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As filed with the Securities and Exchange Commission on January 23, 2001
Registration Statement No. 333-52196
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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K2 DIGITAL, INC.
(FORMERLY K2 DESIGN, INC.)
(Exact name of registrant as specified in its charter)
DELAWARE 13-3886065
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
30 BROAD STREET, 16TH FLOOR
NEW YORK, NY 10004
(212) 301-8800
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
LYNN FANTOM, PRESIDENT
K2 DIGITAL, INC.
30 BROAD STREET, 16TH FLOOR
NEW YORK, NY 10004
(212) 301-8800
(Name, address, including zip code,and telephone number,
including area code, of agent for service)
Copies of all communications to be sent to:
DAVID M. WARBURG, ESQ.
BROWN RAYSMAN MILLSTEIN FELDER & STEINER LLP
120 WEST 45TH STREET
NEW YORK, NY 10036
(212) 944-1515
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and from
time to time thereafter.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _______
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If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
___________
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to such Section 8(a), may determine.
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Subject to completion, dated January 23, 2001.
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
securities and exchange commission is effective. This prospectus is not an
offer to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
Up to 2,677,647 Shares
K2 DIGITAL, INC.
Common Stock
This prospectus relates to the sale of up to 2,677,647 shares of our
common stock which we may issue to Fusion Capital Fund II, LLC. Fusion Capital
is referred to in this prospectus as the selling stockholder.
On December 11, 2000, we entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC pursuant to which Fusion Capital agreed to
purchase up to $12.0 million of our common stock in two tranches. The purchase
price will be based upon the future market price of our common stock.
We estimate that the maximum number of shares we will sell to Fusion
Capital under the first tranche of the common stock purchase agreement will be
2,000,000. We will have the right under certain conditions to suspend and/or
terminate the common stock purchase agreement without any payment or liability
to Fusion Capital. Under the terms of the common stock purchase agreement, in
connection with commencing the first tranche, Fusion Capital will receive
380,485 shares of our common stock and warrants to purchase 297,162 shares of
common stock at an exercise price of $.01 per share as a commitment fee. This
prospectus relates to the offer and sale from time to time by Fusion Capital
of this aggregate of 2,677,647 shares. We will not receive any of the proceeds
from the sale of the shares being offered by this prospectus; however, we may
receive up to $6 million from the sale of shares to Fusion Capital under the
common stock purchase agreement.
Our common stock is quoted on the Nasdaq SmallCap Market under the symbol
"KTWO." On January 19, 2001, the last reported sale price for our common stock
as reported on the Nasdaq SmallCap Market was $1.00 per share. We have applied
to have the shares of common stock offered pursuant to this prospectus
approved for trading on the Nasdaq SmallCap Market.
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Investing in the common stock involves certain risks. See "Risk Factors"
beginning on page 4 for a discussion of these risks.
The selling stockholder is deemed to be an "underwriter" within the
meaning of the Securities Act of 1933, as amended. Any broker executing sell
orders on behalf of the selling stockholder may be deemed to be an
"underwriter." Commissions received by any broker may be deemed to be
underwriting commissions.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
THE DATE OF THIS PROSPECTUS IS JANUARY [__], 2001.
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TABLE OF CONTENTS
K2 Digital, Inc.............................................................. 3
Risk Factors................................................................. 4
The Financing Transaction.................................................... 10
Selling Stockholder.......................................................... 15
Plan of Distribution......................................................... 16
Validity of Common Stock..................................................... 17
Experts...................................................................... 17
About This Prospectus........................................................ 17
Where You Can Find More Information.......................................... 18
Incorporation by Reference................................................... 18
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K2 DIGITAL, INC.
K2 Digital, Inc., a strategic digital professional services company,
provides consulting and development services including analysis, planning,
systems design, creative, and implementation. Employing a proprietary process
called W(3) Organizational Modeling, we construct user-centric digital channels
that map to corporate goals. These channels include business-to-business and
consumer Web sites, intranets, extranets, online media and wireless. Featured
in the end-to-end service offerings are qualitative and quantitative research,
usability labs to test graphical user interfaces, navigation, functionality
and systems, positioning studies for online branding, strategic planning,
e-commerce planning, business process reengineering, online media planning and
buying, proprietary media partnerships, marketing strategies, Web design,
creative services for online advertising (e.g., banners, rich media,
interstitials), technical strategies, requirements specifications and
programming. Our process-driven approach utilizes the strategic, conceptual,
technical and marketing experience we have developed since 1993 to help
multi-divisional and global companies maximize their Internet opportunities.
Clients include ABB Ltd., Aetna Financial Services, Inc., Morgan Stanley Dean
Witter & Co., Philips Electronics NV, Puerto Rico Convention Bureau, Silversea
Cruises, Ltd., and WorldCom Inc.
Our offices are located at 30 Broad Street, New York, New York 10004 and
the telephone number is (212) 301-8800. Our Web site is located at
www.k2digital.com; however, nothing contained on the site is incorporated into
or a part of this prospectus.
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RISK FACTORS
You should carefully consider the risks described below before you decide
to buy our common stock. If any of the following risks actually occur, our
business, financial condition or results of operations would likely suffer. In
such case, the trading price of our common stock could decline, and you could
lose all or part of your investment.
Certain statements made in this prospectus, and other written or oral
statements made by or on behalf of K2 Digital, Inc., may constitute
"forward-looking statements" within the meaning of the federal securities
laws. When used in this prospectus, the words "believes," "expects,"
"estimates," "intends" and similar expressions are intended to identify
forward-looking statements. Statements regarding future events and
developments and our future performance, as well as our expectations, beliefs,
plans, intentions, estimates or projections relating to the future, are
forward-looking statements within the meaning of these laws. Examples of such
statements included or incorporated by reference in this prospectus include
descriptions of our plans with respect to developing our business strategy,
our continuing growth and our need for additional financing. All
forward-looking statements are subject to certain risks and uncertainties that
could cause actual events to differ materially from those projected. We
believe that these forward-looking statements are reasonable; however, you
should not place undue reliance on such statements. These statements are based
on current expectations and speak only as of the date of such statements. We
undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of future events, new information or otherwise.
IF WE ARE UNABLE TO OBTAIN SUFFICIENT FUNDS TO GROW, AND INCUR A CASH FLOW
DEFICIT, OUR BUSINESS COULD BE HARMED. Our focus is on increasing the volume
of all of our services. In order to enhance and expand our operations, we have
hired and will continue to hire additional personnel and have incurred and
will continue to incur substantial expenses for:
- administration
- production
- technical resources
- marketing
- customer support
- infrastructure
We had an operating cash flow deficit of $792,000 in fiscal 1997, operating
cash flow of $474,000 in fiscal 1998, an operating cash flow deficit of
$2,935,000 in fiscal 1999 and for the nine months ended September 30, 2000, an
operating cash flow deficit of $1,265,000. We may require additional sources
of financing in order to satisfy our working capital needs, which may be
unavailable or prohibitively expensive. Should such financing be unavailable
or prohibitively expensive when we require it, we would not be able to finance
any expansion of our business and may not be able to satisfy our working
capital needs, either of which would have a material adverse effect on our
business, operating results and financial condition.
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Even if we are able to access all $12 million available under the common
stock purchase agreement with Fusion Capital, we may still need additional
capital to fully implement our business, operating and development plans. In
addition, one result of the raising of additional capital through the common
stock purchase agreement with Fusion Capital would be the issuance of
additional shares of our common stock. The issuance of additional shares to
Fusion Capital pursuant to the common stock purchase agreement could result in
substantial dilution to our existing stockholders. We only have the right to
receive $250,000 per month under the common stock purchase agreement unless
our stock price equals or exceeds $4.00 per share.
WE HAVE A RELATIVELY SHORT OPERATING HISTORY, HAVE INCURRED RECENT
OPERATING LOSSES AND EXPECT FUTURE OPERATING LOSSES. Our gross revenues for
the nine months ended September 30, 2000 and the years ended December 31,
1999, 1998 and 1997 were $5,544,000, $5,859,000, $6,420,000 and $7,501,000,
respectively. Our net revenues, excluding media pass-through costs, for the
nine months ended September 30, 2000 and the years ended December 31, 1999,
1998 and 1997 were $3,252,000, $3,705,000, $3,705,000 and $5,091,000,
respectively, with income (losses) from continuing operations of $(1,934,000),
$750,000, $(1,672,000) and $(1,241,000), respectively. Net loss was $1,934,000
for the nine months ended September 30, 2000, net income was $750,000 for
fiscal 1999, $1,237,000 for fiscal 1998 and a net loss of $1,703,000 for
fiscal 1997. Our net income of $750,000 in fiscal 1999 included $2,521,000 in
gains from the sale of 86,492 shares of our stock in 24/7 Media, Inc. The
Company did not sell any of its remaining 110,000 shares of 24/7 Media Inc.
during the nine months ended September 30, 2000, and the market value of the
shares of 24/7 Media Inc. held by the Company has declined substantially from
previous levels. There can be no assurance that these holdings will increase
in value, that revenue growth can be sustained, or that we will be profitable
in the future.
Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets and
especially those in Internet and other computer related markets, many of which
have or are experiencing extreme volatility and extended steep declines in
their public and private equity market values. There can be no assurance that
we will be successful in addressing these risks.
WE MAY BE UNABLE TO CONTINUE MANAGING SUCCESSIVE RAPID GROWTH. We have
experienced substantial growth in services to our customers and the number of
our employees, which has resulted in:
- increased responsibility of management;
- strain on management, administrative, operational, financial and
technical resources; and
- increased demands on our management information systems and controls.
There can be no assurance that we will effectively develop and implement
systems, procedures or controls adequate to support our operations or that
management will be able to achieve the rapid execution necessary to fully
exploit all opportunities for our services. To manage our business and growth,
we must continue to implement and improve our operational and financial
systems and continue to expand, train and manage our employees. If we are
unable to manage our business effectively, our business, operating results and
financial condition will be materially adversely affected.
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OUR BUSINESS MAY BE ADVERSELY AFFECTED IF WE DO NOT CONTINUE DEVELOPING OUR
MARKET STRATEGY. Our marketing efforts have expanded as the range of services
which we offer has increased. In addition to developing strategic
relationships with other companies and channel sources (those companies that
seek to augment their businesses by directly or indirectly offering to their
clients Web site services provided by us and other third parties), we also
directly market our core creative services as well as the services of our
media group.
Should a channel source favor other providers of similar services, fail to
effectively market our services as a result of the channel source's
competitive position or otherwise, or not utilize our services to the extent
anticipated, our business may be adversely affected. Our inability to recruit,
manage or retain additional channel sources, or to provide services to even
indirect competitors of existing clients or channel sources, or their
inability to market our services effectively or provide timely and
cost-effective customer support and service, could materially adversely effect
our business, operating results and financial condition.
PROJECT-ORIENTED CLIENTS DOMINATE OUR REVENUE BASE, WHICH MAY ADVERSELY
AFFECT OUR ABILITY TO GENERATE REVENUE. Since many of our clients engage us on
a single project basis, clients from whom we generated substantial revenue in
one period have not necessarily been a substantial source of revenue in a
subsequent period. Additionally, costs are significantly higher with respect
to single projects as compared to servicing a client on a multiple project or
continuous basis. Due to our limited operating history and the emerging nature
of the Internet, we cannot be sure whether our future relationships with
clients will be on a project basis or on a longer term relationship basis. To
the extent we do not generate repeat or ongoing business from our clients, we
will incur higher sales and marketing expenses associated with attracting new
clients as compared to lower expenses in obtaining additional business from
existing clients.
VOLATILITY OF TRADING MARKET MAY AFFECT YOUR INVESTMENT. The market price
for our securities has been and may continue to be highly volatile. Factors
such as our financial results, introduction of new products in the
marketplace, and various factors affecting the advertising industry and the
Internet generally, including extreme volatility and extended steep declines
in equity market values of other Internet-related publicly traded companies,
as well as sharp declines in private equity valuations of Internet-related
privately-held companies, may have a significant impact on the market price of
our securities, as well as price and volume volatility affecting small and
emerging growth companies, in general, and not necessarily related to the
operating performance of such companies.
EVEN IF OUR STOCK PRICE DECREASES, WE MAY ELECT TO CAUSE PURCHASES OF OUR
COMMON STOCK TO BE MADE UNDER THE COMMON STOCK PURCHASE AGREEMENT, CAUSING
MORE SHARES TO BE OUTSTANDING AND RESULTING IN SUBSTANTIAL DILUTION. The
purchase price for the common stock to be issued to the selling stockholder
under the common stock purchase agreement will fluctuate based on the closing
price of our common stock. See "The Financing Transaction--Purchase of Shares
Under the Common Stock Purchase Agreement" for a detailed description of the
purchase price and the relation of the purchase price to the percentage of the
outstanding shares of our common stock issuable to Fusion Capital pursuant to
the common stock purchase agreement.
All shares registered in this offering will be freely tradeable. We expect
that shares registered in this offering will be sold over a period of up to 24
months from the date of this prospectus. The sale of a substantial number of
shares of our common stock under this offering, or anticipation of such sales,
could make it more difficult for us to sell equity or equity related
securities in the future at a time and price we deem appropriate.
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If Fusion Capital purchased the full amount of shares purchasable under the
first tranche of the common stock purchase agreement on the date of this
prospectus, and assuming a purchase price per share of $1.00 (the closing sale
price of the common stock on January 19, 2001), Fusion Capital would have been
able to purchase 6,000,000 shares of our common stock under the common stock
purchase agreement. In addition, Fusion Capital will receive 380,485 shares of
common stock and warrants exercisable for 297,162 shares of common stock as a
commitment fee. Assuming Fusion Capital's purchase under the first tranche of
the common stock purchase agreement of a total of 2,000,000 shares of common
stock on the date of this prospectus, those shares, along with the 677,647
shares issuable to Fusion Capital as a commitment fee, or issuable upon the
exercise of warrants issuable as a commitment fee, would represent 43.6% of the
then outstanding common stock. This would result in significant dilution to the
ownership interests of other holders of our common stock. Such dilution could
be more significant if the trading price of our common stock is lower than the
current trading price of our stock at the time Fusion Capital purchases shares
of our common stock under the common stock purchase agreement, as a lower
trading price would cause more shares of our common stock to be issuable to
Fusion Capital. Although we have no present intention of selling more than
2,000,000 shares to Fusion Capital under the first tranche of the common stock
purchase agreement, assuming the trading price of our common stock was $0.50
and a corresponding decrease in the purchase price under the common stock
purchase agreement, 12,000,000 shares of common stock would be issuable to
Fusion Capital under the first tranche, not including shares of common stock or
warrants issuable as a commitment fee. This would represent more than 77% of
the then outstanding common stock.
Although we have the right to block Fusion Capital's purchases under the
common stock purchase agreement if our stock price is below $15.00 for three
consecutive trading days, we may still elect to require Fusion Capital's
purchase of shares under the common stock purchase agreement. We can require
Fusion Capital to purchase additional shares if our closing sale price on each
of the five trading days immediately prior to the first trading day of any
30-day period is at least $4.00, provided the closing sale price of our common
stock during such 30-day period or periods is at least $4.00. In the event
that we decide to issue a number of shares that represents greater than 20% of
our outstanding shares of common stock, we would first seek stockholder
approval. We presently intend to seek such stockholder approval in the first
quarter of 2001. The purchase under the common stock purchase agreement of a
significant percentage of our outstanding stock may result in substantial
dilution to the ownership interests of other holders of our common stock. See
page 11 for a table that shows the number of shares issuable and potential
dilution based on varying market prices. Since we only plan to sell up to
2,000,000 shares to Fusion Capital under the common stock purchase agreement,
our stock price will need to equal or exceed $3.00 per share for us to receive
the maximum proceeds of $6 million under the common stock purchase agreement.
Assuming a purchase price of $1.00 per share (the closing sale price of the
common stock on January 19, 2001) and the purchase by Fusion Capital of the
full amount of shares purchasable under the first tranche of the common stock
purchase agreement, proceeds to us would only be $2,000,000 unless we choose
to issue more than 2,000,000 shares, which we have the right to do.
THE COMMON STOCK PURCHASE AGREEMENT COULD LEAD TO DOWNWARD PRESSURE ON OUR
STOCK PRICE. Either actual dilution caused by sales of our common stock to
Fusion Capital or the perception of such dilution by holders of our common
stock could cause holders to elect to sell the shares of common stock held by
them, which could cause the trading price of our common stock to decrease.
Furthermore, a perception that sales of our common stock to Fusion Capital may
lead to downward pressure on the trading price of our common stock could
provide an incentive for selling which could also adversely affect the trading
price of our common stock.
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POSSIBLE FUTURE DELISTING FROM NASDAQ. Our common stock is traded on the
Nasdaq SmallCap Market. For continued inclusion on Nasdaq, listed companies
are required to maintain a minimum closing bid price per share of at least $1.
If the share price falls below $1 for 30 consecutive business days, the listed
company is to be notified promptly and shall have a period of 90 calendar days
to achieve compliance, which is achieved by having the share price close at or
above $1 for 10 consecutive business days during the 90-day compliance period.
A company which does not comply is subject to delisting from Nasdaq. Our
common stock has recently traded below $1 per share, as reported by Nasdaq,
and there can be no assurance that the trading price of our common stock will
not close below $1 per share in the foreseeable future. We could therefore be
subject to delisting from Nasdaq as described above.
WE MAY BE UNABLE TO ATTRACT AND RETAIN QUALIFIED TECHNICAL PERSONNEL. Our
success depends upon our key technical personnel and senior management. The
loss of the services of these persons could materially adversely affect our
ability to develop our business. Competition for qualified technical, sales
and marketing, customer support, financial and accounting, and managerial
personnel in the Internet industry is intense, and we cannot be certain that
we will be able to retain our key personnel or that we can attract, integrate
or retain other highly qualified personnel in the future. We have experienced
in the past, and may continue to experience in the future, difficulty in
hiring and retaining candidates with appropriate qualifications.
FAILURE OF OUR COMPUTER SYSTEMS MAY DISRUPT OUR OPERATIONS. Our success
largely depends on the uninterrupted operation of our computer and
communications hardware systems. Our systems and operations are vulnerable to
damage or interruption from fire, flood, power loss, telecommunications
failure, break-ins, earthquake and similar events. We presently have very
limited redundant systems. We do not have a formal disaster recovery plan and
we carry limited business interruption insurance to compensate for any losses
that may occur. Our servers are also vulnerable to computer viruses, physical
or electronic break-ins, and similar disruptions, which could materially and
adversely affect us.
OUR BUSINESS MAY NOT GROW IF THE INTERNET, AS A MEDIUM OF COMMERCE AND
COMMUNICATIONS, DOES NOT CONTINUE TO DEVELOP. Demand and market acceptance for
recently introduced services and products like those offered by us are subject
to a high level of uncertainty. The use of the Internet in marketing,
advertising and commerce, particularly by those individuals and enterprises
that have historically relied upon traditional means of marketing and
advertising, generally requires the acceptance of a new way of conducting
business and exchanging information. Enterprises that have already invested
substantial resources in other means of conducting business and exchanging
information may be particularly reluctant or slow to adopt a new strategy that
may make their existing resources and infrastructure less useful. There can be
no assurance that the market for our services will develop and if it fails to
develop, develops more slowly than expected or becomes saturated with
competitors, or if our services do not achieve market acceptance, our
business, operating results and financial condition will be materially
adversely effected.
Our ability to derive revenues will also depend upon a robust industry and
the infrastructure for providing Internet access and carrying Internet
traffic. The Internet may not prove to be a viable commercial marketplace
because of inadequate development of the necessary infrastructure or timely
development of complementary products, such as high speed modems and
bandwidths. Moreover, other critical issues concerning the commercial use of
the Internet (including security, reliability, cost, ease of use and access,
and quality of service) remain unresolved and may impact the growth of
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Internet use. Because global commerce and online exchange of information on
the Internet and other similar open wide area networks are new and evolving,
it is difficult to predict with any assurance whether the Internet will prove
to be and remain a viable commercial marketplace. If the infrastructure
necessary to support the Internet's commercial viability is not developed, or
if the Internet does not become a viable marketplace, our business, operating
results and financial condition would be materially and adversely effected.
TECHNOLOGICAL CHANGE MAY RENDER OUR SERVICE OBSOLETE. Our services, and the
services and products we expect to offer in the future, are impacted by
rapidly changing technology, evolving industry standards, emerging competition
and frequent new service, software and other product introductions. There can
be no assurance that we can successfully identify new business opportunities
and develop and bring new services or products to market in a timely and
cost-effective manner, or that services, products or technologies developed by
others will not render our services or products noncompetitive or obsolete. In
addition, there can be no assurance that services, products or enhancements
introduced by us will achieve or sustain market acceptance or be able to
effectively address compatibility, inoperability or other issues raised by
technological changes or new industry standards. Our pursuit of technological
advances may also require us to seek assistance from third parties.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY. We believe that our
success in our core business of interactive advertising is not dependent upon
patents, copyrights or trademarks and we do not currently have any registered
patents, copyrights or trademarks, although applications for various
trademarks have been made. Consequently, we rely principally on a combination
of common-law and statutory law to protect our proprietary information and
know-how. We also utilize technology owned by third parties. There can be no
assurance that licenses for any technology developed by third parties that
might be required for our services would be available on reasonable terms, if
at all.
Although we do not believe that our services infringe the proprietary
rights of any third parties, there can be no assurance that third parties will
not assert claims based on our services or that any of those claims would not
be successful. In addition, many of our competitors rely upon trade secret
law. Litigation may be necessary in the future to enforce our intellectual
property rights and to protect our proprietary information, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Litigation of this nature, whether or
not successful, could result in substantial costs and diversions of resources,
either of which could have a material adverse effect on our business,
financial condition and operating results. Furthermore, parties making claims
against us could secure a judgment awarding substantial damages, as well as
injunctive or other equitable relief which could directly or indirectly
prohibit us from providing certain services and products. A judgment of this
nature could have a material adverse effect on our business, financial
condition and results of operations.
ABSENCE OF DIVIDENDS. We have not paid any cash dividends on our common
stock and do not anticipate paying any such cash dividends on our common stock
in the foreseeable future. Earnings, if any, will be retained to finance
future growth. Our ability to declare dividends on our common stock may be
restricted by future financings or lenders, if any.
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THE FINANCING TRANSACTION
GENERAL
On December 11, 2000, we entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC ("Fusion Capital") pursuant to which Fusion
Capital agreed to purchase up to $12 million of our common stock in two
tranches. Each $6 million tranche is to be purchased over a period of up to
twenty-four months, subject to a six month extension or earlier termination at
our discretion. The selling price of the shares will be equal to the lesser of
(1) $15.00 or (2) a price based upon the future market price of the common
stock without any fixed discount to the market price.
After all of the shares of our common stock purchasable under the first
tranche of the common stock purchase agreement have been purchased by Fusion
Capital, we have the right to deliver to Fusion Capital an irrevocable written
notice stating that we elect to commence the second tranche. The obligation of
Fusion Capital to commence the second tranche is subject only to customary
conditions, all of which are outside the control of Fusion Capital.
PURCHASE OF SHARES UNDER THE COMMON STOCK PURCHASE AGREEMENT
Under the common stock purchase agreement, Fusion Capital will purchase
shares of our common stock by purchasing from time to time a specified dollar
amount of our common stock. Subject to the limits on purchase and the
termination rights described below, during each 30-day period during the term
of the first tranche of up to 24 months, Fusion Capital will purchase $250,000
of our common stock. This amount may be decreased by us at any time. If our
stock price equals or exceeds $4.00 per share, we have the right to increase
this monthly amount up to the full remaining portion of the $6 million
commitment. The selling price per share is equal to the lesser of:
- the lowest sale price of our common stock on the day of submission of
a purchase notice by Fusion Capital; or
- the average of any five closing bid prices of our common stock,
selected by Fusion Capital, during the 15 trading days prior to the
date of submission of a purchase notice by Fusion Capital; or
- $15.00
The selling price will be adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction
occurring during the fifteen (15) trading days in which the closing bid price
is used to compute the purchase price. Notwithstanding the foregoing, Fusion
Capital may not purchase shares of common stock under the common stock
purchase agreement if Fusion Capital or its affiliates would beneficially own
more than 9.9% of our then aggregate outstanding common stock immediately
after the proposed purchase. If the 9.9% limitation is ever reached this shall
not effect or limit Fusion Capital's obligation to fund the required monthly
purchase amount of $250,000 or Fusion Capital's mandatory purchase obligation
under the common stock purchase agreement.
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The following table sets forth the number of shares of our common stock
that would be sold to Fusion Capital upon our sale of common stock under the
first tranche of the common stock purchase agreement at varying purchase
prices:
NUMBER OF SHARES
TO BE ISSUED UPON A PERCENT OF OUR COMMON STOCK
ASSUMED FULL PURCHASE OF THE FIRST OUTSTANDING AS OF DECEMBER 31, 2000,
PURCHASE TRANCHE OF THE COMMON STOCK AFTER GIVING EFFECT TO THE ISSUANCE TO
PRICE PURCHASE AGREEMENT FUSION CAPITAL(1)
----- ------------------ -----------------
$ 0.50 2,677,647(2) 43.6%
$ 1.00(3) 2,677,647(2) 43.6%
$ 4.00 2,177,647 38.6%
$10.00 1,277,647 27.0%
$15.00 1,077,647 23.7%
Since we only plan to sell up to 2,000,000 shares to Fusion Capital under
the common stock purchase agreement, our stock price will need to equal or
exceed $3.00 per share for us to receive the maximum proceeds of $6 million
under the common stock purchase agreement. Assuming a purchase price of $1.00
per share (the closing sale price of the common stock on January 19, 2001) and
the purchase by Fusion Capital of the full amount of shares purchasable under
the first tranche of the common stock purchase agreement, proceeds to us would
only be $2,000,000 unless we choose to issue more than 2,000,000 shares, which
we have the right to do.
OUR RIGHT TO PREVENT PURCHASES
At any time or from time to time, so long as the closing sale price of our
common stock has been below $15.00 for the most recent three trading days, we
shall have the unconditional right to prevent any purchases effective upon
three trading days prior notice. To the extent we need to use the cash
proceeds of the sales of common stock under the common stock purchase
agreement for working capital or other business purposes, we do not intend to
restrict purchases under the common stock purchase agreement.
OUR RIGHT TO MANDATORY PURCHASES
If the closing sale price of our common stock on each of the five trading
days immediately prior to
- --------
(1) Based on 3,462,794 shares of common stock outstanding as of December
31, 2000. Includes the issuance of 380,485 shares of common stock issuable to
Fusion Capital and 297,162 shares of common stock issuable to Fusion Capital
upon exercise of warrants issuable to it as a commitment fee, and the number
of shares issuable at the corresponding assumed purchase price set forth in
the adjacent column.
(2) We estimate that we will issue no more than 2,000,000 shares to Fusion
Capital under the first tranche of the common stock purchase agreement,
excluding the shares of common stock issued as a commitment fee, all of which
are included in this offering. If more than 2,000,000 shares are issuable to
Fusion Capital under the first tranche of the common stock purchase agreement,
we currently intend to terminate the common stock purchase agreement without
any payment or liability to Fusion Capital.
(3) The closing price as of January 19, 2001 was $1.00.
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the first trading day of any 30-day period is at least $4.00, we shall have
the right to require purchase by Fusion Capital of part or all of the
outstanding $6 million (in such amounts as determined by us), during such time
or times as Fusion Capital shall determine during the next two 30-day periods,
provided the closing sale price of our common stock during such 30-day period
or periods is at least $4.00. Our right to require purchase by Fusion Capital
shall be exercisable by written notice from us to Fusion Capital prior to the
first trading day of any 30-day period.
OUR TERMINATION RIGHTS
Prior to the date on which shares are purchased by Fusion Capital, we shall
have the right to terminate the common stock purchase agreement at any time for
any reason by issuing to Fusion Capital the shares to be issued as a commitment
fee. After the date on which shares are first purchased by Fusion Capital, if
at any time the closing sale price of our common stock for each of any
ten consecutive trading days is below $15.00, we may, at any time within the
next three trading days, give notice to Fusion Capital exercising our right to
terminate the common stock purchase agreement. Such notice shall be effective
three trading days after Fusion Capital receives such notice. We may not
exercise our termination rights in anticipation of, or in connection with, a
change of control or other major transaction unless the change of control or
other major transaction has been publicly disclosed for at least 45 trading
days.
EFFECT OF PERFORMANCE OF THE COMMON STOCK PURCHASE AGREEMENT ON K2 AND OUR
STOCKHOLDERS
All shares registered in this offering will be freely tradable. It is
anticipated that shares registered in this offering will be sold over a period
of up to 24 months from the date of this prospectus. The sale of a significant
amount of shares registered in this offering at any given time could cause the
trading price of our common stock to decline and to be highly volatile. Fusion
Capital may ultimately purchase all of the shares of common stock issuable
under the first tranche of the common stock purchase agreement, and it may
sell all of the shares of common stock it acquires upon purchase. Therefore,
the purchases under the common stock purchase agreement may result in
substantial dilution to the interests of other holders of our common stock.
However, we have the right to block purchases of the common stock purchase
agreement and to require termination of the common stock purchase agreement in
some cases.
NO SHORT-SELLING OR HEDGING BY FUSION CAPITAL
Fusion Capital has agreed that neither it nor any of its affiliates will
engage in any direct or indirect short-selling or hedging of our common stock
during any time prior to the termination of the common stock purchase
agreement.
EVENTS OF DEFAULT
Generally, Fusion Capital may terminate the common stock purchase agreement
without any liability or payment to K2 upon the occurrence of any of the
following events of default:
- if for any reason the shares offered by this prospectus cannot be sold
pursuant to this prospectus for a period of 10 consecutive trading days
or for more than an aggregate of 30 trading days in any 365-day period;
- suspension by the Nasdaq SmallCap Market of our common stock from
trading for a period of 10 consecutive trading days or for more than an
aggregate of 30 trading days in any 365-day period;
- our failure to satisfy any listing criteria of the Nasdaq SmallCap
Market for a period of 10
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consecutive trading days or for more than an aggregate of 30 trading
days in any 365-day period;
- (1) notice from our transfer agent to the effect that it intends not to
comply with a proper request for purchase under the common stock
purchase agreement of shares of common stock; (2) our failure to
promptly confirm to the transfer agent Fusion Capital's purchase notice
or (3) the failure of the transfer agent to issue shares of our common
stock promptly upon delivery of a purchase notice;
- any material breach of the representations or warranties or covenants
contained in the common stock purchase agreement or any related
agreements which has or which could have a material adverse affect on K2
subject to a cure period of 10 trading days;
- if the number of shares to be issued to Fusion Capital reaches an
aggregate amount that would require stockholder approval under Nasdaq
regulations (to the extent not previously obtained and then required) or
otherwise cause K2 to breach Nasdaq rules and regulations;
- the removal or resignation of both Lynn Fantom as Chief Executive
Officer of K2 and of Gary W. Brown as K2's Chief Operating Officer;
- a default of any payment obligation of K2 in excess of $1.0 million; or
- commencement of insolvency or bankruptcy proceedings by or against K2.
ADDITIONAL SHARES ISSUED TO FUSION CAPITAL
Under the terms of the common stock purchase agreement, we will issue to
Fusion Capital shares of our common stock, together with warrants to purchase
shares of our common stock, equal to 12% of $6.0 million or an aggregate of
677,647 shares (including 297,162 shares issuable upon exercise of the
warrants) as a commitment fee. The warrants have an exercise price of $0.01
per share and are exercisable for five years from the date of issue. Unless an
event of default occurs, these shares must be held by Fusion Capital until the
common stock purchase agreement has been terminated. On the date that the
second tranche is commenced, Fusion Capital will be entitled to receive an
additional commitment fee, payable in shares of our common stock, equal to 8%
of $6.0 million, divided by the lower of (1) the average of the closing price
of our common stock for the five consecutive trading days immediately
preceding the trading day which is two trading days prior to the commencement
of the second tranche and (2) the average of the closing price of our common
stock for the five consecutive trading days immediately preceding the date the
Company delivers notice to Fusion Capital of its intent to commence the second
tranche.
NO VARIABLE PRICED FINANCINGS
Until the termination of the common stock purchase agreement, we have
agreed not to issue, or enter into any agreement with respect to the issuance
of, any variable priced equity or variable priced "equity-like" securities
unless we have obtained Fusion Capital's prior written consent.
HOLDINGS OF FUSION CAPITAL UPON TERMINATION OF THE OFFERING
Because Fusion Capital may sell all, some or none of the common stock
offered by this prospectus, no estimate can be given as to the amount of
common stock that will be held by Fusion Capital upon
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early termination of the offering.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our
common stock by the selling stockholder; however, we may receive up to $6
million from the sale of shares to Fusion Capital under the common stock
purchase agreement. We are registering the shares for sale to provide the
selling stockholder with freely tradable securities, but the registration of
these shares does not necessarily mean that any of these shares will be
offered or sold by the selling stockholder.
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SELLING STOCKHOLDER
The selling stockholder is Fusion Capital Fund II, LLC. Under the common
stock purchase agreement, Fusion Capital agreed to purchase up to $12.0
million of our common stock in two tranches of $6.0 million. The purchase
price of our common stock is based upon the future market price of our common
stock. We will commence the first tranche with Fusion Capital after this
registration statement is effective. At our sole option, we can require Fusion
Capital to commence the second tranche and purchase up to an additional $6.0
million of our common stock.
We estimate that the maximum number of shares we will sell to Fusion
Capital under the first tranche of the common stock purchase agreement will be
2,000,000. We have the right under certain conditions to suspend and/or
terminate the common stock purchase agreement without any payment or liability
to Fusion Capital. We will issue 380,485 additional shares of common stock and
warrants to purchase 297,162 shares of common stock at an exercise price of
$.01 per share to Fusion Capital as a commitment fee in connection with the
first tranche under the common stock purchase agreement. Unless an event of
default occurs, these shares must be held by Fusion Capital until the common
stock purchase agreement has been terminated. This prospectus relates to the
offer and sale from time to time by Fusion Capital of these shares. The common
stock purchase agreement is described in detail under the heading "The
Financing Transaction."
Notwithstanding the limitations set forth in the common stock purchase
agreement, if Fusion Capital was to purchase all of the common stock issuable
in the first tranche of the common stock purchase agreement, the 2,000,000
shares purchased, together with the 380,485 additional shares we will issue to
Fusion Capital, and the 297,162 which are issuable upon exercise of warrants
issuable to it, as a commitment fee, Fusion Capital would beneficially own
43.6% of our then outstanding common stock.
HOLDINGS OF FUSION CAPITAL UPON COMPLETION OF THIS OFFERING
Following completion of this offering, Fusion Capital will beneficially own
no more than 380,485 shares of common stock and warrants to acquire 297,162
shares of common stock. This aggregate of 677,647 shares issuable as a
commitment fee may be sold following termination of the common stock purchase
agreement. All of these shares are deemed to be beneficially owned by Steven
G. Martin and Joshua B. Scheinfeld, the principals of Fusion Capital. Messrs.
Martin and Scheinfeld have shared voting and dispositive power of the shares
being offered pursuant to this prospectus.
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PLAN OF DISTRIBUTION
The common stock offered by this prospectus is being offered by the selling
stockholder, Fusion Capital Fund II, LLC. The common stock may be sold or
distributed from time to time by the selling stockholder, or by donees or
transferees of, or other successors in interests to, the selling stockholder,
directly to one or more purchasers or through brokers, dealers or underwriters
who may act solely as agents or may acquire such common stock as principals,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices, or at fixed prices, which may
be changed. The sale of the common stock offered by this prospectus may be
effected in one or more of the following methods:
- ordinary brokers' transactions;
- transactions involving cross or block trades or otherwise on the Nasdaq
SmallCap Market;
- purchases by brokers, dealers or underwriters as principal and resale
by such purchasers for their own accounts pursuant to this prospectus;
- "at the market" to or through market makers or into an existing market
for the common stock;
- in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through
agents;
- in privately negotiated transactions; or
- any combination of the foregoing.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and complied
with.
Brokers, dealers, underwriters or agents participating in the distribution
of the shares as agents may receive compensation in the form of commissions,
discounts or concessions from the selling stockholder and/or purchasers of the
common stock for whom such broker-dealers may act as agent, or to whom they
may sell as principal, or both. The compensation paid to a particular
broker-dealer may be less than or in excess of customary commissions.
The selling stockholder is an "underwriter" within the meaning of the
Securities Act of 1933. Any broker-dealers who act in connection with the sale
of the shares hereunder may be deemed to be "underwriters" within the meaning
of the Securities Act, and any commissions they receive and proceeds of any
sale of the shares may be deemed to be underwriting discounts and commissions
under the Securities Act.
Neither we nor the selling stockholder can presently estimate the amount of
compensation that any agent will receive. We know of no existing arrangements
between any selling stockholder, any other stockholder, broker, dealer,
underwriter or agent relating to the sale or distribution of the shares. At a
time a particular offer of shares is made, a prospectus supplement, if
required, will be distributed that
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will set forth the names of any agents, underwriters or dealers and any
compensation from the selling stockholder and any other required information.
We will pay all of the expenses incident to the registration, offering and
sale of the shares to the public other than commissions or discounts of
underwriters, broker-dealers or agents. K2 has also agreed to indemnify the
selling stockholder and related persons against specified liabilities,
including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of K2, we have
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore,
unenforceable.
FUSION CAPITAL AND ITS AFFILIATES HAVE AGREED NOT TO ENGAGE IN ANY DIRECT OR
INDIRECT SHORT SELLING OR HEDGING OF OUR COMMON STOCK DURING THE TERM OF THE
COMMON STOCK PURCHASE AGREEMENT
We have advised the selling stockholder that while it is engaged in a
distribution of the shares included in this prospectus it is required to
comply with Regulation M promulgated under the Securities Exchange Act of
1934, as amended. With certain exceptions, Regulation M precludes the selling
stockholder, any affiliated purchasers, and any broker-dealer or other person
who participates in such distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase any security which is
the subject of the distribution until the entire distribution is complete.
Regulation M also prohibits any bids or purchases made in order to stabilize
the price of a security in connection with the distribution of that security.
All of the foregoing may affect the marketability of the shares offered hereby
this prospectus.
This offering will terminate on the earlier of (1) the date on which the
shares are eligible for resale without restrictions pursuant to Rule 144(k)
under the Securities Act or (2) the date on which all shares offered by this
prospectus have been sold by the selling stockholder.
VALIDITY OF COMMON STOCK
The validity of the common stock offered by this prospectus will be passed
upon for us by Brown Raysman Millstein Felder & Steiner LLP, New York, New
York.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-KSB of K2 Digital, Inc. (formerly K2 Design,
Inc.) for the year ended December 31, 1999 have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
with respect thereto, and are included herein in reliance upon the authority
of said firm as experts in giving said report.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, a company that has the right to receive shares of our
common stock may sell up to an aggregate of 2,667,647 shares of common
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stock in one or more offerings. This prospectus and any applicable prospectus
supplement provided to you should be considered together with the additional
information described under the heading "Where You Can Find More Information."
The registration statement that contains this prospectus (including the
exhibits to the registration statement) contains additional information about
our company and the securities offered by this prospectus. That registration
statement can be read at the SEC web site or at the SEC offices mentioned
under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission. Those reports, proxy statements and other information
may be obtained:
- At the Public Reference Room of the SEC, Room 1023 - Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549;
- At the public reference facilities at the SEC's regional offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048 or
Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661;
- At the offices of the Nasdaq Stock Market, Inc., Reports Section, 1735 K
Street, N.W., Washington, D.C. 20006; or
- From the Internet site maintained by the SEC at http://www.sec.gov,
which contains reports, proxy statements and other information regarding
issuers that file electronically with the SEC.
Some locations may charge prescribed rates or modest fees for copies. For
more information on the public reference rooms, call the SEC at
1-800-SEC-0330.
This Prospectus is part of a registration statement that we filed with the
SEC. The registration statement contains more information than this Prospectus
regarding our business and our common stock and warrants, including certain
exhibits. You can get a copy of the registration statement from the SEC at the
addresses listed above or from its Internet Web site.
INCORPORATION BY REFERENCE
We "incorporate by reference" into this prospectus the information we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus and any information that we file
subsequently with the SEC will automatically update this prospectus. We
incorporate by reference:
(a) Our Annual Report on Form 10-KSB for the year ended December 31, 1999,
filed with the SEC on March 30, 2000;
(b) Definitive Proxy Statement on Schedule 14A dated April 28, 2000;
(c) Our Quarterly Report on Form 10-QSB for the quarter ended March 31,
2000;
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(d) Our Quarterly Report on Form 10-QSB for the quarter ended June 30,
2000;
(e) Our Quarterly Report on Form 10-QSB for the quarter ended September 30,
2000;
(f) Our Current Report on Form 8-K dated April 24, 2000;
(g) Our Current Report on Form 8-K dated July 11, 2000;
(h) Our Current Report on Form 8-K dated December 19, 2000;
(i) The description of our common stock and warrants contained in the
Registration Statement on Form SB-2, filed with the Commission on July
17, 1996 (File No. 333-4319).
All documents subsequently filed by us pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act, prior to the filing of a post-effective
amendment hereto indicating that all securities offered hereby have been sold
or which deregisters all securities then remaining unsold, shall be deemed to
be incorporated by reference in this Prospectus and to be a part of this
Prospectus from the respective dates of filings of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated herein by reference modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
We undertake to provide, without charge, to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or
oral request of such person, a copy of any and all of the documents
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference herein). Requests for
such documents should be directed to our Chief Financial Officer at 30 Broad
Street, 16th Floor, New York, New York 10004. Telephone requests for such
copies should be directed to the Chief Financial Officer at (212) 301-8800.
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==============================================================================
UP TO 2,677,647 SHARES
K2 DIGITAL, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
January [__], 2001
TABLE OF CONTENTS
SECTION PAGE
------- -----
K2 Digital, Inc. 3
Risk Factors 4
The Financing Transaction 10
Selling Stockholder 15
Plan of Distribution 16
Validity of Common Stock 17
Experts 17
About This Prospectus 17
Where You Can Find More Information 18
Incorporation by Reference 18
==============================================================================
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, payable by the
registrant in connection with the sale of common stock being registered. All
amounts are estimates, except the SEC registration fee and the Nasdaq listing
fee.
SEC registration fee.................................... $798.80
Nasdaq SmallCap Market listing fee...................... 17,500.00
Printing expenses....................................... 5,000.00*
Legal fees and expenses................................. 15,000.00*
Accounting fees and expenses............................ 5,000.00*
Blue sky fees and expenses.............................. 1,000.00*
Miscellaneous........................................... 5,701.20*
Total................................................... $50,000.00*
===========
* Indicates estimate
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, except that no indemnification may
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
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Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
Section 145, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; that indemnification provided
for by Section 145 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such person's heirs,
executors and administrators, and empowers the corporation to purchase and
maintain insurance on behalf of a director or officer of the corporation
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liabilities under Section
145.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director provided that such provision shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law, or
(iv) for any transaction from which the director derived an improper personal
benefit.
Article Seventh of the Company's Certificate of Incorporation states that:
(a) A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the Delaware General Corporation
Law.
(b)(1) Each person (and the heirs, executors or administrators of such
person) who was or is a party or is threatened to be made a party to, or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that such person is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless by the Corporation to the fullest
extent permitted by the Delaware General Corporation Law. The right to
indemnification conferred in this Article Seventh shall also include the right
to be paid by the Corporation the expenses incurred in connection with any
such proceeding in advance of its final disposition to the fullest extent
permitted by the Delaware General Corporation Law. The right to
indemnification conferred in this Article Seventh shall be a contract right.
(2) The Corporation may, by action of its board of directors, provide
indemnification to such of the employees and agents of the Corporation and
such other persons serving at the request of the Corporation as employees or
agents of another corporation, partnership, joint venture, trust or other
enterprise to such extent and to such effect as is permitted by the Delaware
General Corporation Law and the board of directors shall determine to be
appropriate.
(c) The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
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joint venture, trust or other enterprise against any expense, liability or
loss incurred by such person in any such capacity or arising out of his status
as such, whether or not the Corporation would have the power to indemnify him
against such liability under the Delaware General Corporation Law.
(d) The rights and authority conferred in this Article Seventh shall not be
exclusive of any other right which any person may otherwise have or hereafter
acquire.
(e) No amendment, modification or repeal of this Article Seventh, nor the
adoption of any provision of this certificate of incorporation or the bylaws
of the Corporation, nor, to the fullest extent permitted by the Delaware
General Corporation Law, any amendment, modification or repeal of law shall
eliminate or reduce the effect of this Article Seventh or adversely affect any
right or protection then existing hereunder in respect of any acts of
omissions occurring prior to such amendment, modification, repeal or adoption.
The Registrant also provides liability insurance for its directors and
officers which provides for coverage against loss from claims made against
directors and officers in their capacity as such, including liabilities under
the Securities Act of 1933, as amended. The Registration Rights Agreement
between the Registrant and the selling stockholder contains provisions for
indemnification by the Registrant of the selling securityholder against
certain liabilities under the Act.
ITEM 16. EXHIBITS
4.1.1 Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 filed with the Registrant's Registration
Statement on Form SB-2, as filed on May 22, 1996 (Registration No.
333-04319)).
4.1.2 Certificate of Amendment to the Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1(a) filed with the
Registrant's Registration Statement on Form SB-2A, as filed on July 17,
1996 (Registration No. 333-04319)).
4.2.1 By-laws of the Registrant (incorporated by reference to Exhibit 3.2
filed with the Registrant's Registration Statement on Form SB-2, as
filed on May 22, 1996 (Registration No. 333-04319)).
4.2.2 Amended By-laws of the Registrant (incorporated by reference to Exhibit
3.2(b) filed with the Registrant's Registration Statement on Form SB-2A,
as filed on July 17, 1996 (Registration No. 333-04319)).
5.1 Opinion of Brown Raysman Millstein Felder & Steiner LLP.
10.1 Common Stock Purchase Agreement dated as of December 11, 2000 between
the Company and Fusion Capital Fund II, LLC (incorporated by reference
to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K,
as filed on December 19, 2000).
10.2 Form of Registration Rights Agreement (incorporated by reference to
Exhibit 10.2 filed with the Registrant's Current Report on Form 8-K, as
filed on December 19, 2000).
23.1 Consent of Brown Raysman Millstein Felder & Steiner LLP (included in
Exhibit 5.1).
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23.2 Consent of Arthur Andersen LLP.*
- ----------
* Previously Filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii)to reflect in the Prospectus any facts of events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the commission pursuant to Rule 424(b) if, in the aggregate, the
charges in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(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 (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant
to section 13 or section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
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therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the Delaware General Corporation Law, the charter
or the bylaws of the registrant, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer, or controlling person of
the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and authorized this Amendment
No. 1 to Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York on the 22nd day
of January, 2001.
K2 DIGITAL, INC.
By: /s/ Lynn Fantom
----------------------------
Lynn Fantom, President
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement on Form S-3 has been signed by or on
behalf of the following persons in the capacities and on the dates stated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Lynn Fantom January 22, 2000
- ---------------------------------
Lynn Fantom President, Chief Executive Officer
and Director (Principal Executive Officer)
/s/ Lynn Fantom January 22, 2000
- ---------------------------------
Matthew G. de Ganon Chairman of the Board
/s/ Lynn Fantom January 22, 2000
- ---------------------------------
Gary Brown Acting Chief Financial Officer
(Principal Financial and Accounting
Officer)
/s/ Lynn Fantom January 22, 2000
- ---------------------------------
Douglas E. Cleek Executive Vice President and Director
/s/ Lynn Fantom January 22, 2000
- ---------------------------------
David R. Sklaver Director
/s/ Lynn Fantom January 22, 2000
- ---------------------------------
Steven N. Goldstein Director
- ---------------------------------
Scott Munro Director
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EXHIBIT INDEX
4.1.1 Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 filed with the Registrant's Registration
Statement on Form SB-2, as filed on May 22, 1996 (Registration No.
333-04319)).
4.1.2 Certificate of Amendment to the Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1(a) filed with the
Registrant's Registration Statement on Form SB-2A, as filed on July 17,
1996 (Registration No. 333-04319)).
4.2.1 By-laws of the Registrant (incorporated by reference to Exhibit 3.2
filed with the Registrant's Registration Statement on Form SB-2, as
filed on May 22, 1996 (Registration No. 333-04319)).
4.2.2 Amended By-laws of the Registrant (incorporated by reference to Exhibit
3.2(b) filed with the Registrant's Registration Statement on Form SB-2A,
as filed on July 17, 1996 (Registration No. 333-04319)).
5.1 Opinion of Brown Raysman Millstein Felder & Steiner LLP.
10.1 Common Stock Purchase Agreement dated as of December 11, 2000 between
the Company and Fusion Capital Fund II, LLC (incorporated by reference
to Exhibit 10.1 filed with the Registrant's Current Report on Form 8-K,
as filed on December 19, 2000).
10.2 Form of Registration Rights Agreement (incorporated by reference to
Exhibit 10.2 filed with the Registrant's Current Report on Form 8-K, as
filed on December 19, 2000).
23.1 Consent of Brown Raysman Millstein Felder & Steiner LLP (included in
Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP.*
- ----------
* Previously filed.