As filed with the Securities and Exchange Commission on_____________
Registration No. _____________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VASCO DATA SECURITY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
1901 SOUTH MEYERS ROAD, SUITE 210, OAKBROOK TERRACE, IL 60181
(630) 932-8844
(Address of principal executive offices)
DELAWARE 36-416320
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
--------------
T. Kendall Hunt
Chairman and Chief Executive Officer
VASCO Data Security International, Inc.
1901 South Meyers Road, Suite 210
Oakbrook, Illinois 60181
(630) 932-8844
(Name, address, including zip code and telephone number,
including area code of agent for service)
COPIES TO:
Robert B. Murphy, Esq.
Enger McCartney-Smith, Esq.
Pepper Hamilton LLP
600 14th Street, NW
Washington, D.C. 20005-2004
(202) 220-1200
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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
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 MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) SHARE(2) PRICE REGISTRATION FEE
-------------------------------------------------------------------------------------------------------------------
Common Stock, par value
$0.001 per share 7,500,000 $2.89 $21,675,000 $1753.51
===================================================================================================================
(1) Pursuant to Rule 416 under the Securities Act, as amended, this registration
statement also covers such additional number of shares of common stock as may
become issuable under any stock split, stock dividend or similar transaction.
(2) Estimated pursuant to Rule 457(c) under the Securities Act solely for the
purpose of calculating the registration fee, based upon the average of the high
and low prices reported for such shares of common stock, as reported on the
Nasdaq SmallCap Market on September 11, 2003.
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PURSUANT TO RULE 429 UNDER THE SECURITIES ACT, THE PROSPECTUS CONTAINED IN THIS
REGISTRATION STATEMENT IS A COMBINED PROSPECTUS AND ALSO RELATES TO (I) UP TO
6,418,595 OPTIONS TO PURCHASE COMMON STOCK AND UP TO 6,418,595 SHARES OF COMMON
STOCK UNDERLYING SUCH OPTIONS AND (II) UP TO 1,056,922 WARRANTS TO PURCHASE
COMMON STOCK AND UP TO 1,056,922 SHARES OF COMMON STOCK UNDERLYING SUCH
WARRANTS, WHICH OPTIONS, WARRANTS AND SHARES OF COMMON STOCK WERE REGISTERED
UNDER A REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333-35563) PREVIOUSLY FILED
WITH THE SEC AND DECLARED EFFECTIVE, AND WHICH REGISTRATION STATEMENT, PURSUANT
TO RULE 416, ALSO COVERED SUCH INDETERMINATE NUMBER OF SHARES OF COMMON STOCK AS
MAY BE ISSUABLE UPON THE EXERCISE OF THE OPTIONS AND/OR WARRANTS PURSUANT TO
ANTI-DILUTION PROVISIONS. THIS REGISTRATION STATEMENT CONSTITUTES POST-EFFECTIVE
AMENDMENT NO. 4 TO REGISTRATION STATEMENT NO. 333-35563, WHICH POST-EFFECTIVE
AMENDMENT SHALL HEREAFTER BECOME EFFECTIVE CONCURRENTLY WITH THE EFFECTIVENESS
OF THIS REGISTRATION STATEMENT AND IN ACCORDANCE WITH SECTION 8(C) OF THE
SECURITIES ACT. THIS REGISTRATION STATEMENT COVERS THE RESALE OF THE MAXIMUM
NUMBER OF SHARES OF OUR COMMON STOCK ISSUABLE PURSUANT TO THE CONVERSION TERMS
OF OUR SERIES C PREFERRED STOCK, 1,239,474 SHARES OF COMMON STOCK UNDERLYING
OTHER OUTSTANDING WARRANTS, AND 322,565 SHARES OF RESTRICTED COMMON STOCK ISSUED
IN CONNECTION WITH CERTAIN ACQUISITIONS, INCLUDING SUCH INDETERMINATE NUMBER OF
SHARES OF COMMON STOCK AS MAY BE ISSUABLE PURSUANT TO THE ANTI-DILUTION
PROVISIONS OF SUCH SECURITIES. UPON THE EFFECTIVENESS OF SUCH POST-EFFECTIVE
AMENDMENT AND THIS REGISTRATION STATEMENT, THIS REGISTRATION STATEMENT WILL
RELATE TO AN AGGREGATE OF 6,418,595 OPTIONS AND 1,056,922 WARRANTS TO PURCHASE
COMMON STOCK AND 14,578,659 SHARES OF COMMON STOCK. THE FILING FEE ASSOCIATED
WITH 6,418,595 OPTIONS, 1,056,922 WARRANTS AND THE 7,475,517 SHARES OF COMMON
STOCK UNDERLYING SUCH OPTIONS AND WARRANTS UNDER REGISTRATION STATEMENT NO.
333-35563 WAS PAID AT THE TIME OF FILING OF THAT REGISTRATION STATEMENT.
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PROSPECTUS
VASCO DATA SECURITY INTERNATIONAL, INC.
Common Stock
This Prospectus relates to the sale by the selling shareholders, listed on pages
13-14, from time to time, of up to 7,500,000 shares of common stock, $0.001 par
value per share, of VASCO Data Security International, Inc. including 2,000,000
shares of common stock currently held by the selling shareholders, 4,000,000
shares of common stock issuable upon the conversion of outstanding shares of
Series D 5% Cumulative Convertible Voting Preferred Stock held by the selling
shareholders at a conversion price of $2.00 per share of common stock, 600,000
shares of common stock issuable upon the exercise of outstanding warrants held
by the selling shareholders to purchase shares of common stock at a per share
exercise price of $3.47 and 900,000 shares of common stock issuable to the
selling shareholders by us as dividends on the Series D preferred shares. The
issuance of the shares upon exercise of the warrants is not covered by this
Prospectus, but rather only the sale of such shares by the selling shareholders.
See "Selling Shareholders."
No underwriter is being used in connection with this offering of our common
stock. The selling shareholders may offer and sell their shares to or through
broker-dealers, who may receive compensation in the form of discounts,
concessions or commissions from the selling shareholders, the purchasers of the
shares, or both. The selling shareholders and any broker-dealer executing
selling orders on their behalf may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933 (the "Securities Act") in which event
commissions received by such broker-dealer may be deemed to be underwriting
commissions under the Securities Act. We will not receive any direct proceeds
from the sale of shares, but will receive proceeds related to the exercise of
the warrants held by the selling shareholders; provided that there is no
assurance that any of the warrants will be exercised, and therefore there are no
assurances that we will receive any proceeds hereunder.
The price of the common stock being offered under this Prospectus will be
determined by the prevailing market price for our common stock or in negotiated
transactions. Our common stock is traded on the Nasdaq Small Cap Market under
the symbol VDSI. On September 11, 2003, the closing price of one share of our
common stock was $2.93.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY READ AND CONSIDER THE RISK FACTORS BEGINNING ON PAGE 7.
Neither the Securities and Exchange Commission ("SEC") nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is September ___, 2003.
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TABLE OF CONTENTS
Page
----
Summary........................................................ 6
Recent Developments............................................ 6
Risk Factors................................................... 7
Forward-Looking Statements..................................... 12
Use of Proceeds................................................ 12
Selling Shareholders........................................... 13
Plan of Distribution........................................... 14
Legal Matters.................................................. 15
Experts........................................................ 15
Where You Can Find More Information............................ 16
VASCO, VACMAN and Digipass are registered trademarks in the United States. In
addition, VACMAN Optimum is a registered trademark in the Benelux countries.
5
SUMMARY
This Summary highlights some information contained elsewhere in this Prospectus.
You should read the entire Prospectus carefully including the section entitled
"Risk Factors" before deciding to invest in our common stock.
OUR COMPANY
We design, develop, market and support patented "Identity Authentication"
products for e-business and e-commerce. Our products enable secure financial
transactions to be made over private enterprise networks and public networks,
such as the Internet. VASCO's Identity Authentication software is delivered via
its Digipass security products, small "calculator" hardware devices carried by
an end user, or in a software format on mobile phones, other portable devices,
and PCs. The Digipass devices, most of which incorporate an electronic digital
signature capability, guarantee the integrity of electronic transactions and
data transmissions. For user access control, VASCO's VACMAN Server products
limit application access to designated Digipass users. Digipass and VACMAN
combine to provide greater flexibility and a more affordable means than
competing products of authenticating to any network, including the Internet.
VASCO's target markets are the applications and their several hundred million
users that utilize fixed passwords as security. VASCO's time-based system
generates a "one-time" password that changes with every use. As a result, when
compared to fixed passwords, it substantially reduces the risk of unauthorized
access to the application.
Our security solutions are sold worldwide through our direct sales force, as
well as through distributors, resellers and systems integrators. We currently
have approximately 1,250 customers in more than 60 countries. Representative
customers of our products include Rabobank Nederland, ABN AMRO Bank, Eterra
Norway, ING Bank, DaimlerChrysler, Fortis Bank, Telindus, CoStar Group, and the
U.S. Government.
Our principal executive offices are located at 1901 South Meyers Road, Suite
210, Oakbrook Terrace, Illinois 60181 and the telephone number at that address
is (630) 932-8844. Our principal offices in Europe are located at Koningin
Astridlaan 164, B-1780 Wemmel Belgium and the telephone number at that address
is 32-2-456-98-10. We maintain a website at www.vasco.com. The information
contained on our website does not constitute part of this prospectus.
RECENT DEVELOPMENTS
Financial Results. For the six and three months ended June 30 and March 31,
2003, respectively, we reported net income of $1,202,000 and $481,000 on net
revenues from continuing operations of $11,071,000 and $5,118,000. Revenues for
the first quarter have been adjusted to exclude the net revenues from the VACMAN
Enterprise business, which was sold in July 2003 as noted below, and reported as
a discontinued operation in the second quarter of 2003. This represents the
first consecutive quarters of net income since we became a public company in
1997. In addition, we were able to add 160 new customers in the second quarter
of 2003 and for the first six months of 2003, we have added a total of 330 new
customers.
Series C Preferred Stock. On July 15, 2003, the Company reached an agreement
with Ubizen N.V., a Belgian Internet securities firm, whereby VASCO repurchased
and redeemed all of the VASCO Series C Convertible Preferred Stock and Common
Stock Purchase Warrants owned by Ubizen.
Under the terms of the Purchase Agreement, VASCO paid Ubizen $3,000,000 and
issued 2,000,000 shares of VASCO Common Stock on July 25, 2003, and agreed to
pay Ubizen an additional $1,000,000 on or before November 14, 2003. The Common
Stock issued by VASCO will be subject to a lock-up period wherein the lock-up
will expire in increments of 500,000 shares each on October 15, 2003, January
15, 2004, April 15, 2004 and July 15, 2004. Upon the expiration of each
incremental lock-up, the released shares will be subject to volume trading
restrictions through January 1, 2005.
The Series C Convertible Preferred Stock along with warrants to purchase
1,269,474 shares of VASCO Common Stock were originally sold to Ubizen for
$15,000,000 in July 2000. The Series C Convertible Preferred Stock was subject
to a mandatory redemption feature that would have been effective in July 2004.
At the mandatory redemption date, VASCO was obligated to either redeem the
Preferred Stock for $15,000,000 in cash or issue an equivalent value in VASCO
Common Stock at a per share price that was calculated to be equal to the average
trading price of VASCO's Common Stock for the 30 trading dates prior to the
redemption date less five (5) percent.
Sale of VACMAN Enterprise. In July 2003, we also announced the sale of our
VACMAN Enterprise business unit, originally known as IntelliSoft and/or
SnareWorks, to SecureD Services, Inc., a newly-organized security consulting and
managed security services company. Under the terms of the Agreement, we received
a senior secured promissory note of
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approximately $1,100,000 and $2,000,000 of Convertible Preferred Stock from
SecureD Services. The promissory note bears a six percent (6%) interest rate and
will be payable in thirty-six (36) equal and consecutive monthly payments. The
SecureD Services Preferred Stock includes a six percent (6%) cumulative stock
dividend, payable quarterly, and can be converted into SecureD Services Inc.
common stock at defined intervals beginning July 1, 2005. The Company is in the
process of receiving an independent valuation of the fair value of the
consideration received from the sale. T. Kendall Hunt, our Chairman and CEO, is
one of the founders and organizers of SecureD Services, Inc.
Series D Preferred Stock and Warrants. On September 11, 2003, we completed a
private placement of 800 shares of our Series D 5% Cumulative Convertible Voting
Preferred Stock with several investors including all of the selling shareholders
other than Ubizen N.V. The Series D preferred stock is convertible, at the
option of its holders, into shares of our common stock at a per share conversion
price of $2.00. Holders of the Series D preferred stock are entitled to the
payment of cumulative dividends quarterly, at the rate of five percent (5%),
either in cash or in shares of our common stock, in our discretion.
Simultaneously with the issuance of the Series D preferred stock, each of the
holders thereof also purchased warrants to purchase a number of shares of our
common stock equal to fifteen percent (15%) of the number of shares of common
stock that such holder's Series D preferred stock is convertible into. The
exercise price of the warrants is $3.47 per share of common stock and the
warrants may be exercised at any time, at the option of the holders, until
September 11, 2008. We received a total purchase price for all shares of Series
D preferred stock and warrants equal to $8,006,000.
RISK FACTORS
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AS WELL AS OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN OUR COMMON STOCK. IF
ANY OF THE FOLLOWING RISKS WERE TO OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR
OPERATING RESULTS COULD BE MATERIALLY AND ADVERSELY AFFECTED. IN THAT CASE, THE
TRADING PRICE OF OUR COMMON STOCK COULD DECLINE AND YOU COULD LOSE ALL OR PART
OF YOUR INVESTMENT.
WE HAD A HISTORY OF OPERATING LOSSES AND HAVE A LARGE ACCUMULATED DEFICIT.
Although we have reported net income of $1,202,000 and $721,000 for the six and
three months ended June 30, 2003, respectively, we have incurred net losses of
$4,538,995, $12,033,970 and $4,161,772 for the years ended December 31, 2002,
2001 and 2000, respectively, and as of June 30, 2003, our accumulated deficit is
$41,405,905.
WE FACE SIGNIFICANT COMPETITION AND IF WE LOSE OR FAIL TO GAIN MARKET SHARE OUR
FINANCIAL RESULTS WILL SUFFER.
The market for computer and network security products is highly competitive. Our
competitors include organizations that provide computer and network security
products based upon approaches similar to and different from those that we
employ such as RSA Security Inc., ActivCard, Rainbow Technologies, and Aladdin
Knowledge Systems. Many of our competitors have significantly greater financial,
marketing, technical and other competitive resources than we do. As a result,
they may be able to adapt more quickly to new or emerging technologies and
changes in customer requirements, or to devote greater resources to the
promotion and sale of their products.
TECHNOLOGICAL CHANGES OCCUR RAPIDLY IN OUR INDUSTRY AND OUR DEVELOPMENT OF NEW
PRODUCTS IS CRITICAL TO MAINTAIN OUR REVENUES.
The introduction by our competitors of products embodying new technologies and
the emergence of new industry standards could render our existing products
obsolete and unmarketable. Our future revenue growth and operating profit will
depend in part upon our ability to enhance our current products and develop
innovative products to distinguish ourselves from the competition and to meet
customers' changing needs in the data security industry. We cannot assure you
that security-related product developments and technology innovations by others
will not adversely affect our competitive position or that we will be able to
successfully anticipate or adapt to changing technology, industry standards or
customer requirements on a timely basis.
THE SALES CYCLE FOR OUR PRODUCTS AND TECHNOLOGY IS LONG, AND WE MAY INCUR
SUBSTANTIAL EXPENSES FOR SALES THAT DO NOT OCCUR WHEN ANTICIPATED.
7
The sales cycle for our products, which is the period of time between the
identification of a potential customer and completion of the sale, is typically
lengthy and subject to a number of significant risks over which we have little
control. If revenue falls significantly below anticipated levels, our business
would be seriously harmed.
A typical sales cycle is often three to six months and with larger banking
transactions up to eighteen months. Purchasing decisions for our products and
systems may be subject to delay due to many factors which are not within our
control, such as:
o the time required for a prospective customer to recognize the need
for our products;
o the significant expense of many data security products and network
systems;
o customers' internal budgeting processes; and
o internal procedures customers may require for the approval of large
purchases.
WE HAVE A SIGNIFICANT DEPENDENCE ON MAJOR CUSTOMERS AND LOSING ANY OF THESE
CUSTOMERS COULD RESULT IN A SIGNIFICANT LOSS IN REVENUES.
If we don't find other customers who generate significant future revenues, the
unforeseen loss of one or more of our major customers, or the inability to
maintain reasonable profit margins on sales to any of these customers, would
have a material adverse effect on our results of operations and financial
condition.
OUR SUCCESS DEPENDS ON ESTABLISHING AND MAINTAINING STRATEGIC RELATIONSHIPS WITH
OTHER COMPANIES TO DEVELOP, MARKET AND DISTRIBUTE OUR TECHNOLOGY AND PRODUCTS
AND, IN SOME CASES, TO INCORPORATE OUR TECHNOLOGY INTO THEIR PRODUCTS.
Part of our business strategy is to enter into strategic alliances and other
cooperative arrangements with other companies in our industry. We currently are
involved in cooperative efforts with respect to incorporation of our products
into products of others, research and development efforts, marketing efforts and
reseller arrangements. None of these relationships are exclusive, and some of
our strategic partners also have cooperative relationships with certain of our
competitors. If we are unable to enter cooperative arrangements in the future or
if we lose any of our current strategic or cooperative relationships, our
business could be harmed. We do not control the time and resources devoted to
such activities by parties with whom we have relationships. In addition, we may
not have the resources available to satisfy our commitments, which may adversely
affect these relationships. These relationships may not continue, may not be
commercially successful, or may require our expenditure of significant
financial, personnel and administrative resources from time to time. Further,
certain of our products and services compete with the products and services of
our strategic partners.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND OUR FAILURE TO OBTAIN CAPITAL
WOULD INTERFERE WITH OUR GROWTH STRATEGY.
Our ability to obtain financing will depend on a number of factors, including
market conditions, our operating performance and investor interest. These
factors may make the timing, amount, terms and conditions of any financing
unattractive. They may also result in our incurring additional indebtedness or
accepting stockholder dilution. If adequate funds are not available or are not
available on acceptable terms, we may have to forego strategic acquisitions or
investments, defer our product development activities, or delay the introduction
of new products.
WE MUST CONTNIUE TO ATTRACT AND RETAIN HIGHLY SKILLED TECHNICAL PERSONNEL FOR
OUR RESEARCH AND DEVELOPMENT DEPARTMENT.
The market for highly skilled technicians in Europe, Asia, Australia and the
United States is highly competitive. If we fail to attract, train, assimilate
and retain qualified technical personnel for our research and development
department, we will experience delays in introductions of new or modified
products, loss of clients and market share and a reduction in revenues.
WE FACE A NUMBER OF RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS, ANY OR
ALL OF WHICH COULD RESULT IN A DISRUPTION IN OUR BUSINESS AND A DECREASE IN OUR
REVENUES.
Our business internationally is subject to a number of risks any or all of which
could result in a disruption in our business and a decrease in our revenues.
These include:
o inconsistent regulations and unexpected changes in regulatory
requirements;
o difficulties and costs of staffing and managing international
operations;
8
o potentially adverse tax consequences;
o wage and price controls;
o uncertain protection for intellectual property rights;
o imposition of trade barriers;
o differing technology standards;
o uncertain demand for electronic commerce;
o linguistic and cultural differences;
o political instability; and
o social unrest.
WE ARE SUBJECT TO FOREIGN EXCHANGE RISKS, AND IMPROPER MANAGEMENT OF THAT RISK
COULD RESULT IN LARGE CASH LOSSES.
Because a significant number of our principal customers are located outside the
United States, we expect that international sales will continue to generate a
significant portion of our total revenue. We are subject to foreign exchange
risks because the majority of our costs are denominated in U.S. dollars, whereas
a significant portion of the sales and expenses of our European operating
subsidiaries are denominated in various foreign currencies. A decrease in the
value of any of these foreign currencies relative to the U.S. dollar could
affect the profitability in U.S. dollars of our products sold in these markets.
We do not currently hold forward exchange contracts or other hedging instruments
to exchange foreign currencies for U.S. dollars to offset currency rate
fluctuations.
WE HAVE A GREAT DEPENDENCE ON A LIMITED NUMBER OF SUPPLIERS AND THE LOSS OF
THEIR MANUFACTURING CAPABILITY COULD MATERIALLY IMPACT OUR OPERATIONS.
In the event that the supply of components or finished products is interrupted
or relations with either of our principal vendors is terminated, there could be
a considerable delay in finding suitable replacement sources to manufacture our
products at the same cost or at all. The majority of our products are
manufactured by two independent vendors, one headquartered in Europe and the
other in Hong Kong. Our security tokens are assembled at facilities in mainland
China. The importation of these products from China exposes us to the
possibility of product supply disruption and increased costs in the event of
changes in the policies of the Chinese government, political unrest or unstable
economic conditions in China or developments in the United States that are
adverse to trade, including enactment of protectionist legislation.
WE DEPEND SIGNIFICANTLY UPON OUR PROPRIETARY TECHNOLOGY AND INTELLECTUAL
PROPERTY AND THE FAILURE TO PROTECT OUR PROPRIETARY RIGHTS COULD REQUIRE US TO
REDESIGN OUR PRODUCTS OR REQUIRE US TO ENTER INTO ROYALTY OR LICENSING
AGREEMENTS, ANY OF WHICH COULD REDUCE REVENUE AND INCREASE OUR OPERATING COSTS.
We currently rely on a combination of patent, copyright and trademark laws,
trade secrets, confidentiality agreements and contractual provisions to protect
our proprietary rights. We seek to protect our software, documentation and other
written materials under trade secret and copyright laws, which afford only
limited protection, and generally enter into confidentiality and nondisclosure
agreements with our employees and with key vendors and suppliers.
There has been substantial litigation in the technology industry regarding
intellectual property rights, and we may have to litigate to protect our
proprietary technology. We expect that companies in the computer and information
security market will increasingly be subject to infringement claims as the
number of products and competitors increases. Any such claims or litigation may
be time-consuming and costly, cause product shipment delays, require us to
redesign our products or require us to enter into royalty or licensing
agreements, any of which could reduce revenue and increase our operating costs.
OUR PATENTS MAY NOT PROVIDE US WITH COMPETITIVE ADVANTAGES.
We hold several patents in the United States and a corresponding patent in some
European countries, which cover multiple aspects of our technology. The U.S.
patents expire between 2003 and 2010 and the patent in those European countries
expires in 2008. There can be no assurance that we will continue to develop
proprietary products or technologies that are patentable, that any issued patent
will provide us with any competitive advantages or will not be challenged by
third parties, or that patents of others will not hinder our competitive
advantage.
WE ARE SUBJECT TO PRODUCT LIABILITY RISKS.
9
A malfunction of or design defect in our products which results in a breach of a
customer's data security could result in tort or warranty claims against us. We
do not presently maintain product liability insurance for these types of claims.
THERE IS SIGNIFICANT GOVERNMENT REGULATION OF TECHNOLOGY EXPORTS AND TO THE
EXTENT WE CANNOT MEET THE REQUIREMENTS OF THE REGULATIONS WE MAY BE PROHIBITED
FROM EXPORTING SOME OF OUR PRODUCTS WHICH COULD NEGATIVELY IMPACT OUR REVENUES.
Our international sales and operations are subject to risks such as the
imposition of government controls, new or changed export license requirements,
restrictions on the export of critical technology, trade restrictions and
changes in tariffs. If we become unable to obtain foreign regulatory approvals
on a timely basis our business in those countries would no longer exist and our
revenues would decrease dramatically. Certain of our products are subject to
export controls under U.S. law. The list of products and countries for which
export approval is required, and the regulatory policies with respect thereto
may be revised from time to time and our inability to obtain required approvals
under these regulations could materially adversely affect our ability to make
international sales.
WE EMPLOY CRYPTOGRAPHIC TECHNOLOGY IN OUR AUTHENTICATION PRODUCTS THAT USES
COMPLEX MATHEMATICAL FORMULATIONS TO ESTABLISH NETWORK SECURITY SYSTEMS.
Many of our products are based on cryptographic technology. With cryptographic
technology, a user is given a key which is required to encrypt and decode
messages. The security afforded by this technology depends on the integrity of a
user's key and in part on the application of algorithms, which are advanced
mathematical factoring equations. These codes may eventually be broken or become
subject to government regulation regarding their use, which would render our
technology and products less effective. The occurrence of any one of the
following could result in a decline in demand for our technology and products:
o any significant advance in techniques for attacking cryptographic
systems, including the development of an easy factoring method or
faster, more powerful computers;
o publicity of the successful decoding of cryptographic messages or the
misappropriation of keys; and
o increased government regulation limiting the use, scope or strength of
cryptography.
ANY ACQUISITIONS WE MAKE COULD DISRUPT OUR BUSINESS AND HARM OUR FINANCIAL
CONDITION.
We may make investments in complementary companies, products or technologies.
Should we do so, our failure to successfully manage future acquisitions could
seriously harm our operating results. In the event of any future purchases, we
will face additional financial and operational risks, including:
o difficulty in assimilating the operations, technology and personnel of
acquired companies;
o disruption in our business because of the allocation of resources to
consummate these transactions and the diversion of management's
attention from our existing business;
o difficulty in retaining key technical and managerial personnel from
acquired companies;
o dilution of our stockholders, if we issue equity to fund these
transactions;
o assumption of operating losses, increased expenses and liabilities;
and
o our relationships with existing employees, customers and business
partners may be weakened or terminated as a result of these
transactions.
WE EXPERIENCE VARIATIONS IN QUARTERLY OPERATING RESULTS AND ARE SUBJECT TO
SEASONALITY, BOTH OF WHICH MAY RESULT IN A VOLATILE STOCK PRICE.
In the future, as in the past, our quarterly operating results may vary
significantly resulting in a volatile stock price. Factors affecting our
operating results include:
o the level of competition;
o the size, timing, cancellation or rescheduling of significant orders;
o new product announcements or introductions by current competitors;
10
o technological changes in the market for data security products
including the adoption of new technologies and standards;
o changes in pricing by current competitors;
o our ability to develop, introduce and market new products and product
enhancements on a timely basis, if at all;
o component costs and availability;
o our success in expanding our sales and marketing programs;
o market acceptance of new products and product enhancements;
o changes in foreign currency exchange rates; and
o general economic trends.
A SMALL GROUP OF PERSONS CONTROL A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK AND
COULD DELAY OR PREVENT A CHANGE OF CONTROL.
Our board of directors, our officers and their immediate families and related
entities beneficially own approximately 36%, with Mr. T. Kendall Hunt
controlling approximately 33%, of the outstanding shares of our common stock not
including the shares being registered hereunder that are issuable (a) upon
conversion of our Series D preferred stock, (b) upon exercise of warrants
purchased in conjunction with the Series D preferred stock or (c) as dividends
upon the Series D preferred stock. If the foregoing categories of shares are
included as outstanding shares, the beneficial ownership percentages are 30% and
28%, respectively. As the chairman of the board of directors and our largest
stockholder, Mr. Hunt may exercise substantial control over our future direction
and operation and such concentration of control may have the effect of
discouraging, delaying or preventing a change in control and may also have an
adverse effect on the market price of our common stock.
OUR STOCK PRICE MAY BE VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT
OR ABOVE ACCEPTABLE PRICES.
The market price of our common stock may fluctuate significantly in response to
factors, some of which are beyond our control, including the following:
o actual or anticipated fluctuations in our operating results;
o changes in market valuations of other technology companies;
o announcements by us or our competitors of significant technical
innovations, contracts, acquisitions, strategic partnerships, joint
ventures or capital commitments;
o additions or departures of key personnel;
o future sales of common stock;
o any deviations in net revenues or in losses from levels expected by
the investment community; and
o trading volume fluctuations.
WE HAVE NOT PAID AND DO NOT INTEND TO PAY DIVIDENDS.
We have not paid any dividends on our common stock, and we do not intend to pay
cash dividends in the foreseeable future.
CERTAIN PROVISIONS OF OUR CHARTER AND OF DELAWARE LAW MAKE A TAKEOVER OF OUR
COMPANY MORE DIFFICULT.
Our corporate charter and Delaware law contain provisions, such as a class of
authorized but unissued preferred stock which may be issued by our Board without
stockholder approval, that might enable our management to resist a takeover of
our company. Delaware law also limits business combinations with interested
stockholders. These provisions might discourage, delay or prevent a change in
our control or a change in our management. These provisions could also
discourage proxy contests, and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. The existence
of these provisions could limit the price that investors might be willing to pay
in the future for shares of our common stock.
FUTURE ISSUANCES OF BLANK CHECK PREFERRED STOCK MAY REDUCE VOTING POWER OF
COMMON STOCK AND MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD PREVENT A CHANGE IN
CONTROL.
Our corporate charter authorizes the issuance of up to 500,000 shares of
preferred stock with such designations, rights, powers and preferences as may be
determined from time to time by our board of directors. The board of directors
is
11
empowered, without further stockholder approval, to issue up to 500,000 shares
of preferred stock with such dividend, liquidation, conversion, voting or other
rights, powers and preferences as may be determined from time to time by the
board of directors. The issuance of preferred stock could adversely affect the
voting power or other rights of the holders of common stock. In addition, the
authorized shares of preferred stock and common stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control.
U.S. INVESTORS MAY HAVE DIFFICULTIES IN MAKING CLAIMS FOR ANY BREACH OF THEIR
RIGHTS AS HOLDERS OF SHARES BECAUSE SOME OF OUR ASSETS AND EXECUTIVES ARE NOT
LOCATED IN THE UNITED STATES.
Several of our executives are residents of Belgium, and a substantial portion of
our assets and those of some of our executives are located in Belgium. As a
result, it may not be possible for investors to effect service of process on
those persons located in Belgium, or to enforce judgments against some of our
executives based upon the securities or other laws of jurisdictions other than
Belgium. Moreover, we believe that under Belgian law there exist certain
restrictions on the enforceability in Belgium in original actions, or in actions
of enforcement of judgments rendered against us in courts outside jurisdictions
that are a party to the Brussels Convention on Jurisdiction and the Enforcement
of Judgments in Civil and Commercial Matters (as amended). Actions for
enforcement of such judgments may be successful only if the Belgian court
confirms the substantive correctness of the judgment of such court, and is
satisfied:
o that the judgment is not contrary to the principles of public policy
in Belgium or rules of Belgian public law;
o that the judgment did not violate the rights of the defendant;
o that the judgment is final under applicable law;
o that the court did not accept its jurisdiction solely on the basis of
the nationality of the plaintiff; and
o as to the authenticity of the text of the judgment submitted to it.
Judgments rendered in the courts of parties to the Brussels Convention will be
enforceable by the courts of Belgium without reexamination of the merits of the
case provided such judgment is final and otherwise satisfies all of the
conditions provided for in this Convention. If proceedings have been brought in
one country, however, new proceedings in another country may be barred.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in, and that are or will be incorporated by
reference in, this Prospectus constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, including
without limitation, discussions of future expectations, projections of results
of operation or financial condition and statements with respect to other
forward-looking information. Forward-looking statements can be identified by the
use of progressive terminology, such as "may," "will," "expect," "anticipate,"
"believe", "intend", "estimate," "continue" or other similar words. These
statements are subject to known and unknown risks and uncertainties that could
cause our actual results of operation or financial condition to differ
materially from those contemplated by the statements. Factors that might cause a
difference between future projections and actual results include those discussed
in the section titled "Risk Factors" beginning on page 7. Any forward-looking
statements and other information contained in this Prospectus is current only as
of its date, regardless of the time of delivery of this Prospectus or of any
sale of the Shares. Therefore, the information, and any forward-looking
statements based on such information, are subject to change. You should read
carefully the entire Prospectus, as well as the documents incorporated by
reference in the Prospectus, in order to assess the merits of any
forward-looking statements and to make an informed investment decision. In
addition, important factors to consider in evaluating such forward-looking
statements include changes in external market factors, changes in our business
or growth strategy or an inability to execute our strategy due to changes in our
industry or the economy generally, the emergence of new or growing competitors
and various other competitive factors. In light of these risks and
uncertainties, there can be no assurance that the matters referred to in the
forward-looking statements contained in this Prospectus will in fact occur.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the Shares of our Common Stock
by the Selling Shareholders. If the Warrants held by the Selling Shareholders
are exercised for cash, we intend to use the net proceeds generated by such
Warrant exercise for working capital and general corporate purposes in the
ordinary course of business. Temporarily, we may invest the net proceeds from
the exercise of the Warrants, if any, in high grade short-term interest bearing
investments.
12
SELLING SHAREHOLDERS
The number of shares beneficially owned by the selling security holders is
determined under rules promulgated by the SEC. In particular, no holder of
Series D preferred stock or warrants issued in connection with the Series D
preferred stock financing is entitled to convert any shares of Series D
preferred stock into, or exercise any such warrants for, common stock, or
dispose of any shares of Series D preferred stock or any portion of any such
warrants, to the extent that such right to effect such conversion, exercise or
disposition would result in the holder or any of its affiliates together
beneficially owning more than (a) 4.95% of the outstanding shares of common
stock or (b) 19.99% of the outstanding shares of common stock. Therefore, while
included in the number of shares offered in the table below, shares which the
selling stockholder is prevented from acquiring as a result of these provisions
are not shown as beneficially owned by our stockholder. Similarly, shares of
common stock acquirable upon exercise of warrants that are not exercisable
within 60 days of _____________, 2003 are included in the shares being offered,
but not considered to be beneficially owned pursuant to the rules promulgated by
the SEC. As a result, the number of shares that the holders of Series D
preferred stock may sell pursuant to this prospectus may exceed the number of
shares of common stock they would otherwise be deemed to beneficially own as
determined pursuant to Section 13(d) of the Exchange Act.
The table below sets forth the beneficial ownership of our common stock by the
selling shareholders as of September 11, 2003. Beneficial ownership includes
shares of outstanding common stock as of September 11, 2003, and shares of
common stock that a selling shareholder has the right to acquire within 60 days
of this Prospectus. Unless otherwise indicated, the selling shareholders have
the sole power to direct the voting and investment over the shares owned by
them.
Except as indicated above, the number of shares that may be actually sold by any
selling shareholder will be determined by the selling shareholder. Because the
selling shareholders may sell all, some or none of the shares of common stock
which they hold, and because the offering contemplated by this Prospectus is not
currently being underwritten, no estimate can be given as to the number of or
percentage of total shares of common stock that will be held by the selling
shareholders upon termination of the offering.
Total Common
Stock Owned Number of Shares Common Stock
Before the of Common Stock Owned After
Name Offering to be Offered the Offering
Ubizen N.V. 2,000,000 2,000,000
AIG DKR SoundShore Strategic Holding Fund Ltd. 57,500(1) 57,500(1)
BayStar Capital II, L.P. 690,000(2)(11) 690,000(2)
Cranshire Capital, L.P. 172,500(3) 172,500(3)
Crestview Capital Fund II, LP 460,000(4) 460,000(4)
E*Capital Corporation 172,500(3) 172,500(3)
Gryphon Master Fund LP 172,500(3) 172,500(3)
J R Squared, LLC 460,000(4) 460,000(4)
JAS Securities, LLC 86,250(5) 86,250(5)
JMB Capital Partners, L.P. 460,000(4) 460,000(4)
Langley Partners, LP 460,000(4) 460,000(4)
Omicron Master Trust 287,500(6) 287,500(6)
OTAPE Investments LLC 143,750(7) 143,750(7)
Platinum Partners Value Arbitrage Fund LP 57,500(1) 57,500(1)
Redwood Partners II, LLC 115,000(8) 115,000(8)
SDS Merchant Fund, LP 690,000(2)(12) 690,000(2)
TCMP3 Partners 46,000(9) 46,000(9)
Truk Opportunity Fund, LLC 23,000(10) 23,000(10)
Tuva Financial 46,000(9) 46,000(9)
Totals
1. 50,000 of these shares are issuable upon conversion of the Series D
preferred stock at a conversion price of $2.00 per share.
7,500 of these shares are issuable upon exercise of warrants at a price of
$3.47 per share. These warrants expire on September 11, 2008.
2. 600,000 of these shares are issuable upon conversion of the Series D
preferred stock at a conversion price of $2.00 per share.
90,000 of these shares are issuable upon exercise of warrants at a price of
$3.47 per share. These warrants expire on September 11, 2008.
3. 150,000 of these shares are issuable upon conversion of the Series D
preferred stock at a conversion price of $2.00 per share.
22,500 of these shares are issuable upon exercise of warrants at a price of
$3.47 per share. These warrants expire on September 11, 2008.
4. 400,000 of these shares are issuable upon conversion of the Series D
preferred stock at a conversion price of $2.00 per share.
60,000 of these shares are issuable upon exercise of warrants at a price of
$3.47 per share. These warrants expire on September 11, 2008.
5. 75,000 of these shares are issuable upon conversion of the Series D
preferred stock at a conversion price of $2.00 per share.
11,250 of these shares are issuable upon exercise of warrants at a price of
$3.47 per share. These warrants expire on September 11, 2008.
6. 250,000 of these shares are issuable upon conversion of the Series D
preferred stock at a conversion price of $2.00 per share.
37,500 of these shares are issuable upon exercise of warrants at a price of
$3.47 per share. These warrants expire on September 11, 2008.
7. 125,000 of these shares are issuable upon conversion of the Series D
preferred stock at a conversion price of $2.00 per share.
18,750 of these shares are issuable upon exercise of warrants at a price of
$3.47 per share. These warrants expire on September 11, 2008.
13
8. 100,000 of these shares are issuable upon conversion of the Series D
preferred stock at a conversion price of $2.00 per share.
15,000 of these shares are issuable upon exercise of warrants at a price of
$3.47 per share. These warrants expire on September 11, 2008.
9. 40,000 of these shares are issuable upon conversion of the Series D
preferred stock at a conversion price of $2.00 per share.
6,000 of these shares are issuable upon exercise of warrants at a price of
$3.47 per share. These warrants expire on September 11, 2008.
10. 20,000 of these shares are issuable upon conversion of the Series D
preferred stock at a conversion price of $2.00 per share.
3,000 of these shares are issuable upon exercise of warrants at a price of
$3.47 per share. These warrants expire on September 11, 2008.
11. BayStar Capital Management, LLC, a Delaware limited liability company, is
the general partner of BayStar Capital II, LP, and has the sole voting and
investment power with respect to the shares of our common stock that
BayStar Capital II, LP is offering in this prospectus. By reason of such
relationship, BayStar Capital Management, LLC may be deemed beneficial
owner of these shares. However, BayStar Capital Management, LLC disclaims
such beneficial ownership of these shares. There are three independent
managing members of BayStar Capital Management, LLC. Accordingly, no person
or "group" (as that term is defined in Section 13(d) of the Securities
Exchange Act of 1934 or Regulation 13D-G) controls BayStar Capital
Management, LLC.
12. SDS Capital Partners, LLC, a Delaware limited liability company, is the
general partner of SDS Merchant Fund, LP, and has the sole voting and
investment power with respect to the shares of our common stock that SDS
Merchant Fund, LP is offering in this prospectus. By reason of such
relationship, SDS Capital Partners, LLC may be deemed beneficial owner of
these shares. However, SDS Capital Partners, LLC disclaims such beneficial
ownership of these shares. Steve Derby is the managing member of SDS
Capital Partners, LLC. Mr. Derby disclaims beneficial ownership of the
shares of our common stock owned by SDS Merchant Fund, LP.
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling
shareholders identified on pages 13-14 of this Prospectus. The shares being
registered are owned or, with respect to some of the selling shareholders, may
be acquired by the selling shareholders (a) upon exercise of warrants to
purchase common stock, (b) upon conversion of our Series D preferred stock into
shares of common stock or (c) as dividends paid by us on the preferred stock.
The selling shareholders, as used in this Prospectus, includes donees, pledgees,
transferees or other successors in interest who may receive shares from the
selling shareholders after the date of this Prospectus. The selling shareholders
will act independently of us in making decisions with respect to the timing,
manner and size of each sale of the common stock covered by this Prospectus. The
selling shareholders may offer their shares of our common stock at various times
in one or more of the following transactions:
o in ordinary broker's transactions on the Nasdaq Small Cap Market or
any national securities exchange on which our common sStock may be
listed at the time of sale;
o in the over-the-counter market;
o in private transactions other than in the over-the-counter market;
o in connection with short sales of other shares of our common stock in
which shares are redelivered to close out positioning;
o by pledge to secure debts and other obligations;
o in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions and in settlement of other transactions
in standardized or over-the-counter options; or
o in a combination of any of the above transactions or by any other
legally available means.
The selling shareholders may sell their shares of our common stock at market
prices prevailing at the time of sale, at prices related to the prevailing
market prices, at negotiated prices or at fixed prices. The selling shareholders
may, but need not, use broker-dealers to sell their shares of our common stock.
If broker-dealers are used, such broker-dealers will either receive discounts or
commissions from the selling shareholders, or they will receive commissions from
purchasers of shares of our common stock for whom they acted as agents. This
compensation may exceed customary commissions.
The selling shareholders also may resell all or a portion of the shares of our
common stock in open market transactions in reliance upon Rule 144 under the
Securities Act, provided that such selling shareholders meet the criteria and
conform to the requirements of that rule. The selling shareholders and the
broker-dealers to or through whom sale of the shares of our common stock may be
made could be deemed to be "underwriters" within the meaning of Section 2(a)(11)
of Securities Act, and their commissions or discounts and other compensation
received in connection with the sale of the shares may be regarded as
underwriters' compensation, if the SEC determines that they purchased the shares
in order to resell them to the public.
The selling shareholders have not advised us of any specific plans for the
distribution of the shares of our common stock covered by this Prospectus. When
and if we are notified by any selling shareholder that any material arrangement
has been entered into with a broker-dealer or underwriter for the sale of a
material portion of the shares covered by this Prospectus, a Prospectus
supplement or post-effective amendment to the registration statement will be
filed with the SEC. This supplement or amendment will include the following
information:
o the name of the participating broker-dealer(s) or underwriters;
o the number of shares involved;
o the price or prices at which the shares were sold by the selling
shareholder;
o the commissions paid or discounts or concessions allowed by the
selling shareholder to the broker-dealers or underwriters; and
o other material information.
Under agreements which may be entered into by the selling security holders,
underwriters who participate in the distribution of shares may be entitled to
indemnification by the selling security holders against certain liabilities,
including liabilities under the Securities Act. We have also agreed to
indemnify, in certain circumstances, the selling security holders and certain
control and other persons related to the foregoing persons against certain
liabilities, including liabilities under the Securities Act. The selling
security holders have agreed to indemnify us in certain circumstances, as well
as certain related persons, against certain liabilities, including liabilities
under the Securities Act.
We have advised the selling shareholders that the anti-manipulation rules
promulgated under the Securities Exchange Act, including Regulation M, may apply
to sales of the shares offered by the selling shareholders. We have agreed to
pay all costs
14
relating to the registration of the shares. Any commissions or other fees
payable to broker-dealers or otherwise in connection with any sale of the shares
will be paid by the selling shareholders or other party selling the shares.
LEGAL MATTERS
The validity of the shares of common stock offered was passed upon for us by
Pepper Hamilton LLP.
EXPERTS
Our consolidated financial statements appearing in our annual report on Form
10-K for the year ended December 31, 2002, have been audited by KPMG LLP,
independent accountants, as set forth in their report thereon (the "KPMG
Report") included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon the KPMG Report upon the authority of KPMG LLP as experts in
accounting and auditing.
15
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange Act
of 1934 (the "Exchange Act"). We file annual, quarterly and special reports,
proxy statements and other information with the SEC. You may read and copy any
document we file at the SEC's public reference room at the SEC's principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You
may obtain information on the operation of this public reference room by calling
1-800-SEC-0330. Our SEC filings are also available to the public from the SEC's
web site at http://www.sec.gov. In addition, any of our SEC filings may also be
inspected and copied at the offices of The Nasdaq Stock Market, Inc., 9801
Washingtonian Blvd., Gaithersburg, MD 20878.
We have filed with the SEC a registration statement on Form S-3 covering the
securities offered by this Prospectus. You should be aware that this Prospectus
does not contain all of the information contained or incorporated by reference
in that registration statement and its exhibits and schedules, particular
portions of which have been omitted as permitted by the SEC rules. For further
information about us and our securities, we refer you to the registration
statement and its exhibits and schedules. You may inspect and obtain the
registration statement, including exhibits, schedules, reports and other
information we have filed with the SEC, as described in the preceding paragraph.
Statements contained in this Prospectus concerning the contents of any document
to which we refer you are not necessarily complete and in each instance we refer
you to the applicable document filed with the SEC for more complete information.
The SEC allows us to incorporate by reference the information we file with them,
which means that we can disclose important information to you by referring to
those documents. The information incorporated by reference is considered to be
part of this Prospectus, and the information that we file at a later date with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below as well as any future filings we make
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act:
o our annual report on Form 10-K for the fiscal year ended December 31,
2002;
o our quarterly reports on Form 10-Q for the quarters ending March 31
and June 30, 2003; and
o the description of our Common Stock which is contained in our
registration statement on Form S-4 (SEC File No. 333-35563) filed
under the Exchange Act, including any amendment or reports filed for
the purpose of updating this description.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address: VASCO Data Security International, Inc., 1901 South
Meyers Road, Suite 210, Oakbrook Terrace, Illinois 60181, Attention: Corporate
Secretary, (630) 932-8844.
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED IN
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE ELSE
TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE SELLING SECURITYHOLDERS ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THE DOCUMENT.
DEALER PROSPECTUS DELIVERY OBLIGATION
Until _____________, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
Prospectus. This is in addition to the dealer's obligation to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
16
VASCO DATA SECURITY INTERNATIONAL, INC.
_____________________________________________
PROSPECTUS
_____________________________________________
7,500,000 SHARES
COMMON STOCK
______________, 2003
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses payable by us in connection
with the sale and distribution of the securities offered in this offering. All
of the amounts shown are estimated except the Securities and Exchange Commission
registration fee.
Securities and Exchange Commission
Registration fee $ 1,753.51
Printing expenses 800.00
Legal fees and expenses 15,000.00
Accounting fees and expenses 4,000.00
Miscellaneous expenses 500.00
-----------
Total $ 22,053.51
-----------
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify directors, officers, employees and agents against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement in connection with specified actions, suits, or proceedings whether
civil, criminal, administrative, or investigative (other than an action by or in
the right of the corporation--a "derivative action"), if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard is applicable in the case of derivative actions, except that
indemnification is permitted only for expenses (including attorneys' fees)
incurred in connection with the defense or settlement of such action, and the
statute requires court approval before there can be any indemnification for
expenses where the person seeking indemnification has been found liable to the
corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's charter, bylaws,
disinterested director vote, stockholder vote, agreement, or otherwise.
Article V of the Bylaws of Registrant provides that Registrant shall indemnify
and hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person (an "Indemnitee") who
was or is made or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director or officer of the
Registrant or, while a director or officer of the Registrant, is or was serving
at the written request of the Registrant as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or nonprofit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses (including
attorneys' fees) reasonably incurred by such Indemnitee. Notwithstanding the
preceding sentence, except as otherwise provided in Section 3 of Article V of
such Bylaws, the Registrant shall be required to indemnify an Indemnitee in
connection with a proceeding (or part thereof) commenced by such Indemnitee only
if the commencement of such proceeding (or part thereof) by the Indemnitee was
authorized by the Board of Directors.
ITEM 16. EXHIBITS
-------------------------------------------------------------------------------
EXHIBIT NO. DESCRIPTION
-------------------------------------------------------------------------------
3.1 (1) Certificate of Incorporation
-------------------------------------------------------------------------------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-4 (File No. 333-35563) filed on September 12, 1997
3.2 (1) Bylaws, as amended
-------------------------------------------------------------------------------
3.3 Certificate of Designations, Rights and Preferences of the
Series D Preferred Stock (to be filed by amendment).
-------------------------------------------------------------------------------
3.4 Form of Series D Warrant (to be filed by amendment).
-------------------------------------------------------------------------------
5.1 Opinion of Pepper Hamilton LLP
-------------------------------------------------------------------------------
23.1 Consent of KPMG LLP
-------------------------------------------------------------------------------
23.2 Consent of Pepper Hamilton LLP (included as part of
Exhibit 5.1 hereto)
-------------------------------------------------------------------------------
24.1 Power of Attorney (included in signature page)
-------------------------------------------------------------------------------
(1) Incorporated by reference to the Registrant's Registration Statement on
Form S-4 (File No. 333-35563) filed on September 12, 1997
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of this 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 this registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the Calculation of Registration
Fee table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in the registration statement; provided,
however, that the undertakings set forth in paragraphs (i) and (ii) above do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, 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 hereby which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for the purpose 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
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered 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 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions 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 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 DuPage County, State of Illinois, on the 12th day of September,
2003.
VASCO DATA SECURITY INTERNATIONAL, INC.
By: /s/ T. Kendall Hunt
------------------------------------
T. Kendall Hunt
Chief Executive Officer and
Chairman of the Board of Directors
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 date indicated.
NAME TITLE DATE
---- ----- ----
/s/ T. Kendall Hunt Chief Executive Officer and Chairman of
--------------------------- the Board of Directors
T. Kendall Hunt (Principal Executive
Officer)
/s/ Clifford K. Bown Executive Vice President and Chief
----------------------- Financial Officer
Clifford K. Bown (Principal Financial and
Accounting Officer)
/s/ Michael P. Cullinane Director
---------------------------
Michael P. Cullinane
/s/ Michael A. Mulshine Director
-----------------------
Michael A. Mulshine
/s/ Forrest D. Laidley Director
---------------------------
Forrest D. Laidley
/s/ John R. Walter Director
---------------------------
John R. Walter
EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION
--------------------------------------------------------------------------------
3.1 (1) Certificate of Incorporation
--------------------------------------------------------------------------------
3.2 (1) Bylaws, as amended
--------------------------------------------------------------------------------
3.3 Certificate of Designations, Rights and Preferences of the
Series D Preferred Stock (to be filed by amendment).
-------------------------------------------------------------------------------
3.4 Form of Series D Warrant (to be filed by amendment).
-------------------------------------------------------------------------------
5.1 Opinion of Pepper Hamilton LLP
--------------------------------------------------------------------------------
23.1 Consent of KPMG LLP
--------------------------------------------------------------------------------
23.2 Consent of Pepper Hamilton LLP (included as part of
Exhibit 5.1 hereto)
--------------------------------------------------------------------------------
24.1 Power of Attorney (included in signature page)
--------------------------------------------------------------------------------
(1) Incorporated by reference to the Registrant's Registration Statement on Form
S-4 (File No. 333-35563) filed on September 12, 1997