Company's 43
research and development employees were devoted to developing Internet
videoconferencing technologies. The Company began shipping Enhanced CU-SeeMe
and the White Pine Reflector in March 1996 and May 1996, respectively, and
therefore has had only a limited opportunity to determine the extent to which
these products will succeed in the marketplace. A number of companies have
introduced, or have announced plans to introduce, videoconferencing software
that will compete with Enhanced CU-SeeMe and the White Pine Reflector, including
software for use over the Internet. The Company's future success will depend in
significant part on its ability to develop and introduce new products and to
continue to improve the performance, features and reliability of its products,
including Enhanced CU-SeeMe and the White Pine Reflector, in response to both
competing product offerings and evolving marketplace demands. There can be no
assurance that the Company will be successful in developing new products or that
any new products will be accepted in the marketplace. The Company's future
success will also depend on its ability to comply with developing industry
standards for videoconferencing over the Internet. The introduction of
competing products that incorporate new technology or the emergence of new
industry standards may render the Company's existing products obsolete and
unmarketable. Any failure or inability of Enhanced CU-SeeMe, the White Pine
Reflector or other new products to perform substantially as anticipated or to
achieve market acceptance would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business-
Products" and "-Competition" in the Form SB-2.
8
DEPENDENCE UPON LICENSE AGREEMENT; LIMITED PROPRIETARY PROTECTION
The Company's success is heavily dependent upon its proprietary technology.
The Company's videoconferencing products, Enhanced CU-SeeMe and the White Pine
Reflector, are commercial versions of Freeware CU-SeeMe and its related server.
The Company's ability to develop, modify, market, distribute and sublicense
Enhanced CU-SeeMe and the White Pine Reflector, as well as the right to use the
trademark "CU-SeeMe," derives entirely from the License Agreement with the
Cornell Foundation. In order to maintain the exclusivity provisions of the
License Agreement, the Company must meet certain staffing, product introduction
and sublicensing obligations. There can be no assurance that the Company will
meet these obligations. Any failure to meet such obligations will permit the
Cornell Foundation to grant licenses to other companies, including competitors
of the Company, to develop, sell and sublicense commercial versions of Freeware
CU-SeeMe and its related server. In addition, the Company's right to issue
sublicenses is contingent upon the Company's continued marketing of commercial
versions of Freeware CU-SeeMe and its related server. Even if the Company
fulfills such obligations, the License Agreement has a fixed term ending
December 1, 1998. Although the License Agreement contains certain provisions
for automatic annual renewal, the License Agreement may be terminated by the
Cornell Foundation for "cause." Under the License Agreement, "cause" includes
failure by the Company to pay any amount due under the License Agreement, if not
cured within 30 days of written notice of such failure to pay, or any "material
breach" of the License Agreement by the Company, if not cured within 90 days of
written notice of such breach. "Material breach" includes failure to exercise
due diligence to develop, manufacture and market commercial versions of Freeware
CU-SeeMe and its related server, failure to grant sublicenses as required by the
License Agreement, failure to maintain quality control over the Company's
commercial versions of Freeware CU-SeeMe and its related server, and failure to
develop and exploit the market to the extent necessary to meet the Company's
minimum royalty obligations under the License Agreement. Any termination of the
License Agreement would have a material adverse effect on the Company's
business, financial condition and results of operations. The License Agreement
requires that the Company pay royalties based on the Company's net revenue from
its commercial versions of Freeware CU-SeeMe and its related server (subject to
certain minimum per-copy royalties) and share sublicensing income with the
Cornell Foundation. The License Agreement also requires that the Company make
certain annual minimum royalty payments, including minimum payments based on
royalties from sublicensing. The failure to pay any such minimum amount would
constitute "cause" for termination of the License Agreement, as described above.
Moreover, Freeware CU-SeeMe and its related server are freely available on the
Internet. Such availability may adversely affect sales of licenses for Enhanced
CU-SeeMe and the White Pine Reflector. The Company also depends upon the
Cornell Foundation, as the owner of the trademark "CU-SeeMe," to protect and
enforce rights in the trademark. Any failure of the Cornell Foundation to
protect or enforce such rights could substantially impair the value of such
trademark and the Company's rights to use such trademark.
The Company currently has no patents and relies primarily on copyright,
trademark and trade secrets law, as well as employee and third-party non-
disclosure agreements, to protect its intellectual property. There can be no
assurance that the steps taken by the Company to protect its proprietary rights
will be adequate to prevent misappropriation of its technology or independent
development by others of similar technology. Certain of the Company's products,
including Enhanced CU-SeeMe and the White Pine Reflector, are licensed to
customers under "shrink wrap" licenses included as part of the product
packaging. Although in certain sales the Company's shrink wrap licenses are
accompanied by specifically negotiated agreements signed by the licensee, in
most cases its shrink wrap licenses are not negotiated with or signed by
individual licensees. Certain provisions of the Company's shrink wrap licenses,
including provisions limiting the Company's liability and protecting against
unauthorized use, copying, transfer and disclosure of the licensed program, may
be unenforceable under the laws of certain jurisdictions. Also, the Company has
delivered certain technical data and information relating to Enhanced CU-SeeMe
and the White Pine Reflector to the United States government and, as a result,
the United States government may have unlimited rights to use such technical
data and information or to authorize others to use such technical data and
information. There can be no assurance that the United States government will
not authorize others to use such technical data and
9
information for purposes competitive with those of the Company. In addition, the
laws of some foreign countries do not protect the Company's proprietary rights
to the same extent as do laws in the United States. There can be no assurance
that the protections afforded by the laws of such countries will be adequate to
protect the Company's proprietary rights, the unenforceability of any of which
could have a material adverse effect on the Company's business, financial
condition and results of operations. Litigation may be necessary to enforce the
Company's intellectual property rights or to protect the Company's trade
secrets. Any such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
financial condition and results of operations.
Although the Company believes that its products and technology do not infringe
the proprietary rights of others, there can be no assurance that third parties
will not assert infringement and other claims against the Company or that such
claims will not be successful. From time to time, the Company has received and
may receive in the future notice of claims of infringement of other parties'
proprietary rights. Many participants in the software industry have an
increasing number of patents and have frequently demonstrated a readiness to
commence litigation based on allegations of patent or other intellectual
property infringement. Third parties may assert exclusive patent, trademark,
copyright and other intellectual property rights to technologies that are
important to the Company. There can be no assurance that infringement or
invalidity claims (or claims for indemnification resulting from infringement
claims) will not be asserted or prosecuted against the Company or that any such
assertion or prosecution will not have a material adverse effect on the
Company's business, financial condition or results of operations. Regardless of
the validity or the successful assertion of any such claims, the Company could
incur significant costs and diversion of resources in defending such claims,
which could have a material adverse effect on the Company's business, financial
condition and results of operations. Furthermore, any party making such claims
could secure a judgment awarding substantial damages, as well as injunctive or
other equitable relief, which could effectively block the Company's ability to
make, use, sell, distribute or market its products and services in the United
States or abroad. Any such judgment could have a material adverse effect on the
Company's business, financial condition and results of operations. In
circumstances where claims relating to proprietary technology or information are
asserted against the Company, the Company may seek licenses to such intellectual
property. There can be no assurance, however, that such licenses would be
available or, if available, that such licenses could be obtained on terms that
are commercially reasonable and acceptable to the Company. The failure to
obtain the necessary licenses or other rights could preclude the sale,
manufacture or distribution of the Company's products and, therefore, could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business-Proprietary Rights" in the Form SB-2.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
Revenue from international sales represented 11%, 20% and 30% of the Company's
total revenue in the fiscal years ended December 31, 1994 and 1995 and the nine
months ended September 30, 1996, respectively. The increased level of
international revenue in the nine months ended September 30, 1996 reflected the
acquisition of ASC on a purchase accounting basis effective as of November 1,
1995. ASC generates a majority of its revenue from outside the United States. As
part of its business strategy, the Company intends to seek opportunities to
expand its product and service offerings into additional international markets.
The Company believes that expansion into new international markets is critical
to the Company's ability to continue to grow and to market its products and
services. In marketing its products and services internationally, the Company
will likely face new competitors. There can be no assurance that the Company
will be successful in developing localized versions of its products for new
international markets or in marketing or distributing products and services in
these markets or that its international revenue will be adequate to offset the
expense of establishing and maintaining international operations. The Company's
international business may be adversely affected by changing economic conditions
in foreign countries. The majority of the Company's sales are currently
denominated in U.S. dollars, but there can be no assurance that a significantly
higher level of future sales will not be denominated in foreign currencies. To
the extent the Company makes sales denominated in currencies other than U.S.
dollars, gains and losses on the conversion of those sales to U.S. dollars may
contribute to
10
fluctuations in the Company's business, financial condition and results of
operations. In addition, fluctuations in exchange rates could affect demand for
the Company's products and services. Conducting an international business
inherently involves a number of other difficulties and risks, such as export
restrictions, export controls relating to technology, compliance with existing
and changing regulatory requirements, tariffs and other trade barriers,
difficulties in staffing and managing international operations, longer payment
cycles, problems in collecting accounts receivable, software piracy, political
instability, seasonal reductions in business activity in Europe and certain
other parts of the world during the summer months, and potentially adverse tax
consequences. There can be no assurance that one or more of these factors will
not have a material adverse effect on any international operations established
by the Company and, consequently, on the Company's business, financial condition
and results of operations. See "Business-Strategy" in the Form SB-2.
DEPENDENCE ON KEY PERSONNEL
The Company's success to date has depended to a significant extent on Howard
R. Berke, its Chairman, President and Chief Executive Officer, David O. Bundy,
its Vice President of Engineering, Killko A. Caballero, its Senior Vice
President of Research and Development and Chief Technology Officer, Richard M.
Darer, Chief Finanical Officer and Vice President of Administration, and a
number of other key management, engineering, research and development, sales and
operational personnel. The loss of the services of Mr. Berke, Mr. Bundy or Mr.
Caballero or any of the Company's other key personnel could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company believes that its future success will depend in large
part on its ability to attract and retain highly qualified management,
engineering, research and development, sales and operational personnel. In
particular, the Company will need to hire and train additional software
developers in order to support and increase its recent software licensing
activities. Competition for all of these personnel is intense and there can be
no assurance that the Company will be successful in attracting and retaining key
personnel. The failure of the Company to hire, train and retain qualified
personnel could have a material adverse effect upon the Company's business,
financial condition and results of operations. The Company does not maintain key
person life insurance policies on its key personnel, except for a policy with
respect to Mr. Berke in the amount of $1.0 million. See "Business-Employees" and
"Management" in the Form SB-2.
RISKS ASSOCIATED WITH CREATING AND ACCESSING NEW DISTRIBUTION CHANNELS
The Company's primary strategy for marketing Enhanced CU-SeeMe and the White
Pine Reflector is to form channel relationships in key markets with major
distributors. The Company also intends to license Enhanced CU-SeeMe and the
White Pine Reflector to original equipment manufacturers ("OEMs"), value-added
resellers ("VARs") and additional distributors for bundling with their products
and services. The Company expects that its future success will depend in large
part upon these OEMs, VARs and distributors. The performance of these OEMs,
VARs and distributors will be outside the control of the Company, and the
Company is unable to predict the extent to which these organizations will be
successful in marketing and selling Enhanced CU-SeeMe or the White Pine
Reflector or products incorporating Enhanced CU-SeeMe or the White Pine
Reflector. The Company's failure to establish relationships with OEMs, VARs and
distributors could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company is
currently seeking to establish distribution relationships with retail channels,
including store chains, superstores and catalog sales, for Enhanced CU-SeeMe.
The Company has no prior experience in selling software through retail channels,
and no assurance can be given that it will succeed in establishing a retail
network for Enhanced CU-SeeMe or that, if established, such a network will not
result in unexpected expenses for inventory, returned software, distribution or
otherwise. The Company's distributors typically carry the products of
competitors of the Company, many of whom have substantially greater financial
resources than the Company. The distributors have limited capital to invest in
inventory, and their decisions to purchase the Company's products and, in the
case of retail stores, to give them critical shelf space, are partly a function
of pricing, terms and special promotions offered by the Company and its
11
competitors, over which the Company has no control and which it cannot predict.
See "Business-Marketing and Distribution" in the Form SB-2.
The Company also distributes certain of its products electronically through
the Internet. By distributing its products through the Internet, the Company
may decrease demand for its products and increase the likelihood of unauthorized
copying and use of its software. The Company has allowed and intends to
continue to allow customers to download certain of its products for a free
evaluation period.
RISK OF PRODUCT DEFECTS
Software developed and incorporated by the Company may contain significant
undetected errors when first released or as new versions are released. Although
the Company tests its software before commercial release, there can be no
assurance that errors in the software will not be found after customers begin to
use the software. Enhanced CU-SeeMe 2.1 for Windows, which was released in the
fourth quarter of 1996, corrects a number of such errors in Enhanced CU-SeeMe
2.0. The Company intends to ship Enhanced CU-SeeMe 3.0, which the Company
expects will support relevant Internet and International Telecommunications
Union standards and incorporate a number of new features, in the first half of
1997. Any error in Enhanced CU-SeeMe 3.0, the White Pine Reflector or the
Company's other products may result in decreased revenue or increased expenses
because of adverse publicity, reduced orders, product returns, uncollectible
accounts receivable, delays in collecting accounts receivable, and additional
and unexpected costs of further product development to correct the errors. Any
of these results could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company is a defendant in 10 lawsuits pending in New York federal and
state courts in which the plaintiffs claim to suffer from carpal tunnel
syndrome, or "repetitive stress injuries," as a result of having used computer
keyboards that are alleged to have been defectively designed by a predecessor of
the Company. None of these suits has reached trial and additional information
detrimental to the Company could be developed in the course of discovery.
Although the Company has established a reserve for these suits that the Company
believes is adequate, there can be no assurance that the Company's liabilities
under these suits will not substantially exceed that reserve. See "Business-
Legal Proceedings" in the Form SB-2.
DEPENDENCE ON THIRD-PARTY SOFTWARE
In addition to Freeware CU-SeeMe and its related server, the Company depends
upon certain other software and products that it licenses from third parties,
including voice compression technology from Voxware, Inc., global Internet
conferencing "white pages" software from Four11 Corporation, video compression/
decompression software ("codec") from Crystal Net Corporation ("Crystal Net")
and whiteboard software from Group Technologies, Inc. d/b/a Group Logic, Inc.
and DataBeam Corporation. Certain of these licenses are for limited terms, have
certain minimum royalty obligations or may be terminated if the Company breaches
the terms of the license. There can be no assurance that these suppliers will
continue to license this software to the Company on commercially reasonable
terms. In late January 1997, Crystal Net delivered notice to the Company of
alleged breaches by the Company of certain terms of the existing license
agreement between the two companies. The Company is in the process of
investigating and responding to these allegations, but believes that the
resolution of these issues will not have a material adverse effect on the
Company's business, financial condition and results of operations.
Most of the Company's third-party licenses are non-exclusive and there can be
no assurance that the Company's competitors will not obtain licenses to and
utilize such software in competition with the Company. There can be no assurance
that licensors of software utilized in the Company's products will continue to
provide, enhance or support such software in the form utilized by the Company,
nor can there be any assurance that the Company will be able to modify its own
software to adapt to any changes in the licensed software. In addition, there
can be no assurance that financial or other difficulties that may be experienced
by such third-party suppliers will not have a material adverse effect on the
availability, quality or support of software incorporated in the Company's
products, or that, if such software becomes unavailable, the Company would be
able to find suitable alternatives on a timely basis and on commercially
reasonable terms. The loss of or inability to maintain any of these licenses
could result in the discontinuation of, or delays or reductions in, product
shipments unless and until equivalent technology is identified, licensed and
integrated with the Company's software, and could have a material adverse effect
12
on the Company's business, financial condition and results of operations. See
"Business-Proprietary Rights" in the Form SB-2.
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS
The Company may acquire or invest in companies, technologies or products that
complement the Company's business or its product offerings. Any future
acquisitions may result in a potentially dilutive issuance of equity securities,
the incurrence of additional debt, the write-off of software development costs
or the amortization of expenses related to goodwill and other intangible assets,
any of which could have a material adverse effect on the Company's business,
financial condition and results of operations. Future acquisitions would
involve numerous additional risks, including difficulties in the assimilation of
the operations, services, products and personnel of any acquired company, the
diversion of management's attention from other business concerns, the disruption
of the Company's business, the entry into markets in which the Company has
little or no direct prior experience and the potential loss of key employees of
any acquired company. There can be no assurance that the Company would be
successful in overcoming these risks or any other problems encountered in
connection with any such acquisition.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
At present, there are few laws or regulations that specifically address access
to or commerce on the Internet. The increasing popularity and use of the
Internet, however, enhance the risk that the governments of the United States
and other countries in which the Company sells or expects to sell its products
will seek to regulate videoconferencing and the Internet with respect to, among
other things, user privacy, pricing, and the characteristics and quality of
products and services. Any such regulation could have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, because the Internet has only recently come into widespread use, it is
not yet clear how existing laws governing issues such as libel, privacy and the
ownership of intellectual property will apply to communications over the
Internet. The Company is unable to predict the impact, if any, that existing or
future legislation, legal decisions or regulations may have on its business,
financial condition or results of operations. The Telecommunications Act of
1996, which was enacted in February 1996, purports to impose criminal liability
on (i) any person that sends or displays in a manner available to minors
indecent or patently offensive material on an interactive computer service such
as the Internet and (ii) any entity that knowingly permits facilities under its
control to be used for such activities. In June 1996, a special three-judge
panel in federal district court found these provisions unconstitutional and
issued a preliminary injunction against their enforcement. The U.S. Department
of Justice has appealed this decision to the U.S. Supreme Court. If these
provisions are upheld or if similar provisions are enacted in the future, they
may inhibit the growth or use of the Internet and chill the development of
Internet content, thereby decreasing the demand for the Company's Internet
videoconferencing products or otherwise having a material adverse effect on the
Company's business, financial condition and results of operations. In March
1996, the America's Carriers Telecommunication Association ("ACTA"), a group of
telecommunications common carriers, filed a petition (the "ACTA Petition") with
the Federal Communications Commission (the "FCC"), arguing that providers (such
as the Company) of computer software products that enable voice transmission
over the Internet (Internet "telephone" services) are operating as common
carriers without complying with various regulatory requirements and without
paying certain charges required by law. The ACTA Petition argues that the FCC
has the authority to regulate both the Internet and the providers of Internet
"telephone" services and requests that the FCC declare its authority over
interstate and international telecommunications services using the Internet,
initiate rulemaking proceedings to consider rules governing the use of the
Internet for the provision of telecommunications services, and order providers
of Internet "telephone" software to immediately cease the sale of such software
pending such rulemaking. Certain parties have filed comments with the FCC
regarding the ACTA Petition. The Company is unable to predict the outcome of
this proceeding. Any action by the FCC to grant the relief sought by ACTA or
otherwise to regulate use of the Internet as a medium of communication,
including any action to
13
permit local exchange carriers to impose additional charges for connections used
for Internet access, could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business-
Government Regulation" in the Form SB-2.
FUTURE CAPITAL REQUIREMENTS
Expansion of the Company's business will require significant additional
expenditures for research and development, sales and marketing, capital
equipment and working capital. The Company expects that its current cash
balances will be sufficient to fund its operations for at least the next twelve
months. The Company's capital requirements will depend on many factors,
including the progress of its research and development efforts, the receipt of
software license fees and other product revenue, and the demand for the
Company's products. The Company's existing bank line of credit will expire on
June 30, 1998. There can be no assurance that the Company will not need to
raise additional funds through public or private financings or that, if needed,
such funds will be available on acceptable terms. The inability of the Company
to raise needed funds would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources" in the Form SB-2 and "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources" in the Form 10-Q.
POSSIBLE VOLATILITY OF STOCK PRICE
Factors such as quarterly variations in the Company's results of operations,
announcements of technological innovations or new products by the Company, its
competitors and others, market conditions in the industry and changes in
financial estimates by public market analysts may cause the market price of the
Common Stock to fluctuate significantly. In addition, the stock market in
general has recently experienced substantial price and volume fluctuations,
which have affected the market prices of many high technology companies,
particularly Internet-related companies, and which have often been unrelated to
the operating performance of such companies. These broad market fluctuations
may materially and adversely affect the market price of the Common Stock.
Following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such a
company. Any such litigation against the Company could result in substantial
costs and diversion of management's attention and other resources, which could
have a material adverse effect on the Company's business, financial condition
and results of operations.
SUBSTANTIAL INFLUENCE OF EXISTING STOCKHOLDERS
As of October 11, 1996, the Company's executive officers, directors and five
percent stockholders beneficially owned an aggregate of approximately 48% of the
outstanding shares of Common Stock. As a result, these stockholders, if acting
together, would effectively be able to control most matters requiring the
approval of stockholders of the Company, including the election of directors or
the approval of significant corporate matters. This concentration of ownership
by existing stockholders may also have the effect of delaying or preventing a
change in control of the Company. See "Principal Stockholders" in the Form SB-
2.
ANTI-TAKEOVER EFFECT OF CHARTER PROVISIONS, BY-LAWS AND DELAWARE LAW
The Restated Charter and the Restated By-Laws contain provisions that could
discourage takeover attempts or make more difficult the acquisition of a
substantial block of the Common Stock. The Restated Charter provides that
stockholders may act only at meetings of stockholders and not by written consent
in lieu of a stockholders' meeting. The Restated By-Laws provide that special
meetings of the Company's stockholders may be called by the President and must
be called by the President or the Secretary at the written request of a majority
of the directors. The Restated By-Laws provide that nominations for directors
may not be made
14
by a stockholder at any annual or special meeting thereof unless the stockholder
intending to make a nomination notifies the Company of its intentions a
specified number of days in advance of the meeting and furnishes to the Company
certain information regarding itself and the intended nominee. The Restated By-
Laws also require a stockholder to provide to the Secretary of the Company
advance notice of business to be brought by such stockholder before any annual
or special meeting of stockholders as well as certain information regarding such
stockholder and others known to support such proposal and any material interest
they may have in the proposed business. These provisions could delay any
stockholder actions that are favored by the holders of a majority of the
outstanding stock of the Company until the next stockholders' meeting. These
provisions may also discourage another person or entity from making a tender
offer for the Common Stock, because such person or entity, even if it acquired a
majority of the outstanding stock of the Company, could only take action at a
duly called stockholders' meeting and not by written consent. In addition, the
Board of Directors is authorized to issue shares of Common Stock and Preferred
Stock which, if issued, could dilute and adversely affect various rights of the
holders of Common Stock and, in addition, could be used to discourage an
unsolicited attempt to acquire control of the Company.
The Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibit the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person becomes an
interested stockholder, unless the business combination is approved in a
prescribed manner. The application of Section 203 may limit the ability of
stockholders to approve a transaction that they may deem to be in their best
interests. The foregoing and other provisions of the Restated Charter and the
Restated By-Laws and the application of Section 203 of the Delaware General
Corporation Law could deter certain takeovers or tender offers or could delay or
prevent certain changes in control or management of the Company, including
transactions in which stockholders might otherwise receive a premium for their
shares over then current market prices. See "Description of Capital Stock" in
the Form SB-2.
ABSENCE OF DIVIDENDS
The Company has never declared or paid any cash dividends on its capital stock
and does not currently expect to pay any cash dividends in the foreseeable
future. In addition, the terms of the Company's existing bank line of credit
and term loan prohibit the Company from declaring or paying cash dividends on
the Common Stock. See "Dividend Policy" in the Form SB-2.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders, nor will any such proceeds be available for use by the
Company or otherwise for the Company's benefit. See "Selling Stockholders."
15
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock owned by
the Selling Stockholders as of February 4, 1997. Beneficial ownership of Common
Stock by the Selling Stockholders following this offering will depend on the
number of Shares sold by each Selling Stockholder. The shares of Common Stock
offered by this Reoffer Prospectus may be offered from time to time by the
Selling Stockholders named below. In addition, certain non-affiliates of the
Company who each hold less than the lesser of 1,000 shares and 1% of the shares
issuable under the Plan pursuant to which such shares were granted and who,
therefore, are not required to be named in the following table may use this
Reoffer Prospectus for offers and sales of up to an aggregate of 2,153 of the
Shares.
SHARES NUMBER OF SHARES Shares to be
BENEFICIALLY OWNED BEING REGISTERED Beneficially Owned
PRIOR TO OFFERING(1) for Sale Hereby(2) After Offering(3)
------------------ ---------------------- ---------------------
Name Number Percent Number Percent
- ---- ------ ------- ------ -------
Howard R. Berke(4) 209,067 2.3% 20,000 189,067 2.1%
Margery L. Blake-Hart 1,630 * 1,630 - *
Michael J. Braca(5) 21,500 * 10,000 11,500 *
Todd R. Korth 1,548 * 1,548 - *
Lora L. Luttrell 2,514 * 2,514 - *
Brian B. Simonelli 1,994 * 1,944 50 *
- ----------------
* Less than 1%.
(1) The number of shares beneficially owned by each stockholder is determined in
accordance with the rules promulgated by the Commission, and the information
is not necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which the
person has sole or shared voting or investment power and also any shares
which the person has the right to acquire within 60 days after February 4,
1997. The inclusion of such shares herein, however, does not constitute an
admission that the named stockholder is a direct or indirect beneficial
owner of such shares. To the Company's knowledge, each person named in the
table has sole voting and investment power (or shares such power with his
spouse) with respect to all shares of Common Stock shown as beneficially
owned by such person. Solely for the purpose of computing the percentage of
shares beneficially owned by a person, shares of Common Stock which the
person has the right to acquire within 60 days of February 4, 1997 are
deemed outstanding.
(2) The Registration Statement shall also cover any additional shares of Common
Stock that become issuable in connection with the shares of Common Stock
registered for sale hereby by reason of any stock dividend, stock split,
recapitalization, or other similar transaction effected without the receipt
of consideration that results in an increase in the number of the Company's
outstanding shares of Common Stock.
(3) Assumes that all of the Shares offered hereby are sold.
(4) Includes 189,067 shares subject to options exercisable within 60 days of
February 4, 1997. Mr. Berke is the President and Chief Executive Officer and
a director of the Company.
(5) Includes 10,000 shares subject to options exercisable within 60 days of
February 4, 1997.
16
PLAN OF DISTRIBUTION
The shares offered hereby may be sold from time to time by the Selling
Stockholders or their pledgees, donees, transferees or other successors in
interest. Such sales may be made on the Nasdaq National Market, or otherwise,
at prices and on terms then prevailing or at prices related to the then-current
market prices, or in negotiated transactions at negotiated prices. The shares
may be sold by one or a combination of the following: (a) a block trade in
which the broker or dealer 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 Reoffer Prospectus; (c)
an exchange distribution in accordance with the rules of such exchange; and (d)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers
or dealers may receive discounts, concessions, commissions or other compensation
from Selling Stockholders in amounts to be negotiated immediately prior to the
sale. The Selling Stockholders and any broker-dealers that participate in the
distribution may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, and any commission received by them and any profit
on the resale of shares sold by them may be deemed to be underwriting discounts
and commissions. In addition, any securities covered by this Reoffer Prospectus
that qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this Reoffer Prospectus.
Upon the Company being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplemented prospectus will
be filed, if required, pursuant to Rule 424(c) under the Securities Act, setting
forth (i) the name of such Selling Stockholder and the name of each of the
participating broker-dealers, (ii) the number of shares involved, (iii) the
price at which such shares were sold, (iv) the commissions paid or discounts or
concessions allowed to such broker-dealers, where applicable, (v) a statement to
the effect that such broker-dealers did not conduct any investigation to verify
the information set out or incorporated by reference in this Reoffer Prospectus
and (vi) other facts material to the transaction.
The Selling Stockholders will be responsible for any discounts, concessions,
commissions or other compensation due to any broker or dealer in connection with
the sale of any of the Shares offered hereby. All of the other expenses of this
offering will be paid by the Company.
Limitations on Resale
---------------------
The Company, as of the date of this Reoffer Prospectus, does not meet the
registrant requirements for the use of Form S-3. Therefore, pursuant to General
Instruction C of Form S-8, the Selling Stockholders, and any other persons with
whom a Selling Stockholder is acting in concert for the purpose of selling
securities of the Company, are subject to the volume resale limitations of Rule
144(e) under the Securities Act. Rule 144(e) limits the volume of sales of
shares for the account of persons subject to its provisions to the greater of
(a) 1% of the shares of the class outstanding as shown by the most recent report
issued or published by the issuer or (b) the average weekly trading volume in
the securities as determined pursuant to Rule 144(e).
LEGAL MATTERS
The validity of the Shares offered hereby has been passed upon for the Company
by Foley, Hoag & Eliot LLP, Boston, Massachusetts. Mark L. Johnson, a partner
at Foley, Hoag & Eliot LLP, is the Secretary of the Company.
17
EXPERTS
The Consolidated Financial Statements of the Company as of December 31, 1995,
and for the nine months ended December 31, 1994 and the year ended December 31,
1995, incorporated by reference in this Reoffer Prospectus and the Registration
Statement, and the Consolidated Financial Statements of About Software
Corporation S.A. for the nine months ended December 31, 1994 and the ten months
ended October 31, 1995, incorporated by reference in this Reoffer Prospectus and
Registration Statement, have been audited by Ernst & Young, independent
auditors, as set forth in their reports thereon appearing in the Form SB-2 and
incorporated by reference herein, and are incorporated by reference herein in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
18
TABLE OF CONTENTS
No broker, dealer or any other person has been authorized to give any
information or to make any representations in connection with this offering
other than those contained in this Reoffer Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or any Selling Stockholder. This Reoffer Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any
securities other than the shares of Common Stock to which it relates or an offer
to, or a solicitation of, any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this Reoffer Prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof or that information contained herein is correct as of any time
subsequent to its date.
TABLE OF CONTENTS
Page
------------------ ----
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company............................................................... 3
Risk Factors.............................................................. 4
Use of Proceeds........................................................... 15
Selling Stockholders...................................................... 16
Plan of Distribution...................................................... 17
Legal Matters............................................................. 17
Experts................................................................... 18
White Pine Software, Inc.
39,789 Shares of Common Stock
--------------------------
PROSPECTUS
--------------------------
February 6, 1997
19
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed with the Securities and Exchange Commission (the
"Commission") are incorporated in this Registration Statement by reference:
(a) the Prospectus dated October 11, 1996 of White Pine Software, Inc. (the
"Company" or the "Registrant") included in the Company's Registration Statement
on Form SB-2 (registration number 333-9525), as declared effective by the
Commission on October 10, 1996;
(b) the description of the Company's Common Stock contained in the
Registration Statement on Form 8-A filed with the Commission on September 6,
1996 under Section 12 of the Securities Exchange Act of 1934, including any
amendment or report filed for the purpose of updating such description;
(c) the Company's Quarterly Report on Form 10-Q for the Quarterly Period ended
September 30, 1996 (file number 000-21415), as filed with the Commission on
November 14, 1996; and
(d) all documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be part hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Mark L. Johnson, a partner at Foley, Hoag & Eliot LLP, is the Secretary of
the Company. Foley, Hoag & Eliot LLP has passed upon the validity of the Shares
offered hereby for the Company.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law affords a Delaware
corporation the power to indemnify its present and former directors and offices
under certain conditions. Article SEVENTH of the Restated Charter provides that
the Company shall indemnify each person who at any time is, or shall have been,
a director or officer of the Company, and is threatened to be or is made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is, or was, a director or officer of the Company, or is or was serving at the
request of the Company as a director, officer, employee, trustee, or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement incurred in connection with any such action, suit or proceeding to
the maximum extent permitted by the Delaware General Corporation Law.
II-1
Section 102(b)(7) of the Delaware Corporation Law gives a Delaware corporation
the power to adopt a charter provision eliminating or limiting the personal
liability of directors to the corporation or its stockholders for breach of
fiduciary duty as directors, provided that such provision may not eliminate or
limit the liability of directors for (i) any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) any acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) any payment of a dividend or approval of a stock purchase that is
illegal under Section 174 of the Delaware Corporation Law or (iv) any
transaction from which the director derived an improper personal benefit.
Article NINTH of the Restated Charter provides that to the maximum extent
permitted by the General Corporation Law of the State of Delaware, no director
of the Company shall be personally liable to the Company or to any of its
stockholders for monetary damages arising out of such director's breach of
fiduciary duty as a director of the Company. No amendment to or repeal of the
provisions of Article NINTH shall apply to or have any effect of the liability
or the alleged liability of any director of the Corporation with respect to any
act or failure to act of such director occurring prior to such amendment or
repeal. A principal effect of such Article NINTH is to limit or eliminate the
potential liability of the Company's directors for monetary damages arising from
breaches of their duty of care, unless the breach involves one of the four
exceptions described in (i) through (iv) above.
Section 145 of the Delaware General Corporation Law also affords a Delaware
corporation the power to obtain insurance on behalf of its directors and
officers against liabilities incurred by them in those capacities. The Company
has procured a directors' and officers' liability and company reimbursement
liability insurance policy that (a) insures directors and officers of the
Company against losses (above a deductible amount) arising from certain claims
made against them by reason of certain acts done or attempted by such directors
or officers and (b) insures the Company against losses, (above a deductible
amount) arising from any such claims, but only if the Company is required or
permitted to indemnify such directors or officers for such losses under
statutory or common law or under provisions of the Restated Charter or the
Restated By-Laws.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
An aggregate of 39,789 of the shares of Common Stock covered by this
Registration Statement are restricted securities being registered for resale by
stockholders of the Registrant. These securities were issued to said
stockholders by the Registrant in reliance on the exemption provided by Section
4(2) of the Securities Act of 1933, as amended, relating to sales by an issuer
not involving a public offering. Such shares were issued to such stockholders
upon their exercises of stock options granted under the White Pine Software,
Inc. Stock Option Plan (1992), Stock Option Plan (1993), Stock Option Plan
(1994) and Stock Option Plan (1995).
ITEM 8. EXHIBITS.
4.1* Specimen certificate for the Common Stock
5.1 Opinion of Foley, Hoag & Eliot LLP
10.1* White Pine Software, Inc. (formerly Visual International, Inc.) Stock
Option Plan (1992), as amended
10.2* White Pine Software, Inc. Stock Option Plan (1993), as amended
10.3* White Pine Software, Inc. Stock Option Plan (1994)
10.4* White Pine Software, Inc. Stock Option Plan (1995), as amended
10.5* White Pine Software, Inc. 1996 Incentive and Nonqualified Stock Option
Plan
10.6 Letter Agreement between White Pine Software, Inc. and Jack Dutzy dated
as of October 13, 1995
10.7 Letter Agreement between White Pine Software, Inc. and Andrew Hally dated
as of March 25, 1996, as supplemented
10.8 Letter Agreement between White Pine Software, Inc. and Richard Kennerly
delivered as of April 16, 1996, as supplemented
10.9 Letter Agreement between White Pine Software, Inc. and Richard M. Darer
dated as of May 28, 1996
23.1 Consent of Ernst & Young, LLP
23.2 Consent of Ernst & Young Audit
23.3 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1)
24.1 Power of Attorney (contained on pages II-4 and II-5)
- ------
* Filed as an exhibit to the Company's Registration Statement on Form SB-2
(registration number 333-9525), as declared effective by the Commission on
October 10, 1996, and incorporated herein by reference.
II-2
ITEM 9. UNDERTAKINGS.
1. The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs 2 (a)(1)(i) and 2 (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference herein.
(b) 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 herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) 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.
2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Nashua, New Hampshire, on this 5th day of February,
1997.
WHITE PINE SOFTWARE, INC.
By: /s/ Howard R. Berke
-------------------------
Howard R. Berke
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Howard R. Berke, Richard M. Darer and Mark L.
Johnson, and each of them, true and lawful attorneys-in-fact and agents with
full power of substitution, for and in name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing which
they, or any of them, may deem necessary or advisable to be done in connection
with this Registration Statement, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or any substitute or substitutes
for any or all of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities as of February 5, 1997.
Signature Title
--------- -----
/s/ Howard R. Berke President, Chief Executive
- ------------------------------- Officer and Director
Howard R. Berke (Principal Executive Officer)
/s/ Richard M. Darer Chief Financial Officer and
- ------------------------------- Vice President of Administration
Richard M. Darer (Principal Financial and Accounting
Officer)
/s/ Killko A. Caballero Director
- -------------------------------
Killko A. Caballero
/s/ Arthur H. Bruno Director
- -------------------------------
Arthur H. Bruno
II-4
/s/ Jonathan G. Morgan Director
- -------------------------------
Jonathan G. Morgan
Director
- -------------------------------
Pierre-Gabriel Vallee
II-5
EXHIBIT INDEX
-------------
Exhibit
No. Description Page
- ------- ----------- ----
4.1* Specimen certificate for the Common Stock
5.1 Opinion of Foley, Hoag & Eliot LLP
10.1* White Pine Software, Inc. (formerly Visual International, Inc.)
Stock Option Plan (1992), as amended
10.2* White Pine Software, Inc. Stock Option Plan (1993), as amended
10.3* White Pine Software, Inc. Stock Option Plan (1994)
10.4* White Pine Software, Inc. Stock Option Plan (1995), as amended
10.5* White Pine Software, Inc. 1996 Incentive and Nonqualified Stock
Option Plan
10.6 Letter Agreement between White Pine Software, Inc. and Jack Dutzy
dated as of October 13, 1995
10.7 Letter Agreement between White Pine Software, Inc. and Andrew Hally
dated as of March 25, 1996, as supplemented
10.8 Letter Agreement between White Pine Software, Inc. and Richard
Kennerly delivered as of April 16, 1996, as supplemented
10.9 Letter Agreement between White Pine Software, Inc. and Richard M.
Darer dated as of May 28, 1996
23.1 Consent of Ernst & Young, LLP
23.2 Consent of Ernst & Young Audit
23.3 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1)
24.1 Power of Attorney (contained on pages II-4 and II-5)
- -----------
* Filed as an exhibit to the Company's Registration Statement on Form SB-2
(registration number 333-9525), as declared effective by the Commission on
October 10, 1996, and incorporated herein by reference.