As filed with the Securities and Exchange Commission on April 25, 1997
Registration No. 333-22165
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SANDATA, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
11-2841799
(I.R.S. Employer Identification Number)
26 Harbor Park Drive
Port Washington, New York 11050
(516) 484-9060
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Bert E. Brodsky
President
Sandata, Inc.
26 Harbor Park Drive
Port Washington, New York 11050
(516) 484-9060
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies of all communications and notices to:
Steven J. Kuperschmid, Esq.
Certilman Balin Adler & Hyman, LLP
90 Merrick Avenue
East Meadow, New York 11554
(516) 296-7000
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the effective date of
this Registration Statement.
(Cover continued on following page)
If any of the securities being registered on this form are to
be offered on a delayed or continuous basis pursuant to Rule
415 of the Securities Act of 1933, 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 registration statement number of
the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Proposed
Proposed Maximum Maximum
Amount to be Offering Price Aggregate Offering Amount of
Title of Each Class of Securities to be Registered Registered (1) Per Share (2) Price (2) Registration Fee
- ------------------------------------------------ ----------------------- --------------------- ------------------- ---------------
Common Stock, $.001 1,988,140 $10.38 $20,636,893 $6,253.60(3)
Par Value, registered for the benefit
of Selling Stockholders
================================================ ======================= ===================== ===================== ==============
(1) This Registration Statement also covers such additional number
of shares of Common Stock as may be issuable by reason of the
operation of the antidilution provisions of certain
outstanding warrants.
(2) Estimated solely for the purpose of calculating the amount of
the registration fee pursuant to Rule 457(c).
(3) Paid with the previous filings.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
Subject to Completion
Preliminary Prospectus Dated April 25, 1997
PROSPECTUS
1,988,140 SHARES OF COMMON STOCK, $.001 PAR VALUE
SANDATA, INC.
This Prospectus relates to 1,988,140 shares of Common Stock (the "Shares")
of Sandata, Inc. (the "Company"), or approximately 170% of the Company's
currently issued and outstanding shares of Common Stock. See Risk
Factors--Effect of Outstanding Exercisable Securities" and "Risk Factors--Shares
Eligible for Future Sale May Adversely Affect the Market". This Prospectus
covers: (i) the resale by certain individuals and entities of up to an aggregate
of 300,000 Shares issued by the Company pursuant to Subscription Agreements
dated as of December 23, 1996, (ii) the resale by certain persons of up to an
aggregate of 100,000 Shares issued by the Company pursuant to Subscription
Agreements dated as of September 13, 1996, (iii) the resale by certain Directors
and executive officers of the Company of up to an aggregate of 1,238,140 Shares,
including, without limitation, shares underlying options and warrants, and (iv)
the resale by certain individuals and entities of up to an aggregate of 350,000
shares issuable upon the exercise of outstanding warrants.
The various persons and entities referred to herein are hereinafter
referred to individually as a "Selling Stockholder" and collectively as the
"Selling Stockholders". The Company will receive no proceeds upon the resale of
the Shares by such persons and entities. There are no commitments pursuant to
which the Company will receive any proceeds from the resale of the Shares by the
Selling Stockholders. See "Selling Stockholders."
In October, 1996, the Company commenced a private offering, on a "best
efforts--all or none" basis, to raise $1,500,000 by issuing an aggregate of
300,000 shares of Common Stock and five year warrants for the purchase of
150,000 shares of Common Stock at an exercise price of $7.00 per share. Neither
the shares of Common Stock, the warrants nor the shares of Common Stock
underlying the warrants were registered under the Securities Act of 1933, as
amended (the "Securities Act"). Contemporaneously with the execution and
delivery by the Company of the letter of intent with regard to such private
offering, certain assignees of the placement agent acquired 100,000 shares of
the Company's Common Stock at a purchase price of $3.00 per share.
In connection with the closing of such private offering, an affiliate of
the placement agent entered into a financial consulting agreement with the
Company pursuant to which, among other things, such affiliate will receive
aggregate annual payment of $36,000 and certain assignees of such affiliate
received warrants to purchase an aggregate of 200,000 shares of Common Stock
exercisable as follows: 100,000 shares at $5.00 per share and 100,000 shares at
$7.00 per share, such warrants to be exercisable for one year (with respect to
the warrants exercisable at $5.00 per share) and two years (with respect to the
warrants exercisable at $7.00 per share). The warrants issued in such private
offering, including those issued to investors as well as the assignees of the
placement agent's affiliate, are redeemable by the Company under certain
circumstances.
Except for the Shares of Messrs. Bert E. Brodsky, Hugh Freund and Gary
Stoller, the Shares proposed to be sold hereby were acquired (and may be
acquired upon exercise of the above mentioned warrants) by Selling Stockholders
pursuant to the above mentioned private offering. Among other things, in
connection with such private offering, the Company agreed to register, under
certain circumstances, on one or more occasions, the Shares acquired by such
Selling Stockholders (including, without limitation, the placement agent) in
such private offering. The filing of the registration statement of which this
Prospectus forms a part represents the fulfillment of certain obligations of the
Company to such Selling Stockholders.
To the Company' s knowledge, the Selling Stockholders, directly through
agents designated by them from time to time or through broker-dealers or
underwriters also to be designated, may sell the Shares from time to time, in or
through privately negotiated transactions, or in one or more transactions,
including block transactions, on the NASDAQ SmallCap Market, or on any other
market or stock exchange on which the Shares may be listed in the future
pursuant to and in accordance with the applicable rules of such market or
exchange or otherwise. The selling price of the Shares may be at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. See "Selling Stockholders" and "Plan of
Distribution".
The Company has agreed to indemnify certain of the Selling Stockholders
against certain civil liabilities, including liabilities under the Securities
Act. See "Selling Stockholders" and "Plan of Distribution".
The Selling Stockholders and any agents, broker-dealers, or underwriters
that participate with the Selling Stockholders in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the Securities
Act, and any commissions received by them, and any profit on the resale of the
Shares purchased by them, may be deemed to be underwriting commissions or
discounts under the Securities Act. The Company is not aware of any underwriting
arrangements with respect to the resale of the Shares by the Selling
Stockholders. See "Selling Stockholders" and "Plan of Distribution".
A PURCHASE OF THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" (PAGE 5).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Company's Common Stock is traded on the NASDAQ SmallCap Market under
the symbol "SAND". On April 21, 1997, the closing bid price for the Company's
Common Stock, as reported on the NASDAQ SmallCap Market, was $9.00.
, 1997
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT ANY INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company files reports, proxy and information statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following Regional Offices of the Commission:
7 World Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material can also be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Furthermore, the Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding the
Company. The address of such Web site is http://www.sec.gov.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act") and are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended May 31, 1996, as amended (the "Form 10-KSB").
(b) The Company's Quarterly Report on Form 10-QSB for the period ended
August 31, 1996, as amended.
(c) The Company's Quarterly Report on Form 10-QSB for the period ended
November 30, 1996, as amended.
(d) The Company's Quarterly Report on Form 10-QSB for the period ended
February 28, 1997 (the "February 10-QSB").
(e) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8(a), as amended.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of the offering of the Shares offered hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
their respective dates of filing.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents referred to above which have been
incorporated into this Prospectus by reference (other than exhibits to such
documents). Requests for such copies should be directed to the Secretary,
Sandata, Inc., 26 Harbor Park Drive, Port Washington, New York 11050 (telephone
number: (516) 484-9060).
Any statement contained in a document incorporated herein by reference
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
THE COMPANY
The Company, through its wholly-owned subsidiaries, is engaged in the
business of providing computerized data processing services and custom software
and programming services, by utilizing Company- developed software, and software
acquired or licensed by the Company, principally to the health care industry,
but also to the general commercial market. In addition, the Company provides
hardware maintenance of personal computers ("PCs"), printers and networks and
training on PC software packages.
3
Applications of the Company's software include: a home health care system,
computerized preparation of management reports, payroll processing and
electronic time card with voice recognition systems. Principal products and
services provided by the Company include the Sandsport Home Attendant Reporting
Program, data entry services and specialized system development, among others.
In addition, the Company provides administration and processing services for an
affiliate engaged in the pharmacy prescription reimbursement business See "Risk
Factors--Unascertainable Risks Related to Possible Acquisitions".
Generally, in providing data processing services, the Company first
receives data from its customers, then processes it and generates reports based
on such data. Services are provided to customers by processing on the Company's
equipment at its premises. The Company also has available software which permits
information retrieval from customers' facilities which communicate with the
Company's computers at its data center. This allows the Company's customers to
have access to processing hardware and software without a substantial investment
on their part. The Company also offers its services on a turnkey basis. Turnkey
computer systems offer the customer total in-house capabilities through the
licensing of the Company's software for use on a customer's computer. The
Company's software is written in a variety of software languages including
COBOL, C and FoxPro.
Over the past several years, the Company has developed its Santrax product,
a computerized time and attendance management system. The Santrax system
utilizes voice recognition and telecommunications technology to verify that a
person is at a particular telephone number at a particular time. Presently, the
system is being utilized by several of the Company's home health care clients,
with the Company receiving approximately an aggregate of 400,000 calls per week.
Although no assurances can be given, it is anticipated that the Santrax product
can be utilized by other industry applications. On April 10, 1997, the Company
received notice that MCI Telecommunications Corporation ("MCI") had commenced an
action against it in the United States District Court for the Eastern District
of New York alleging that the Company's Santrax time and attendance system
infringes on certain patent rights allegedly owned by plaintiff. The complaint
seeks compensatory and treble damages with interest and injunctive relief. The
Company believes that its product does not infringe on such patent rights and
intends to vigorously defend this action. However, in that the litigation has
only recently been commenced, no assurances as to the outcome can be given. See
"Risk Factors--Proprietary Rights; Pending Litigation".
The Company was incorporated in the State of New York in June 1978 and
reincorporated in the State of Delaware in December 1986, at which time it also
assumed its present name.
The Company maintains its executive offices at 26 Harbor Park Drive, Port
Washington, New York 11050; telephone number (516) 484-9060.
FORWARD-LOOKING STATEMENTS
The Company cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ materially from
any forward-looking statements which may be deemed to have been made in this
Prospectus or which are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in this Prospectus that are not statements of
historical fact may be deemed to be forward- looking statements. Without
limiting the generality of the foregoing, words such as "may", "will", "expect",
4
"believe", "anticipate", "intend", "could", "estimate", or "continue" or
the negative variations thereof or comparable terminology are intended to
identify forward-looking statements. Factors which may effect the Company's
results include, but are not limited to, the risks and uncertainties associated
with data processing and system sales. The Company is also subject to other
risks detailed herein or detailed from time to time in the Company's Commission
filings. Factors that could cause or contribute to such difference include, but
are not limited to, those discussed in "Risk Factors" below, as well as those
discussed elsewhere in this Prospectus and in the Company's filings with the
Commission.
RISK FACTORS
An investment in the securities offered hereby is speculative and involves
a high degree of risk and should only be purchased by investors who can afford
to lose their entire investment. Prospective purchasers, prior to making an
investment, should carefully consider the following risks and speculative
factors, as well as other information set forth elsewhere in this Prospectus. As
discussed above, this Prospectus contains, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ materially. Factors that could cause
or contribute to such difference include, but are not limited to, those
discussed below, as well as those discussed elsewhere in this Prospectus.
1. Dependence on Governmental Program.
For its fiscal years ended May 31, 1996 and 1995, and the fiscal nine
month periods ended February 28, 1997 and 1996, approximately 51%, 61%, 76%
and 67%, respectively, of the Company's revenues were derived from data
processing and other related services rendered to vendor agencies under
contract with the Human Resources Agency of the City of New York ("HRA").
Such vendor agencies receive a substantial portion of their operating funds
from the federal government through its Medicaid program; the balance of
their funding is provided by the State and City of New York. Management
believes that operations will, for the foreseeable future, continue to be
dependent upon revenues generated from such vendor agencies. Elimination of
the home attendant services program by HRA or a substantial cut-back in the
level of funding of this program by the federal, state or city governments
would have, through the impact of such cut-backs on the vendor agencies, a
material adverse effect on the Company. See "Item 1--Description of
Business--Principal Products and Services" in the Form 10-KSB.
2. Technological Obsolescence.
The data processing and computer software fields are characterized by
rapid technological developments and advances, often resulting in partial
or total obsolescence of systems. There is no assurance that the Company's
research and development activities will permit it to keep abreast of new
developments. See "Item 1--Description of Business--Research and
Development" in the Form 10-KSB.
5
3. Competition.
Some of the Company's competitors are larger and have greater
financial resources than the Company. Furthermore, the Company's customers
may find it desirable to perform for themselves the services being rendered
by the Company. The Company also competes with larger and better
established companies for the hiring of qualified technical and marketing
personnel. See "Item 1--Description of Business--Competition" in the Form
10-KSB.
4. Proprietary Rights; Pending Litigation.
The Company does not own, nor has it applied for, Federal Copyright
registration on its computer software systems now in existence or being
developed. However, the Company believes that its computer software systems
are proprietary trade secrets and that they, together with the
documentation, manuals, training aids, instructions and other materials
supplied by the Company to customers, are subject to the proprietary rights
of the Company and protected by applicable law. However, there can be no
assurance that the Company will be able to protect itself against
misappropriation of its proprietary rights and trade secrets. See "Item
1--Business--Proprietary Rights" in the Form 10-KSB. On April 10, 1997, the
Company received notice that MCI had commenced an action against it in the
United States District Court for the Eastern District of New York alleging
that the Company's Santrax time and attendance system infringes on certain
patent rights allegedly owned by plaintiff. The complaint seeks
compensatory and treble damages with interest and injunctive relief. The
Company believes that its product does not infringe on such patent rights
and intends to vigorously defend this action. However, in that the
litigation has only recently been commenced, no assurances as to the
outcome can be given.
5. Control by Current Stockholders.
The Company's Certificate of Incorporation does not provide for
cumulative voting. Therefore, stockholders owning in excess of 50% of the
outstanding shares of the Company's Common Stock are able to elect all the
members of the Board of Directors. As of the date of this Prospectus,
present management of the Company owns approximately 68.1% of the issued
and outstanding shares of Common Stock of the Company and will be able to
elect all of the Company's directors and to control the Company. However,
upon the completion of this offering, as to which no assurances can be
made, the present management of the Company will own 13.2% in the aggregate
of the issued and outstanding shares of the Company's Common Stock.
6. Effect of Outstanding Exercisable Securities.
As of the date of this Prospectus, the Company had currently
exercisable outstanding options and warrants to purchase shares of the
Company's Common Stock exercisable at various prices from $1.38 to $7.00,
subject to adjustment per share, pursuant to which an aggregate of
1,575,259 shares of Common Stock (subject to adjustment) may be issued.
This includes warrants granted to the Company's Chairman and options
granted to various directors, officers, employees and consultants.
During the respective terms of the Company's outstanding derivative
securities, the holders thereof may be able to purchase shares of Common
Stock at prices substantially below the then-current market price of the
6
Company's Common Stock with a resultant dilution in the interests of
the existing stockholders. In addition, the exercise of outstanding
derivative securities and the subsequent public sales of Common Stock by
holders of such securities pursuant to this offering, a registration
statement effected at their demand, under Rule 144 or otherwise, could have
an adverse effect upon the market for and price of the Company's
securities.
7. Shares Eligible for Future Sale May Adversely Affect the Market.
870,420 of the Company's outstanding shares of Common Stock)
(exclusive of shares of Common Stock issuable upon the exercise of
outstanding options and warrants) are "restricted securities" and, in the
future, may be sold upon compliance with Rule 144 or pursuant to
registration (effected by demand or other rights granted to certain
stockholders) under the Securities Act. Rule 144 currently provides, in
essence, that a person holding "restricted securities" for a period of two
years (as of April 29, 1997, one year) may sell an amount every three
months up to the greater of (a) 1% of the Company's issued and outstanding
securities of that class of securities or (b) the average weekly volume of
sales of such securities during the four calendar weeks preceding the sale
if there is adequate current public information available concerning the
Company. Additionally, non-affiliates (who have not been affiliates of the
Company for at least three months) may sell their "restricted securities"
in compliance with Rule 144 without volume limitations after they have held
such securities for a period of three years (as of April 29, 1997, two
years). An aggregate of 442,754 shares of Common Stock have been owned by
Messrs. Brodsky, Freund and Stoller for more than two years. However, such
shares are subject to an agreement with Barber & Bronson Incorporated
("B&B") imposing certain restrictions on the public sale thereof until
December 22, 1997 without B&B's consent. B&B has authorized Messrs.
Brodsky, Freund and Stoller to sell an aggregate of 1,238,140 shares, which
amount includes outstanding shares of Common Stock, as well as shares of
Common Stock underlying presently exercisable options and warrants.
The Company is registering for resale 1,988,140 Shares held by certain
stockholders, including, without limitation, Shares underlying certain
options and warrants. Such Shares may be resold at any time following the
date of this Prospectus. Prospective investors should be aware that the
possibility of resales by the Selling Stockholders, as well as other
stockholders of the Company, may have a material depressive effect on the
market price of the Company's shares of Common Stock in any market which
may develop.
8. Ability to Renew Present Financing; Significant Outstanding
Indebtedness; Loan Covenants and Security Interests.
From time to time the Company and/or its subsidiaries have entered
into loan arrangements with Marine Midland Bank (the "Bank"), among others.
As of February 28, 1997, the Company owed the Bank $237,486.
On April 18, 1997, the Company's wholly owned subsidiary, Sandsport
Data Services, Inc. ("Sandsport") entered into a Revolving Credit Agreement
(the "Credit Agreement") with the Bank which allows Sandsport to borrow and
re-borrow amounts up to $3,000,000. Interest accrues on amounts outstanding
under the Credit Agreement at a rate equal to the London Interbank Offered
Rate plus 2% and will be paid quarterly in arrears or, at Sandsport's
option, interest may accrue at the Bank's prime rate. The Credit Agreement
required Sandsport to pay a commitment fee in the amount of $30,000 and a
fee equal to 1/4% per annum payable on the unused average daily
balance of amounts under the Credit Agreement. In addition, there are other
fees and charges imposed
7
based upon Sandsport's failure to maintain certain minimum balances.
The Credit Agreement will expire on March 1, 2000. The indebtedness under
the Credit Agreement is guaranteed by the Company and Sandsport's sister
subsidiaries (the "Group"). The collateral for the facility is a first lien
on all equipment owned by Sandsport and the guarantors, as well as a
collateral assignment of $2,000,000 of life insurance payable on the life
of Mr. Brodsky. The Group's guaranty to the Bank, relating to the bonds
discussed below, was modified to conform covenants described therein to
comply with those in the Credit Agreement.
All of the Group assets are pledged to the Bank as collateral for the
amounts due under the Credit Agreement. The Group is prohibited from
incurring additional indebtedness except under certain circumstances.
In addition, pursuant to the Credit Agreement, the Group is required
to maintain certain levels of net worth and meet certain financial ratios
in addition to various other affirmative and negative covenants. The Group
has, in the past, under prior agreements with the the Bank, failed to meet
these net worth and financial ratios, and the Bank has granted the Group
waivers. No assurance can be given that the Group will be able to meet
these net worth and financial requirements in the future, and/or that the
Bank will continue to grant to the Group waivers. Although in the past the
Bank has renewed its loans to the Company when they matured, there can be
no assurance that it will continue to do so or that the Company, if the
Bank does not renew the loan, will be able to arrange alternative financing
on terms satisfactory to it.
In addition, the Company is indebted to companies affiliated with the
Company's Chairman in the amount, as of February 28, 1997, of $1,297,000.
Of this amount, as of February 28, 1997, an aggregate of $462,000 of
indebtedness was evidenced by notes due in December 1997 and May 1998.
On June 1, 1994, BFS Sibling Realty Inc., formerly known as Brodsky
Sibling Realty, Inc. ("BFS") borrowed $3,350,000 in the form of Industrial
Development Revenue Bonds ("Bonds") to finance costs incurred in connection
with the acquisition, renovation and equipping of the Company's office
space located at 26 Harbor Park Drive, Port Washington, New York (the
"Facility" or the "Building") from the Nassau County Industrial Development
Agency (the "NCIDA"). These Bonds were subsequently purchased by the Bank.
The aggregate cost incurred by BFS in conjunction with such acquisition,
renovation and equipping was approximately $4,377,000. In addition, the
Company incurred approximately $500,000 of indebtedness to affiliates of
Mr. Brodsky in connection with additional capital improvements. The Bonds
bore interest at prime plus 3/4 of 1% until August 11, 1995, at which time
the interest rate became fixed at 9% for a five-year term through September
1, 2000. At that time, the interest rate will be adjusted to a rate of
either prime plus 3/4 of 1%, or the applicable fixed rate if offered by the
Bank. As a condition to the issuance of the Bonds, the NCIDA obtained title
to the Facility which it then leased to BFS. On June 21, 1994 (as of June
1, 1994), the Company and its Chairman guaranteed the full and prompt
payment of principal and interest of the Bonds and the Company granted the
Bank a security interest and lien on all the assets of the Company. In
connection with the issuance and sale of the Bonds, the Company entered
into a lease agreement (the "Sublease") with BFS, whereby the Company
leased the Facility for the conduct of its business and, in consideration
therefor, was obligated to make lease payments that at least equal amounts
due to satisfy the underlying Bond obligations.
On July 31, 1995, by an Assignment and Assumption and First Amendment
to Lease between the Company and BFS, the Company assumed the obligations
of BFS under the lease and became the direct tenant and
8
the beneficial owner of the Facility (collectively the "Assignment
Transaction"). In connection with the Assignment Transaction, the Sublease
was terminated. During the period commencing July 1, 1995 and ending
October 31, 1996 the Company paid rent for the Facility to the NCIDA in the
amount of $48,600 per month, subject to adjustment based upon the then
effective interest rate of the Bonds, among other things. In connection
with the Assignment Transaction, the Company obtained the right to acquire
the Facility upon expiration of the lease with the NCIDA (the "Lease") and
became directly liable to the NCIDA for amounts due thereunder. In
connection with the Assignment Transaction, the Company assumed certain
indebtedness owed to affiliates of the Company's Chairman as follows: (i)
the $364,570 remaining balance of a 48-month term loan bearing interest at
8.7% per annum, and (ii) the $428,570 remaining balance of a 42-month term
loan bearing interest at 8.91%. Each of the foregoing loans were incurred
in connection with the construction of improvements to the Building, are
collateralized by the assets of the primary obligor and are guaranteed by
the Company's Chairman.
On August 11, 1995, the Company entered into a $750,000 loan agreement
with the Long Island Development Corporation ("LIDC"), under a guarantee by
the U.S. Small Business Administration ("SBA") (the "SBA Loan"). The entire
$750,000 proceeds have been used to repay a portion of the Bonds. The
Company entered into the Assignment Transaction primarily to satisfy
certain requirements of the SBA. The SBA Loan is payable in 240 monthly
installments of $6,255, which includes principal and interest at a rate of
7.015%.
As of November 1, 1996, the Company entered into an Assignment and
Assumption of and Second Amendment to Lease Agreement among BFS Realty,
LLC, an affiliate of the Company's Directors (the "Assignee"), the Bank and
the Company (the "Second Amendment"). In connection with the Second
Amendment, (i) the Assignee assumed all of the Company's obligations under
the Lease with the NCIDA and entered into a sublease with the Company for
the Facility; and (ii) the Company conveyed to the Assignee the right to
become the owner of the Facility upon expiration of the Lease. In addition,
pursuant to the sublease, the Company has assumed certain obligations owed
by the Assignee to the NCIDA under the Lease. The Assignee has indemnified
the Company with respect to certain obligations relative to the Lease and
the Second Amendment.
The documentation with regard to each of the foregoing contain various
covenants requiring and/or restricting the Company from taking various
action. Among other things, the documentation relating to the SBA Loan
contains certain covenants which require certain principal stockholders of
the Company to maintain certain levels of equity in the Company. Such
restriction could impact the Company's ability to engage in equity
financings and a violation of such covenant could result in a default under
the SBA Loan. In the past, the Company has been able to obtain a waiver of
such provision, however, no assurances can be made that it will continue to
be able to do so. Messrs. Brodsky, Freund and Stoller have advised the
Company that, if as a result of action taken by any of them, a default
occurs under the SBA Loan, such individuals shall either cure such default,
if possible, or satisfy the obligation.
10. Limited Marketing Capability.
The Company has limited marketing capabilities and resources. To date,
substantially all of the Company's commercial marketing activities have
been conducted by sales representatives directly employed by the Company
and independent sales agents. Such activities have consisted primarily of
personal contact with potential customers. Because of the nature of the
Company's business, management will continue to devote a substantial
9
amount of time developing and maintaining continuing personal
relationships with the Company's customers. See "Item 1--Description of
Business--Marketing and Distribution" in the Form 10-KSB.
11. Dependence on Key Personnel.
The Company is dependent upon the expertise and abilities of three key
executive personnel: Bert E. Brodsky, Chairman of the Board, President and
Treasurer, Hugh Freund, Executive Vice President and Secretary, and Gary
Stoller, Executive Vice President. Messrs. Stoller and Freund are not
parties to any employment agreements with the Company; Effective February
1, 1997 the Company and Mr. Brodsky entered into an employment agreement
for a 5 year term (the "Brodsky Employment Agreement"). Among other things,
the Brodsky Employment Agreement provides for compensation at the annual
rate of $500,000. See--"Subsequent Events". The Company's agreement with
the Bank requires that Mr. Brodsky at all times be active on a
substantially full-time basis in the affairs of the Company. The Company or
its subsidiaries is the beneficiary under certain key- man life insurance
policies on the life of each of Messrs. Brodsky and Freund in the amounts
of $4,500,000 and $1,400,000, respectively, the benefits of which are
payable to the Company. Of such insurance benefits, an aggregate of
$2,000,000 on the life of Mr. Brodsky has been pledged to the Bank.
However, if the Company were to lose the services of any of these key
personnel as a result of disability, death or otherwise the Company could
be in default under its agreement with the Bank and its business could be
adversely affected.
12. No Dividends.
To date, the Company has not paid any cash dividends on its Common
Stock and does not expect to declare or pay any cash or other dividends in
the foreseeable future. Dividends are restricted pursuant to the terms of
the Credit Agreement between the Company and the Bank. See "Item 5 - Market
for Common Equity and Related Stockholder Matters--Dividend Policy" in the
Form 10-KSB.
13. Unascertainable Risks Related to Possible Acquisitions. The
Company intends to explore opportunities to add, through acquisition or
licensing, technology or products to enhance or add to its current product
line, or to acquire a customer base or sales organization to augment the
Company's infrastructure. In exploring potential acquisitions or licenses,
the Company will consider, among other criteria: the comparative cost to
the Company in capital, resources and personnel to create the identified
technology or product, or to establish the targeted customer base or sales
organization; restrictions to the Company developing similar technology or
products arising from patent or other intellectual property protection; and
the synergy of the identified technology or products, or customer base or
sales organization, with the Company's products and organization. Although
the Company anticipates it will follow the foregoing general criteria in
determining whether or not to make any acquisitions, management will have
sole discretion over whether or not to engage in an acquisition. There can
be no assurance that the Company will identify any acquisition or licensing
candidates or, if it does, that it will be able to reach any agreements to
acquire or license technology or products, or acquire assets, on terms
acceptable to the Company. To the extent that the Company effects an
acquisition of technology or products in the early stage of development or
growth (including technology or products which have not been fully tested
or marketed), the Company will be subject to numerous risks inherent in
developmental technology and other high level of risk associated with high
technology industries based on innovative technologies or processes.
Furthermore, future acquisition transactions may require the Company to
obtain additional financing from banks or financial institutions
10
or to undertake debt or equity financing. No assurance can be given
that the Company would be able to obtain financing upon commercially
reasonable terms, or at all. Furthermore, equity financing will result in a
dilution of existing Stockholders of the Company, which may be significant.
To the extent that debt financing ultimately proves to be available, any
borrowings may subject the Company to various risks traditionally
associated with the incurring of indebtedness, including the risks of
interest rate fluctuations and insufficiency of cash flow to pay principal
and interest. Although the Company will endeavor to evaluate the risks
inherent in a particular acquisition, there can be no assurance that the
Company will properly ascertain or assess such significant risk factors.
The Company provides data processing services to a company of which
affiliates of Mr. Brodsky are principal stockholders, and which is engaged
in the administration of pharmacy prescription reimbursement programs for
unions and other benefit providers. The Company is considering entering
into the pharmacy prescription reimbursement administration business
directly or through one or more acquisitions of existing companies,
including, without limitation, the above mentioned affiliate; the Company
is considering several possible acquisition candidates in such industry,
including, without limitation, the above-mentioned affiliate; however, the
Company is in the preliminary stages of such consideration and has not had
formal negotiations with any such company. Accordingly, no assurances can
be made as to whether (i) the Company will enter into the business
directly, (ii) any of the acquisitions presently being considered will be
consummated, (iii) if consummated, the terms upon which any such
acquisitions may occur, and (iv) if consummated, whether such acquisitions
will be successful. Except as set forth above, as of the date of this
Prospectus , the Company has no other specific plans with respect to
material acquisitions. In addition to the foregoing, the Company may, from
time to time, enter into agreements with related parties. In such case, the
Company anticipates that the terms of such agreements will be commercially
reasonable and no less favorable to the Company than the Company could
obtain from unrelated third parties. Additionally, the Company intends that
such agreements will be approved by a majority of disinterested directors.
14. Securities Market Factors.
In recent years, the securities markets have experienced a high level
of volume volatility and market prices for many companies, particularly
small and emerging growth companies, have been subject to wide fluctuations
in response to quarterly variations in operating results. The securities of
many of theses companies which trade in the over-the-counter market, have
experienced wide price fluctuations, which in many cases were unrelated to
the operating performance of, or announcements concerning, the issuers of
the affected stock. Factors such as announcements by the Company or its
competitors concerning technological innovations, new products or
procedures, government regulations and developments or disputes relating to
proprietary rights may have a significant impact on the market for the
Company's securities. General market price declines or market volatility in
the future could adversely affect the future price of the Company's
securities.
15. Prior Public Announcements.
In a January 20, 1997 Newsday article, Mr. Brodsky was referred to as
saying that the Company could have revenues "in excess of 12 million" for
the fiscal year ended May 31, 1997. As of the date of this Prospectus, the
Company anticipates that revenue for the fiscal year ended May 31, 1997
will likely be between $11 million and $12 million, and though not likely,
could exceed $12 million if the fourth quarter is particularly strong, as
to which no assurances can be made. The foregoing constitutes a
forward-looking statement as to which no
11
assurances can be given with respect to the outcome thereof. Factors
making it problematic to determine the outcome of the foregoing statements
include, among other things, general market and economic factors affecting
the Company's sales in the fourth quarter of the fiscal year ended May 31,
1997.
SUBSEQUENT EVENTS
Effective February 1, 1997, the Company and Mr. Brodsky entered into the
Brodsky Employment Agreement providing for, among other things, compensation at
the annual rate of $500,000 plus such bonuses or additional compensation that
the Board of Directors of the Company may, on the basis of improvements in the
Company's performance or other reasonable criteria, deem appropriate. During the
term of the Brodsky Employment Agreement, the employee shall also be provided
with a full-time use of a Company automobile, six (6) weeks paid vacation
annually and group medical insurance and other benefits or programs which the
Company establishes or is made available to its employees.
In March 1997, Sandsport entered into a sale/lease-back transaction with
General Electric Capital Corporation ("GEC") whereby certain fixed assets,
including, without limitation, a certain program licensing agreement (the
"License") (the "Assets"), were sold to GEC for $981,000 and concurrently leased
back to Sandsport. The License was originally paid for by Sandsport and
inadvertently registered in the name of an affiliate of Mr. Brodsky for which
the Company provides services, but was assigned to Sandsport in connection with
the above-mentioned lease. The lease requires monthly rental payments of
$25,465.98 commencing on May 1, 1997 for a term of 38 months, and provides
Sandsport the option to purchase the Assets for $200,000 upon expiration of the
lease. Sandsport has assigned such purchase option to P.W. Capital Corp., an
affiliate of the Company's Chairman ("PW"), which has agreed to purchase the
Assets from GEC subject to the terms of the lease. PW acquired the right to
purchase such equipment on consideration of its posting a letter of credit in
connection with such lease.
SELLING STOCKHOLDERS
The following table sets forth, as of April 24, 1997, to the Company's
knowledge, certain securities ownership information with respect to the Selling
Stockholders:
Common Shares Number of Common Common Shares to be
Beneficially Shares Offered Beneficially Owned
Name and Address Owned (1) for Sale After Offering(2)
- --------------- --------- -------- --------------
Number Percent of Outstanding
Bert E. Brodsky 955,809 (3) 820,213 (3) 135,596 7.1%
Hugh Freund 323,493 (4) 255,696 (4) 67,797 5.0%
Gary Stoller 257,786 (5) 162,231 (5) 95,555 7.2%
12
Common Shares Number of Common Common Shares to be
Beneficially Shares Offered Beneficially Owned
Name and Address Owned (1) for Sale After Offering(2)
- ---------------- --------- -------- --------------
Percent of
Number Outstanding
Steven N. Bronson 152,950 (6) 152,950 (6) -0- -0-
James S. Cassel 30,800 (7) 30,800 (7) -0- -0-
James S. Cassel and Mindy
Cassel, TBTE 58,300 (8) 58,300 (8) -0- -0-
James S. Cassel, as
Custodian for Chira Cassel 1,000 1,000 -0- -0-
James S. Cassel, as
Custodian for Seth Cassel
under the Uniform Gifts to
Minors Act ("UGMA") 1996 1,000 1,000 -0- -0-
James S. Cassel, as
Custodian for Philip Cassel
under the Uniform Gifts to
Minors Act 1996 1,000 1,000 -0- -0-
James S. Cassel, as
Custodian for Levi Cassel
under the Uniform Gifts to
Minors Act 1996 1,000 1,000 -0- -0-
Keil Stern 30,000 (9) 30,000 (9) -0- -0-
Eric R. Elliot 8,900 (10) 6,650 (10) -0- -0-
Eric R. Elliott (IRA) 7,500 (15) 7,500 (15) -0- -0-
Barry J. Booth 6,650 (11) 6,650 (11) -0- -0-
Bruce C. Barber 6,650 (12) 6,650 (12) -0- -0-
Barry Steiner & Lisa Steiner
(JT) 5,750 (13) 5,750 (13) -0- -0-
Scott Salpeter 2,000 (14) 2,000 (14) -0- -0-
Leonard Adler 3,750 (15) 3,750 (15) -0- -0-
Hans Koenig Revocable
Living Trust
(Hans & Hanni Koenig) - by
agreement 3/6/91 7,500 (15) 7,500 (15) -0- -0
13
Common Shares Number of Common Common Shares to be
Beneficially Shares Offered Beneficially Owned
Name and Address Owned (1) for Sale After Offering(2)
- ---------------- --------- -------- --------------
Percent of
Number Outstanding
Paul Pesce 7,500 (15) 7,500 (15) -0- -0-
Amral Raul Ragoonanan 3,750 (15) 3,750 (15) -0- -0-
Peter David Bronson &
Maguy F. Bronson (JT) 7,500 (15) 7,500 (15) -0- -0-
Martin & Dolores Elkin (JT) 7,500 (15) 7,500 (15) -0- -0-
Stephen Paul Kregstein 3,750 (15) 3,750 (15) -0- -0-
Juetten Family Trust
(Richard Juetten, Trustee) -
by agreement dated 4/4/91 3,750 (15) 3,750 (15) -0- -0-
Kenneth B. Elias 3,750 (15) 3,750 (15) -0- -0-
Ronald A. David & Dona C.
David (TE) 3,750 (15) 3,750 (15) -0- -0-
Haguy Shechter 7,500 (15) 7,500 (15) -0- -0-
Nial Maura Ingerto 3,750 (15) 3,750 (15) -0- -0-
Ronald Richard Fieldstone &
Linda Brady Fieldstone (TE) 7,500 (15) 7,500 (15) -0- -0-
Gordon Jay Dow (IRA) 7,500 (15) 7,500 (15) -0- -0-
James Allen Settlage &
Carol Lynn Settlage (JT) 3,750 (15) 3,750 (15) -0- -0-
Paul Maurice Bronson &
Laura Mae Bronson (JT) 7,500 (15) 7,500 (15) -0- -0-
Fern Susan Thaw 3,750 (15) 3,750 (15) -0- -0-
David Wayne Raisbeck &
Ellen Jane Raisbeck (JT) 3,750 (15) 3,750 (15) -0- -0-
The Petersen Family Trust
(Norman W. Petersen) - by
agreement 9/28/93 3,750 (15) 3,750 (15) -0- -0-
Margery Schwartz
(Cust for Evan Schwartz NJ-
UTMA) 3,750 (15) 3,750 (15) -0- -0-
14
Common Shares Number of Common Common Shares to be
Beneficially Shares Offered Beneficially Owned
Name and Address Owned (1) for Sale After Offering(2)
- ---------------- --------- -------- --------------
Percent of
Number Outstanding
Joseph Anthony Spinella 3,750 (15) 3,750 (15) -0- -0-
David William Rogers 3,750 (15) 3,750 (15) -0- -0-
Craig Loren Silverman 3,750 (15) 3,750 (15) -0- -0-
Anthony Peter Conza 7,500 (15) 7,500 (15) -0- -0-
Jeffrey L. Thomas & Sylvia
H. Thomas (JT) 3,750 (15) 3,750 (15) -0- -0-
Howard Clifford Beach 3,750 (15) 3,750 (15) -0- -0-
Delaware Charter Guarantee
& Trust Co.
Custodian F/B/O Law
Offices Bruce Thaw Keogh
Plan 3,750 (15) 3,750 (15) -0- -0-
Sylvia Levine 3,750 (15) 3,750 (15) -0- -0-
Hal Kaufman 3,750 (15) 3,750 (15) -0- -0-
Leonard Goodfriend &
Audrey Goodfriend (JT) 3,750 (15) 3,750 (15) -0- -0-
A.C. Brown 3,750 (15) 3,750 (15) -0- -0-
Frederick H. Fialkow 7,500 (15) 7,500 (15) -0- -0-
James A. Cook 3,750 (15) 3,750 (15) -0- -0-
Thomas A. Hanford Trust
(Thomas A. Hanford) - by
agreement 5/17/96 7,500 (15) 7,500 (15) -0- -0-
S. Daniel Ponce (IRA) 3,750 (15) 3,750 (15) -0- -0-
Yehuda Shechter 7,500 (15) 7,500 (15) -0- -0-
Effectenbank Stroeve N.V. 7,500 (15) 7,500 (15) -0- -0-
Jeffrey Scott Roschman 7,500 (15) 7,500 (15) -0- -0-
Steven I. Levin 3,750 (15) 3,750 (15) -0- -0-
Frank T. Vicino, Jr. 3,750 (15) 3,750 (15) -0- -0-
15
Common Shares Number of Common Common Shares to be
Beneficially Shares Offered Beneficially Owned
Name and Address Owned (1) for Sale After Offering(2)
---------------- --------- -------- --------------
Percent of
Number Outstanding
Mark S. Schecter 3,750 (15) 3,750 (15) -0- -0-
Michael J. Bonner &
Deborah M. Bonner (JT) 3,750 (15) 3,750 (15) -0- -0-
C.G. Chase Construction Co. 7,500 (15) 7,500 (15) -0- -0-
John Raymond Prufeta 3,750 (15) 3,750 (15) -0- -0-
Richard S. Serbin & Kathe
Serbin 7,500 (15) 7,500 (15) -0- -0-
Zvika Shechter 3,750 (15) 3,750 (15) -0- -0-
George Andrew Solack 3,750 (15) 3,750 (15) -0- -0-
Sheldon Drobny 7,500 (15) 7,500 (15) -0- -0-
Susan Lambeth Charitable
Remainder Unitrust
(Susan Lambeth and Edmuns
Schupp) - by agreement
3/5/47 7,500 (15) 7,500 (15) -0- -0-
Mark Hart 11,250 (15) 11,250 (15) -0- -0-
David Brian Cohen 7,500 (15) 7,500 (15) -0- -0-
Robert Stuart Pearlman &
Rita Jo Pearlman (JT) 3,750 (15) 3,750 (15) -0- -0-
Robbins, Tunkey, Ross,
Amsel, Raben and Waxman,
P.A.
401K Profit Sharing Trust
F/B/O William R. Tunkey 3,750 (15) 3,750 (15) -0- -0-
Doran Topaz 3,750 (15) 3,750 (15) -0- -0-
Harvey Morton Soldan &
Ingrid Else Soldan (JT) 7,500 (15) 7,500 (15) -0- -0-
The Beckham Family Trust
(David Beckham, Trustee) -
by agreement dated 10/26/95 3,750 (15) 3,750 (15) -0- -0-
Boris Zalkind 3,750 (15) 3,750 (15) -0- -0-
16
Common Shares Number of Common Common Shares to be
Beneficially Shares Offered Beneficially Owned
Name and Address Owned (1) for Sale After Offering(2)
- ---------------- --------- -------- --------------
Percent of
Number Outstanding
Eliahu Ben-Shmuel 7,500 (15) 7,500 (15) -0- -0-
Horst Siegfried Filtzer 3,750 (15) 3,750 (15) -0- -0-
Charles G. Leaness 3,750 (15) 3,750 (15) -0- -0-
Lior Ben-Shmuel 7,500 (15) 7,500 (15) -0- -0-
Sonya Ben-Shmuel Personal
Revocable Trust (Sonya
Ben-Shmuel, Trustee) - by
agreement dated 5/13/96 3,750 (15) 3,750 (15) -0- -0-
The Equity Group Profit-
Sharing Plan and Trust
(Robert D. Goldstein,
Trustee) - by agreement
dated 1/1/80 7,500 (15) 7,500 (15) -0- -0-
Jeffrey I. Binder & Rosalie
G. Binder (TE) 7,500 (15) 7,500 (15) -0- -0-
Jay Haft 3,750 (15) 3,750 (15) -0- -0-
Henry Tie Shue 3,750 (15) 3,750 (15) -0- -0-
Bruno Guazzoni
c/o Zanett Capital, Inc. 7,500 (15) 7,500 (15) -0- -0-
Barry J. Booth & Suellen G.
Booth (JT) 7,500 (15) 7,500 (15) -0- -0-
Lenore Katz 7,500 (15) 7,500 (15) -0- -0-
Private Opportunity Partners
II, Ltd.
FL Limited Partnership 71,250 71,250 -0- -0-
(1) Unless otherwise noted, the Company believes that all persons
named above have sole voting and investment power with respect
to all Common Stock beneficially owned by them, subject to
community property laws, where applicable. A person is deemed
to be the beneficial owner of securities that can be acquired
by such person within 60 days from the date hereof upon the
exercise of warrants or options. Each beneficial owner's
percentage ownership is determined by assuming that options or
warrants that are held by such person (but not those held by
any other person) and which are exercisable within 60 days
from the date hereof have been exercised.
17
(2) Assumes that all of the shares registered for the account of
the Selling Stockholders are sold.
(3) Includes 50,000 shares of Common Stock owned by Mr. Brodsky's
wife. Includes presently exercisable options to purchase
74,000 shares of Common Stock at $1.79 per share under the
Company's Employee's Incentive Stock Option Plan (the
"Incentive Plan"); includes presently exercisable options to
purchase 44,000 shares of Common Stock at $1.51 per share
under the 1995 Stock Option Plan (the "1995 Plan"); includes
presently exercisable options to purchase 44,000 shares of
Common Stock at $2.34 per share under the 1995 Plan; includes
presently exercisable options to purchase 60,667 shares of
Common Stock at $1.38 per share under the Non-Qualified Stock
Option Plan (the "Non-Qualified Plan"); includes presently
exercisable options to purchase 110,000 shares of Common Stock
at $2.61 per share under the 1995 Plan; includes presently
exercisable warrants to purchase 400,000 shares of Common
Stock at $1.38 per share under a Warrant Agreement which
expires in August, 2001; includes 68,352 shares of the
Company's Common Stock owned by the trusts established for the
benefit of Mr. Brodsky's four children, of which Mr. Brodsky
is a trustee.
(4) Excludes 8,000 shares of Common Stock owned by Mr. Freund's
adult children. Excludes 4,000 shares of Common Stock and
presently exercisable options to purchase (i) 43,000 shares of
Common Stock at $1.79 per share under the Incentive Plan, (ii)
18,000 shares of Common Stock at $1.38 per share under the
1995 Plan and (iii)18,000 shares of Common Stock at $1.38 per
share under the Non-Qualified Plan owned by Mr. Freund's wife.
As set forth in Mr. Freund's Schedule 13G, filed with the SEC
on February 9, 1997, Mr. Freund disclaims any beneficial
interest in, or voting or dispositive control over, such
shares; includes presently exercisable options to purchase
43,000 shares of Common Stock at $1.79 per share under the
Incentive Plan; includes presently exercisable options to
purchase 18,000 shares of Common Stock at $1.51 per share
under the 1995 Plan; includes presently exercisable options to
purchase 36,000 shares of Common Stock at $2.34 per share
under the 1995 Plan; includes presently exercisable options to
purchase 18,000 shares of Common Stock at $1.38 per share
under the Non-Qualified Plan; includes presently exercisable
options to purchase 90,000 shares of Common Stock at $2.61 per
share under the 1995 Plan.
(5) Includes presently exercisable options to purchase 46,667
shares of Common Stock at $1.79 per share under the Incentive
Plan; includes presently exercisable options to purchase
20,000 shares of Common Stock at $1.51 per share under the
1995 Plan; includes presently exercisable options to purchase
20,000 shares of Common Stock at $2.34 per share under the
1995 Plan; includes presently exercisable options to purchase
20,000 shares of Common Stock at $1.38 per share under the
Non-Qualified Plan; includes presently exercisable options to
purchase 50,000 shares of Common Stock at $2.61 per share
under the 1995 Plan. Includes 13,000 shares of the Company's
Common Stock owned by trusts established for the benefit of
Mr. Stoller's children of which Mr. Stoller is a trustee.
(6) Includes 101,200 Shares issuable upon the exercise of
currently exercisable warrants.
(7) Includes 30,800 Shares issuable upon the exercise of currently
exercisable warrants.
(8) Includes 30,800 Shares issuable upon the exercise of currently
exercisable warrants.
(9) Includes 20,000 Shares issuable upon the exercise of currently
exercisable warrants.
(10) Includes 4,400 Shares issuable upon the exercise of currently
exercisable warrants.
(11) Includes 4,400 Shares issuable upon the exercise of currently
exercisable warrants.
(12) Includes 4,400 Shares issuable upon the exercise of currently
exercisable warrants.
(13) Includes 2,000 Shares issuable upon the exercise of currently
exercisable warrants.
(14) Includes 2,000 Shares issuable upon the exercise of currently
exercisable warrants.
18
(15) Of such amount, two-thirds represents shares of Common Stock
and one-third represents shares of Common Stock issuable upon
exercise of currently exercisable warrants.
Certain of the securities set forth in the above table are included in this
Prospectus pursuant to registration commitments accorded to certain of the
Selling Stockholders. There are no commitments pursuant to which the Company
will receive any proceeds from the sale of the Shares by the Selling
Stockholders.
To the Company's knowledge, no Selling Stockholder has had any position,
office or other material relationship with the Company or any of its affiliates
during the past three years (other than as a holder of the Company's
securities), except that (i) Bert E. Brodsky has served as Chairman of the Board
and Treasurer of the Company since 1983 and President since 1989; (ii) Hugh
Freund has served as a director of the Company since 1978 and Executive Vice
President of the Company since 1986 (iii) Gary Stoller has served as a director
and Executive Vice President of the Company since 1983; and (iv) B&B has been a
market maker of the Company's Common Shares during such three year period. B&B
acted as the placement agent in a recent private offering by the Company. The
Company believes that Messrs. Steven R. Bronson, James S. Cassel, (and Mindy
Cassel), Keil Stern, Eric R. Elliot, Barry J. Booth, Bruce C. Barber, Barry E.
Steiner (and Ms. Lisa Steiner) and Scott Salpeter are affiliated with B&B.
PLAN OF DISTRIBUTION
The Shares set forth in the "Selling Stockholders" table may be sold by the
Selling Stockholders, or by pledgees, donees, transferees or other successors in
interest, either pursuant to the Registration Statement of which this Prospectus
forms a part or, if available, under Section 4(1) of the Securities Act or Rule
144 promulgated thereunder.
To the Company's knowledge, this offering is not being underwritten. The
Company believes that the Selling Stockholders, directly through agents
designated from time to time, or through broker-dealers or underwriters also to
be designated (who may purchase as principal and resell for their own account),
may sell the Shares from time to time, in or through privately negotiated
transactions, or in one or more transactions, including block transactions, on
the NASDAQ SmallCap Market or on any other market or stock exchange on which the
Shares may be listed in the future pursuant to and in accordance with the
applicable rules of such market or exchange or otherwise. The selling price of
the Shares may be at market prices prevailing at the time of sale, at prices
relating to such prevailing market prices or at negotiated prices. From time to
time the Selling Stockholders may engage in short sales against the box, puts
and calls and other transactions in securities of the Company or derivatives
thereof, and may sell and deliver the shares in connection therewith. Further,
except as set forth herein, the Selling Stockholders are 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, which may have a
depressive effect on the market price of the Company's shares of Common Stock.
The Selling Stockholders may also pledge shares as collateral for margin
accounts, and such shares could be resold pursuant to the terms of such
accounts. Resales or reoffers of the Shares by the Selling Stockholders must be
accompanied by a copy of this Prospectus.
19
The Selling Stockholders and any agents, broker-dealers or underwriters
that participate in the distribution of the Shares may be deemed to be
underwriters, and any profit on the sale of the Shares by them, and any
discounts, commissions or concessions received by them, may be deemed to be
underwriting commissions or discounts under the Securities Act.
LEGAL MATTERS
Matters relating to the legality of the securities being offered hereby are
being passed upon for the Company by Certilman Balin Adler & Hyman, LLP, 90
Merrick Avenue, East Meadow, New York 11554.
EXPERTS
The consolidated financial statements of the Company appearing in the Form
10-KSB, as amended, have been audited by Marcum & Kliegman, LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form S-3 (together with
all amendments thereto, the "Registration Statement") with the Commission under
the Securities Act of 1933, as amended, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the securities offered hereby, reference is made to the Registration Statement
and to the exhibits filed therewith, copies of which may be obtained upon
payment of a fee prescribed by the Commission, or may be examined free of charge
at the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Each statement made in
this Prospectus referring to a document filed as an exhibit to the Registration
Statement is qualified by reference to the exhibit for a complete statement of
its terms and conditions.
20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses (estimated except for the
Registration Fee) in connection with the Offering described in the Registration
Statement:
Registration Fee.......................................................$6,253.60
Accountants' Fees and Expenses..........................................3,000.00
Legal Fees and Expenses................................................17,000.00
Printing .............................................................. 1,500.00
Miscellaneous.............................................................500.00
Total.................................................................$28,253.66
Item 15. Indemnification of Directors and Officers.
Pursuant to Section 145 of the Delaware General Corporation Law, Sandata,
Inc. (hereinafter, the "Registrant") has the power, under certain circumstances,
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding.
Article Tenth of the Registrant's Certificate of Incorporation provides
that the Registrant shall, to the fullest extent permitted by said Section 145,
indemnify all persons whom it may indemnify pursuant thereto.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("1933 Act") may be permitted to directors, officers or controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
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Item 16. Exhibits.
Exhibit Number Description of Exhibit
5 Opinion of Certilman Balin Adler & Hyman, LLP regarding the
legality of the securities being registered
10.1 Form of agreement between Sandsport and vendor agency*
10.2 Form of agreement between Sandsport and vendor agency**
10.3 Form of Subscription Agreement dated December 23, 1996*
10.4 Form of Subscription Agreement dated September 12, 1996*
10.5 Form of Common Stock Purchase Warrant ($5.00 Exercise Price)*
10.6 Form of Common Stock Purchase Warrant ($7.00 Exercise Price)
10.7 Form of Redeemable Common Stock Purchase Warrant*
23.1 Consent of Marcum & Kliegman, LLP
23.2 Consent of Certilman Balin Adler & Hyman, LLP (included in
its opinion filed as Exhibit 5)
24 Powers of Attorney (included in signature page forming a
part hereof)
* Filed previously
**Supersedes prior filing
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Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(l) 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 the
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 a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (l)(i) and (l)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
Section 13 or 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 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, as amended, each filing of the Registrant's annual report pursuant
to Section 13(a) or 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 described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission
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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, 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 and will be governed by the final adjudication of such issue.
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 Port Washington, State of New York, on the 25th day
of April 1997.
SANDATA, INC.
By: /s/ Bert E. Brodsky
Bert E. Brodsky
President and
Chief Executive Officer
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Bert E. Brodsky as his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him and in his name, place and stead, in any and all capacities to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
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Signature Capacity Date
President, Treasurer,
Chief Executive Officer
and Chairman of the
Board (Principal
Executive Officer and
Principal Financial and
/s/ Bert E. Brodsky Accounting Officer) April 25, 1997
- ---------------------
Bert E. Brodsky
Executive Vice President
Secretary
/s/Hugh Freund and Director April 25, 1997
- ----------------------
Hugh Freund
Executive Vice President
/s/ Gary Stoller and Director April 25, 1997
- ---------------------
Gary Stoller
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