AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 2001
REGISTRATION NO. 333-_______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
DELANO TECHNOLOGY CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
ONTARIO, CANADA 98-0206122
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
302 TOWN CENTRE BOULEVARD
MARKHAM, ONTARIO, CANADA, L3R 0E8
(905) 947-2222
(Address of Principal Executive Offices) (Zip Code)
EMPLOYMENT AGREEMENT AND
RESTRICTED SHARE AGREEMENT
BETWEEN VIKAS KAPOOR AND
DELANO TECHNOLOGY CORPORATION
EACH, DATED AS OF OCTOBER 5, 2001
(Full Title of the Plan)
DAVID GARLAND
VICE PRESIDENT, FINANCE
302 TOWN CENTRE BOULEVARD
MARKHAM, ONTARIO, CANADA, L3R 0E8
(Name and Address of Agent For Service)
(905) 947-2222
(Telephone Number, Including Area Code, of Agent For Service)
COPY TO:
F. GEORGE DAVITT, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP
HIGH STREET TOWER, 125 HIGH STREET
BOSTON, MASSACHUSETTS 02110
(617) 248-7000
CALCULATION OF REGISTRATION FEE
Proposed
Maximum Proposed
Offering Maximum
Price Aggregate Amount of
Title of Securities Amount to be Per Offering Registration
to be Registered Registered(1) Share Price Fee(2)
- ---------------- ------------- ----- ----- ------
Common Shares 4,230,000 $0.515 $2,178,450 $520.65
(1) All of these shares are issued and outstanding and available for resale
hereunder. The price of $0.515 per share, which is the average of the high
and low prices reported on the NASDAQ National Market on December 3, 2001
is solely for purposes of calculating the filing fee pursuant to Rule
457(c) and (h).
(2) Calculated pursuant to Section 6(b) of the Securities Act of 1933, as
amended.
PART I
REOFFER PROSPECTUS STATEMENT
The materials that follow, up to but not including the page beginning Part
II of this Registration Statement, constitute a Reoffer Prospectus prepared in
accordance with the requirements of Part I of Form F-3 pursuant to General
Instruction C to Form S-8. The Reoffer Prospectus may be utilized for
reofferings and resales of up to 4,230,000 common shares, no par value, of
Delano Technology Corporation acquired by Vikas Kapoor pursuant to the
Employment Agreement between Mr. Kapoor and Delano Technology Corporation and
the Restricted Share Agreement between Mr. Kapoor and Delano Technology
Corporation, each dated as of October 5, 2001.
REOFFER PROSPECTUS
4,230,000 SHARES
DELANO TECHNOLOGY CORPORATION
COMMON SHARES
This reoffer prospectus relates to 4,230,000 common shares, no par value,
of Delano Technology Corporation, an Ontario corporation ("Delano"), which may
be sold from time to time by Vikas Kapoor, Chief Executive Officer and member of
the Board of Directors of Delano. These common shares were issued to Mr. Kapoor
pursuant to the Employment Agreement between Mr. Kapoor and Delano and the
Restricted Share Agreement between Mr. Kapoor and Delano, each dated as of
October 5, 2001. Mr. Kapoor may sell the common shares from time to time,
subject to certain restrictions, at fixed prices that may be changed, at market
prices prevailing at the time of sale, at prices related to prevailing market
prices or at negotiated prices. Delano will receive no proceeds from the sale of
the common shares.
Our common shares are listed on the NASDAQ National Market under the
symbol "DTEC" and listed on the Toronto Stock Exchange under the symbol "DLN."
On December 7, 2001, the last reported sale price of our common shares on the
NASDAQ National Market was $0.71 per share.
INVESTING IN OUR COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
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 Reoffer Prospectus is December 10, 2001.
INCORPORATION BY REFERENCE
The Securities and Exchange Commission (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, as amended, until this offering is completed:
- The Company's Annual Report on Form 10-K for the year ended March
31, 2001 and related exhibits (File No. 333-94505);
- The Company's Current Report on Form 8-K filed on October 31, 2001
and related exhibits (File No. 333-94505);
- The Company's Quarterly Reports on Form 10-Q for the quarters ended
June 30, 2001 and September 30, 2001 (File No. 333-94505); 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 (File No. 000-29203), including any amendment or report filed
for the purposes of updating such description.
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 stockholder
is 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.
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FORWARD LOOKING INFORMATION
This prospectus includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act").
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, 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 any
future fiscal quarter. 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.
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 SEC. You can inspect and copy the registration statement on
Form S-8 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
The selling stockholder, Vikas Kapoor, is the Chief Executive Officer
and a member of the Board of Directors of Delano. Mr. Kapoor acquired the
shares being offered in this prospectus pursuant to the Employment Agreement
between Mr. Kapoor and Delano and the Restricted Share Agreement between Mr.
Kapoor and Delano, each dated as of October 5, 2001. Mr. Kapoor 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.
We develop and market Customer Relationship Management (CRM) software that
incorporates advanced analytics with interaction capabilities on a flexible and
scalable technology platform. This technology enables companies to understand,
personalize and manage interactions with customers across multiple communication
channels. These interactions consist of both inbound and outbound communications
through e-mail, company websites, and wireless devices. Companies can use Delano
software applications to gain in-depth customer knowledge by creating a unified
view of the customer across disparate data, and use the customer insight to
initiate marketing campaigns, and route, track, and respond to customer service
inquiries. We focus our sales efforts on businesses in the following industries:
financial services, retail, technology, telecommunications, and transportation
and logistics, as well as other organizations engaged in, or focused on,
business-to-business or business-to-customer commercial opportunities using the
Internet. We are also increasing our activity with channel partners to further
our penetration of target industries. Our professional services group can assist
our client's internal IT personnel to implement our products.
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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;
- any costs or expenses related to our move to new corporate offices;
and
- 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 client's 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.
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 September 30, 2001, we had an accumulated deficit of $206.9 million. For
the six months ended September 30, 2001, we had a net loss of $34.5 million, or
493.6% of total revenues for that period. Our revenue in recent periods has been
from a limited base of clients, and we may not be able to sustain our revenue.
We expect to decrease our operating expenses as part of our restructuring
efforts. We may 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.
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.
6
To date, a significant portion of the total revenues has been derived from
sales to a small number of clients. In the six months ended September 30, 2001,
three customers accounted for 26%, 12% and 11% of our total revenues,
respectively. 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 $7.0 million for the six months ended September 30,
2001, $3.3 million were derived from licenses of our products and $3.7 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 INTERACTION SERVER AND APPLICATIONS
FOR A SUBSTANTIAL MAJORITY OF OUR REVENUES FOR THE FORESEEABLE FUTURE.
In the six months ended September 30, 2001, we derived most of our revenues
from licenses of our Delano Interaction Server and applications. Although we
have added a new product offering, we expect to continue to derive a substantial
majority of our revenues from sales of the Delano Interaction Server and
applications for the foreseeable future. Implementation of our strategy depends
on our 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 our 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 interoperate 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
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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 rental basis
hosted on the hardware of an application service provider, or ASP. We currently
do not offer online offerings in any material way.
Our competitors include companies providing software that is focused on
operational and analytical CRM, such as Kana/Broadbase, e.Piphany, and Xchange
Applications. We believe competition will increase as our current competitors
increase the sophistication of their offerings and as new participants enter the
market.
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 INTERACTION SERVER 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 Interaction Server. 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 BUSINESS.
Competition for these individuals is intense in our industry, particularly
in the Toronto area where we are headquartered, and there are a limited number
of experienced people available with the necessary technical skills. Our ability
to increase revenues in the future depends considerably upon our success in
retaining and in some cases recruiting 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 salespeople 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 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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FAILURE TO INTEGRATE OUR EXECUTIVE TEAM MAY INTERFERE WITH OPERATIONS.
Our executive team has largely been hired in the past two years. Vikas
Kapoor, our Chief Executive Officer, was hired as of October 5, 2001. To
integrate into our company, these individuals must spend a significant amount of
time developing interpersonal relationships and learning our business model and
management system, in addition to performing their regular duties. Accordingly,
the integration of new personnel has resulted, and may continue to result, in
some disruption of our ongoing operations.
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 Nortel Networks,
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 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 acquisitions we have completed. In
September 2000, we acquired Continuity, and in October 2000, we acquired Digital
Archaeology. In July we completed a restructuring of our operations that
resulted in a reduction of many of the employees from the acquired companies. We
may not be able to successfully assimilate the remaining personnel, operations,
acquired technology and products into our business. This is particularly
difficult since Digital Archaeology's operation is located in Kansas while we
are headquartered in Markham, Ontario, 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 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 OUR 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.
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 may 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
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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.
WE MAY SEEK TO GROW BY MAKING ACQUISITIONS AND WE MAY NOT BE ABLE TO
SUCCESSFULLY COMPLETE ANY ACQUISITIONS WE UNDERTAKE OR INTEGRATE ANY ACQUIRED
BUSINESS WITH OUR OWN.
We may consider other investments in complementary companies, products or
technologies. If we undertake such an acquisition or investment, we may not
realize the anticipated benefits. If we buy a company, we may not be able to
successfully assimilate the acquired personnel, operations, technology and
products into our business. In particular, we will need to assimilate and retain
key technical, professional services, sales and marketing personnel. In
addition, acquired products or technology will have to be integrated into our
products and technology, and it is uncertain whether we may accomplish this.
These difficulties could disrupt our ongoing business, distract our management
and employees or increase our expenses. In connection with a merger, or
acquisition for shares, the issuance of these securities may be dilutive to our
existing shareholders or affect profitability. Furthermore, we may have to issue
equity or incur debt to pay for future acquisitions or investments, the issuance
of which could be dilutive to us or our existing shareholders or affect our
profitability. In addition, our profitability may suffer because of
acquisition-related costs or amortization costs for acquired goodwill and other
acquired intangible assets.
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.
11
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.
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. None of our
trademarks is registered, nor do we have any trademark applications pending. We
currently have no patent applications pending relating to our software. 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.
12
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.
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 numbers of competitors grow 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 client's 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.
13
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 client's 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.
OUR INTERNATIONAL EXPANSION EFFORTS MAY NOT BE SUCCESSFUL.
Our operations outside the United States and Canada are located in the
United Kingdom and Asia and, to date, have been limited. We intend to increase
our penetration of these markets by intensifying global activities, and allying
ourselves with selected international third-party distribution companies,
consulting organizations and software vendors.
The expansion of our existing international operations and entry into
additional international markets may 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.
14
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 a
sales office, 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.
OUR BUSINESS IS IMPACTED BY THE SLOWDOWN IN ECONOMIC CONDITIONS.
As a result of recent unfavorable economic conditions and reduced capital
spending, software licensing revenues have declined as a percentage of our total
revenues. In particular, revenues were impacted during the first and second
fiscal quarter of 2002. If the economic conditions in the United States worsen,
or if a wider global economic slowdown occurs, we may experience a material
adverse impact on our business, operating results, and financial condition.
WE HAVE TAKEN AND EXPECT TO CONTINUE TO TAKE REMEDIAL MEASURES TO ADDRESS THE
RECENT SLOWDOWN IN THE MARKET FOR OUR PRODUCTS WHICH COULD HAVE LONG-TERM
EFFECTS ON OUR BUSINESS.
We have taken and expect to continue to take measures to address the recent
slowdown in the market for our products. In particular, we have reduced our
workforce, frozen hiring, and reduced our planned capital expenditure and
expense budgets. These measures will reduce our expenses in the face of
decreased revenues due to decreased customer orders. However, each of these
measures and any additional measures taken in the future to contain expenditures
could have long-term effects on our business by reducing our pool of technical
talent, decreasing or slowing improvements in our products, and making it more
difficult for us to respond to customers.
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
15
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.
16
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 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, 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. After the offering, there will be no
preference shares outstanding. However, 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 common shares and we currently do
not have any plans to pay dividends on our common shares. In addition, our lease
line of credit specifically prohibits the payment of dividends on our common
shares.
17
CAPITALIZATION AND INDEBTEDNESS
The following table sets forth (in thousands of U.S. dollars, except per
share amounts) our capitalization as of October 31, 2001 on a pro forma basis to
give effect to the issuance of 4,230,000 common shares hereunder issued for no
consideration and after deducting estimated expenses. This table should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and related
notes appearing in our Annual Report on Form 10-K dated March 31, 2001
incorporated by reference herein:
October 31, 2001(1)
-------------------
Actual Pro Forma
------ ---------
(unaudited)
Restructuring accrual.................................... 2,516 2,516
Shareholders' equity:
Common shares; unlimited shares authorized;
37,761,323 shares issued and outstanding, actual;
41,991,323 shares issued and outstanding, pro forma . 222,410 222,341(2)
Warrants .............................................. 496 496
Deferred stock-based compensation ..................... (2,119) (2,119)
Accumulated other comprehensive losses ................ (340) (340)
Accumulated deficit ................................... (208,043) (208,043)
--------- ---------
Total shareholders' equity .......................... 12,404 12,335
--------- ---------
Total capitalization .............................. $ 14,920 $ 14,851
========= =========
(1) The table above excludes options outstanding at October 31, 2001 to
purchase up to 7,864,632 common shares under our stock option plans.
(2) Reduced by expenses of $68,820.65.
Delano currently has no outstanding indebtedness.
USE OF PROCEEDS
Delano will not receive any proceeds from the sale of shares by the
selling security holder, Mr. Kapoor. See "Selling Security Holder" and "Plan
of Distribution" described below.
PRICE HISTORY
Delano's common shares are listed on the NASDAQ Stock Market under the
symbol "DTEC" and listed on the Toronto Stock Exchange under the symbol "DLN."
The following table sets forth the range of high and low closing sales
prices (in U.S.$) on the NASDAQ National Market for each period indicated,
adjusted for the 3-for-2 stock split effective January 2000:
18
HIGH LOW
---- ---
FISCAL 2000
Fourth Quarter (from January 12 to March 31, 2000)........... $ 51.50 $ 22.44
FISCAL 2001
First Quarter................................................ $ 24.94 $ 9.75
Second Quarter............................................... $ 18.19 $ 9.50
Third Quarter................................................ $ 17.12 $ 5.12
Fourth Quarter............................................... $ 5.37 $ 1.37
FISCAL 2002
First Quarter................................................ $ 1.81 $ 0.32
Second Quarter............................................... $ 0.41 $ 0.12
Third Quarter (from October 1 to December 7, 2001)........... $ 0.74 $ 0.10
The following table sets forth the high and low closing sales prices (in U.S. $)
of the common shares on the NASDAQ National Market during each of the preceding
six months:
HIGH LOW
---- ---
June 2001.................................................... $0.72 $0.31
July 2001.................................................... $0.42 $0.17
August 2001.................................................. $0.30 $0.17
September 2001............................................... $0.24 $0.11
October 2001................................................. $0.39 $0.10
November 2001................................................ $0.70 $0.21
As of December 7, 2001, the last reported sale price of our common
shares was $0.71 per share, as reported by the Nasdaq National Market and Cdn.
$1.10, as reported by the Toronto Stock Exchange.
DILUTION
The shares being issued under this offering will dilute the interests
of existing shareholders by the amount of the difference between the offering
price per common share and the pro forma adjusted net tangible book value per
common share after this offering.
Our net tangible book value as of October 31, 2001 was $12.4 million,
or $0.33 per common share. Net tangible book value per share is equal to our
total tangible assets less total liabilities, divided by the number of
outstanding common shares.
After giving effect to the issuance of 4,230,000 common shares in this
offering at nil consideration and after deducting estimated expenses, our pro
forma net tangible book value as of October 31, 2001 would have been $12.3
million, or $0.29 per common share. This amount represents:
Net tangible book value per common share as at October 31, 2001................ $ 0.33
Offering price per common share............................................. $0.00
Pro forma net tangible book value per common share after this
Offering.................................................................. 0.29
-----
Adjusted Pro forma net tangible book value per common share after this
Offering..................................................................
0.29
------
Dilution per common share to existing shareholders............................. $ 0.04
======
19
The table below shows on a pro forma basis as of October 31, 2001 the
difference between our existing shareholders and our new investor with respect
to the number of common shares issued before deducting estimated expenses:
Shares purchased Total Consideration
---------------- ------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
Existing shareholders 37,761,323 89.9% $12,461,237 100.0% $ 0.33
New investor ........ 4,230,000 10.1 0 0 0
----------- ------------ ----------- ------------
41,991,323 100.0% 12,461,237 100.0%
SELLING SECURITY HOLDER
This prospectus relates to 4,230,000 common shares of Delano issued to
Vikas Kapoor pursuant to the Employment Agreement between Mr. Kapoor and Delano
and the Restricted Share Agreement between Mr. Kapoor and Delano, each dated as
of October 5, 2001. Mr. Kapoor is the Chief Executive Officer of Delano and has
been a member of the Board of Directors of Delano since July 2001. The following
table sets forth the number and percentage of our common shares beneficially
owned by Mr. Kapoor prior to this offering and the maximum number of shares that
Mr. Kapoor, his transferees, distributees, pledgees, donees or other successors
in interest may offer and sell pursuant to this prospectus. Since Mr. Kapoor may
sell all, some or none of his shares, we cannot estimate the actual number of
common shares that will be sold by Mr. Kapoor or the aggregate number or
percentage of our common shares that Mr. Kapoor will own upon completion of this
offering. See "Plan of Distribution."
Our common shares offered under this prospectus may be offered from
time to time by and for the account of Mr. Kapoor. Although the shares issued to
Mr. Kapoor are subject to vesting, once vested, the shares may be sold at any
time and from time to time by Mr. Kapoor.
SHARES BENEFICIALLY
-------------------------
SHARES BENEFICIALLY OWNED SHARES AVAILABLE OWNED AFTER THE
------------------------- -------------------------
NAME OF PRIOR TO OFFERING FOR REOFFER AND SALE OFFERING (2)
------- ----------------- -------------------------
SELLING SHAREHOLDER NUMBER PERCENTAGE HEREUNDER NUMBER PERCENTAGE
------------------- ------ ---------- --------- ------ ----------
Vikas Kapoor (1) 4,230,000 10.1% 4,230,000 0 0%
c/o Delano Technology Corporation
302 Town Centre Boulevard
Markham, Ontario, Canada
L3R OE8
- ---------------
(1) Mr. Kapoor is the Chief Executive Officer of Delano and has been a member
of the Board of Directors of Delano since July 2001.
(2) Assuming all common shares offered under this prospectus are sold by Mr.
Kapoor.
20
PLAN OF DISTRIBUTION
Our common shares offered hereby may be sold from time to time by Mr.
Kapoor for his own account. Delano will receive no proceeds from this offering.
Mr. Kapoor will pay or assume brokerage commissions or other charges and
expenses incurred in the sale of the shares.
Mr. Kapoor's sale of the shares is not currently subject to any
underwriting agreement. The shares covered by this prospectus may be sold by Mr.
Kapoor or by pledgees, donees, transferees, distributees or other successors in
interest of Mr. Kapoor from time to time. Mr. Kapoor may sell the shares from
time to time at fixed prices that may be changed, at market prices prevailing at
the time of sale, at prices related to prevailing market prices or at negotiated
prices. Sales may be effected in the over-the-counter market, on the National
Association of Securities Dealers Automated Quotation System, on the Nasdaq
National Market, or on any exchange on which the shares may then be listed. Mr.
Kapoor may sell the shares by one or more of the following: (a) in one or more
block trades in which a broker or dealer so engaged will attempt to sell all or
a portion of the shares held by Mr. Kapoor as agent but may position and resell
a portion of the block as principal to facilitate the transaction; (b) through
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this prospectus; (c) in ordinary brokerage
transactions and transactions in which the broker solicits purchasers; (d) in
negotiated transactions; and (e) through other means.
Mr. Kapoor may effect these transactions by selling shares to or
through broker-dealers, and those broker-dealers may receive compensation in the
form of underwriting discounts, concessions, commissions, or fees from Mr.
Kapoor and/or purchasers of the shares for whom such broker-dealers may act as
agent or to whom they may sell as principal, or both (which compensation to a
particular broker-dealer might be in excess of customary commissions). These
broker-dealers and Mr. Kapoor may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with those sales, and any
commissions received by them and any profit on the resale of shares placed by
them might be deemed to be underwriting compensation.
Any common shares covered by this prospectus that qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus.
Mr. Kapoor is not restricted as to the price or prices at which he may
sell his shares. Sales of common shares at less than the market prices may
depress the market price of our common shares. Although the shares issued to Mr.
Kapoor are subject to vesting, once vested, Mr. Kapoor is not restricted as to
the number of shares which may be sold at any one time, and it is possible that
a significant number of shares could be sold at the same time. In addition, Mr.
Kapoor may decide not to sell all, none or a portion of the shares.
We have informed Mr. Kapoor that the anti-manipulation rules under the
Exchange Act (including, without limitation, Rule 10b-5 and Regulation M - Rule
102) may apply to sales in the market and we will furnish Mr. Kapoor upon
request with a copy of these Rules. We will also inform Mr. Kapoor of the need
for delivery of copies of this prospectus.
Computershare Trust Company of Canada is the transfer agent for our
common shares.
EXPENSES OF THE ISSUANCE
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. Mr. Kapoor will pay or assume
brokerage commissions or other charges and expenses incurred in the resale of
the shares. The following table sets forth the costs and expenses to be paid by
Delano in connection with the sale of
21
the shares of common stock being registered hereby. All amounts are estimates
except for the Securities and Exchange Commission registration fee.
Securities and Exchange Commission registration fee.......... $ 520.65
NASDAQ fee................................................... 42,300.00
Accounting fees and expenses................................. 4,000.00
Legal fees and expenses...................................... 20,000.00
Transfer agent and registrar fees and expenses............... 1,000.00
Miscellaneous expenses....................................... 1,000.00
-----------
Total........................................................ $ 68,820.65
LEGAL MATTERS
Certain legal matters with respect to the issuance of the Delano common
shares offered hereby are being passed upon for us by Goodmans LLP, Toronto,
Ontario, Canada. The partners and associates of Goodmans LLP own an aggregate of
20,000 common shares of Delano.
EXPERTS
The consolidated financial statements incorporated in this prospectus
by reference from Delano's Annual Report on Form 10-K for the year ended March
31, 2001 have been audited by KPMG LLP, independent auditors, as stated in their
reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of KPMG LLP given upon their authority
as experts in accounting and auditing. KPMG LLP is located in Toronto, Canada.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
22
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The selling security holder is offering to sell,
and seeking offers to buy, Common Shares only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of the Common Shares. In this prospectus,
references to "Delano ," "we," "our" and "us" refer to Delano Technology
Corporation.
TABLE OF CONTENTS
Page
----
Incorporation by Reference .............................................. 2
Forward Looking Information ............................................. 3
Where You Can Find
More Information ...................................................... 3
Summary ................................................................. 4
Risk Factors ............................................................ 5
Capitalization and Indebtedness ......................................... 18
Use of Proceeds ......................................................... 18
Price History ........................................................... 18
Dilution ................................................................ 19
Selling Security Holder ................................................. 20
Plan of Distribution .................................................... 21
Expenses of the Issuance ................................................ 20
Legal Matters ........................................................... 22
Experts ................................................................. 22
4,230,000 SHARES
DELANO TECHNOLOGY CORPORATION
COMMON SHARES
REOFFER
PROSPECTUS
December 10, 2001
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed by the Registrant with the Securities and
Exchange Commission (the "Commission") are incorporated by reference in this
Registration Statement:
(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended March 31, 2001 and related exhibits (File No.
333-94505);
(b) The Registrant's Quarterly Reports on Form 10-Q for the
quarters ended June 30, 2001 and September 30, 2001 (File No.
333-94505);
(c) The Registrant's Current Report on Form 8-K filed on October
31, 2001 (File No. 333-94505); and
(d) The description of our capital stock contained in the
Registration Statement on Form 8-A which was filed with the
Commission on January 27, 2000 (File No. 000-29203), including
any amendment or report filed for the purposes of updating
such description.
All documents subsequently filed with the Commission by the Registrant pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing
of a post-effective amendment which indicates 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 Registration Statement and to
be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this Registration Statement shall be deemed to be modified or superseded for
purposes of this Registration Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein 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 Registration Statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
Item 6. Indemnification of Directors and Officers.
The By-laws of the Company provide that, subject to Section 136 of the
Business Corporations Act (Ontario) (the "OBCA"), the Company shall indemnify a
director or officer of the Company, a former director or officer of the Company
or a person who acts or acted at the Company's request as a director or officer
of a body corporate of which the Company is or was a shareholder or creditor,
and his or her heirs and legal representatives, against all costs, charges and
expenses reasonably incurred by him or her in respect of certain actions or
proceedings to which he or she is made a party by reason of his or
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her office, if he or she meets certain specified standards of conduct, and the
Company shall also indemnify any such person in such other circumstances as the
OBCA or the law permits or requires. The Company maintains directors' and
officers' liability insurance for its directors and officers. With respect to
directors and officers as a group, the Company paid a premium of approximate
$420,000 initially for directors' and officers' liability insurance, which
included coverage required in connection with the Company's initial public
offering. The total amount of insurance purchased for directors and officers as
a group was $15,000,000. All matters insured are subject to a $500,000
securities-related retainer, which applies to costs of defense and which is
waived where claims against all insureds are dismissed or the insureds are found
not liable. We do not otherwise compensate our directors, but they are
reimbursed for out-of-pocket expenses incurred in connection with meetings of
the Board of Directors or its committees. Reference is made to the Registrant's
Articles of Incorporation, filed as an exhibit to the Company's Registration
Statement on Form F-1 (File No. 333-94505).
Item 7. Exemption From Registration Claimed.
Delano issued an aggregate of 4,230,000 common shares to Mr. Kapoor
pursuant to the Employment Agreement between Mr. Kapoor and Delano and
Restricted Share Agreement between Mr. Kapoor and Delano, each dated October 5,
2001. This issuance was exempt from registration under Section 4(2) of the
Securities Act.
Item 8. Exhibits.
Exhibit No. Description of Exhibit
----------- ----------------------
4.1* Articles of Incorporation of the Registrant, as amended
(filed as an exhibit to the Registrant's Registration
Statement on Form F-1 dated January 12, 2000, File No.
333-94505)
4.2* Bylaws of the Registrant (filed as an exhibit to the
Registrant's Registration Statement on Form F-1 dated
January 12, 2000, File No. 333-94505)
4.3* Specimen stock certificate representing the Common
Shares of the Registrant (filed as an exhibit to the
Registrant's Registration Statement on Form 8-A dated
January 27, 2000, File No. 000-29203)
4.4* Employment Agreement, dated as of October 5, 2001, by
and between Vikas Kapoor and the Registrant (filed as an
exhibit to the Registrant's Interim Report on Form 8-K
dated October 31, 2001, File No. 333-94505)
4.5* Restricted Share Agreement by and between Vikas Kapoor
and the Registrant, dated as of October 5, 2001 (filed
as an exhibit to the Registrant's Interim Report on Form
8-K dated on October 31, 2001, File No. 333-94505)
5.1** Opinion of Goodmans LLP
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23.1** Consent of Goodmans LLP (included in Exhibit 5.1)
23.2** Consent of KPMG LLP
24** Power of Attorney (included on signature page hereto)
- -------------------
* Not filed herewith. In accordance with Rule 411 promulgated pursuant to the
Securities Act of 1933, as amended, reference is made to the documents
previously filed with the Commission, which are incorporated by reference
herein.
** Filed herewith.
Item 9. 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.
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(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) 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 Commission 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 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, 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 of 1933 and will be governed by the
final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Markham and the Province of Ontario in Canada, on
this 10th day of December, 2001.
Delano Technology Corporation
By: /s/ Vikas Kapoor
---------------------------------
Name: Vikas Kapoor
Title: Chief Executive Officer
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POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Delano Technology
Corporation, hereby severally constitute and appoint Vikas Kapoor and David
Garland, 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 S-8
(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
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ VIKAS KAPOOR Chief Executive Officer, Director December 10, 2001
- -------------------------
Vikas Kapoor (Principal Executive Officer)
/s/ DAVID GARLAND Vice President of Finance December 10, 2001
- -------------------------
David Garland (Principal Financial Officer
and Principal Accounting Officer)
/s/DENNIS BENNIE Chairman of the Board of Directors December 10, 2001
- -------------------------
Dennis Bennie
/s/ ALBERT AMATO Director December 10, 2001
- -------------------------
Albert Amato
/s/ J. IAN GIFFEN Director December 10, 2001
- -------------------------
J. Ian Giffen
/s/ BAHMAN KOOHESTANI Director December 10, 2001
- -------------------------
Bahman Koohestani
/s/ DONALD WOODLEY Director December 10, 2001
- -------------------------
Donald Woodley
/s/ ALBERT DELORENZI Director December 10, 2001
- -------------------------
Albert DeLorenzi
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INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
----------- ----------------------
4.1* Articles of Incorporation of the Registrant, as amended
(filed as an exhibit to the Registrant's Registration
Statement on Form F-1 dated January 12, 2000, File No.
333-94505)
4.2* Bylaws of the Registrant (filed as an exhibit to the
Registrant's Registration Statement on Form F-1 dated
January 12, 2000, File No. 333-94505)
4.3* Specimen Stock certificate representing the Common
Shares of the Registrant (filed as an exhibit to the
Registrant's Registration Statement on Form 8-A dated
January 27, 2000, File No. 00-29203)
4.4* Employment Agreement, dated as of October 5, 2001, by
and between Vikas Kapoor and the Registrant (filed as an
exhibit to the Registrant's Interim Report on Form 8-K
dated October 31, 2001, File No. 333-94505)
4.5* Restricted Share Agreement by and between Vikas Kapoor
and the Registrant, dated as of October 5, 2001 (filed
as an exhibit to the Registrant's Interim Report on Form
8-K dated on October 31, 2001, File No. 333-94505)
5.1** Opinion of Goodmans LLP
23.1** Consent of Goodmans LLP (included in Exhibit 5.1)
23.2** Consent of KPMG LLP
24** Power of Attorney (included on signature page hereto)
- -------------------
* Not filed herewith. In accordance with Rule 411 promulgated pursuant to the
Securities Act of 1933, as amended, reference is made to the documents
previously filed with the Commission, which are incorporated by reference
herein.
** Filed herewith.
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