AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 15, 2004
REGISTRATION NO. 333-111433
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PERSISTENCE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3138935
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1720 South Amphlett Blvd., Third Floor
San Mateo, CA 94402
(650) 372-3600
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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Christopher T. Keene
Chief Executive Officer
Persistence Software, Inc.
1720 South Amphlett Blvd., Third Floor
San Mateo, CA 94402
(650) 372-3600
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES TO:
Laurel Finch
Amy Elizabeth Paye
Laura L. McDaniels
Heller Ehrman White & McAuliffe
A Professional Corporation
2775 Sand Hill Road
Menlo Park, CA 94025
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS
SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |__| _______________
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 registrations statement number of the earlier effective registration
statement for the same offering. |__| _______________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
The Information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission becomes effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, dated January 15, 2004
PROSPECTUS
PERSISTENCE SOFTWARE, INC.
390,000 shares of Common Stock
------------------------------
THE SHARES OF COMMON STOCK OF PERSISTENCE SOFTWARE, INC. OFFERED BY
THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE
"RISK FACTORS" ON PAGE 2 IN DETERMINING WHETHER TO PURCHASE THE COMMON STOCK.
------------------------------
The selling stockholders identified on page 12 of this prospectus are
offering up to 300,000 outstanding shares of common stock and up to 90,000
shares of common stock underlying outstanding warrants to purchase common stock.
The selling stockholders may be deemed to be "underwriters," as such
term is defined in the Securities Act of 1933, as amended.
Our common stock is quoted on the Nasdaq SmallCap Market under the
symbol "PRSW".
On January 14, 2004, the last sale price of our common stock on the
Nasdaq SmallCap Market was $4.09 per share.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is _________ __, 2004.
TABLE OF CONTENTS
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PAGE
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SUMMARY.....................................................................1
RISK FACTORS................................................................2
USE OF PROCEEDS............................................................11
TRANSACTIONS WITH SELLING STOCKHOLDERS.....................................11
PLAN OF DISTRIBUTION.......................................................11
SELLING STOCKHOLDERS.......................................................12
LEGAL MATTERS..............................................................14
EXPERTS....................................................................14
WHERE YOU CAN FIND ADDITIONAL INFORMATION..................................14
FORWARD-LOOKING STATEMENTS.................................................15
SUMMARY
Persistence provides a suite of data services products that sit between
existing databases--such as Oracle and DB2--and application servers--such as
BEA, WebLogic, IBM, WebSphere, and Microsoft .NET. Developers can configure
these products, creating a "data services" layer that is designed to position
business information for more efficient access for users, to dramatically reduce
network traffic and data latency, and to achieve better application performance
at a much lower infrastructure cost.
Persistence caching solutions help systems "remember" answers from each
processing step. When the system receives a request for which it has an answer,
it can respond immediately, without traveling to back-end databases to generate
an answer. Synchronization technology is designed to ensure that these cached
answers remain accurate, even as the source data changes. Customer profile
management, logistics, exchanges, trading desks, and supply chain management
systems are just a few examples of query-intensive online systems that can
realize significant increases in capacity and performance through online
caching.
We believe that our customers are able to more effectively manage
enterprise data through re-architecting their IT infrastructure using
Persistence data services products. Persistence data services solutions are
designed to result in real-time, highly scalable, distributed applications
without incurring the high costs of additional hardware and replicated
databases. Decision makers and customers located at any location can now have an
immediate "business visibility" into their data, that is, an up-to-date view
into the data that they need, when and where they need it.
Our EDGEXTEND data services software for Sun Microsystems' full Java 2
Platform, Enterprise Edition (J2EE, formerly known as Enterprise Java Beans or
EJB) application servers, C++ and .NET application servers offers a data
architecture that integrates with IBM's WebSphere, BEA's WebLogic, and Microsoft
..NET, plus C++ application servers to support highly distributed and
transaction-oriented applications both within data centers and in remote
locations. Our DIRECTALERT product is a proactive, personalized client caching
and notification reporting product for zero latency applications which extends
the reach of enterprise systems to small form-factor devices such as mobile
phones, wireless PDAs, and digital set-top boxes.
We issued shares of common stock and warrants to purchase common stock
to the selling stockholders in connection with a private placement on December
1, 2003. For additional information concerning this private placement, you
should refer to the section entitled "Transactions With Selling Stockholders" on
page 11. The selling stockholders may sell the shares of common stock from time
to time on the Nasdaq SmallCap Market, or otherwise, at prices and at terms then
prevailing or at prices related to the then current market price or in private
sales at negotiated prices directly or through a broker or brokers, who may act
as agent or principal or by a combination of such methods of sale. For
additional information on the method of sale, you should refer to the section
entitled "Plan of Distribution" on page 11.
We were incorporated in May 1991 as Fulcrum Innovations, Inc. and
subsequently changed our name to Persistence Software, Inc. Our principal
executive offices are located at 1720 South Amphlett Blvd., Third Floor, San
Mateo, California 94402 and our telephone number at that location is (650)
372-3600. References in the prospectus to "we," "our," "us," the "Company" and
"Persistence" refer to Persistence Software, Inc., a Delaware corporation.
Information contained on our website at http://www.persistence.com does not
constitute part of this prospectus.
1
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES SIGNIFICANT RISKS. YOU
SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE
OTHER INFORMATION IN OR INCORPORATED BY REFERENCE INTO THIS PROSPECTUS INCLUDING
OUR FINANCIAL STATEMENTS BEFORE DECIDING WHETHER TO BUY SHARES OF OUR COMMON
STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE INTENDED TO BE THE ONES
THAT ARE SPECIFIC TO OUR COMPANY OR INDUSTRY AND THAT WE DEEM TO BE MATERIAL,
BUT ARE NOT THE ONLY ONES THAT WE FACE. THE TRADING PRICE OF OUR COMMON STOCK
COULD DECLINE DUE TO ANY OF THESE AND OTHER RISKS AND UNCERTAINTIES, AND YOU
COULD LOSE PART OR ALL OF YOUR INVESTMENT.
WE MAY NOT ACHIEVE OUR SALES TARGETS.
Because we only commenced selling our products EDGEXTEND and
DIRECTALERT in 2002, we have a limited operating history in the data services
markets. We thus face the risks, expenses and difficulties frequently
encountered by companies in early stages of development, particularly companies
in the rapidly changing software industry. These risks include:
o the timing and magnitude of capital expenditures by our
customers and prospective customers;
o our need to achieve market acceptance for our new product
introductions, including DIRECTALERT and EDGEXTEND;
o our dependence for revenue from our POWERTIER product, which
was first introduced in 1997 and has achieved only limited
market acceptance;
o our need to expand our distribution capability through various
sales channels, including a direct sales organization,
original equipment manufacturers, third party distributors,
independent software vendors and systems integrators;
o our unproven ability to anticipate and respond to
technological and competitive developments in the rapidly
changing market for dynamic data management;
o our unproven ability to compete in a highly competitive
market;
o the decline in spending levels in the software infrastructure
market;
o our dependence upon key personnel.
WE NEED TO INCREASE OUR REVENUES, CONTINUE TO REDUCE OUR COST STRUCTURE AND/OR
RAISE EQUITY FINANCING IN ORDER TO ENSURE THAT WE HAVE SUFFICIENT RESOURCES TO
OPERATE AS A GOING CONCERN.
We have experienced declining annual revenues and have incurred losses
from continuing operations of $2.8 million in the first nine months of 2003,
$5.4 million in fiscal 2002 and $15.1 million in fiscal 2001. These factors,
among others, raise substantial doubt that we will be able to continue our
business as a going concern. We are currently targeting that our current cash
and cash equivalents will be sufficient to meet our anticipated needs through at
least June 30, 2004, provided that we are able to achieve our targeted revenues,
accounts receivable collections and expense reductions. If we are unable to
increase our revenues, continue to reduce our cost structure and/or raise
additional equity financing as planned, we may have to cease operations and
engage in efforts to sell our assets. If we seek to sell debt securities or to
obtain a credit facility, these securities could have rights, preferences and
privileges senior to holders of common stock, and the term of this debt could
impose restrictions on our operations. The sale of additional equity or
convertible debt securities could result in additional dilution to our
stockholders, and we may not be able to obtain additional financing on
acceptable terms, if at all. If we are unable to achieve our plan, our business
could be jeopardized.
THE UNPREDICTABILITY OF OUR QUARTERLY RESULTS MAY DEPRESS THE PRICE OF OUR
COMMON STOCK.
Our quarterly operating results have fluctuated significantly in the
past and may continue to fluctuate significantly in the future as a result of a
number of factors, many of which are outside our control. The timing of our
sales is governed in part by our customers' capital spending budgets and thus we
may experience an absolute decline in revenues from quarter to quarter. If our
future quarterly operating results are below the expectations of securities
analysts or investors, the price of our common stock would likely decline. In
addition to the other risk factors described in this prospectus, additional
factors that may cause fluctuations of our operating results include the
following:
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o our ability to close relatively large sales on schedule;
o delays or deferrals of customer orders or deployments;
o delays in shipment of scheduled software releases;
o shifts in demand for and market acceptance among our various
products, including our newer products, EDGEXTEND and
DIRECTALERT, and our older POWERTIER product;
o the level of product competition in the application server and
data services markets;
o the mix of direct sales versus indirect distribution channel
sales;
o the possible loss of sales people;
o the mix of products and services licensed or sold;
o the mix of domestic and international sales; and
o our success in penetrating international markets and general
economic conditions in these markets.
OUR SALES CYCLE IS LONG AND UNPREDICTABLE, SO IT IS DIFFICULT TO FORECAST OUR
REVENUES.
We typically receive a substantial portion of our orders in the last
two weeks of each fiscal quarter because our customers often delay purchases of
our products to the end of the quarter to gain price concessions. Any delay in
sales of our products or services could cause our quarterly revenues and
operating results to fluctuate. The typical sales cycle of our products is long
and unpredictable and requires both a significant capital investment decision by
our customers and our education of prospective customers regarding the use and
benefits of our products. Our sales cycle is generally between three and nine
months. A successful sales cycle typically includes presentations to both
business and technical decision makers, as well as a limited pilot program to
establish a technical fit. Our products typically are purchased as part of a
significant enhancement to a customer's information technology system. The
implementation of our products involves a significant commitment of resources by
prospective customers. Accordingly, a purchase decision for a potential customer
typically requires the approval of several senior decision makers. Our sales
cycle is affected by the business conditions of each prospective customer, as
well as the overall economic climate for technology-related capital
expenditures. Because a substantial portion of our costs are relatively fixed
and based on anticipated revenues, a failure to book an expected order in a
given quarter would not be offset by a corresponding reduction in costs and
could adversely affect our operating results.
WE DEPEND ON A RELATIVELY SMALL NUMBER OF SIGNIFICANT CUSTOMERS, AND THE LOSS OF
ONE OR MORE OF THESE CUSTOMERS COULD RESULT IN A DECREASE IN OUR REVENUES.
Historically, we have received a substantial portion of our revenues
from product sales to a limited number of customers. In addition, the identity
of several of our top five customers has changed from period to period,
including year to year.
% OF TOTAL REVENUES IDENTITY AND % OF TOTAL REVENUES OF TOP
PERIOD OF TOP 5 CUSTOMERS 2 CUSTOMERS
------ ------------------ -----------
Nine months ended September 30, 2003 51% Citigroup Global Markets.............24%
Adobe Systems........................11
Nine months ended September 30, 2002 62 Cablevision..........................29
Citigroup Global Markets.............15
Year ended December 31, 2002 55 Cablevision..........................26
Citigroup Global Markets.............13
Year ended December 31, 2001 45 Citigroup Global Markets.............15
Cablevision..........................11
Year ended December 31, 2000 40 Citigroup Global Markets.............16
Lucent Technologies...................6
If we lose a significant customer, or fail to increase product sales to
an existing customer as planned, we may not be able to replace the lost revenues
with sales to other customers. In addition, because our marketing strategy is to
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concentrate on selling products to industry leaders, any loss of a customer
could harm our reputation within the industry and make it harder for us to sell
our products to other companies in that industry. The loss of, or a reduction in
sales to, one or more significant customers would likely result in a decrease in
our revenues. In addition, because a substantial portion of our revenues result
from product sales to a limited number of customers, the identity of which
change from quarter to quarter, in any given quarter the percentage contribution
of PowerTier, EdgeExtend and DirectAlert to total license revenues varies,
sometimes dramatically.
DECLINES IN SALES REVENUE MAY RESTRICT OUR GROWTH AND HARM OUR BUSINESS AND OUR
ABILITY TO ACHIEVE OUR FINANCIAL OBJECTIVES.
For the three years from 1997 through 2000, our sales revenues grew
over the previous year by 88%, 42% and 75%, respectively. In 2001 sales declined
from the previous year by 23%, in 2002 our sales revenues declined by 25% and in
the nine months ended September 30, 2003 our sales revenues declined by 40% from
the nine months ended September 30, 2002. We believe a substantial portion of
the decline in sales of our products is due to the general downturn in
information technology spending by our prospective customers, many of whom are
Fortune 500 companies. If our prospective customers continue to defer spending
on IT Infrastructure products, such as our products, our product sales may
continue to decline. Our declining sales may also negatively affect our
reputation with the investment community, which may lead to a decline in our
stock price and may also discourage investors from purchasing our stock.
WE ARE CURRENTLY TARGETING THAT A MATERIAL PORTION OF OUR REVENUES WILL BE
DERIVED FROM SALES OF OUR NEWEST PRODUCT, EDGEXTEND; HOWEVER, THERE ARE
TECHNICAL AND MARKET RISKS ASSOCIATED WITH NEW PRODUCTS.
Sales of our EDGEXTEND products currently represent a material
percentage of our revenues. New products, like EDGEXTEND, often contain errors
or defects, particularly when first introduced. Any errors or defects could be
serious or difficult to correct and could result in a delay of product release
or adoption resulting in lost revenues or a delay in gaining market share, which
could harm our revenues and reputation. In addition, market adoption is often
slower for newer products, like EDGEXTEND, than for existing products. Because
we are focusing our marketing and sales efforts on our newer EDGEXTEND data
services product, any failure in market adoption of this product could result in
our failure to meet our revenue goals.
BECAUSE OUR PRODUCTS PROVIDE ADDITIONAL FEATURES TO SUCCESSFUL APPLICATION
SERVER PRODUCTS FROM IBM AND BEA, THEY MAY ADD THESE FEATURES TO A FUTURE
VERSION OF THEIR PRODUCT, REDUCING THE NEED FOR OUR PRODUCTS.
Because IBM and BEA control the development schedule and feature set of
their products, we need to maintain a good working relationship with IBM and BEA
if we decide to develop future versions of EDGEXTEND for those new versions of
WebSphere and WebLogic. Failure to develop future versions compatible with the
latest versions from IBM and BEA could greatly reduce market acceptance for our
products. IBM or BEA could add features to their products, which would reduce or
eliminate the need for our products, which could harm our business. They could
develop their products in a more proprietary way to favor their own products, or
as those offered by a third party, which could make it much harder for us to
compete in the J2EE software market.
IF WE DO NOT DELIVER PRODUCTS THAT MEET RAPIDLY CHANGING TECHNOLOGY STANDARDS
AND CUSTOMER DEMANDS, WE WILL LOSE MARKET SHARE TO OUR COMPETITORS.
The market for our products and services is characterized by rapid
technological change, dynamic customer demands and frequent new product
introductions and enhancements. Customer requirements for products can change
rapidly as a result of innovation in software applications and hardware
configurations and the emergence or adoption of new industry standards,
including Internet technology standards. We may need to increase our research
and development investment over our current targeted spending levels to maintain
our technological leadership. Our future success depends on our ability to
continue to enhance our current products and to continue to develop and
introduce new products that keep pace with competitive product introductions and
technological developments. For example, as Sun Microsystems introduces new J2EE
specifications, we may need to introduce new versions of EDGEXTEND designed to
support these new specifications to remain competitive. If IBM or BEA introduce
new versions of WebSphere and WebLogic, we may need to introduce new versions of
EDGEXTEND designed to support these new versions. If we do not bring
enhancements and new versions of our products to market in a timely manner, our
market share and revenues could decrease and our reputation could suffer. If we
fail to anticipate or respond adequately to changes in technology and customer
needs, or if there are any significant delays in product development or
introduction, our revenues and business could suffer.
Our EDGEXTEND for WebSphere product was released in March 2002, our
EDGEXTEND for WebLogic product was released in August 2002 and our EDGEXTEND for
..NET product was released in October 2002. Any delays in releasing future
enhancements to these products or new products on a generally available basis
may materially effect our future revenues.
4
BECAUSE OUR DIRECT SALES TEAM IS CURRENTLY OUR MOST CRITICAL SALES CHANNEL, ANY
FAILURE TO MAINTAIN AND TRAIN THIS TEAM MAY RESULT IN LOWER REVENUES.
We must maintain a strong direct sales team to generate revenues. In
the last several years, we have experienced significant turnover in our sales
team. Typically, newly hired employees have required training and approximately
six to nine months experience to achieve full productivity. Like many companies
in the software industry, we are likely to continue to experience turnover in
our sales force and we may not be able to hire enough qualified individuals in
the future. As a result of our employee turnover, a number of our sales people
are relatively new and we may not meet our sales goals. In addition, our
recently hired employees may not become productive.
BECAUSE OUR FUTURE REVENUE GOALS ARE BASED ON OUR DEVELOPMENT OF A STRONG SALES
CHANNEL THROUGH INDEPENDENT SOFTWARE VENDORS, SYSTEMS INTEGRATORS, OEM PARTNERS
AND OTHER RESELLERS, ANY FAILURE TO DEVELOP THIS CHANNEL MAY RESULT IN LOWER
REVENUES.
To date, we have sold our products primarily through our direct sales
force, but our ability to achieve revenue growth will depend in large part on
our success in establishing and leveraging relationships with independent
software vendors, system integrators, OEM partners and third parties. It may be
difficult for us to establish these relationships, and, even if we establish
these relationships, we will then depend on the sales efforts of these third
parties. In addition, because these relationships are nonexclusive, these third
parties may choose to sell application servers, data management products or
other alternative solutions offered by our competitors, and not our products. If
we fail to successfully build our third-party distribution channels or if our
third party partners do not perform as expected, our business could be harmed.
BECAUSE OUR PRODUCTS ARE OFTEN INCORPORATED INTO ENTERPRISE-WIDE SYSTEM
DEPLOYMENTS, ANY DELAYS IN THESE PROJECTS MAY RESULT IN LOWER REVENUES.
Because our products are often incorporated into multi-million dollar
enterprise projects, we depend on the successful and timely completion of these
large projects to fully deploy our products and achieve our revenue goals. These
enterprise projects often take many years to complete and can be delayed by a
variety of factors, including general or industry-specific economic downturns,
our customers' budget constraints, other customer-specific delays, problems with
other system components or delays caused by the OEM, independent software
vendors, system integrators or other third-party partners who may be managing
the system deployment. If our customers cannot successfully implement
large-scale deployments, or they determine for any reason that our products
cannot accommodate large-scale deployments or that our products are not
appropriate for widespread use, our business could suffer. In addition, if an
OEM, independent software vendors, system integrator or other third-party
partner fails to complete a project utilizing our product for a customer in a
timely manner, our revenues or business reputation could suffer.
BECAUSE WE COMPETE WITH SUN MICROSYSTEMS, WHO CONTROLS THE J2EE APPLICATION
SERVER STANDARD, WE FACE THE RISK THAT THEY MAY DEVELOP THIS STANDARD TO FAVOR
THEIR OWN PRODUCTS.
Because Sun Microsystems controls the J2EE standard, we need to
maintain a good working relationship with Sun Microsystems as we decide to
develop future versions of EDGEXTEND, as well as additional products using J2EE,
that will gain market acceptance. In March 1998, we entered into a license
agreement with Sun Microsystems, pursuant to which we granted Sun Microsystems
rights to manufacture and sell, by itself and not jointly with others, products
under a number of our patents, and Sun Microsystems granted us rights to
manufacture and sell, by ourselves and not jointly with others, products under a
number of Sun Microsystems' patents. As a result, Sun Microsystems may develop
and sell some competing products that would, in the absence of this license
agreement, infringe our patents. Because Sun Microsystems controls the J2EE
standard, it could develop the J2EE standard in a more proprietary way to favor
a product offered by its own products, or a third party, which could make it
much harder for us to compete in the J2EE software market.
MICROSOFT HAS ESTABLISHED A COMPETING APPLICATION SERVER STANDARD, WHICH COULD
DIMINISH THE MARKET POTENTIAL FOR OUR PRODUCTS IF IT GAINS WIDESPREAD
ACCEPTANCE.
Our primary success has come in the J2EE market. Microsoft has
established a competing standard for distributed computing, .NET. Our .NET
products are new and unproven in the marketplace. If this standard gains
widespread market acceptance over the J2EE or Corba standards, our business
could suffer. Because of Microsoft's resources and commanding position with
respect to other markets and technologies, Microsoft's entry into the
application server market may cause our potential customers to delay or change
purchasing decisions. We expect that Microsoft's presence in the application
server market will increase competitive pressure in this market.
WE FACE SIGNIFICANT COMPETITION FROM COMPANIES WITH GREATER RESOURCES THAN WE
HAVE AND MAY FACE ADDITIONAL COMPETITION IN THE FUTURE.
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The markets for our products are intensely competitive, subject to
rapid change and significantly affected by new product introductions and other
market activities of industry participants. We believe that the principal
competitive factors in our markets are:
o performance, including scalability, integrity and
availability;
o ability to provide a competitive return on investment to the
customer;
o flexibility;
o use of standards-based technology (e.g. J2EE);
o ease of integration with customers' existing enterprise
systems;
o ease and speed of implementation;
o quality of support and service;
o security;
o company reputation and perception of viability; and
o price.
In the EDGEXTEND market, alternative technology is available from a
variety of sources. Companies such as Versant, Gemstone and Progress Software
are middleware vendors that offer alternative data management solutions that
directly target EDGEXTEND'S market. In addition, many prospective customers may
build their own custom solutions.
In the DIRECTALERT market, alternative approaches are provided by a
variety of sources, including the potential for internal development. Company
vendors such as SpiritSoft, TIBCO, and IBM provide message-oriented middleware
software which may evolve into competitive products. Vendors such as webMethods
and Business Objects provide alternative architectures for business intelligence
information. DIRECTALERT is based on licensed technology, which the Company is
licensed to distribute on a non-exclusive basis.
We continue to sell current and earlier versions of POWERTIER for J2EE
application server to current customers. Our competitors for POWERTIER include
both publicly and privately-held enterprises, including BEA Systems (WebLogic),
IBM (WebSphere), Oracle (OAS) and Sun Microsystems (Sun ONE Application Server).
Many customers may not be willing to purchase our POWERTIER products because
they have already invested heavily in databases and other enterprise software
components offered by these competing companies. Many of these competitors have
pre-existing customer relationships, longer operating histories, greater
financial, technical, marketing and other resources, greater name recognition
and larger installed bases of customers than we do.
IF THE MARKETS FOR INFRASTRUCTURE SOFTWARE FOR NETWORKS AND WEB-BASED PRODUCTS
AND SERVICES DO NOT DEVELOP AS WE CURRENTLY ENVISION, WE MAY NOT BE ABLE TO
ACHIEVE OUR PLANNED REVENUE TARGETS.
Our performance and future success will depend on the growth and
widespread adoption of the markets for infrastructure software for networks and
web-based products and services. If these markets do not develop in the manner
we currently envision, our business could be harmed. Moreover, critical issues
concerning the commercial use of the Internet, including security, cost,
accessibility and quality of network service, remain unresolved and may
negatively affect the growth of the Internet as a platform for conducting
various forms of electronic commerce. In addition, the Internet could lose its
viability due to delays in the development or adoption of new standards and
protocols to handle increased activity or due to increased government
regulation.
OUR FAILURE TO MANAGE OUR RESOURCES COULD RESULT IN OUR FAILURE TO ACHIEVE OUR
FINANCIAL OBJECTIVES.
Achieving our planned revenue targets and other financial objectives
will place significant demands on our management and other resources, in
particularly because we must achieve our revenue and product development goals
using both fewer people and less money. Our ability to manage our resources
effectively will require us to continue to improve our sales process and to
train, motivate and manage our employees. If we are unable to manage our
6
business effectively within our current budget, we may not be able to retain key
personnel and the quality of our services and products may suffer.
OUR SALES AND DEVELOPMENT EFFORTS COULD SUFFER IF WE CANNOT ATTRACT AND RETAIN
THE SERVICES OF KEY EMPLOYEES.
Our future success depends on the ability of our management to operate
effectively, both individually and as a group. We are substantially dependent
upon the continued service of our existing executive personnel, especially
Christopher T. Keene, our Chief Executive Officer. We do not have a key person
life insurance policy covering Mr. Keene or any other officer or key employee.
Our success will depend in large part upon our ability to attract and retain
highly-skilled employees, particularly sales personnel and software engineers.
If we are not successful in attracting and retaining these skilled employees,
our sales and product development efforts would suffer. In addition, if one or
more of our key employees resigns to join a competitor or to form a competing
company, the loss of that employee and any resulting loss of existing or
potential customers to a competitor could harm our business. If we lose any key
personnel, we may not be able to prevent the unauthorized disclosure or use of
our technical knowledge or other trade secrets by those former employees.
OUR SOFTWARE PRODUCTS MAY CONTAIN DEFECTS OR ERRORS, AND SHIPMENTS OF OUR
SOFTWARE MAY BE DELAYED.
Complex software products often contain errors or defects, particularly
when first introduced or when new versions or enhancements are released. Our
products have in the past contained and may in the future contain errors and
defects, which may be serious or difficult to correct and which may cause delays
in subsequent product releases. Delays in shipment of scheduled software
releases or serious defects or errors could result in lost revenues or a delay
in market acceptance, which could have a material adverse effect on our revenues
and reputation.
WE MAY BE SUED BY OUR CUSTOMERS FOR PRODUCT LIABILITY CLAIMS AS A RESULT OF
FAILURES IN THEIR CRITICAL BUSINESS SYSTEMS.
Because our customers use our products for important business
applications, errors, defects or other performance problems could result in
financial or other damages to our customers. They could pursue claims for
damages, which, if successful, could result in our having to make substantial
payments. Although our purchase agreements typically contain provisions designed
to limit our exposure to product liability claims, existing or future laws or
unfavorable judicial decisions could negate these limitation of liability
provisions. A product liability claim brought against us, even if meritless,
would likely be time consuming and costly for us to litigate or settle.
A SIGNIFICANT PORTION OF OUR REVENUES IS DERIVED FROM INTERNATIONAL SALES, WHICH
COULD DECLINE AS A RESULT OF LEGAL, BUSINESS AND ECONOMIC RISKS SPECIFIC TO
INTERNATIONAL OPERATIONS.
Our future success will depend, in part, on our successful development
of international markets for our products. Approximately 38% of our total
revenues came from sales of products and services outside of the United States
for the nine months ended September 30, 2003 and approximately 31% of our total
revenues came from sales of products and services outside of the United States
for the nine months ended September 30, 2002. Approximately 33% of our total
revenues came from sales of products and services outside of the United States
for the year ended December 31, 2002, and approximately 38% of our total
revenues came from sales of products and services outside of the United States
for the year ended December 31, 2001. We expect international revenues to
continue to represent a significant portion of our total revenues. To date,
almost all of our international revenues have resulted from our direct sales
efforts. In international markets, however, we expect that we will depend more
heavily on third party distributors to sell our products in the future. The
success of our international strategy will depend on our ability to develop and
maintain productive relationships with these third parties. The failure to
develop key international markets for our products could cause a reduction in
our revenues. Additional risks related to our international expansion and
operation include:
o difficulties of staffing, funding and managing foreign
operations;
o future dependence on the sales efforts of our third party
distributors to expand business;
o longer payment cycles typically associated with international
sales;
o tariffs and other trade barriers;
o failure to comply with a wide variety of complex foreign laws
and changing regulations;
o exposure to political instability, acts of war, terrorism and
economic downturns;
o failure to localize our products for foreign markets;
7
o restrictions under U.S. law on the export of technologies;
o potentially adverse tax consequences;
o reduced protection of intellectual property rights in some
countries; and
o currency fluctuations.
The majority of our product sales outside the United States are
denominated in U.S. dollars. We do not currently engage in any hedging
transactions to reduce our exposure to currency fluctuations as a result of our
foreign operations. We are not currently ISO 9000 compliant, nor are we
attempting to meet all foreign technical standards that may apply to our
products. Our failure to develop our international sales channel as planned
could cause a decline in our revenues.
IF WE DO NOT PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, OUR COMPETITIVE POSITION
MAY BE IMPAIRED.
Our success depends on our ability to protect our proprietary rights to
the technologies used in our products, and yet the measures we are taking to
protect these rights may not be adequate. If we are not adequately protected,
our competitors could use the intellectual property that we have developed to
enhance their products and services, which could harm our business. We rely on a
combination of patents, copyright and trademark laws, trade secrets,
confidentiality provisions and other contractual provisions to protect our
proprietary technology, but these legal means afford only limited protection.
Unauthorized parties may attempt to copy aspects of our products or to obtain
and use information that we regard as proprietary. In addition, the laws of some
foreign countries may not protect our intellectual property rights to the same
extent as do the laws of the United States. Litigation may be necessary to
enforce our intellectual property rights, which could result in substantial
costs and diversion of management attention and resources.
WE MAY BE SUED FOR PATENT INFRINGEMENT, WHICH COULD BE TIME CONSUMING AND
EXPENSIVE, AND, IF SUCCESSFUL, COULD REQUIRE US TO CEASE SELLING OR MATERIALLY
CHANGE OUR PRODUCTS.
The software industry is characterized by the existence of a large
number of patents and frequent litigation based on allegations of patent
infringement and the violation of other intellectual property rights. As the
number of entrants into our market increases, the possibility of an intellectual
property claim against us grows. For example, we may be inadvertently infringing
a patent of which we are unaware. In addition, because patent applications can
take many years to issue, there may be a patent application now pending of which
we are unaware, which will cause us to be infringing when it issues in the
future. To address these patent infringement claims, we may have to enter into
royalty or licensing agreements on disadvantageous commercial terms.
Alternatively, we may be unable to obtain a necessary license. A successful
claim of product infringement against us, and our failure to license the
infringed or similar technology, would harm our business. In addition, any
infringement claims, with or without merit, would be time-consuming and
expensive to litigate or settle and would divert management attention from
administering our core business.
FUTURE SALES OF OUR COMMON STOCK, INCLUDING THE SHARES BEING OFFERED BY THIS
PROSPECTUS, MAY DEPRESS OUR STOCK PRICE.
If our current stockholders sell substantial amounts of common stock,
including the shares being offered by this prospectus in the public market, the
market price of our common stock could fall. In addition, these sales of common
stock could impede our ability to raise funds at an advantageous price, or at
all, through the sale of securities. As of November 30, 2003, we had
approximately 2,410,617 shares of common stock outstanding. Virtually all of our
shares, other than shares held by affiliates, are freely tradable. Shares held
by affiliates are tradable, subject to volume and other restrictions of Rule
144. When the SEC declares the Registration Statement on Form S-3, of which this
prospectus is a part, effective, the selling stockholders will be able to freely
trade their shares in the public market, which could result in a decrease in the
price of our stock.
WE HAVE RECEIVED A NOTICE FROM NASDAQ REGARDING THE POSSIBLE DELISTING OF OUR
STOCK FROM THE NASDAQ SMALLCAP MARKET.
We have received a notice from the Nasdaq SmallCap Market regarding
compliance with the $2,500,000 minimum stockholders' equity requirement. On
December 9, 2003, we filed a Form 8-K with a pro-forma balance sheet as of
September 30, 2003 demonstrating the effect of our December 1, 2003 private
placement on our financial statements. We currently expect that Nasdaq will
accept our plan for compliance, but it may not do so. If we cannot achieve
compliance, we expect to receive a formal delisting notice from the Nasdaq
SmallCap Market. We may seek a Nasdaq hearing for appeal if and when we receive
such notice of delisting. If our efforts in this regard are unsuccessful, our
stock would be delisted from the Nasdaq SmallCap Market and trade on the OTC
"bulletin board." Delisting from the Nasdaq SmallCap Market could reduce the
liquidity of the market for our stock and negatively impact our reputation and
consequently our business.
8
OUR STOCK PRICE HAS BEEN, AND MAY CONTINUE TO BE, VOLATILE.
Our common stock price has been and may continue to be highly volatile,
and we expect that the market price of our common stock will continue to be
subject to significant fluctuations, as a result of variations in our quarterly
operating results and the overall volatility of the Nasdaq SmallCap Market.
These fluctuations have been, and may continue to be, exaggerated because an
active trading market has not developed for our stock. Thus, investors may have
difficulty selling shares of our common stock at a desirable price, or at all.
In addition, the market price of our common stock may rise or fall in
the future as a result of many factors, such as:
o variations in our quarterly results;
o announcements of technology innovations by us or our
competitors;
o introductions of new products by us or our competitors;
o acquisitions or strategic alliances by us or our competitors;
o hiring or departure of key personnel;
o the gain or loss of a significant customer or order;
o changes in estimates of our financial performance or changes
in recommendations by securities analysts;
o market conditions and expectations regarding capital spending
in the software industry and in our customers' industries; and
o adoption of new accounting standards affecting the software
industry.
The market prices of the common stock of many companies in the software
and Internet industries have experienced extreme price and volume fluctuations,
which have often been unrelated to these companies' operating performance. In
the past, securities class action litigation has often been brought against a
company after a period of volatility in the market price of its stock. We may in
the future be a target of similar litigation. Securities litigation could result
in substantial costs and divert management's attention and resources, which
could harm our business.
IF WE DEFAULT ON OUR BANK COVENANTS, THE BANK MAY, AMONG OTHER THINGS, CEASE
ADVANCING FUNDS, DEMAND IMMEDIATE REPAYMENT AND EXERCISE ALL OTHER RIGHTS AS A
CREDITOR UNDER OUR AGREEMENTS.
We were in default of various financial covenants in our loan agreement
at September 30, 2003 because of our $1.2 million net loss in the third quarter,
and the bank waived this non compliance for the third quarter of 2003. We have
not been able to comply with tangible net worth and other covenants of our line
of credit with Comerica Bank in the past, and we may not be able to come into
compliance with these and our other financial covenants in our loan agreement
with the bank in the future if we fail to increase our revenues or continue to
have net losses. We recently renegotiated certain of our bank covenants, which
require, among other things, that we maintain a tangible net worth of at least
$2.25 million (subject to quarterly increases based on net income and proceeds
received from the sale of debt or equity securities, if any). In addition, we
must show a profit of at least one dollar for the quarter ending December 31,
2003 and thereafter, and we must have funds on deposit with the bank in excess
of all outstanding borrowings. Borrowings under this facility are secured by
substantially all of our assets, including our intellectual property. If we
violate any covenant in our agreements with Comerica Bank, the bank may declare
us in default of our obligations and could, among other things, refuse to
advance us any additional funds under the line of credit, accelerate our
repayment obligations under all our facilities, and exercise all of its other
rights as a creditor under our facilities, including the sale of our assets,
including our intellectual property.
THE ANTITAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND UNDER DELAWARE LAW
COULD DISCOURAGE A TAKEOVER THAT CERTAIN OF OUR STOCKHOLDERS MAY CONSIDER
DESIRABLE.
9
Provisions in our certificate of incorporation, bylaws and Delaware law
may discourage, delay or prevent a merger or other change in control that a
stockholder may consider favorable. These provisions may also discourage proxy
contests or make it more difficult for stockholders to take corporate action.
These provisions include the following:
o establishing a classified board in which only a portion of the
total board members will be elected at each annual meeting;
o authorizing the board to issue preferred stock;
o prohibiting cumulative voting in the election of directors;
o limiting the persons who may call special meetings of
stockholders;
o prohibiting stockholder action by written consent; and
o establishing advance notice requirements for nominations for
election of the board of directors or for proposing matters
that can be acted on by stockholders at stockholder meetings.
10
USE OF PROCEEDS
The proceeds from the sale of the shares of common stock offered
pursuant to this prospectus are solely for the account of the selling
stockholders. As such we will not receive any of the proceeds from the sale of
these shares, other than funds, if any, that we may receive upon the exercise of
outstanding warrants held by the selling stockholders. As of January 14, 2004,
the last sale price of our common stock on the Nasdaq SmallCap Market was $4.09,
and therefore none of the warrants issued the selling stockholders are currently
in-the-money. We intend to use any net proceeds from the exercise of such
warrants for general corporate purposes.
Each of the warrants held by the selling stockholders contains a "net
exercise" provision, which means that a selling stockholder may elect to pay the
exercise price of the warrant by surrendering a portion of the shares underlying
the warrant to us instead of paying us cash. If the selling stockholder chooses
this "cashless" method of exercising the warrant, the selling stockholder will
receive that number of shares equal to the number of shares which could have
been purchased using the aggregate difference in value between the exercise
price and the fair market value at the time of exercise.
For example, if the selling stockholder holds a warrant to purchase
5,000 shares of our common stock at an exercise price of $3.80 per share and
assuming that the fair market value of one share of our common stock is $4.00,
then if the warrant is exercised in full, such selling stockholder would receive
250 shares of our common stock:
X = 5,000 * ($4.00-$3.80) = 5,000 * $0.20 = 250 shares
--------------------- -------------
$4.00 $4.00
In the above example, if the selling stockholder were to pay us $19,000 in cash
to exercise the warrant in full, we would be obligated to issue 5,000 shares to
such selling stockholder.
TRANSACTIONS WITH SELLING STOCKHOLDERS
On December 1, 2003, we issued 300,000 shares of our common stock at a
purchase price of $3.73 per share, and warrants to purchase up to 60,000 shares
of our common stock at an exercise price of $4.48 per share, to certain
purchasers identified under the heading "Selling Stockholders" on page 12 of
this prospectus in a private placement transaction. In connection with the
issuance of these securities, we paid Securities Research Associates, Inc. a
customary fee, and also issued a warrant to purchase up to 30,000 of our common
stock at an exercise price of $4.48 per share to a trust controlled by Brian
Swift, an affiliate of Securities Research Associates, Inc., as compensation for
services as placement agent to us. The warrants each contain a net exercise
provision, which is a manner of cashless exercise explained in "Use of Proceeds"
above, and are fully vested as of the date of issuance. The warrants expire if
unexercised on the earlier of November 25, 2008 or a merger or acquisition of
Persistence.
PLAN OF DISTRIBUTION
We are registering shares on behalf of the selling stockholders. We are
required to keep the Registration Statement on Form S-3 of which this prospectus
is a part effective until the earlier of (i) the date when the selling
stockholders have sold all the shares pursuant to the Registration Statement on
Form S-3, (ii) the date on which all of the shares may be sold pursuant to Rule
144(k) under the Securities Act of 1933, as amended or (iii) _____________,
2005, the date that is 18 months after the date on which the Registration
Statement on Form S-3 of which this prospectus is a part is declared effective
by the SEC. We are also required to file an additional registration statement at
the request of certain of the selling stockholders under certain circumstances.
As used in this prospectus, "selling stockholders" includes donees and
pledgees selling shares received from a named selling stockholder after the date
of this prospectus. All costs, expenses and fees in connection with the
registration of the shares offered by this prospectus will be borne by us.
Brokerage commissions and similar selling expenses, if any, attributable to the
sale of shares will be borne by the selling stockholders. Sales of shares may be
effected by selling stockholders from time to time in one or more types of
transactions (which may include block transactions) on the Nasdaq SmallCap
Market, or otherwise, in negotiated transactions, through put or call options
transactions relating to the shares, through short sales of shares, or a
combination of such methods of sale, at market prices prevailing at the time of
sale, or at negotiated prices. Such transactions may or may not involve brokers
or dealers.
11
The selling stockholders will act independently of us in making
decisions with respect to the timing, manner and size of each sale. The selling
stockholders may effect such transactions by selling shares directly to
purchasers or to or through broker-dealers, which may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
To the extent required, we may amend or supplement this prospectus from
time to time to describe a specific plan of distribution. In connection with
distributions of the shares or otherwise, the selling stockholders may enter
into hedging transactions with broker-dealers or other financial institutions.
In connection with those transactions, broker-dealers or other financial
institutions may engage in short sales of the common stock in the course of
hedging the positions they assume with the selling stockholders. After the date
of this prospectus, the selling stockholders also may sell the common stock
short and redeliver the shares to close out those short positions. The selling
stockholders also may enter into option or other transactions or the creation of
one or more derivative securities with broker-dealers or other financial
institutions that require the delivery to the broker-dealer or other financial
institution of shares offered by this prospectus, which shares the broker-dealer
or other financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect those transactions). The selling stockholders
also may pledge or hypothecate shares to a broker-dealer or other financial
institution, and, upon a default, that broker-dealer or other financial
institution may effect sales of the pledged shares pursuant to this prospectus
(as supplemented or amended to reflect that transaction). In effecting sales,
broker-dealers or agents engaged by the selling stockholders may arrange for
other broker-dealers to participate. Broker-dealers or agents may receive
commissions, discounts or concessions from the selling stockholders in amounts
to be negotiated immediately prior to the sale.
The selling stockholders and any broker-dealers that act in connection
with the sale of the common stock may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commission received by
them and any profit on the resale of the shares of common stock as principal
might be deemed to be underwriting discounts and commissions under the
Securities Act. The selling stockholders may agree to indemnify any agent,
dealer or broker-dealer that participates in transactions involving sales of the
shares against some liabilities, including liabilities arising under the
Securities Act. In addition, we have agreed to indemnify the selling
stockholders against certain liabilities arising under the Securities Act and
each of the selling stockholders have agreed to indemnify us against certain
liabilities arising under the Securities Act. Liabilities under the federal
securities laws cannot be waived.
We have advised the selling stockholders that the anti-manipulation
rules under the Securities Exchange Act of 1934 may apply to sales of the shares
offered under this prospectus in the market, and to their own activities and
those of their affiliates. The selling stockholders have advised us that during
the time they are engaged in attempting to sell the shares offered under this
prospectus, they will:
o not engage in any stabilization activity in connection with
any of our securities;
o provide a copy of the final prospectus to each person to whom
shares may be offered, and to each broker-dealer, if any,
through which any shares may be offered;
o not bid for or purchase any of our securities or any rights to
acquire our securities, or attempt to induce any person to
purchase any of our securities or any rights to acquire our
securities other than as permitted under the Exchange Act; and
o not effect any sale or distribution of the shares until after
the prospectus has been appropriately amended or supplemented,
if required.
Selling stockholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of such rule.
SELLING STOCKHOLDERS
The following table sets forth certain information as of December 12,
2003 with respect to the selling stockholders. We are unable to determine the
exact number of shares that actually will be sold by the selling stockholders.
We do not know how long the selling stockholders will hold the shares before
selling them. We assume each selling stockholder will sell all shares offered by
such selling stockholder in this prospectus.
We have determined beneficial ownership in accordance with the rules of
the Securities and Exchange Commission. Except as indicated by the footnotes
below, we believe, based on the information furnished to us, that the persons
and entities named in the tables below have sole voting and investment power
with respects to all shares of common stock that they beneficially own, subject
to applicable community property laws. We have based our calculation of the
percentage of beneficial ownership on 2,410,617 shares of common stock
outstanding on November 30, 2003.
12
Asterisks represent beneficial ownership of less than one percent.
Except as indicated in "Transactions with Selling Stockholders" on page 11, or
by the footnotes below, no selling stockholder has had any material relationship
with us or any of our predecessors or affiliates within the last three years.
Except as indicated by the footnotes below, none of the selling stockholders are
broker-dealers or affiliates of broker-dealers. Each of the selling stockholders
acquired the shares being offered in this prospectus in the ordinary course of
business and at the time of acquisition no selling stockholder had direct or
indirect agreements or understandings with any person to distribute such shares.
SHARES BENEFICIALLY SHARES OFFERED SHARES BENEFICIALLY
OWNED PRIOR BY THIS OWNED AFTER
SELLING STOCKHOLDER TO THE OFFERING PROSPECTUS THE OFFERING (1)
------------------- --------------- -------------- ----------------
Number Percent Number Percent
---------- ------- ------ -------
Clarion Capital Corporation (2) 126,000 5.23% 126,000 -- *
Ohio Savings Plaza, Suite 51D
1801 East Ninth Street
Cleveland, Ohio 44114
Roy Rogers, ttee UTD 9/28/89 (3) 39,600 1.64 39,600 -- *
FBO Roy & Ruth Rogers Unit Trust
27927 Briones Way
Los Altos Hills, CA 94022
Roy Rogers, ttee UTD 1/21/81 (4) 80,400 3.34 80,400 -- *
FBO The Rogers Family Trust
27927 Briones Way
Los Altos Hills, CA 94022
Gerald S Casilli & Jeanne L Casilli (5) 53,000 2.20 48,000 5,000 *
ttees UTD 10/15/96
FBO The Casilli Revocable Trust
2905 Woodside Road
Woodside, CA 94062
John Lee (5) 48,000 1.99 48,000 -- *
555 Montgomery Street
San Francisco, CA 94111
Howard Miller & Barbara Miller (6) 18,000 * 18,000 -- *
ttees UTD 9/30/87
FBO The Miller Trust
13 Edgewater Road
Belvedere, CA 94920
Brian G. Swift and Suzanne B. Swift (7) 30,000 1.24 30,000 -- *
ttees UTD 3/13/91
FBO Brian and Suzanne Swift 1991 Living Trust
c/o Security Research Associates, Inc.
Wood Island, Suite 3F
80 E. Sir Frances Drake Blvd.
Larkspur, CA 94939
- -----------------------
* Represents less than 1 percent ownership
(1) Assumes each selling stockholder will sell all shares offered by such
selling stockholder in this prospectus.
(2) Includes 21,000 shares of common stock issuable upon exercise of a fully
exercisable warrant at an exercise price of $4.48 per share. This warrant
contains a net exercise provision. This warrant expires if unexercised on
the earlier of November 25, 2008 or a merger or acquisition of Persistence.
The natural person holding sole dispositive power over the shares held by
the selling stockholder is Morton A. Cohen. Mr. Cohen disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest in
the shares.
13
(3) Includes 6,600 shares of common stock issuable upon exercise of a fully
exercisable warrant at an exercise price of $4.48 per share. This warrant
contains a net exercise provision. This warrant expires if unexercised on
the earlier of November 25, 2008 or a merger or acquisition of Persistence.
(4) Includes 13,400 shares of common stock issuable upon exercise of a fully
exercisable warrant at an exercise price of $4.48 per share. This warrant
contains a net exercise provision. This warrant expires if unexercised on
the earlier of November 25, 2008 or a merger or acquisition of Persistence.
(5) Includes 8,000 shares of common stock issuable upon exercise of a fully
exercisable warrant at an exercise price of $4.48 per share. This warrant
contains a net exercise provision. This warrant expires if unexercised on
the earlier of November 25, 2008 or a merger or acquisition of Persistence.
(6) Includes 3,000 shares of common stock issuable upon exercise of a fully
exercisable warrant at an exercise price of $4.48 per share. This warrant
contains a net exercise provision. This warrant expires if unexercised on
the earlier of November 25, 2008 or a merger or acquisition of Persistence.
(7) Consists of 30,000 shares of common stock issuable upon exercise of a
warrant at an exercise price of $4.48 per share. This warrant contains a
net exercise provision. Mr. Swift is affiliated with Securities Research
Associates, Inc., a registered broker-dealer.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Persistence by Heller Ehrman White & McAuliffe LLP, 2775 Sand Hill Road, Menlo
Park, California 94025. Mark Medearis, a shareholder of Heller Ehrman White &
McAuliffe LLP, is our Assistant Secretary.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from the
Company's Annual Report on Form 10-K/A for the year ended December 31, 2002 have
been audited by Deloitte & Touche 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 such firm given upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
This prospectus is part of a Registration Statement on Form S-3 that we
filed with the Securities and Exchange Commission. Certain information in the
registration statement has been omitted from this prospectus in accordance with
the rules of the SEC. We file our annual, quarterly and special reports, proxy
statements and other information with the SEC. You can inspect and copy the
registration statement as well as reports, proxy statements and other
information we have filed with the SEC at the public reference room maintained
by the SEC at 450 Fifth Street, NW, Washington, D.C. 20549. You can obtain
copies from the public reference room of the SEC at 450 Fifth Street, NW,
Washington, D.C. 20549 upon payment of certain fees. You can call the SEC at
1-800-732-0330 for further information about the public reference room. We are
also required to file electronic versions of these documents with the SEC, which
may be accessed through the SEC's Internet site at http://www.sec.gov.
Our website is www.persistence.com. We make our annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports available free of charge as soon as reasonably
practicable after we file these reports with the Securities and Exchange
Commission.
Our common stock is quoted on the Nasdaq SmallCap Market. Reports,
proxy and information statements and other information concerning Persistence
may be inspected at the Nasdaq Stock Market at 1735 K Street, NW, Washington,
D.C. 20006.
The SEC allows us to "incorporate by reference" certain of our
publicly-filed documents into this prospectus, which means that information
included in these documents is considered part of this prospectus. Information
that we file with the SEC subsequent to the date of this prospectus will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, until the selling stockholders have sold all the shares.
14
The following documents filed with the SEC are incorporated by
reference in this prospectus:
1. Our Annual Report on Form 10-K for the year ended December 31, 2002
filed with the SEC on March 31, 2003, as amended by Form 10-K/A filed with the
SEC on June 20, 2003 and by Form-10-K/A filed with the SEC on August 12, 2003
(File No. 000-25857).
2. Our Quarterly Report on Form 10-Q for the three months ended March
31, 2003, filed on May 15, 2003, as amended by Form 10-Q/A filed with the SEC on
June 23, 2003, and by Form 10-Q/A filed with the SEC on August 12, 2003 (File
No. 000-25857).
3. Our Quarterly Report on Form 10-Q for the six months ended June 30,
2003, filed on August 14, 2003, as amended by Form 10-Q/A filed with the SEC on
October 7, 2003 (File No. 000-25857).
4. Our Quarterly Report on Form 10-Q for the nine months ended
September 30, 2003, filed with the SEC on November 14, 2003 (File No.
000-25857).
5. The description of our common stock set forth in our Registration
Statement on Form 8-A, filed with the SEC on April 23, 1999, and any further
amendment or report filed hereafter for the purpose of updating any such
description. (File No. 000-25857).
All documents subsequently filed by us pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this registration
statement and prior to the effectiveness of this Registration Statement, shall
be deemed to be incorporated by reference.
We will furnish without charge to you, on written or oral request, a
copy of any or all of the documents incorporated by reference, including
exhibits to such documents. You should direct any requests for documents to
Persistence Software, Inc., 1720 South Amphlett Blvd., Third Floor, San Mateo,
California 94402, (650) 372-3600, Attention: Chief Financial Officer.
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference certain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, including those identified by the words
"believes," "expects," "may," "will," "should," "seeks," "pro forma,"
"anticipates" and similar expressions. These forward-looking statements include,
among others, statements regarding:
o the trends we see in our business and the markets in which we
operate;
o the features, functionality and market acceptance of our
products (including newly launched products and services); and
o our expectations for our future operating results and cash
flows.
These statements are subject to risks and uncertainties, including
those set forth in the "Risk Factors" section beginning on page 2, and actual
results could differ materially from those expressed or implied in these
statements. All forward-looking statements included in this prospectus are made
as of the date hereof. We assume no obligation to update any such
forward-looking statement or reason why actual results might differ except as
required by the Exchange Act. You should carefully review the section entitled
"Risk Factors" and of our subsequently filings with the SEC.
15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses payable by the
registrant in connection with the sale and distribution of the shares of common
stock being registered. Selling commissions and brokerage fees and any
applicable transfer taxes and fees and disbursements of counsel for the selling
stockholders are payable individually by the selling stockholders. All amounts
shown are estimates except the SEC registration fee.
AMOUNT
TO BE PAID
SEC registration fee................................................$ 129.02
Legal fees and expenses............................................. 35,000.00
Accounting fees and expenses........................................ 10,000.00
Transfer agent fees................................................. 1,000.00
Miscellaneous expenses.............................................. 19,000.00
Total........................................................$ 65,129.02
============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Amended Bylaws provide generally for indemnification of our
officers, directors, agents and employees to the maximum extent authorized and
in the manner permitted by the General Corporation Law of the State of Delaware
(the "DGCL"). Pursuant to Section 145 of the DGCL, a corporation generally has
the power to indemnify its present and former directors, officers, employees and
agents against expenses incurred by them in connection with any suit to which
they are, or are threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of a
corporation, and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. With respect to suits by or in the
right of a corporation, however, indemnification is not available if such person
is adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation unless the court determines that indemnification is
appropriate. In addition, a corporation has the power to purchase and maintain
insurance for such person. The statute also expressly provides that the power to
indemnify that it authorizes is not exclusive of any rights granted under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
As permitted by Section 102 of the DGCL, our stockholders have approved
and incorporated provisions into Article XII of our Amended and Restated
Certificate of Incorporation and Article XII of our Amended Bylaws eliminating a
director's personal liability for monetary damages to us and our stockholders
arising from a breach of a director's fiduciary duty, except for liability under
Section 174 of the DGCL or liability for any breach of the director's duty of
loyalty to us or its stockholders, for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law or for any
transaction in which the director derived an improper personal benefit.
Persistence has also entered into agreements with its directors and certain of
its officers that will require Persistence, among other things, to indemnify
them against certain liabilities that may arise by reason of their status or
service as directors to the fullest extent not prohibited by law. Persistence
also maintains director and officer liability insurance.
In connection with this offering, the selling stockholders have agreed
to indemnify Persistence, its directors and officers and each such person who
controls Persistence, against any and all liability arising from inaccurate
information provided to Persistence by the selling stockholders and contained
herein, up to a maximum of the net proceeds received by the selling stockholders
from the sale of their shares hereunder, except in the case of willful fraud.
II-1
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
5.1 Opinion of Heller Ehrman White & McAuliffe LLP.
10.26* Common Stock Purchase Agreement dated as of November 25,
2003 by and among Persistence Software, Inc. and certain
investors.
10.27* Registration Rights Agreement dated as of December 1,
2003 by and among Persistence Software, Inc. and certain
investors.
10.28* Form of Common Stock Warrant dated as of December 1, 2003
issued to certain investors.
10.29* Form of Common Stock Warrant dated as of December 1, 2003
issued to Brian G. Swift and Suzanne B. Swift ttees UTD
3/13/91 FBO Brian and Suzanne Swift 1991 Living Trust.
23.1 Independent Auditors' Consent.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1** Power of Attorney (see page II-4).
___________________________
* Filed as an exhibit to our Current Report on Form 8-K filed
with the SEC on December 9, 2003 and incorporated herein by
reference.
** Previously filed.
II-2
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered 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
the registrant pursuant to the provisions referred to in Item 15 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 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 against the registrant by such director, officer
or controlling person in connection with the securities being registered
hereunder, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question 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.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Mateo, State of California, on the 15th day of
January, 2004.
PERSISTENCE SOFTWARE, INC.
By: /S/ CHRISTOPHER T. KEENE
------------------------------
Christopher T. Keene
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints, Christopher T. Keene and Brian Tobin, and
each of them, as his attorney-in-fact, each with full power of substitution, for
him in any and all capacities, to sign any and all amendments to this
Registration Statement (including post-effective amendments), and any and all
Registration Statements filed pursuant to Rule 462 under the Securities Act of
1933, in connection with or related to the Offering contemplated by this
Registration Statement and its amendments, if any, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to any and all amendments
to said Registration Statement.
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 dates indicated:
SIGNATURE TITLE
/S/ CHRISTOPHER T. KEENE Chief Executive Officer and Director
- -------------------------------------- (Principal Executive Officer)
Christopher T. Keene
/S/ BRIAN TOBIN Acting Chief Financial Officer and
- -------------------------------------- Secretary (Principal Accounting
Brian Tobin Officer)
* Director
- --------------------------------------
Lawrence Owen Brown
* Director
- --------------------------------------
Thomas P. Shanahan
* Director
- --------------------------------------
James F. Sutter
* Director
- --------------------------------------
Sanjay Vaswani
II-4
PERSISTENCE SOFTWARE, INC.
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------
5.1 Opinion of Heller Ehrman White & McAuliffe LLP.
10.26* Common Stock Purchase Agreement dated as of November 25,
2003 by and among Persistence Software, Inc. and certain
investors.
10.27* Registration Rights Agreement dated as of December 1, 2003
by and among Persistence Software, Inc. and certain
investors.
10.28* Form of Common Stock Warrant dated as of December 1, 2003
issued to certain investors.
10.29* Form of Common Stock Warrant dated as of December 1, 2003
issued to Security Research Associates, Inc.
23.1 Independent Auditors' Consent.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1** Power of Attorney (see page II-5).
- ------------------------
* Filed as an exhibit to our Current Report on Form 8-K filed
with the SEC on December 9, 2003 and incorporated herein by
reference.
** Previously filed.