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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 2001
REGISTRATION NO. 333-57820
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 1
TO
FORM F-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DELANO TECHNOLOGY CORPORATION
(Exact name of Registrant as specified in its charter)
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ONTARIO, CANADA 98-0206122
(Province or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
302 TOWN CENTRE BOULEVARD
MARKHAM, ONTARIO, CANADA
L3R 0E8
(905) 947-2222
(Address, including zip code, and telephone
number, including area code, of Registrant's principal
executive offices)
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CT CORPORATION SYSTEM
111 8TH AVENUE
NEW YORK, NY 10011
(212) 894-8940
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE AGENT
FOR SERVICE, SHOULD BE SENT TO:
F. GEORGE DAVITT, ESQ.
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
(617) 248-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, 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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following. [ ]
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DELANO HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL DELANO SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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PROSPECTUS
SUBJECT TO COMPLETION, DATED APRIL 25, 2001
DELANO TECHNOLOGY CORPORATION
5,031,045 Common Shares
This Prospectus relates to the resale of up to an aggregate of
5,031,045 of our common shares issued to the stockholders of Continuity
Solutions, Inc. and Digital Archaeology Corporation in connection with our
acquisition of both companies. None of the proceeds from the resale of the
shares will be received by us. The selling stockholders may sell the shares at
market prices prevailing at the time of the sale or at prices otherwise
negotiated.
THE COMMON SHARES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF
RISK. CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 5.
Our common shares are traded on the Nasdaq National Market under the
symbol "DTEC."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy of this prospectus. Any contrary representation is a criminal offense.
The date of this prospectus is April 25, 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 Exchange Commission is effective. This prospectus is not an offer to
sell securities, and we are not soliciting offer to buy these securities.
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INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus
the information we file with the SEC. This means that we can disclose important
information to you by referring you to those documents. The information we
incorporate by reference is considered a part of this prospectus, and later
information we file with the SEC will automatically update and supersede this
information. We incorporate by reference our documents listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14 and 15(d) of
the Securities Exchange Act of 1934 until this offering is completed:
- Annual Report on Form 10-K for the year ended March 31, 2000
and related exhibits;
- Current Report on Form 8-K filed on October 30, 2000;
- Current Report on Form 8-K/A filed on December 29, 2000;
- Quarterly Report on Form 10-Q for the quarters ended June 30,
2000, September 30, 2000 and December 31, 2000 and related
exhibits; and
- The description of our capital stock contained in the
Registration Statement on Form 8-A which was filed with the
SEC on January 27, 2000.
You may request these documents in writing or by telephone. We will
provide to you, at no cost, a copy of any or all information incorporated by
reference in the registration statement, of which this prospectus is a part.
Requests should be directed to our Investor Relations Department at our
principal offices which are located at 302 Town Centre Boulevard, Markham,
Ontario, Canada, L3R 0E8. You may contact our investor relations department by
calling us at (905) 947-2222.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. The selling stockholders
are not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of the document.
FORWARD LOOKING INFORMATION
This prospectus includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933. This section provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information about themselves so long as they identify these
statements as forward-looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected results. All statements other than statements of historical fact we
make in this prospectus or in any document incorporated by reference are
forward-looking statements. In particular, the statements regarding industry
prospects and our future results of operations or financial position, expected
financial performance for the quarter ended March 31, 2001, expected future
customer demand, our ability to adapt to changing market conditions and compete
and our future cash requirements are forward-looking statements. Forward-looking
statements reflect our current expectations and are inherently uncertain. Our
actual results may differ significantly from our expectations contained in the
forward-looking statements, including our expected financial performance for the
quarter ended March 31, 2001. The section entitled "Risk Factors" describes
some, but not all, of the factors that could cause these differences including
risks relating to our limited operating history and its history of losses, our
relatively fixed operating expenses, rapid technological change in our
marketplace, our dependence on sales of our e-Business Interaction Suite and
product enhancements, integration of our recent acquisitions, increased levels
of competition within our industry and the level of demand for our products and
services.
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Delano, Delano Campaign Server, Delano Component Development Kit,
Delano Component Pack for Back Office, Delano e-Business Interaction Application
Builder, Delano e-Business Interaction Server, Delano e-Business Interaction
Server Administrator, Delano e-Business Interaction Suite and the Delano logo
are trademarks of Delano. This prospectus also makes reference to trademarks of
other companies.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You can inspect
and copy the registration statement on Form F-3 of which this prospectus is a
part, as well as reports, proxy statements and other information filed by us, at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. You can obtain copies of such material from the Public Reference Room of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
You can call the SEC at 1-800-SEC-0330 for information regarding the operation
of its Public Reference Room. The SEC also maintains an Internet site at
http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding registrants, like us, that file electronically.
This prospectus provides you with a general description of the common
shares being registered. This prospectus is part of a registration statement
that we have filed with the SEC. To see more detail, you should read the
exhibits and schedules filed with, or incorporated by reference into, our
registration statement.
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SUMMARY
All selling stockholders were former stockholders of either Continuity
Solutions, Inc. or Digital Archaeology Corporation. The selling stockholders
acquired the shares being offered in this prospectus as a result of our
acquisition of Continuity completed on September 26, 2000 and our acquisition of
Digital Archaeology completed on October 16, 2000. All selling stockholders must
deliver a prospectus to purchasers at or prior to the time of any sale of the
common shares offered in this prospectus.
Delano was incorporated under the laws of the Province of Ontario on
May 7, 1998. Our principal executive offices are located at 302 Town Centre
Boulevard, Markham, Ontario, Canada L3R 0E8. Our telephone number at that
location is (905) 947-2222. Our web site address is www.delanotech.com. The
information contained on our web site is not part of this prospectus.
RECENT DEVELOPMENTS
On April 5, 2001, we announced that we expect to report revenues for
the quarter ended March 31, 2001 of approximately $7.0 million. We also
announced we expect to report a loss ranging between ($0.36) and ($0.38) per
share, before restructuring and one time charges, the amortization of goodwill
and stock compensation expense. These results compare with revenues of $9.3
million for the third quarter ended December 31, 2000, and a net loss of $9.3
million or ($0.35) per share, before goodwill and stock compensation expense.
These numbers are preliminary and remain subject to our normal year-end audit
process.
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RISK FACTORS
Our future operating results may vary substantially from period to
period. The price of our common shares will fluctuate in the future, and an
investment in our common shares is subject to a variety of risks, including but
not limited to the specific risks identified below. Inevitably, some investors
in our securities will experience gains while others will experience losses
depending on the prices at which they purchase and sell securities. Prospective
and existing investors are strongly urged to carefully consider the various
cautionary statements and risks set forth herein. This prospectus contains
forward-looking statements that are not historical facts but rather are based on
current expectations, estimates and projections about our business and industry,
our beliefs and assumptions. Words such as "anticipates", "expects", "intends",
"plans", "believes", "seeks", "estimates" and variations of these words and
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements. These risks and
uncertainties include those described in this section and elsewhere in this
prospectus. Forward-looking statements that were true at the time made may
ultimately prove to be incorrect or false. Readers are cautioned not to place
undue reliance on forward-looking statement, which reflect our management's view
only as of the date of this prospectus.
RISKS RELATED TO OUR BUSINESS
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR BUSINESS AND
FORECAST OUR FUTURE OPERATING RESULTS.
We were incorporated on May 7, 1998, and we first recorded revenues in
the quarter ended June 30, 1999. We are still in the early stages of our
development and have a limited operating history, making it difficult to
evaluate our business and prospects. As a result of our limited operating
history, it is difficult or impossible for us to predict future operating
results. For example, we cannot forecast operating expenses based on our
historical results because our historical results are limited and we, to some
extent, forecast expenses based on future revenue projections. Moreover, due to
our limited operating history, any evaluation of our business and prospects must
be made in light of the risks and uncertainties often encountered by early-stage
companies in internet-related markets. Many of these risks are discussed in the
sub-headings below, and include our ability to execute our product development
activities, implement our sales and marketing initiatives, both domestically and
internationally, and attract more clients. We may not successfully address any
of these risks.
FACTORS RELATING TO OUR BUSINESS MAKE OUR FUTURE OPERATING RESULTS UNCERTAIN,
AND MAY CAUSE THEM TO FLUCTUATE FROM PERIOD TO PERIOD.
Our quarterly revenues and operating results are difficult to predict
and may fluctuate significantly from quarter to quarter, particularly because
our products and services are relatively new and our prospects are uncertain. If
our quarterly revenues or operating results fall below the expectations of
investors, the price of our common shares could decline substantially. Factors
that might cause quarterly fluctuations in our operating results include the
risk factors described in the sub-headings below as well as the following:
- the timing of new releases of our products;
- changes in our pricing policies or those of our competitors,
including the extent to which we may need to offer discounts
to match competitors' pricing;
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- the mix of sales channels through which our products and
services are sold;
- the mix of our domestic and international sales;
- costs related to the customization of our products;
- our ability to expand our operations, and the amount and
timing of expenditures related to this expansion; and
- any costs or expenses related to expansion in our corporate
and other offices;
Our operating results may also be affected by the following factors
over which we have little or no control:
- the evolving and varying demand for interaction-based software
products and services for e-businesses, particularly our
products and services;
- the discretionary nature of our clients' purchasing and
budgetary cycles;
- the timing of execution of large contracts that materially
affect our operating results; and
- global economic conditions, as well as those specific to large
enterprises with high e-mail volume.
OUR OPERATING EXPENSES ARE RELATIVELY FIXED, WHICH WOULD CAUSE OUR OPERATING
RESULTS TO VARY FROM PERIOD TO PERIOD.
Most of our expenses, such as employee compensation and rent, are
relatively fixed in the short term. Moreover, our expense levels are based, in
part, on our expectations regarding future revenue levels. As a result, if total
revenues for a particular quarter are below our expectations, we cannot
proportionately reduce operating expenses for that quarter. Therefore, this
revenue shortfall would have a disproportionate effect on our operating results
for that quarter.
WE HAVE A HISTORY OF LOSSES, WE MAY INCUR LOSSES IN THE FUTURE AND OUR LOSSES
MAY INCREASE BECAUSE OF OUR PLAN TO INCREASE OPERATING EXPENSES.
Since we began operations in May 1998, we have incurred substantial
operating losses in every quarter. As a result of accumulated operating losses,
as of December 31, 2000, we had an accumulated deficit of $47.9 million. For the
three months ended December 31, 2000, we had a net loss of $18.7 million, or
201.5% of total revenues for that period. Our growth in recent periods has been
from a limited base of clients, and we may not be able to sustain our growth
rate. We expect to continue to increase our operating expenses. As a result, we
expect to continue to experience losses and negative cash flow, even if sale of
our products and services continues to grow, and we may not generate sufficient
revenues to achieve profitability in the future.
In addition, as a result of our rapid growth, we expect that our losses
may increase even more because of additional costs and expenses related to an
increase in:
- the number of our employees;
- research and development activities; and
- sales and marketing activities.
WE ARE DEPENDENT UPON A LIMITED NUMBER OF CLIENTS, AND A LOSS OF ANY OF THESE
CLIENTS OR A REDUCTION, DELAY OR CANCELLATION IN ORDERS FROM THESE CLIENTS COULD
HARM OUR BUSINESS.
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To date, a significant portion of our total revenues has been derived
from sales to a small number of clients. In the three months ended December 31,
2000, one customer accounted for more than 10% of revenues. We expect that we
will continue to be dependent upon a limited number of clients for a significant
portion of our revenue in future periods. There can be no assurance that our
existing clients or any future clients will continue to use our products. A
reduction, delay or cancellation in orders from our clients, including
reductions or delays due to market, economic or competitive conditions, could
have a materially adverse effect on our business, operating results and
financial condition.
DIFFICULTIES IN IMPLEMENTING OUR PRODUCTS COULD HARM OUR BUSINESS.
Our success depends upon the ability of our staff and our clients to
implement our products. This implementation typically involves working with
sophisticated software, computing and communications systems. If we experience
implementation difficulties or do not meet project milestones in a timely
manner, we could be obligated to devote more customer support, engineering and
other resources to a particular project than anticipated. Some clients may also
require us to develop customized features or capabilities. If new or existing
clients require more time to deploy our products than is originally anticipated,
or require significant amounts of our professional services support or
customized features, our revenue recognition could be further delayed and our
costs could increase, causing increased variability in our operating results.
OUR PRODUCTS AND SERVICES MAY NOT BE ACCEPTED BY THE MARKETPLACE.
Of our total revenues of $9.3 million for the three months ended
December 31, 2000, $8.0 million was derived from licenses of our products and
$1.3 million was from related services. We are not certain that our target
clients will widely adopt and deploy our products and services. Our future
financial performance will depend on the successful development, introduction
and client acceptance of new and enhanced versions of our products. In the
future, we may not be successful in marketing our products and services or any
new or enhanced products.
WE EXPECT TO DEPEND ON SALES OF OUR DELANO E-BUSINESS INTERACTION SUITE AND
VELOCITY SUITE APPLICATIONS FOR A SUBSTANTIAL MAJORITY OF OUR REVENUES FOR THE
FORESEEABLE FUTURE.
In the three months ended December 31, 2000, we derived most of our
revenues from licenses of our Delano e-Business Interaction Suite and Customer
Velocity. Although we have added new product offerings and expect to add new
product offerings, we expect to continue to derive a substantial majority of our
revenues from sales of the Delano e-Business Interaction Suite for the
foreseeable future. Implementation of our strategy depends on these products
being able to solve the communication needs of businesses engaging in commercial
transactions over the internet or having an internet presence. If current or
future clients are not satisfied with these products, our business and operating
results could be seriously harmed.
WE MUST CONTINUE TO DEVELOP ENHANCEMENTS TO OUR PRODUCTS AND NEW APPLICATIONS
AND FEATURES THAT RESPOND TO THE EVOLVING NEEDS OF OUR CLIENTS, RAPID
TECHNOLOGICAL CHANGE AND ADVANCES INTRODUCED BY OUR COMPETITORS.
Future versions of hardware and software platforms embodying new
technologies and the emergence of new industry standards could render our
products obsolete. The market for e-business communications software is
characterized by:
- rapid technological change
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- frequent new product introductions;
- changes in customer requirements; and
- evolving industry standards.
Our products are designed to work on, or inter-operate with, a variety
of operating systems used by our clients. However, our software may not operate
correctly on evolving versions of operating systems, or the hardware upon which,
or with which, they are intended to run or interoperate, programming languages,
databases and other systems that our clients use. If we cannot successfully
develop these products in response to client demands or improve our existing
products to keep pace with technological changes, our business could suffer.
We must continually improve the performance, features and reliability
of our products, particularly in response to competitive offerings. Our success
depends, in part, on our ability to enhance our existing software and to develop
new services, functionality and technologies that address the increasingly
sophisticated and varied needs of our prospective clients. If we do not properly
identify the feature preferences of prospective clients, or if we fail to
deliver features that meet the requirements of these clients on a timely basis,
our ability to market our products successfully and to increase our revenues
will be impaired.
DELAYS IN INTRODUCING NEW AND ENHANCED PRODUCTS COULD HARM OUR BUSINESS.
The development of proprietary technologies and necessary service
enhancements entail significant technical and business risks and requires
substantial expenditures and lead time. If we experience product delays in the
future we may face:
- customer dissatisfaction;
- cancellation of orders and license agreements;
- negative publicity;
- loss of revenues;
- slower market acceptance; and
- legal action by clients against us.
In the future, our efforts to remedy product delays may not be
successful and we may lose clients as a result. Delays in bringing to market new
products or product enhancements could be exploited by our competitors. If we
were to lose market share as a result of lapses in our product development, our
business would suffer.
INTENSE COMPETITION COULD REDUCE OUR MARKET SHARE AND HARM OUR FINANCIAL
PERFORMANCE.
The market for our products and services is intensely competitive,
evolving and subject to rapid technological change. We expect the intensity of
competition to increase in the future. Increased competition may result in price
reductions, reduced gross margins and loss of market share. The market for
e-business communications software is new and intensely competitive. There are
no substantial barriers to entry in this emerging market segment, and we expect
established or new entities to enter this market segment in the near future.
We currently face competition for our products principally from systems
designed by in-house and third-party development efforts. In addition, some of
our competitors who currently offer licensed software products are now beginning
to offer online offerings, which involve providing software on a
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rental basis hosted on the hardware of an application service provider, or ASP.
In our third quarter, we have begun to offer on-line offerings as well. However,
we may lose potential clients to competitors operating with longer histories.
Our competitors include companies providing software that is focused on
a few operational or functional areas, such as eGain Communications, Kana
Communications, Broadbase Software Inc. and E.Piphany Inc. We also compete with
companies that provide customer management and communications solutions, such as
Siebel Systems and Vantive. Furthermore, established enterprise software
companies, including Hewlett-Packard, IBM and Microsoft, may leverage their
existing relationships and capabilities to offer e-business communications
software that competes with our products. We believe competition will increase
as our current competitors increase the sophistication of their offerings and as
new participants enter the market. We may also face competition from web
application servers, messaging server platform solutions, e-mail application
vendors and e-mail service bureaus.
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, significantly
greater name recognition and a larger installed base of customers than we do. In
addition, many of our competitors have well-established relationships with our
current and potential clients and have extensive knowledge of our industry. We
may lose potential clients to competitors for various reasons, including the
ability or willingness of our competitors to offer lower prices and other
incentives that we cannot match. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. We also expect that competition may increase as a
result of industry consolidations. We may not be able to compete successfully
against current and future competitors, and competitive pressures may seriously
harm our business.
THE DELANO E-BUSINESS INTERACTION SUITE ENABLES THIRD PARTIES TO DEVELOP
APPLICATIONS THAT COMPETE WITH OUR APPLICATIONS.
Third parties have the ability to develop their own applications on top
of the Delano e-Business Interaction Suite. The applications of these third
parties could compete with products developed by us or services, which we offer
now or will offer in the future. If our target clients do not widely adopt and
purchase our products, or if third parties compete with applications developed
by us, our business would suffer.
FAILURE TO ATTRACT AND RETAIN ADDITIONAL QUALIFIED PERSONNEL COULD ADVERSELY
AFFECT OUR EXPANSION PLANS.
Our ability to increase revenues in the future depends considerably
upon our success in recruiting, training and retaining additional direct sales
personnel and the success of the direct sales force. Our business will be harmed
if we fail to hire or retain qualified sales personnel, or if newly hired sales
people fail to develop the necessary sales skills or develop these skills more
slowly than we anticipate. We also are substantially dependent upon our ability
to develop new products and enhance existing products, and we may not be able to
hire and retain highly qualified research and development personnel. Similarly,
our failure to attract and retain the highly trained personnel that are integral
to our professional services group, which is responsible for the implementation
and customization of, and technical support for, our products and services, may
limit the rate at which we can develop and install new products or product
enhancements, which would harm our business.
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THE LOSS OF ANY OF OUR EXECUTIVE OFFICERS COULD ADVERSELY AFFECT OUR BUSINESS.
Our future success depends to a significant degree on the skills,
experience and efforts of our executive officers. In particular, we depend upon
the continued services of John Foresi, our Chief Executive Officer. The loss of
the services of Mr. Foresi or any of our executive officers would harm our
business and operations.
We have not entered into employment agreements with our executive
officers which would require them to work solely for us on a long-term basis. If
any of our executive officers left or was seriously injured and unable to work
and we were unable to find a qualified replacement, our business could be
harmed.
WE HAVE EXPERIENCED RAPID GROWTH, WHICH HAS PLACED A STRAIN ON OUR RESOURCES,
AND ANY FAILURE TO MANAGE OUR GROWTH EFFECTIVELY MAY CAUSE OUR BUSINESS TO
SUFFER.
Our ability to offer our products and services successfully in a
rapidly evolving market requires an effective planning and management process.
We have limited experience in managing rapid growth. We are experiencing a
period of growth that is placing a significant strain on our managerial,
financial and personnel resources. On December 31, 2000, we had a total of 626
full-time employees compared to 159 on December 31, 1999. Our business will
suffer if this growth continues and we fail to manage this growth. Any
additional growth will further strain our management, financial, personnel and
other resources. To manage any future growth effectively, we must improve our
financial and accounting systems, controls, reporting systems and procedures,
integrate new personnel and manage expanded operations. Any failure to do so
could negatively affect the quality of our products, our ability to respond to
our clients and retain key personnel, and our business in general.
OUR FUTURE REVENUE GROWTH COULD BE IMPAIRED IF WE ARE UNABLE TO DEVELOP
ADDITIONAL DISTRIBUTION CHANNELS FOR OUR PRODUCTS.
We believe that our success in penetrating our target markets depends
in part on our ability to enter into agreements with established third-party
distribution companies, consulting organizations and software vendors relating
to the distribution of our products. We have entered into non-exclusive
distribution agreements with various parties, including Clarify,
Hewlett-Packard, Macromedia, Deloitte Consulting and PricewaterhouseCoopers.
Since these agreements are non-exclusive and normally terminable without penalty
on short notice, some third parties may choose to discontinue working with us or
may decide to work with our competitors. We derive revenues from these
agreements through the sale of licenses. We may not be able to derive
significant revenues in the future from these agreements.
WE HAVE RECENTLY COMPLETED TWO ACQUISITIONS, AND THOSE ACQUISITIONS MAY RESULT
IN DISRUPTIONS TO OUR BUSINESS AND MANAGEMENT DUE TO DIFFICULTIES IN
ASSIMILATING PERSONNEL AND OPERATIONS.
We may not realize the benefits from the significant acquisitions we
have completed. In September 2000, we acquired Continuity, and in October 2000,
we acquired Digital Archaeology. We may not be able to successfully assimilate
the additional personnel, operations, acquired technology and products into our
business. In particular, we will need to assimilate and retain key professional
services, engineering and marketing personnel. This is particularly difficult
since Continuity's operations are located in San Francisco and Digital
Archaeology is located in Kansas while we are headquartered in Toronto, Canada.
Key personnel from the acquired companies may in the future decide that they do
not want to work for us. In addition, products of these companies will have to
be integrated into our products, and it is uncertain whether we may accomplish
this easily or at all. These difficulties could disrupt our
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ongoing business, distract management and employees or increase expenses.
Acquisitions are inherently risky and we may also face unexpected costs, which
may adversely affect operating results in any quarter.
THE ACQUISITIONS OF CONTINUITY AND DIGITAL ARCHAEOLOGY INTO OUR COMPANY COULD
ADVERSELY AFFECT COMBINED FINANCIAL RESULTS.
If the benefits of the acquisitions of Continuity and Digital
Archaeology into our company do not exceed the costs associated with these
acquisitions, including any dilution to our stockholders resulting from the
issuance of shares in connection with the acquisitions, our financial results,
including earnings per share, could be adversely affected.
THE MARKET PRICE OF OUR COMMON SHARES MAY DECLINE AS A RESULT OF THE
ACQUISITIONS OF CONTINUITY AND DIGITAL ARCHAEOLOGY.
The market price of our common shares may decline as a result of the
acquisitions if:
- the integration of our company and each of Continuity and
Digital Archaeology is unsuccessful;
- we do not achieve the perceived benefits of the acquisitions
as rapidly or to the extent anticipated by financial or
industry analysts or investors; or
- the effect of the acquisitions on our financial results is not
consistent with the expectations of financial or industry
analysts or investors.
The market price of our common shares could also decline as a result of
factors related to the acquisitions which may currently be unforeseen. A decline
in the market price of our common shares could materially and adversely affect
our operating results.
IF WE ACQUIRE ADDITIONAL COMPANIES, PRODUCTS OR TECHNOLOGIES, WE MAY FACE RISKS
SIMILAR TO THOSE FACED IN OUR OTHER ACQUISITIONS.
If we are presented with appropriate opportunities, we intend to make
other investments in complementary companies, products or technologies. We may
not realize the anticipated benefits of any other acquisition or investment. If
we acquire another company, we will likely face the same risks, uncertainties
and disruptions as discussed above with respect to our other acquisitions.
Furthermore, we may have to incur debt or issue equity securities to pay for any
additional future acquisitions or investments, the issuance of which could be
dilutive to our company or our existing stockholders. In addition, our
profitability may suffer because of acquisition-related costs or amortization
costs for acquired goodwill and other intangible assets.
FUTURE SALES OF STOCK COULD AFFECT OUR STOCK PRICE.
If our stockholders sell substantial amounts of our common shares,
including shares issued in connection with acquisitions and upon the exercise of
outstanding options and warrants, in the public market, the market price of our
common shares could fall. These sales also might make it more difficult for us
to sell equity or equity-related securities in the future at a time and price
that we deem appropriate.
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WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO GROW OUR BUSINESS, WHICH WE MAY NOT
BE ABLE TO DO.
Our future liquidity and capital requirements are difficult to predict
because they depend on numerous factors, including the success of our existing
and new service offerings as well as competing technological and market
developments. As a result, we may not be able to generate sufficient cash from
our operations to meet additional working capital requirements, support
additional capital expenditures or take advantage of acquisition opportunities.
Accordingly, we may need to raise additional capital in the future. Our ability
to obtain additional financing will be subject to a number of factors, including
market conditions and our operating performance. These factors may make the
timing, amount, terms and conditions of additional financing unattractive for
us. If we raise additional funds by selling equity securities, the relative
equity ownership of our existing investors could be diluted or the new investors
could obtain terms more favorable than previous investors. If we raise
additional funds through debt financing, we could incur significant borrowing
costs. If we are unable to raise additional funds when needed, our ability to
operate and grow our business could be impeded.
TECHNICAL PROBLEMS WITH INTERNAL OR OUTSOURCED COMPUTER AND COMMUNICATIONS
SYSTEMS COULD RESULT IN REDUCED REVENUES AND HARM TO OUR REPUTATION.
The success of our online support services depends on the efficient and
uninterrupted operation of our own and outsourced computer and communications
hardware and software systems. These systems and operations are vulnerable to
damage or interruption from human error, natural disasters, telecommunications
failures, break-ins, sabotage, computer viruses and similar adverse events. Our
operations depend on our ability to protect our systems against damage or
interruption. We cannot guarantee that our internet access will be
uninterrupted, error-free or secure. We have no formal disaster recovery plan in
the event of damage or interruption, and our insurance policies may not
adequately compensate us for losses that we may incur. Any system failure that
causes an interruption in our service or a decrease in responsiveness could harm
our relationships with our clients and result in reduced revenues.
FAILURE TO SELL ONLINE SERVICES MAY IMPAIR OUR FUTURE REVENUE GROWTH.
We currently focus primarily on software sales rather than online
offerings. Our competitors may move to a heavier emphasis on online offerings,
and our failure to focus on it at an early stage may make it difficult to
compete if online offerings become a dominant means of generating revenues
within the industry. In addition, although our sales force sells both our
software products and online offerings, the skills necessary to market and sell
online offerings are different than those relating to our software products. As
a result, our sales and marketing groups may not be able to maintain or increase
the level of sales of our online offerings.
A DECLINE IN OUR LICENSE REVENUES COULD CAUSE A DECLINE IN OUR SERVICE REVENUES.
Our products are designed to enable customers to rapidly develop and
deploy e-business communication applications. Where desirable, our professional
services group can assist our clients internal IT personnel to implement our
products. Because the revenues associated with these services are largely
correlated with the licensing of our products, a decline in license revenues
could also cause a decline in our service revenues.
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CONFLICTS BETWEEN OUR PRODUCTS AND OTHER VENDORS' PRODUCTS COULD HARM OUR
BUSINESS AND REPUTATION.
Our clients generally use our products together with products from
other companies. As a result, when problems occur in the network, it may be
difficult to identify the source of the problem. Even when these problems are
not caused by our products, they may cause us to incur significant warranty and
repair costs, divert the attention of our engineering personnel from our product
development efforts and cause significant customer relations problems.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY RIGHTS.
We rely on contractual restrictions, such as confidentiality agreements
and licenses, to establish and protect our proprietary rights. Despite any
precautions that we take to protect our intellectual property:
- laws and contractual restrictions may be insufficient to
prevent misappropriation of our technology or deter others
from developing similar technologies;
- current laws that prohibit software copying provide only
limited protection from software "pirates", and effective
trademark, copyright and trade secret protection may be
unavailable or limited in foreign countries;
- other companies may claim common law trademark rights based
upon state, provincial or foreign laws that precede any
registrations we may receive for our trademarks; and
- policing unauthorized use of our products and trademarks is
difficult, expensive and time-consuming, and we may be unable
to determine the extent of this unauthorized use.
It is possible that our intellectual property rights could be
successfully challenged by one or more third parties, which could result in our
inability to exploit, or our loss of the right to prevent others from
exploiting, certain intellectual property. We are aware that certain of our
competitors have filed patent applications.
Also, the laws of other countries in which we market our products may
offer little or no effective protection of our technology. Reverse engineering,
unauthorized copying or other misappropriation of our technology could enable
third parties to benefit from our technology without paying us for it, which
would significantly harm our business.
WE RELY ON SOFTWARE LICENSED TO US BY THIRD PARTIES FOR FEATURES WE INCLUDE IN
OUR PRODUCTS.
We use and in the future will use certain software technologies and
other information that we license or otherwise acquire from third parties,
usually on a non-exclusive basis, including software that is integrated with our
internally developed software and used in our products to perform what may be
important functions. If we are not able to continue to use the third-party
software and technologies, or if they fail to adequately update and support
their products, we could suffer delays or reductions in shipments of our
products until alternative software and technologies could be identified, which
could adversely affect our business and financial condition.
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CLAIMS BY OTHER COMPANIES THAT OUR PRODUCTS INFRINGE THEIR PROPRIETARY RIGHTS
COULD ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS AND INCREASE OUR COSTS.
Substantial litigation over intellectual property rights exists in our
industry. We expect that software in our industry may be increasingly subject to
third-party infringement claims as the number of competitors grows and the
functionality of products in different industry segments overlap. Third parties
may currently have, or may eventually be issued patents that our products or
technology infringe.
Any of these third parties might make a claim of infringement against
us. Many of our software license agreements require us to indemnify our clients
and suppliers from any claim or finding of intellectual property infringement.
Any litigation, brought by us or others, could result in the expenditure of
significant financial resources and the diversion of management's time and
efforts. In addition, litigation in which we are accused of infringement might
cause negative publicity, have an impact on prospective clients, cause product
shipment delays, require us to develop non-infringing technology or require us
to enter into royalty or license agreements, which might not be available on
acceptable terms, or at all. If a successful claim of infringement were made
against us and we could not develop non-infringing technology or license the
infringed or similar technology on a timely and cost-effective basis, our
business could be significantly harmed.
OUR INSURANCE MAY NOT BE SUFFICIENT TO COVER ALL POTENTIAL PRODUCT LIABILITY AND
WARRANTY CLAIMS.
Our products are integrated into our clients' networks. The sale and
support of our products results in the risk of product liability or warranty
claims based on damage to these networks. In addition, the failure of our
products to perform to client expectations could give rise to warranty claims.
Although we carry general liability insurance, our insurance would likely not
cover potential claims of this type or may not be adequate to protect us from
all liability that may be imposed.
OUR PRODUCTS COULD CONTAIN UNDETECTED DEFECTS OR ERRORS.
We face the possibility of higher costs as a result of the complexity
of our products and the potential for undetected errors. Due to the mission-
critical nature of our products and services, undetected errors are of
particular concern. We have only a limited number of clients that test new
features and the functionality of our software before we make these features and
functionalities generally available. If our software contains undetected errors
or we fail to meet our clients' expectations in a timely manner, we could
experience:
- loss of, or delay in revenues expected from the new product
and an immediate and significant loss of market share;
- loss of existing clients that upgrade to the new product and
of new clients;
- failure to achieve market acceptance;
- diversion of development resources;
- injury to our reputation;
- increased service and warranty costs;
- legal actions by clients against us; and
- increased insurance costs.
A product liability claim could harm our business by increasing our
costs, damaging our reputation and distracting our management.
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OUR INTERNATIONAL EXPANSION EFFORTS MAY NOT BE SUCCESSFUL.
Our operations outside the United States and Canada are located in the
United Kingdom, Denmark, The Netherlands and Hong Kong, and to date, have been
limited. We plan to expand our existing international operations and establish
additional facilities in other parts of the world, including other parts of
Europe and Asia. However, we have not yet determined which cities or countries
will be the locations for our international expansion. The expansion of our
existing international operations and entry into additional international
markets are key parts of our growth strategy and will require significant
management attention and financial resources. In addition, to expand our
international sales operations, we will need to, among other things:
- expand our international sales channel management and support
organizations;
- develop relationships with international service providers and
additional distributors and systems integrators; and
- customize our products for local markets.
Our investments in facilities in other countries may not produce
desired levels of revenues. Even if we are able to expand our international
operations successfully, we may not be able to maintain or increase
international market demand for our products.
OUR BUSINESS MAY SUFFER IF WE FAIL TO ADAPT APPROPRIATELY TO THE CHALLENGES
ASSOCIATED WITH OPERATING INTERNATIONALLY.
Expanding our operations outside the United States and Canada subjects
us to numerous inherent potential risks associated with international
operations. These risks include greater difficulty in accounts receivable
collection, the burden of complying with multiple and conflicting regulatory
requirements, foreign exchange controls, longer payment cycles, import and
export restrictions and tariffs, potentially adverse tax consequences, and
political and economic instability, any of which could impair our sales and
results of operations. In addition, our ability to expand our business in
certain countries will require modification of our products, particularly
domestic language support.
Our international operations will increase our exposure to
international laws and regulations. If we cannot comply with foreign laws and
regulations, which are often complex and subject to variation and unexpected
changes, we could incur unexpected costs and potential litigation. For example,
the governments of foreign countries might attempt to regulate our products and
services or levy sales or other taxes relating to our activities. In addition,
foreign countries may impose tariffs, duties, price controls or other
restrictions on foreign currencies or trade barriers, any of which could make it
more difficult to conduct our business. The European Union, in which we have
sales offices recently enacted its own privacy regulations that may result in
limits on the collection and use of certain user information, which, if applied
to the sale of our products and services, could negatively impact our results of
operations.
FLUCTUATIONS IN EXCHANGE RATES MAY AFFECT OUR OPERATING RESULTS.
A substantial portion of our revenues are now, and are expected to
continue to be, realized in currencies other than Canadian dollars. Our
operating expenses are primarily paid in Canadian dollars. Fluctuations in the
exchange rate between the Canadian dollar and these other currencies may have a
material effect on our results of operations. In particular, we may be adversely
affected by a significant strengthening of the Canadian dollar against the U.S.
dollar. We do not currently engage in currency
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hedging activities. We have not yet, but may in the future, experience
significant foreign exchange rate losses, especially to the extent that we do
not engage in hedging.
IF WE ARE OR BECOME A PASSIVE FOREIGN INVESTMENT COMPANY WE MAY NOT BE ABLE TO
SATISFY RECORD-KEEPING REQUIREMENTS, WHICH COULD HAVE ADVERSE U.S. TAX
CONSEQUENCES TO YOU.
The rules governing passive foreign investment companies can have
significant effects on U.S. investors. We could be classified as a passive
foreign investment company if, for any taxable year, either:
- 75% or more of our gross income is passive income, which
includes interest, dividends and some types of rents and
royalties; or
- the average percentage, by fair market value, or, in some
cases, by adjusted tax basis, of our assets that produce or
are held for the production of passive income is 50% or more.
Distributions which constitute "excess distributions," as defined in
Section 1291 of the Internal Revenue Code, from a passive foreign investment
company and dispositions of shares of a passive foreign investment company are
subject to the highest rate of tax on ordinary income in effect and to an
interest charge based on the value of the tax deferred during the period during
which the shares are owned. However, these rules generally will not apply if the
U.S. investor elects to treat the passive foreign investment company as a
qualified electing fund under Section 1295 of the Internal Revenue Code.
If we are or become a passive foreign investment company we may not be
able to satisfy record-keeping requirements that would permit you to make a
qualified electing fund election.
RISKS RELATED TO OUR INDUSTRY
OUR FUTURE REVENUES AND PROFITS DEPEND ON THE CONTINUED GROWTH IN USE AND
EFFICIENT OPERATION OF THE INTERNET AND E-MAIL.
We sell our products and services primarily to organizations that
receive large volumes of e-mail and communications over the web. Consequently,
our future revenues and profits, if any, substantially depend upon the continued
acceptance and use of the web and e-mail, which are evolving as communications
media. Rapid growth in the use of e-mail is a recent phenomenon and may not
continue. As a result, a broad base of enterprises that use e-mail as a primary
means of communication may not develop or be maintained. Moreover, companies
that have already invested significant resources in other methods of
communications with customers, such as call centers, may be reluctant to adopt a
new strategy that may limit or compete with their existing investments. If
businesses do not continue to accept the web and e-mail as communications media,
our business would suffer.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES RELATING TO THE INTERNET COULD
DISCOURAGE COMMUNICATION BY E-MAIL OR OTHER INTERNET-BASED COMMUNICATIONS
FACILITATED BY OUR PRODUCTS.
Due to the increasing popularity and use of the internet, it is
possible that Canadian and U.S. federal, Canadian provincial, U.S. state, and
other foreign regulators could adopt laws and regulations that impose additional
burdens on those companies that conduct business online. These laws and
regulations could discourage communication by e-mail or other internet-based
communications facilitated by our products, which could reduce demand for our
products and services.
The growth and development of the market for online services may prompt
calls for more stringent consumer protection laws or laws that may inhibit the
use of internet-based communications or
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18
the information contained in these communications. The adoption of any
additional laws or regulations may slow the growth of the internet. A decline in
the growth of the internet, particularly as it relates to online communication,
could decrease demand for our products and services and increase our cost of
doing business, or otherwise harm our business.
BECAUSE WE ARE A CANADIAN COMPANY, IT MAY BE DIFFICULT FOR YOU TO ENFORCE
AGAINST US LIABILITIES BASED SOLELY UPON THE FEDERAL SECURITIES LAWS OF THE
UNITED STATES.
We have been incorporated under the laws of the Province of Ontario,
and our executive offices are located in Ontario. Many of our directors,
controlling persons and officers, and representatives of the experts named
herein are residents of Canada and a substantial portion of their assets and a
majority of our assets are located outside the United States. Consequently, it
may be difficult for you to enforce against us or any of our directors,
controlling persons, officers or experts who are not resident in the United
States, liabilities based solely upon the federal securities laws of the United
States.
OUR BOARD OF DIRECTORS MAY ISSUE, WITHOUT SHAREHOLDER APPROVAL, PREFERENCE
SHARES THAT HAVE RIGHTS AND PREFERENCES SUPERIOR TO THOSE OF COMMON SHARES AND
THAT MAY DELAY OR PREVENT A CHANGE OF CONTROL.
Our Articles of Incorporation allow the issuance of an unlimited number
of preference shares in one or more series. Our board of directors may set the
rights and preferences of any class of preference shares in its sole discretion
without the approval of the holders of common shares. The rights and preferences
of these preference shares may be superior to those of the common shares.
Accordingly, the issuance of preference shares may adversely affect the rights
of holders of common shares. The issuance of preference shares also could have
the effect of delaying or preventing a change of control of our company.
WE DO NOT INTEND TO PAY ANY DIVIDENDS ON OUR COMMON SHARES.
We have not paid any cash dividends on our shares and we currently do
not have any plans to pay dividends on our shares. In addition, our lease line
of credit specifically prohibits the payment of dividends on our shares.
RISKS ASSOCIATED WITH THIS OFFERING OF OUR COMMON SHARES
THE PRICE OF OUR COMMON SHARES AFTER THIS OFFERING MAY BE LOWER THAN THE PRICE
YOU PAY IN THIS OFFERING.
The market price of our common shares has been highly volatile and has
fluctuated significantly since the initial public offering of our common shares
on February 14, 2000. The market price of our common shares may continue to
fluctuate significantly in response to a number of factors, some of which are
beyond our control.
The stock market in general has recently experienced extreme price and
volume fluctuations. In addition, the market prices of securities of technology
companies have been extremely volatile, and have experienced fluctuations that
often have been unrelated or disproportionate to the operating performance of
these companies. These broad market fluctuations could adversely affect the
market price of our common shares.
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19
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of our common
shares by the selling stockholders. The principal purpose of this offering is to
effect an orderly disposition of the selling stockholders' shares.
-18-
20
SELLING STOCKHOLDERS
The following table sets forth the number of shares beneficially owned
by each of the selling stockholders as of March 26, 2001 and the number of
shares that may be offered by the selling stockholders pursuant to this
prospectus. We have assumed, when calculating the numbers in the table, that all
of the shares owned by each selling stockholder and offered pursuant to this
prospectus will be sold.
Except as otherwise noted, none of the selling stockholders has held
any position, office or other material relationship with Delano or any of its
affiliates within the past three years other than as a result of his or its
ownership of the shares.
As of March 26, 2001, there were 37,240,389 common shares outstanding.
NUMBER OF SHARES OWNED NUMBER OF SHARES NUMBER OF SHARES
BEFORE THE OFFERED PURSUANT TO OWNED AFTER THE
SELLING STOCKHOLDER OFFERING THIS PROSPECTUS OFFERING
CONTINUITY SOLUTIONS, INC.
James P. Agah 6,666 6,666 -
Michael D. Agah 6,666 6,666 -
Wendy A. Sohorec Agah 13,332 13,332 -
Jenny Au 2,666 2,666 -
Michael Au, Trustee, The 2000
Michael AU Descendants' 17,332 17,332 -
Trust
Jeffrey G. Bernstein and
Christina M. Horn, joint 8,604 8,604 -
tenants
Robert J. Bishop 6,666 6,666 -
C. Mark Bold & Mary
McAllister Bold, Trustees, C.
Mark & Mary McAllister Bold
U/T/A dated 6/16/94 6,000 6,000 -
Douglas M. Brockett 94,057 94,057 -
Mark W. and Louise B.
Brockett, joint tenants 11,933 11,933 -
R. Duke Buchnan III 3,332 3,332 -
Roy Bukstein & Katherine
Bukstein Trustees for R&K
Bukstein Declaration of Trust
dated 5/24/96 1,332 1,332 -
Elliot H. Cole 1,332 1,332 -
James W. Concidine 2,000 2,000 -
Charlie and Macia Corbett 13,332 13,332 -
John Coss 3,332 3,332 -
Bruce Crozier 5,332 5,332 -
Ted Fagenson 2,166 2,166 -
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NUMBER OF SHARES OWNED NUMBER OF SHARES NUMBER OF SHARES
BEFORE THE OFFERED PURSUANT TO OWNED AFTER THE
SELLING STOCKHOLDER OFFERING THIS PROSPECTUS OFFERING
Terence J. Gallagher 2,666 2,666 -
Christopher C. Gaut and Tiffany A.
Camarillo, Joint Tenancy 3,666 3,666 -
Eric K. Gaut 246,329 246,329 -
Jeffrey G. Gaut 3,732 3,732 -
Norman Gaut 46,000 46,000 -
Charles Heard, Trustee, Trust
Fund C u/a dated 3/24/72 by
Marvin J. Gaut, FBO Norman
Gaut 229,257 229,257 -
Douglas A. Graham 6,666 6,666 -
Michael David Greenbaum 10,832 10,832 -
Hambra Investment Limited 15,264 15,264 -
Joseph D. Heard Jr. & Marie C.
Heard JTROS 2,666 2,666 -
Brian L. Hinman and Suzanne
R. Skees, Trustees of the Brian
L. Hinman and Suzanne R.
Skees 1996 Inter Vivos Trust 10,325 10,325 -
Matt Hynes 240 240 -
Mary Elizabeth Johnson 1,000 1,000 -
Mary H. Kelley 3,332 3,332 -
Kendu Partners Company 13,332 13,332 -
Alex J. Knight 665 665 -
Nancy J. Knight, Trustee,
Robert T. and Nancy J. Knight
Living Trust 8,597 8,597 -
Maxime Levesque 2,783 2,783 -
MDNH Trading Corporation 8,000 8,000 -
Mary Miner, Trustee FBO the
Survivors TR Est Under the R
& M Miner Admin Trust
Under 1st Amnd/Rstd Aud 20,000 20,000 -
3/14/94
Joan M. Nevins 3,198 3,198 -
Aoife Ni Mhathuna 40 40 -
Aidan O'Sullivan 1,558 1,558 -
Michael Pausic and Kelly A.
MacDougall, joint tenants with
right of survivorship 3,332 3,332 -
Julie Perry 40,000 40,000 -
Christopher Pia 6,666 6,666 -
Jeffrey G. & Lisa L. Quiros 4,000 4,000 -
James W. Ryan 2,666 2,666 -
David Salomon 16,000 16,000 -
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NUMBER OF SHARES OWNED NUMBER OF SHARES NUMBER OF SHARES
BEFORE THE OFFERED PURSUANT TO OWNED AFTER THE
SELLING STOCKHOLDER OFFERING THIS PROSPECTUS OFFERING
Steven Howard Shapiro 3,332 3,332 -
Ssangyong Cement (Singapore)
Limited 92,523 92,523 -
Melissa Sterrett 1,749 1,749 -
Neil C. Stipanich & Ann A.
Stipanich, Trustees, Neil C.
Stipanich & Ann A. Stipanich
1996 Trust 3,332 3,332 -
Les B. Strauss 9,600 9,600 -
Georgia Lou Susie Anderson,
Trustee, Georgia Lou Susie 1,332 1,332 -
Anderson Trust
Technology Fund II Pte Ltd. 64,392 64,392 -
DIGITAL ARCHAEOLOGY CORPORATION
Michael H. Foster 145,354 145,354 -
Chief Technology Officer
Striata, Inc. 25,650 25,650 -
Michael E. Gaddis 684 684 -
James A. Bartolomeo 4,236 4,236 -
Steven N. Mersand 4,236 4,236 -
KCEP I, L.P. 723,930 723,930 -
Gateway Partners L.P. 196,216 196,216 -
John P. Humphreys Revocable
Trust 664,668 664,668 -
Shirley Bush Helzberg 11,774 11,774 -
Shirley Bush Helzberg
Revocable Trust u/t/d 12/23/94 38,952 38,952 -
James T. Schraith 9,738 9,738 -
James P. Pryde 2,922 2,922 -
Manuel Parra 38,952 38,952 -
Leah White Hollingshead 9,738 9,738 -
Davis, Tuttle Venture Partners, 289,836 289,836 -
L.P.
Citicorp 496,862 496,862 -
Kansas City Equity Partners
DA, LLC 198,744 198,744 -
Kansas Venture Capital, Inc. 165,621 165,621 -
MorAmerica Capital
Corporation 159,410 159,410 -
NDSBIC, L.P. 47,616 47,616 -
Diamond State Ventures, L.P. 124,216 124,216 -
White Pines Limited Partnership I 87,448 87,448 -
Pacific Capital, L.P. 148,561 148,561 -
Ian R. N. Bund 2,815 2,815 -
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NUMBER OF SHARES OWNED NUMBER OF SHARES NUMBER OF SHARES
BEFORE THE OFFERED PURSUANT TO OWNED AFTER THE
SELLING STOCKHOLDER OFFERING THIS PROSPECTUS OFFERING
Yocum Consulting Associates, Inc. 1,159 1,159 -
Volunteer Healthcare
Associates, L.L.C. 1,325 1,325 -
McDonald Investments Inc.
Custodian FBO S. Sterling
McMillan 497 497 -
Ronald G. Kalish Living Trust 2,815 2,815 -
Anthony Grover 497 497 -
McDonald Investments Inc.
Custodian FBO Daniel J.
Boyle 1,656 1,656 -
Herbert S. Amster, as Trustee of
the Herbert S. Amster
Amended Trust dated January
23, 1989 1,656 1,656 -
Wincrest Ventures, LTD. 197,419 197,419 -
John Price 1,325 1,325 -
David C. Feldman 20,703 20,703 -
Thistle Hill Partners, LTD. 12,422 12,422 -
Donald R. Sinclair 20,703 20,703 -
J. Randolph Ewing 8,281 8,281 -
Richard J. Adler 8,281 8,281 -
Silicon Valley Bancshares 9,304 9,304 -
GATX Ventures, Inc. 49,671 49,671 -
----------------------------------------------
TOTAL 5,031,045 5,031,045 -
===== ========= =========
The selling stockholders acquired their shares in connection with (i)
the acquisition of Continuity Solutions, Inc. by our wholly owned subsidiary,
Continuity Acquisition Corporation, on September 26, 2000 and (ii) the
acquisition of Digital Archaeology Corporation by our wholly owned subsidiary
Delano/DA Acquisition Corp. on October 16, 2000. In the Continuity Merger,
Delano issued common shares in exchange for all of the capital stock of
Continuity. In the Digital Merger, Delano issued common shares and cash in
exchange for all of the capital stock of Digital. Both acquisitions were
accounted for using the purchase method of accounting. In connection with the
acquisitions, we entered into separate registration rights agreements with both
Continuity and Digital Archaeology stockholders pursuant to which we agreed to
register the shares issued to them in connection with the respective
acquisitions.
In connection with the acquisition of Digital Archaeology, all
stockholders executed an Investment Agreement whereby such stockholders agreed
not to sell, contract or offer to sell, sell short, pledge, transfer or
otherwise dispose of any shares of Delano without the prior written consent of
Delano ("Lock-up Shares"). Twenty-five percent of such Lock-up Shares were
released from such restrictions on March 1, 2001, an additional 50% of such
Lock-up Shares shall be released from such restrictions on October 16, 2001 and
the remaining Lock-up Shares shall be released from such restrictions on April
16, 2002. A total of 3,935,890 shares being registered in this offering are
Lock-up Shares.
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PLAN OF DISTRIBUTION
The shares offered in this prospectus may be offered and sold from time
to time for the accounts of the selling stockholders, subject to the
restrictions mentioned above.
The selling stockholders will act independently of Delano in making
decisions with respect to the timing, manner and size of any sale. The selling
stockholders may sell the shares:
- at then-prevailing prices and terms;
- at prices related to the then-current market price; or
- at negotiated prices.
The sales may be made in the over-the-counter market, on the Nasdaq
National Market, or on any exchange on which the shares are listed. The selling
stockholders may sell the shares in one or more of the following types of
transactions:
- one or more block trades in which the broker or dealer will
attempt to sell as agent or principal all or a portion of the
shares held by the selling stockholder;
- purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this
prospectus;
- ordinary brokerage transactions and transactions in which a
broker solicits purchasers;
- in negotiated transactions; or
- through other means.
Subject to the restrictions imposed on them related to their employment
by us, the selling stockholders may enter into hedging transactions when selling
the shares. For example, the selling stockholders may:
- sell shares short and redeliver such shares to close out their
short positions;
- enter into transactions involving short sales by the brokers
or dealers;
- enter into option or other types of transactions that require
the selling stockholder to deliver shares to a broker or
dealer, who then resells or transfer the shares under this
prospectus; or
- loan or pledge the shares to a broker or dealer, who may sell
the loaned shares or, in the event of default, sell the
pledged shares.
The selling stockholders may effect sales through brokers, dealers or
agents, who in turn may arrange for other brokers or dealers to participate. The
brokers, dealers or agents may receive discounts, concessions, commissions or
fees from the selling stockholders and/or purchasers of the shares in amounts to
be determined prior to the sale. Under the federal securities laws, these
brokers or dealers and any other participating brokers or dealers may be deemed
to be "underwriters" and any discounts, concessions or commissions received by
them may be deemed to be "underwriting compensation" under the Securities Act of
1933, as amended. Because the selling stockholders may be deemed to be
"underwriters" within the meaning of the Securities Act, the selling
stockholders will be subject to the prospectus delivery requirements of the
Securities Act.
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In addition to selling the shares, the selling stockholders may:
- sell their shares under Rule 144 of the Securities Act, if the
transaction meets the requirements of Rule 144;
- transfer the shares by gift, distribution or other transfer
not involving market makers or established trading markets; or
- agree to indemnify any broker, dealer or agent that
participates in transactions involving the sale of the shares
against certain liabilities, including liabilities arising
under the Securities Act.
The selling stockholders are not subject to any underwriting agreement.
The selling stockholders, or any parties who receive the shares from the selling
stockholders by way of a gift, donation, distribution or other transfer, may
sell the shares covered by this prospectus.
Delano will pay all expenses incident to the offering and sale of the
shares to the public other than any discounts, concessions, commissions or fees
of underwriters, brokers, dealers or agents.
Some states require that any shares sold in that state only be sold
through registered or licensed brokers or dealers. In addition, some states
require that the shares have been registered or qualified for sale in that
state, or that there exists an exemption from the registration or qualification
requirements and that the issuer has complied with the exemption.
We intend to maintain the effectiveness of this prospectus until
October 16, 2001 or such period as is required to satisfy our obligations under
the registration rights agreements among the selling stockholders and us. We may
suspend the selling stockholders' rights to resell shares under this prospectus.
We have informed the selling stockholders that the anti-manipulation
rules of Regulation M under the Securities Exchange Act of 1934, as amended, may
apply to sales of shares in the market and to the activities of the selling
stockholders and their respective affiliates. In addition, we will make copies
of this prospectus available to each of the selling stockholders and shall
inform them of the need to deliver copies of this prospectus to purchasers at or
prior to the time of any sale of the shares.
We will not receive any proceeds from this offering. The selling
stockholders will pay or assume brokerage commissions or other charges and
expenses incurred in the resale of the shares.
LEGAL MATTERS
The legality of the shares offered in this prospectus is being passed
upon for us by Blake, Cassels & Graydon LLP, Toronto, Ontario, Canada. As of
the date of this prospectus, certain attorneys with the firm of Blake, Cassels
& Graydon LLP beneficially own not more than 1% of our common shares.
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EXPERTS
The consolidated financial statements and related schedule as of March
31, 1999 and 2000 and for the period from May 7, 1998 (date of inception) to
March 31, 1999 and the year ended March 31, 2000 included in the Annual Report
on Form 10-K of Delano Technology Corporation, incorporated by reference herein,
have been so incorporated in reliance on the report of KPMG LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Digital Archaeology Corporation at December
31, 1999 and 1998 and for the years then ended, incorporated in this Prospectus
and Registration Statement by reference to Amendment No. 1 to Delano Technology
Corporation's Current Report on Form 8-K, as filed with the Securities and
Exchange Commission on December 29, 2000, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon, and are
included in reliance upon such firm as experts in accounting and auditing.
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27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an estimate of the expenses we expect to
incur and pay in connection with the issuance and distribution of the securities
being registered:
Registration Fee -- Securities and Exchange Commission............. $ 2,201.08
Nasdaq Additional Listing Fee...................................... $ 0
Accounting Fees and Expenses....................................... $ 10,000
Legal Fees and Expenses............................................ $ 25,000
Miscellaneous...................................................... $ 1,000
TOTAL.............................................................. $38,201.08
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Business Corporations Act (Ontario) and the Company's Articles of
Organization and by-laws provide for indemnification of the Company's directors
and officers for liabilities and expenses that they may incur in such
capacities. In general, directors and officers are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be in, or not
opposed to, the best interests of the Company and, with respect to any criminal
action or proceeding, actions that the indemnitee had no reasonable cause to
believe were unlawful. Reference is made to our Articles of Organization and to
our by-laws filed as exhibits to our registration statement on Form F-1 (No.
333-94505).
Reference also is hereby made to Section 5 of the Registration Rights
Agreement filed as Exhibit 2.2 to the Company's Current Report on Form 8-K dated
October 16, 2000, filed on October 20, 2000 and Section 5 of the Registration
Rights Agreement filed as Exhibit 4.2 hereto, for a description of
indemnification arrangements between the Company and Digital Archaeology and
Continuity Selling Stockholders, pursuant to which the Digital Archaeology and
Continuity Selling Stockholders are obligated, under certain circumstances, to
indemnify directors, officers and controlling persons of the Company against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
In addition, the Company has an existing directors and officers
liability insurance policy.
ITEM 16. EXHIBITS.
EXHIBIT NO. ITEM AND REFERENCE
2 -- Agreement and Plan of Reorganization, dated October 13, 2000,
by and among Delano Technology Corporation, Delano/DA
Acquisition Corp., and Digital Archaeology Corporation (filed
as Exhibit 2.1 to the Company's Current Report on Form 8-K
filed on October 20, 2000 and incorporated by reference
herein)
4.1 -- Registration Rights Agreement dated as of October 13, 2000,
by and among Delano Technology Corporation and Digital
Archaeology stockholders, (filed as Exhibit 2.2 to the
Company's Current Report on Form 8-K filed on October 20, 2000
and incorporated by reference herein)
28
4.2 -- Registration Rights Agreement dated as of September 26, 2000
by and among Delano Technology Corporation and Continuity
stockholders (previously filed)
5.1 -- Legal Opinion of Blake, Cassels & Graydon LLP (previously
filed)
23.1 -- Consent of KPMG LLP (filed herewith)
23.2 Consent of Ernst & Young LLP (filed herewith)
23.3 -- Consent of Blake, Cassels & Graydon LLP (previously filed)
24 -- Power of Attorney (contained on signature page)
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(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.
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 changes in volume
and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective 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 (a)(1)(ii) and (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
with or furnished to the Commission by the registrant pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining 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 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.
29
(4) To file a post-effective amendment to the registration
statement to include any financial statements required by Item
8.A. of Form 20-F at the start of any delayed offering or
throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act
need not be furnished, PROVIDED, that the registrant includes
in the prospectus, by means of a post-effective amendment,
financial statements required pursuant to this paragraph and
other information necessary to ensure that all other
information in the prospectus is at least as current as the
date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form
F-3, a post-effective amendment need not be filed to include
financial statements and information required by Section
10(a)(3) of the Act or Rule 3-19 if such financial statements
and information are contained in periodic reports filed with
or furnished to the SEC by the registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference herein.
(5) That, for purposes of determining any liability under the
Securities Act, each filing of our annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of Delano
pursuant to the foregoing provisions, or otherwise, Delano has 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. 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, Delano will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Delano
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Markham, in the Province of Ontario,
Canada, on this 25th day of April, 2001
DELANO TECHNOLOGY CORPORATION
By: /s/ John Foresi
----------------------------------------------
John Foresi
President and Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Delano Technology
Corporation, hereby severally constitute and appoint John Foresi and Thomas
Hearne, and each of them singly, our true and lawful attorneys, with full power
to them and each of them singly, to sign for us in our names in the capacities
indicated below, any amendments to this registration statement on Form F-3
(including post-effective amendments) and any amendments thereto, and to file
the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, and generally to do all things in
our names and on our behalf in our capacities as officers and directors to
enable Delano Technology Corporation, to comply with the provisions of the
Securities Act of 1933, as amended, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or any of them, to said
registration statement and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE
/s/ John Foresi President and Chief Executive Officer, April 25, 2001
- ------------------------------- Director
John Foresi (Principal Executive Officer)
/s/ Thomas Hearne Chief Financial Officer April 25, 2001
- ------------------------------- (Principal Financial Officer and Principal
Thomas Hearne Accounting Officer)
/s/ Dennis Bennie Chairman of the Board of Directors April 25, 2001
- -------------------------------
Dennis Bennie
/s/ Albert Amato Director April 25, 2001
- -------------------------------
Albert Amato
/s/ J. Ian Giffen Director April 25, 2001
- -------------------------------
J. Ian Giffen
/s/ Bahman Koohestani Director April 25, 2001
- -------------------------------
Bahman Koohestani
31
/s/ Donald Woodley Director April 25, 2001
- -------------------------------
Donald Woodley
/s/ Al Delorenzi Director April 25, 2001
- -------------------------------
Al Delorenzi
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
- ------- ----------------------
2 Agreement and Plan of Reorganization, dated October 13, 2000,
by and among Delano Technology Corporation, Delano/DA
Acquisition Corp., and Digital Archaeology Corporation (filed
as Exhibit 2.1 to the Company's Current Report on Form 8-K
filed on October 20, 2000 and incorporated by reference
herein)
4.1 Registration Rights Agreement dated as of October 13, 2000, by
and among Delano Technology Corporation and Digital
Archaeology stockholders, (filed as Exhibit 2.2 to the
Company's Current Report on Form 8-K filed on October 20, 2000
and incorporated by reference herein)
4.2 Registration Rights Agreement dated as of September 26, 2000
by and among Delano Technology Corporation and Continuity
stockholders (previously filed)
5.1 Legal Opinion of Blake, Cassels & Graydon LLP (previously
filed)
23.1 Consent of KPMG LLP (filed herewith)
23.2 Consent of Ernst & Young LLP (filed herewith)
23.3 Consent of Blake, Cassels & Graydon LLP (previously filed)
24 Power of Attorney (contained on signature page)