FILED PURSUANT TO RULE 424(B)(3)
REGISTRATION NO. 333-127673
PROSPECTUS
5,291,809 Shares
Class A common stock
This prospectus relates to the resale by certain selling security holders of
Access Integrated Technologies, Inc. of 5,291,809 shares of our Class A common
stock, including 1,909,115, shares of our Class A common stock purchased by
certain security holders in our July 2005 private offering, 477,275 shares of
our Class A common stock issuable upon the exercise of warrants issued to those
security holders. We are contractually obligated under our registration rights
agreements with the selling stockholders in our July 2005 private offering to
register the shares they may resell under such registration rights agreements.
This prospectus may also be used by selling stockholders who exercised their
piggyback registration rights with regard to 2,905,419 shares of our Class A
common stock that they acquired in private transactions with us.
The selling security holders may offer to sell the shares of our Class A common
stock being offered by this prospectus at fixed prices, at prevailing market
prices at the time of sale, at varying prices, or at negotiated prices.
The shares of our Class A common stock are listed for trading on the American
Stock Exchange under the symbol "AIX". On August 17, 2005, the last reported
sale price of our Class A common stock was $13.15 per share.
We will not receive any proceeds from the resale of shares of our Class A common
stock by the selling security holders, other than payment of the exercise price
of the warrants. We will pay the expenses of this offering.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF FACTORS THAT YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR CLASS A COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION 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.
August 31, 2005
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed
with the SEC utilizing a shelf registration process. Under this shelf
registration process, selling stockholders may, from time to time, offer and
sell shares of our Class A common stock pursuant to this prospectus. It is
important for you to read and consider all of the information contained in this
prospectus and any applicable prospectus supplement before making a decision
whether to invest in our Class A common stock. You should also read and consider
the information contained in the documents that we have incorporated by
reference as described in "Where You Can Find More Information" and
"Incorporation of Certain Documents By Reference" in this prospectus.
You should rely only on the information provided in this prospectus and
any applicable prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with additional or
different information. If anyone provides you with additional, different or
inconsistent information, you should not rely on it. We are not offering to sell
or soliciting offers to buy, and will not sell, any securities in any
jurisdiction where it is unlawful. You should assume that the information
contained in this prospectus or in any prospectus supplement, as well as
information contained in a document that we have previously filed or in the
future will file with the SEC and incorporate by reference in this prospectus or
any prospectus supplement, is accurate only as of the date of this prospectus,
the applicable prospectus supplement or the document containing that
information, as the case may be. Our financial condition, results of operations,
cash flows or business may have changed since that date.
WHERE YOU CAN FIND MORE INFORMATION
We are required to file periodic reports, proxy statements and other
information relating to our business, financial and other matters with the SEC
under the Securities Exchange Act of 1934. Our filings are available to the
public over the Internet at the SEC's web site at HTTP://WWW.SEC.GOV. You may
also read and copy any document we file with the SEC at, and obtain a copy of
any such document by mail from, the SEC's public reference room located at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed charges. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room
and its charges.
We have filed with the SEC a registration statement on Form S-3 under
the Securities Act of 1933 with respect to our securities described in this
prospectus. References to the "REGISTRATION STATEMENT" or the "REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART" mean the original registration
statement and all amendments, including all schedules and exhibits. This
prospectus does not, and any prospectus supplement will not, contain all of the
information in the registration statement because we have omitted parts of the
registration statement in accordance with the rules of the SEC. Please refer to
the registration statement for any information in the registration statement
that is not contained in this prospectus or a prospectus supplement. The
registration statement is available to the public over the Internet at the SEC's
web site described above and can be read and copied at the locations described
above.
Each statement made in this prospectus or any prospectus supplement
concerning a document filed as an exhibit to the registration statement is
qualified in its entirety by reference to that exhibit for a complete
description of its provisions.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "INCORPORATE BY REFERENCE" in this prospectus the
information contained in other documents filed separately with the SEC. This
means that we can disclose important information to you by referring you to
other documents filed with the SEC that contain such information. The
information incorporated by reference is an important part of this prospectus
and prospectus supplement. Information disclosed in documents that we file later
with the SEC will automatically add to, update and change information previously
disclosed. If there is additional information in a later filed document or a
conflict or inconsistency between information in this prospectus or a prospectus
supplement and information incorporated by reference from a later filed
document, you should rely on the information in the later dated document.
1
We incorporate by reference the documents listed below (and the
documents incorporated by reference therein) that we have previously filed, and
any documents that we may file in the future, with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, until the offerings contemplated by this
prospectus are completed:
o our current report on Form 8-K, dated November 17, 2004 filed with the
SEC on February 2, 2005;
o our annual report on Form 10-KSB for the fiscal year ended March 31,
2005, filed with the SEC on June 29, 2005;
o our quarterly report on Form 10-QSB for the period ended June 30, 2005,
filed with the SEC on August 15, 2005;
o our current report on Form 8-K, dated April 29, 2005, filed with the SEC
on April 29, 2005;
o our current report on Form 8-K, dated June 14, 2005, filed with the SEC
on June 14, 2005;
o our current report on Form 8-K, dated June 24, 2005, filed with the SEC
on June 24, 2005;
o our current report on Form 8-K, dated June 27, 2005, filed with the SEC
on June 27, 2005;
o our current report on Form 8-K, dated July 22, 2005, filed with the SEC
on July 22, 2005;
o our current report on Form 8-K/A, dated July 22, 2005, filed with the
SEC on July 22, 2005;
o our current report on Form 8-K, dated August 11, 2005, filed with the
SEC on August 11, 2005;
o the description of our Class A common stock contained in our
registration statement on Form 8-A (File No. 001-31810), filed with the
SEC under Section 12 of the Exchange Act on September 24, 2003.
Any statement made in this prospectus, a prospectus supplement or a
document incorporated by reference in this prospectus or a prospectus supplement
will be deemed to be modified or superseded for purposes of this prospectus and
any applicable prospectus supplement to the extent that a statement contained in
an amendment to the registration statement, any subsequent prospectus supplement
or in any other subsequently filed document incorporated by reference herein or
therein adds, updates or changes that statement. Any statement so affected will
not be deemed, except as so affected, to constitute a part of this prospectus or
any applicable prospectus supplement.
You may obtain a copy of these filings, excluding exhibits (but
including exhibits that are specifically incorporated by reference), free of
charge, by oral or written request directed to: Access Integrated Technologies,
Inc., 55 Madison Avenue, Suite 300, Morristown, NJ 07960, Attention: General
Counsel, Telephone (973) 290-0080.
FORWARD-LOOKING STATEMENTS
Various statements contained in this prospectus or incorporated by reference
into this prospectus constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are based on current expectations and are indicated by words or
phrases such as "believe," "expect," "may," "will," "should," "seek," "plan,"
"intend" or "anticipate" or the negative thereof or comparable terminology, or
by discussion of strategy. Forward-looking statements represent as of the date
of this prospectus our judgment relating to, among other things, future results
of operations, growth plans, sales, capital requirements and general industry
and business conditions applicable to us. Such forward-looking statements are
based largely on our current expectations and are inherently subject to risks
and uncertainties. Our actual results could differ materially from those that
are anticipated or projected as a result of certain risks and uncertainties,
including, but not limited to, a number of factors, such as:
o successful integration of acquired businesses;
o the effect of our indebtedness on our financial condition and
financial flexibility, including, but not limited to, the ability to
obtain necessary financing for our business;
o economic and market conditions;
o the performance of our targeted markets;
o changes in business relationships with our major customers;
o competitive product and pricing pressures; and
o the other risks and uncertainties that are described in this
prospectus and from time to time in our filings with the SEC.
2
Except as otherwise required to be disclosed in periodic reports required to be
filed by public companies with the SEC pursuant to the SEC's rules, we have no
duty to update these statements, and we undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks and
uncertainties, we cannot assure you that the forward-looking information
contained in this prospectus will in fact transpire.
3
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS, ANY PROSPECTUS SUPPLEMENT AND THE DOCUMENTS INCORPORATED BY
REFERENCE. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER
BEFORE MAKING A DECISION TO INVEST OUR IN CLASS A COMMON STOCK. YOU SHOULD READ
CAREFULLY THE ENTIRE PROSPECTUS, ANY APPLICABLE PROSPECTUS SUPPLEMENT AND THE
DOCUMENTS INCORPORATED BY REFERENCE, INCLUDING "RISK FACTORS" AND THE
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT.
In this prospectus, "AccessIT", "we," "us," "our" and the "Company" refer to
Access Integrated Technologies, Inc. and its subsidiaries unless the context
otherwise requires.
OUR BUSINESS
AccessIT was organized on March 31, 2000 and we are in the business of providing
software services and technology solutions to the motion picture industry, and
operating Internet data centers. We are actively expanding into new and
interrelated business areas relating to the delivery and management of digital
cinema content to entertainment venues worldwide. These businesses, supported by
our Internet data center business, have become our primary strategic focus.
Our business focus is to create a secure, managed and complete system that
consists of software to book, track and perform accounting functions for digital
content in theatres, deliver digital content to multiple locations and provide
the content management software for in-theatre playback system for the digital
cinema marketplace. The system is intended to use all of our businesses:
MEDIA SERVICES
o DIGITAL MEDIA DELIVERY - digital media managed electronic delivery
services and in-theatre management software for use in theatres from
Access Digital Media, Inc. ("AccessDM"), our wholly- owned subsidiary,
and satellite delivery services from FiberSat Global Services, Inc.,
our wholly-owned subsidiary. The Pavilion Theatre (as defined below)
is utilizing the digital media managed electronic delivery services
and in-theatre management software products;
o MOVIE DISTRIBUTION AND EXHIBITOR SOFTWARE - Hollywood Software, Inc.
("Hollywood SW"), our wholly-owned subsidiary, develops and licenses
distribution and exhibitor software products and services;
DATA CENTER SERVICES
o DATA CENTERS - AccessIT's Internet data centers ("IDCs" or "data
centers"), including redundant sites in Los Angeles and New York City;
and
o MANAGED SERVICE OFFERINGS- managed storage and network and systems
management services by Core Technology Services, Inc. ("Managed
Services"), our wholly-owned subsidiary, and AccessIT.
Our system provides a digital content owner with the secure delivery of multiple
files to multiple locations with proactive notification and security management.
Our system also provides the digital content exhibitor with access to digital
content, freedom to choose what to play and when to play it with proactive
notifications and management software. We have created a system whereby digital
content is delivered where it is supposed to go, is played when it is supposed
to be played along with the ability to act upon and report back management and
financial information.
We have two reportable segments: Media Services, which represents the operations
of AccessDM (including Boeing Digital (as defined below)), Pavilion Theatre,
FiberSat (as defined below) and Hollywood SW; and Data Center Services, which
are comprised of our IDC operations and Managed Service Offerings.
4
In February 2003, we organized AccessDM, which in May 2004 became our
wholly-owned subsidiary. AccessDM has developed proprietary software, Digital
Express e-Courier, capable of worldwide delivery of digital data -- including
movies, advertisements and alternative content such as concerts, seminars and
sporting events -- to movie theaters and other venues having digital projection
equipment. Also, in April 2005 we completed the development of in-theatre
management software for use by digitally - equipped movie theaters, called the
Theatre Command Center.
In November 2003, we acquired all of the capital stock of Hollywood SW, a
leading provider of proprietary transactional support software and consulting
services for distributors and exhibitors of filmed entertainment in the United
States and Canada (the "Hollywood SW Acquisition"). Its licensed software
records and manages information relating to the planning, scheduling, revenue
sharing, cash flow and reporting associated with the distribution and exhibition
of theatrical films. In addition, Hollywood SW's software complements, and is
integrated with, AccessDM's digital content delivery software by enabling
Hollywood SW's customers to seamlessly plan and schedule delivery of digital
content to entertainment venue operators as well as to manage the related
financial transactions.
In an effort to increase the competitive advantage of the IDCs, on January 9,
2004, we acquired Managed Services, a managed service provider of information
technologies. As an information technology outsourcing organization, Managed
Services manages clients' networks and systems in over 35 countries in Europe,
Asia, North and South America and more than 20 states in the United States.
Managed Services operates a 24x7 Global Network Command Center ("GNCC"), capable
of running the networks and systems of large corporate clients. The four largest
customers of Managed Services accounted for approximately 54% of its revenues.
The managed services capabilities of Managed Services have been integrated with
our IDCs and now operate under the name of AccessIT Managed Services.
In March 2004, we acquired certain assets of Boeing Digital Cinema ("Boeing
Digital"), a division of The Boeing Company ("Boeing"). These assets were
purchased to further our strategy of becoming a leader in the delivery of movies
and other digital content to movie theaters. The acquired assets consist of
digital projectors, satellite dishes and other equipment installed at 28 screens
within 21 theaters in the United States and equipment stored at other locations,
and satellite transmission equipment located in Los Angeles, California. Since
the acquisition, we have used the stored equipment (and added new equipment) in
an additional 3 screens within 2 theaters in the United States.
Also in March 2004, we refinanced approximately $4.2 aggregate principal amount
(plus accrued and unpaid interest) of our promissory notes pursuant to an
exchange offer. In exchange for these promissory notes, we issued 707,477
unregistered shares of our Class A common stock and $1.7 million aggregate
principal amount of new convertible notes which as of March 31, 2005 were
convertible into a maximum of 312,425 shares of our Class A common stock.
In May 2004, we entered into an agreement with the holder of 750,000 shares of
AccessDM's common stock, to exchange all of the holder's shares for 31,300
unregistered shares of AccessIT's Class A common stock. As a result of the
transaction, which was consummated on May 26, 2004, AccessIT now holds 100% of
AccessDM's common stock.
In June 2004, we consummated a $4.87 million private placement of 1,217,500
unregistered shares of our Class A common stock with institutional and other
accredited investors. Pursuant to the private placement, we also issued to the
investors and the placement agent warrants to purchase up to 243,500 and 60,875
shares of our Class A common stock, respectively, at an exercise price of $4.80
per share, exercisable upon receipt. We registered the resale of all of the
1,217,500 shares and the 304,375 shares underlying the warrants on a
registration statement on Form SB-2 with the SEC on July 2, 2004, which was
declared effective by the SEC on July 20, 2004.
In November 2004, we consummated a $1.1 million private placement of 282,776
unregistered shares of our Class A common stock at $3.89 per share with certain
accredited investors (the "November 2004 PIPE"). The net proceeds of
approximately $1.023 million from such private placement were used for the
FiberSat Acquisition and for working capital. These shares carry piggyback and
demand registration rights, at the sole expense of the investors. The investors
exercised their piggyback registration rights and we registered the resale of
all of the 282,776 shares on a registration statement on Form S-3, which was
declared effective by the SEC on March 21, 2005.
5
Also in November 2004, we acquired substantially all of the assets of FiberSat
Global Services, LLC ("FiberSat") through FiberSat Global Services, Inc., our
wholly-owned subsidiary (the "FiberSat Acquisition"). FiberSat, headquartered in
Chatsworth, California, provides services utilizing satellite ground facilities
and fiber-optic connectivity to receive, process, store, encrypt and transmit
television and data signals globally. FiberSat's Chatsworth facility currently
houses the infrastructure operations of our digital cinema satellite delivery
services. By completing the FiberSat Acquisition, we gained extensive satellite
distribution and networking capabilities provided by FiberSat's fully
operational data storage and uplink facility located in Los Angeles, California.
FiberSat has the ability to provide broadband video, data and Internet
transmission and encryption services for the broadcast and cable television and
communications industries.
In February 2005, we consummated a private placement of $7.6 million, 4-year
convertible debentures (the "Convertible Debentures"). The Convertible
Debentures bear interest at the rate of 7% per year and are convertible into
shares of our Class A common stock at the price of $4.07 per share, subject to
possible adjustments from time to time. In connection with the Convertible
Debenture offering, we issued the participating institutional investors warrants
(the "Convertible Debentures Warrants") exercisable for up to 560,196 shares of
Class A common stock at an initial exercise price of $4.44 per share, subject to
adjustments from time to time. The Convertible Debentures Warrants may be
exercised beginning on September 9, 2005 until five years thereafter. We
registered the resale of all of the shares underlying the Convertible Debentures
and the Convertible Debentures Warrants with the SEC on March 11, 2005, which
was declared effective by the SEC on March 21, 2005.
Also in February 2005, through ADM Cinema Corporation, our wholly-owned
subsidiary ("ADM Cinema"), we consummated the acquisition of substantially all
of the assets of the Pavilion Movie Theatre located in the Park Slope section of
Brooklyn, New York ("Pavilion Theatre") from Pritchard Square Cinema, LLC
("Pavilion Theatre Seller"). The Pavilion Theatre is an eight-screen movie
theatre and cafe and is a component of the Media Services segment. Continuing to
operate as a fully functional multiplex, the Pavilion Theatre will also become
our showplace to demonstrate our integrated digital cinema solutions to the
movie entertainment industry.
On June 15, 2005, the Company entered into a digital cinema framework agreement
(the "Framework Agreement") with Christie Digital Systems USA, Inc. ("Christie")
through the Company's newly formed wholly-owned subsidiary, Christie/AIX, Inc.,
a Delaware corporation ("Christie/AIX"), whereby, among other things (1)
Christie/AIX will seek to raise financing to purchase 200 of Christie's digital
cinema projection systems (the "Systems") at agreed-upon prices; (2)
Christie/AIX would then seek to raise additional debt and/or equity financing to
purchase an additional 2,300 Systems at agreed-upon prices. The Framework
Agreement allows Christie/AIX to terminate the agreement for several reasons,
including failure to: (1) execute definitive agreements with certain film
distributors by August 31, 2005 to pay virtual print fees to Christie/AIX for
deliveries of digital films made to the Systems, (2) execute agreements with
certain exhibitors by August 31, 2005 to license the Systems, to house them in
the exhibitor locations, and (3) obtain Christie/AIX's final commitment to
purchase at least 100 Systems by July 31, 2005.
In connection with the execution of an agreement between the Company and
Christie Digital Systems USA, Inc. ("the Framework Agreement"), in June 2005 the
Company engaged a third party to assist in raising funds to purchase the
equipment associated with the Framework Agreement, and for general corporate
purposes. On July 19, 2005 the Company sold to certain institutional and other
accredited investors in a private placement (the "July 2005 Private Placement")
a total of 1,909,115 shares of Class A Class A common stock at $9.50 per share
and warrants (the "July 2005 Private Placement Warrants") to purchase up to
477,275 shares of the Company's Class A Class A common stock. The gross proceeds
from the July 2005 Private Placement were $18.1 million, prior to the placement
agent's fee and various other expenses. The Company intends to use the net
proceeds of the July 2005 Private Placement primarily for funding of the capital
investments in the first digital cinema systems contemplated in the Company's
2,500-screen Christie/AIX digital cinema deployment plan announced on June 21,
2005 and for working capital and general corporate purposes. In August 2005, the
Company ordered the first 100 digital cinema systems from Christie.
6
The July 2005 Private Placement Warrants have an exercise price of $11.00 per
share of Class A Class A common stock, become exercisable on February 18, 2006
and expire on February 18, 2011. The Warrants are callable by the Company,
subject to certain conditions, after the later of (i) the seven month
anniversary from the date of the Warrants and (ii) the date on which the
registration statement required under the registration rights agreement
referenced below is declared effective; provided that the trading price of the
Company's Class A Common Stock is 200% of the applicable exercise price for 20
consecutive trading days.
The Company is required to register the shares and warrants issued in the July
2005 Private Placement with the Securities and Exchange Commission by filing a
Form S-3 on or before August 20, 2005. Certain monetary penalties apply if the
Company fails to file the Form S-3 by August 18, 2005, or the registration
statement is not declared effective within a stipulated period of time.
We offer interrelated services that use each of our business units for the
planning, purchasing, delivery and management of digital content -- such as
movies, advertising, trailers and alternative content, including concerts,
seminars and sporting events -- to movie theater and other venue operators. We
believe that our ability to offer a wide range of fully managed services will
differentiate us from other service providers, including distributors of other
types of digital media.
During the fiscal year ended March 31, 2005, we received 62% of our revenue from
the Data Center Services segment and 38% of our revenue from the Media Services
segment. During the fiscal year ended March 31, 2004, we received 81% of our
revenue from the Data Center Services segment and 19% of our revenue from the
Media Services segment. For the fiscal year ended March 31, 2005, KMC Telecom,
an IDC customer, comprised approximately 18% of our revenues. Our contract with
KMC Telecom expires on December 31, 2005, with respect to which we have received
an indication from KMC Telecom that they will not renew the contract for at
least some of the current sites that they are licensing under such contract. No
other single customer accounted for greater than 10% of revenues during the
fiscal year ended March 31, 2005.
Our principal executive offices are at 55 Madison Avenue, Suite 300, Morristown,
NJ 07960, and our telephone number at such offices is (973) 290-0080. Our e-mail
address is investor@accessitx.com and our web site address is www.accessitx.com.
Information accessed on or through our web site does not constitute a part of
this prospectus.
7
THE OFFERING
Class A common stock offered
by selling security holders.........5,291,809 shares (1)
Common stock equivalents
presently outstanding...............12,398,815 shares (2)
Common stock equivalents to be
outstanding immediately
after this offering.................12,398,815 shares (2)
Use of proceeds.....................We will not receive any proceeds from the
resale of shares of our Class A common
stock by the selling security holders,
other than payment of the exercise price of
the warrants.
American Stock Exchange symbol......AIX
(1) This prospectus covers the resale by the selling security holders named
in this prospectus of up to 1,909,115 shares of our Class A common stock
and up to 477,275 shares of our Class A common stock issuable upon the
exercise of warrants issued to those selling security holders. These
securities were acquired by the selling security holders in a private
placement transaction which was exempt from the registration requirements
of the Securities Act of 1933. This prospectus may also be used by selling
stockholders who exercised their piggyback registration rights with regard
to 2,905,419 shares of our Class A common stock that they acquired in
various private transactions with us. The selling security holders may
offer to sell the shares of Class A common stock being offered in this
prospectus at fixed prices, at prevailing market prices at the time of
sale, at varying prices or at negotiated prices. Please see "Plan of
Distribution" in this prospectus for a detailed explanation of how the
shares of Class A common stock may be sold.
(2) Reflects 11,473,004 outstanding shares of our Class A common stock as of
August 15, 2005, and 925,811 outstanding shares of our Class B common
stock as of August 15, 2005, which are convertible into 925,811 shares of
Class A common stock; excludes up to 4,618,744 shares of Class A common
stock issuable upon the exercise of outstanding warrants and options, and
shares issuable upon the conversion of convertible notes as of August 15,
2005. Please see "Description of Securities" in this prospectus for a
discussion of our capital stock.
This prospectus contains our trademarks, tradenames and servicemarks and also
contains certain trademarks, tradenames and servicemarks of other parties.
-----------------
8
RISK FACTORS
AN INVESTMENT IN OUR CLASS A COMMON STOCK INVOLVES A HIGH DEGREE OF RISK AND
UNCERTAINTY. YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE
DECIDING TO INVEST IN OUR CLASS A COMMON STOCK. THE RISKS DESCRIBED BELOW ARE
NOT THE ONLY ONES FACING OUR COMPANY. ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US
OR THAT WE PRESENTLY CONSIDER IMMATERIAL MAY ALSO ADVERSELY AFFECT OUR COMPANY.
IF ANY OF THE FOLLOWING RISKS OCCUR, OUR BUSINESS, FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND PROSPECTS COULD BE MATERIALLY ADVERSELY AFFECTED. IN THAT
CASE, THE TRADING PRICE OF OUR CLASS A COMMON STOCK COULD DECLINE, AND YOU COULD
LOSE ALL OR PART OR YOUR INVESTMENT. IN ASSESSING THESE RISKS, YOU SHOULD ALSO
REFER TO THE OTHER INFORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, INCLUDING THE CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO OF
OUR COMPANY INCLUDED ELSEWHERE IN THIS PROSPECTUS.
WE HAVE INCURRED LOSSES SINCE OUR INCEPTION.
We have incurred losses since our inception in March 2000 and have financed our
operations principally through equity investments and borrowings. We incurred
net losses of $4.8 million and $6.8 million in the fiscal years ended March 31,
2004 and 2005, respectively. As of March 31, 2005, we had working capital of
$1.7 million and cash and cash equivalents of $4.8 million; we had an
accumulated deficit of $21.5 million; and, from inception through such date, we
had used $8.5 million in cash for operating activities. Our net losses are
likely to continue for the foreseeable future.
Our profitability is dependent upon us achieving a sufficient volume of business
from our customers. If we cannot achieve a high enough volume, we likely will
incur additional net and operating losses. We may be unable to continue our
business as presently conducted unless we obtain funds from additional
financings.
Our net losses and negative cash flows may increase as and to the extent that we
increase the size of our business operations, increase our sales and marketing
activities, enlarge our customer support and professional services and acquire
additional businesses. These efforts may prove to be more expensive than we
currently anticipate which could further increase our losses. We must
significantly increase our revenues in order to become profitable. We cannot
reliably predict when, or if, we will become profitable. Even if we achieve
profitability, we may not be able to sustain it. If we cannot generate operating
income or positive cash flows in the future, we will be unable to meet our
working capital requirements.
WE HAVE LIMITED EXPERIENCE IN OUR BUSINESS OPERATIONS, WHICH MAY NEGATIVELY
AFFECT OUR ABILITY TO GENERATE SUFFICIENT REVENUES TO ACHIEVE PROFITABILITY.
We were incorporated on March 31, 2000. Our first IDC became operational in
December 2000. In addition to our data center operations, we have expanded into
the following new business areas: (a) providing back office transactional
software for distributors and exhibitors of filmed and digital entertainment
through our wholly-owned subsidiary, Hollywood SW; (b) providing software and
systems for the delivery of digital entertainment, such as movies, to movie
theaters and other venues through our wholly-owned subsidiary, AccessDM; (c)
providing information technologies, secure system monitoring of
telecommunications and data network outsourcing through our wholly-owned
subsidiary, Managed Services, and (d) providing satellite delivery services
through our wholly-owned subsidiary FiberSat; (e) operation of a movie theatre,
through our wholly-owned subsidiary ADM Cinema and (f) through the planned
operation of Christie/AIX, to place digital cinema projection systems into movie
theaters and collect virtual print fees in connection therewith. Although we
have retained the senior management of Hollywood SW, Managed Services, and
FiberSat, we have little experience in these new areas of business and cannot
assure you that we will be able to develop and market the services provided
thereby. None of these new businesses is directly related to our data center
operations and we cannot assure you that any of them will complement our data
center operations, or vice versa. We also cannot assure you that we will be able
to successfully operate these businesses. Our efforts to expand into these five
new business areas may prove costly and time-consuming and may divert a
considerable amount of resources from our data center operations.
9
Our lack of operating experience in the digital cinema industry and providing
transactional software for movie distributors could result in:
o increased operating and capital costs;
o an inability to effect a viable growth strategy;
o service interruptions for our customers; and
o an inability to attract and retain customers.
We may not be able to generate sufficient revenues to achieve profitability
through the operation of our data centers, our digital cinema business or our
movie distribution software business. We cannot assure you that we will be
successful in marketing and operating these new businesses or, even if we are
successful in doing so, that we will not experience additional losses.
OUR RECENT ACQUISITIONS INVOLVE RISKS, INCLUDING OUR INABILITY TO INTEGRATE
SUCCESSFULLY THE NEW BUSINESSES AND OUR ASSUMPTION OF CERTAIN LIABILITIES.
We have recently made meaningful acquisitions to expand into new business areas.
However, we may experience costs and hardships in integrating the new
acquisitions into our current business structure. On November 3, 2003, we
acquired Hollywood SW and on January 9, 2004, we acquired Managed Services. On
March 29, 2004, we acquired assets used in the operations of Boeing Digital, a
business unit of Boeing, which we integrated into the business of AccessDM. On
November 17, 2004, we acquired assets of FiberSat. Most recently, on February
11, 2005, we acquired the Pavilion Theatre through ADM Cinema, our wholly-owned
subsidiary. We may not be able to integrate successfully the acquired businesses
and assets into our existing business. We cannot assure you that we will be able
to effectively market the services provided by Hollywood SW, AccessDM, Managed
Services, FiberSat and the Pavilion Theatre along with our data centers.
Further, these new businesses and assets may involve a significant diversion of
our management time and resources and be costly. Our acquisition of these
businesses and assets also involves the risks that the businesses and assets
acquired may prove to be less valuable than we expected and/or that we may
assume unknown or unexpected liabilities, costs and problems. In addition, we
assumed certain liabilities in connection with these acquisitions and we cannot
assure you that we will be able to adequately pay off such assumed liabilities.
Other companies that offer similar products and services may be able to market
and sell their products and services more cost-effectively than we can.
BECAUSE THE USE OF ACCESSDM'S SERVICES LARGELY DEPENDS ON THE EXPANDED USE OF
DIGITAL PRESENTATIONS REQUIRING ELECTRONIC DELIVERY, IF SUCH EXPANDED USE DOES
NOT OCCUR, NO VIABLE MARKET FOR ACCESSDM'S SERVICES MAY DEVELOP.
Even if we are among the first to develop software and systems for the delivery
of digital content to movie theaters and other venues, the demand for them will
largely depend on a concurrent expansion of digital presentations at theaters,
which may not occur for several years. There can be no assurance, however, that
major movie studios that currently rely on traditional distribution networks to
provide physical delivery of digital files will adopt a different method,
particularly electronic delivery, of distributing digital content to movie
theaters. If the development of digital presentations and changes in the way
digital files are delivered does not occur, there may be no viable market for
AccessDM's delivery systems and software.
IF WE DO NOT MANAGE OUR GROWTH, OUR BUSINESS WILL BE HARMED.
We may not be successful in managing our rapid growth. Since February 2003, we
acquired five businesses and in connection with those acquisitions, we formed
three more subsidiaries. These subsidiaries operate in business areas different
from our data center operations business. The number of our employees has grown
from 11 in March 2003 to 34 in March 2004 and to 93 in March 2005. Past growth
has placed, and future growth will continue to place, a significant challenge to
our management and resources, related to the successful integration of the newly
acquired businesses. To manage the expected growth of our operations, we will
need to improve our existing and implement new operational and financial
systems, procedures and controls. We may also need to expand our finance,
administrative, client services and operations staff and train and manage our
growing employee base effectively. Our current and planned personnel, systems,
procedures and controls may not be adequate to support our future operations.
Our business, results of operations and financial position will suffer if we do
not effectively manage our growth.
10
WE MAY NOT BE ABLE TO GENERATE THE AMOUNT OF CASH NEEDED TO FUND OUR FUTURE
OPERATIONS.
Our ability either to make payments on or to refinance our indebtedness, or to
fund planned capital expenditures and research and development efforts, may
depend on our ability to generate cash in the future. Our ability to generate
cash is in part subject to general economic, financial, competitive, regulatory
and other factors that are beyond our control.
Based on our current level of operations, we believe our cash flow from
operations and available cash financed through the issuance of common stock and
promissory notes will be adequate to meet our future liquidity needs for at
least one year from the date of this prospectus. Significant assumptions
underlie this belief, including, among other things, that there will be no
material adverse developments in our business, liquidity or capital
requirements. If we are unable to service our indebtedness, we will be forced to
adopt an alternative strategy that may include actions such as:
o reducing capital expenditures;
o reducing research and development efforts;
o selling assets;
o restructuring or refinancing our remaining indebtedness; and
o seeking additional funding.
We cannot assure you, however, that our business will generate sufficient cash
flow from operations, or that we will be able to make future borrowings in
amounts sufficient to enable us to pay the principal and interest on our current
indebtedness or to fund our other liquidity needs. We may need to refinance all
or a portion of our indebtedness on or before maturity. We cannot assure you
that we will be able to refinance any of our indebtedness on commercially
reasonable terms or at all.
WE MAY CONTINUE TO HAVE CUSTOMER CONCENTRATION IN OUR BUSINESS, AND THE LOSS OF
ONE OR MORE OF OUR LARGEST CUSTOMERS COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
We expect that we will rely, at least in the near future, upon a limited number
of customers for a substantial percentage of our revenues and may continue to
have customer concentration company-wide. For fiscal years ended 2004 and 2005,
our four largest customers accounted for approximately 54% and 40% of our
revenues, respectively (our largest customer, KMC Telecom, accounted for
approximately 27% and 18%, respectively of our revenues for such fiscal years).
Our contract with KMC Telecom expires on December 15, 2005, with respect to
which we have received an indication from KMC Telecom that they will not renew
the contract for at least some of the current sites that they are licensing
under such contract. The revenues generated from our IDC business constituted
approximately 62% of our total revenue for the fiscal year ended March 31, 2005.
AccessDM has generated revenues of $260,000 for the fiscal year ended March 31,
2005, and we anticipate that AccessDM's revenues will grow significantly
although there can be no assurances of this. For the fiscal year ended March 31,
2005, the five largest customers of Hollywood SW accounted for approximately 78%
of its revenues (its largest customer, 20th Century Fox, accounted for
approximately 35% of its revenues for such period). For the fiscal year ended
March 31, 2005, the four largest customers of Managed Services and FiberSat
accounted for approximately 54% and 73% of their respective revenues. A loss of
or decrease in business from one or more of our largest customers for any reason
could have a material adverse effect on our business, financial position and
results of operations.
OUR SUBSTANTIAL DEBT AND LEASE OBLIGATIONS COULD IMPAIR OUR FINANCIAL
FLEXIBILITY AND OUR COMPETITIVE POSITION.
We now have, and will continue to have, significant debt obligations. We have
notes payable to third parties with principal amounts aggregating $14.1 million
as of March 31, 2005. We also have capital lease obligations with principal
amounts aggregating $6.5 million as of March 31, 2005.
These obligations could have important consequences for us, including:
o limiting our ability to obtain necessary financing in the future and
make it more difficult for us to satisfy our lease and debt
obligations;
11
o requiring us to dedicate a substantial portion of our cash flow to
payments on our lease and debt obligations, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other corporate requirements;
o making us more vulnerable to a downturn in our business and limit our
flexibility to plan for, or react to, changes in our business; and
o placing us at a competitive disadvantage compared to competitors that
might have stronger balance sheets or better access to capital by, for
example, limiting our ability to enter into new markets.
o If we are unable to meet our lease and debt obligations, we could be
forced to restructure or refinance our obligations, to seek additional
equity financing or to sell assets, which we may not be able to do on
satisfactory terms or at all. As a result, we could default on those
obligations.
AN INABILITY TO OBTAIN NECESSARY FINANCING MAY HAVE A MATERIAL ADVERSE EFFECT ON
OUR FINANCIAL POSITION, OPERATIONS AND PROSPECTS IF UNANTICIPATED CAPITAL NEEDS
ARISE.
Our capital requirements may vary significantly from what we currently project
and be affected by unforeseen delays and expenses. We may experience problems,
delays, expenses and difficulties frequently encountered by similarly-situated
companies, as well as difficulties as a result of changes in economic,
regulatory or competitive conditions. If we encounter any of these problems or
difficulties or have underestimated our operating losses or capital
requirements, we may require significantly more financing than we currently
anticipate. We cannot assure you that we will be able to obtain any required
additional financing on terms acceptable to us, if at all. We will be restricted
on the type and amount of additional indebtedness that we may incur as a result
of our acquisition of Hollywood SW. In connection with the acquisition of
Hollywood SW, we issued secured promissory notes to the sellers that will be
senior to all indebtedness during the term of those notes other than any debt
provided by a bank or institutional lender, which is less than $1 million in
aggregate principal amount, unsecured or secured by the assets of Hollywood SW
and its subsidiaries. We will also be restricted on the type of additional
indebtedness that we may incur as a result of our Convertible Debentures. An
inability to obtain necessary financing could have a material adverse effect on
our financial position, operations and prospects. In connection with the
Framework Agreement, we have agreed, through Christie/AIX, to seek to raise
financing for purchases of digital cinema projection systems. If we are unable
to raise such funds, we may not be able to fulfill our obligations under the
Framework Agreement.
OUR PLAN TO ACQUIRE ADDITIONAL BUSINESSES INVOLVES RISKS, INCLUDING OUR
INABILITY SUCCESSFULLY TO COMPLETE AN ACQUISITION, OUR ASSUMPTION OF
LIABILITIES, DILUTION OF YOUR INVESTMENT AND SIGNIFICANT COSTS.
We intend to make further acquisitions of similar or complementary businesses or
assets, although there are no acquisitions identified by us as probable at this
time. Even if we identify appropriate acquisition candidates, we may be unable
to negotiate successfully the terms of the acquisitions, finance them, integrate
the acquired business into our then existing business and/or attract and retain
customers. Completing an acquisition and integrating an acquired business,
including our recently acquired businesses, may require a significant diversion
of management time and resources and involves assuming new liabilities. Any
acquisition also involves the risks that the assets acquired may prove less
valuable than expected and/or that we may assume unknown or unexpected
liabilities, costs and problems. If we make one or more significant acquisitions
in which the consideration consists of our capital stock, your equity interest
in our company could be diluted, perhaps significantly. If we were to proceed
with one or more significant acquisitions in which the consideration included
cash, we could be required to use a substantial portion of our available cash,
or obtain additional financing to consummate them.
WE EXPECT COMPETITION TO BE INTENSE: IF WE ARE UNABLE TO COMPETE SUCCESSFULLY,
OUR BUSINESS AND RESULTS OF OPERATIONS WILL BE SERIOUSLY HARMED.
The market for the IDC facilities and managed services business, the digital
cinema business and the movie distribution software business, although
relatively new, are competitive, evolving and subject to rapid technological and
other changes. We expect the intensity of competition in each of these areas to
increase in the future. Companies willing to expend the necessary capital to
create facilities and/or software similar to ours may compete with our business.
Increased competition may result in reduced revenues and/or margins and loss of
market share, any of which could seriously harm our business. In order to
compete effectively in each of these fields, we must differentiate ourselves
from competitors.
12
Many of our current and potential competitors have longer operating histories
and greater financial, technical, marketing and other resources than us, which
may permit them to adopt aggressive pricing policies. As a result, we may suffer
from pricing pressures that could adversely affect our ability to generate
revenues and our results of operations. Many of our competitors also have
significantly greater name and brand recognition and a larger customer base than
us. We may not be able to compete successfully with our competitors. If we are
unable to compete successfully, our business and results of operations will be
seriously harmed.
WE FACE THE RISKS OF AN EARLY-STAGE COMPANY IN A NEW AND RAPIDLY EVOLVING MARKET
AND MAY NOT BE ABLE SUCCESSFULLY TO ADDRESS SUCH RISKS AND EVER BE SUCCESSFUL OR
PROFITABLE.
We have encountered and will continue to encounter the challenges, uncertainties
and difficulties frequently experienced by early-stage companies in new and
rapidly evolving markets, including:
o lack of operating experience;
o net losses;
o lack of sufficient customers;
o insufficient revenues and cash flow to be self-sustaining;
o necessary capital expenditures;
o an unproven business model;
o a changing business focus; and
o difficulties in managing potentially rapid growth.
This is particularly the case with respect to our newly acquired businesses. We
cannot assure you that we will ever be successful or profitable.
MANY OF OUR CORPORATE ACTIONS MAY BE CONTROLLED BY OUR OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS; THESE ACTIONS MAY BENEFIT THESE PRINCIPAL STOCKHOLDERS
MORE THAN OUR OTHER STOCKHOLDERS.
As of March 31, 2005, our directors, executive officers and principal
stockholders beneficially own, directly or indirectly, in the aggregate,
approximately 41% of our outstanding common stock. In particular, A. Dale Mayo,
our President and Chief Executive Officer, beneficially holds 965,811 shares of
Class B common stock, 9,601 shares of Class A common stock, and notes which are
convertible into 45,810 shares of Class A common stock, which collectively
represent approximately 10% of our outstanding common stock, but due to the
supervoting Class B common stock, represent approximately 51% of the voting
power. These stockholders, and Mr. Mayo himself, will have significant influence
over our business affairs, with the ability to control matters requiring
approval by our security holders, including elections of directors and approvals
of mergers or other business combinations. Our Class B common stock entitles the
holder to ten votes per share. The shares of Class A common stock have one vote
per share. Also, certain corporate actions directed by our officers may not
necessarily inure to the proportional benefit of other stockholders of our
company; under his employment agreement, for example, Mr. Mayo is entitled to
receive cash bonuses based on our revenues, regardless of our earnings, if any.
OUR SUCCESS WILL SIGNIFICANTLY DEPEND ON OUR ABILITY TO HIRE AND RETAIN KEY
PERSONNEL.
Our success will depend in significant part upon the continued services of our
key technical, sales and senior management personnel. If we lose one or more of
our key employees, we may not be able to find a suitable replacement(s) and our
business and results of operations could be adversely affected. In particular,
our performance depends significantly upon the continued service of A. Dale
Mayo, our President and Chief Executive Officer, whose experience and
relationships in the movie theater industry are integral to our business,
13
particularly in the business areas of Hollywood SW and AccessDM. Although we
have obtained two $5 million key-man life insurance policies in respect of Mr.
Mayo, the loss of his services would have a material and adverse effect on our
business, operations and prospects. Each policy carries a death benefit of $5
million, and while we are the beneficiary of each policy, under one of the
policies the proceeds will be used to repurchase, after reimbursement of all
premiums paid by us some, or all, of the shares of our capital stock held by Mr.
Mayo's estate at the then-determined fair market value. We also rely on the
experience and expertise of Russell J. Wintner, AccessDM's President and Chief
Operating Officer, the two co-founders of Hollywood SW, David Gajda and Robert
Jackovich, and Ravi Patel, FiberSat's President and Chief Operating Officer. In
addition, our future success will depend upon our ability to hire, train,
integrate and retain qualified new employees.
IF WE ARE NOT SUCCESSFUL IN PROTECTING OUR INTELLECTUAL PROPERTY, OUR BUSINESS
WILL SUFFER.
We depend heavily on technology to operate our business. Our success depends on
protecting our intellectual property, which is one of our most important assets.
Although we do not currently hold any copyrights, patents or registered
trademarks, we do have intellectual property consisting of:
o licensable software products;
o rights to certain domain names;
o registered service marks on certain names and phrases;
o various unregistered trademarks and service marks;
o know-how; and
o rights to certain logos.
If we do not adequately protect our intellectual property, our business,
financial position and results of operations would be harmed. Our means of
protecting our intellectual property may not be adequate. Unauthorized parties
may attempt to copy aspects of our intellectual property or to obtain and use
information that we regard as proprietary. In addition, competitors may be able
to devise methods of competing with our business that are not covered by our
intellectual property. Our competitors may independently develop similar
technology, duplicate our technology or design around any intellectual property
that we may obtain.
The success of some of our business operations depends on the proprietary nature
of certain software. We do not, however, have any patents with respect to such
software. Because there is no patent protection in respect of our software,
other companies are not prevented from developing and marketing similar
software. We cannot assure you, therefore, that we will not face more
competitors or that we can compete effectively against any companies that
develop similar software. We also cannot assure you that we can compete
effectively or not suffer from pricing pressure with respect to our existing and
developing products that could adversely affect our ability to generate
revenues.
Although we hold rights to various web domain names, regulatory bodies in the
United States and abroad could establish additional top-level domains, appoint
additional domain name registrars or modify the requirements for holding domain
names. The relationship between regulations governing domain names and laws
protecting trademarks and similar proprietary rights is unclear. We may be
unable to prevent third parties from acquiring domain names that are similar to
or diminish the value of our proprietary rights.
14
SERVICE AND OTHER INTERRUPTIONS COULD POTENTIALLY REDUCE OUR REVENUES AND HARM
OUR REPUTATION AND FINANCIAL RESULTS.
Our facilities and our customers' equipment are vulnerable to damage from human
error, physical or electronic security breaches, power loss, other facility
failures, fire, earthquake, water damage, sabotage, vandalism and similar
events. In addition, our customers would be adversely affected by the failure of
carriers to provide network access to our facilities as a result of any of these
events. Any of these events or other unanticipated problems could interrupt our
customers' ability to provide services from our facilities. This could damage
our reputation, make it difficult to attract new and retain customers and cause
our customers to terminate their contracts with us and to seek damages. Any of
these events could have a material adverse effect on our business, financial
position and prospects.
WE DEPEND ON RELATIONSHIPS WITH THIRD PARTIES, WHICH, IF NOT MAINTAINED, MAY
ADVERSELY AFFECT OUR ABILITY TO PROVIDE SERVICES TO OUR CUSTOMERS.
We are not a communications carrier and, therefore, we rely substantially on
third parties to provide our customers with access to voice, data and Internet
networks. We must maintain relationships with third-party network providers in
order to offer our data center customers access to a choice of networks. Many
carriers have their own data center facilities and may be reluctant to provide
network services at our data centers. As a result, some carriers may choose not
to connect their services to our data centers. We do not own any real property
and depend on our ability to negotiate favorable lease terms with the owners of
our data center facilities. The use of our IDCs is limited to the extent that we
do not extend or renew our leases, in which case we might not be able to
accommodate our customers, particularly if we were unable to relocate timely to
a comparable facility.
The availability of an adequate supply of electrical power and the
infrastructure to deliver that power is critical to our ability to attract and
retain customers and achieve profitability. We rely on third parties to provide
electrical power to our data centers, and cannot be certain that these parties
will provide adequate electrical power or that we will have the necessary
infrastructure to deliver such power to our customers. If the electrical power
delivered to our facilities is inadequate to support our customers' requirements
or if delivery is not timely, our results of operations and financial position
may be materially and adversely affected.
WE MAY HAVE DIFFICULTY COLLECTING PAYMENTS FROM SOME OF OUR CUSTOMERS AND INCUR
COSTS AS A RESULT.
A number of our customers are early stage companies. In addition, many of our
customers are telecommunications companies, and many telecommunications
companies have been experiencing significant financial difficulties. There is a
risk that these companies will experience difficulty paying amounts owed to us,
and we might not be able to collect on a timely basis all monies owed to us by
some of them. Although we intend to remove customers that do not pay us in a
timely manner, we may experience difficulties and costs in collecting from or
removing these customers.
IF WE DO NOT RESPOND TO FUTURE ADVANCES IN TECHNOLOGY AND CHANGES IN CUSTOMER
DEMANDS, OUR FINANCIAL POSITION, PROSPECTS AND RESULTS OF OPERATIONS MAY BE
ADVERSELY AFFECTED.
The demand for our digital cinema business, movie distribution software and data
centers will be affected, in large part, by future advances in technology and
changes in customer demands. Our success will also depend on our ability to
address the increasingly sophisticated and varied needs of our existing and
prospective customers.
We cannot assure you that there will be a demand for the digital cinema software
and delivery services provided by AccessDM. AccessDM's profitability depends
largely upon the general expansion of digital presentations at theaters, which
may not occur for several years. There can be no assurance that major movie
studios relying on traditional distribution networks to provide physical
delivery of digital files will adopt a different method, particularly electronic
delivery, of distributing digital content to movie theaters. If the development
of digital presentations and changes in the way digital files are delivered does
not occur, there may be no viable market for AccessDM's software and systems.
15
WE MAY BE SUBJECT TO ENVIRONMENTAL RISKS RELATING TO THE ON-SITE STORAGE OF
DIESEL FUEL AND BATTERIES.
Our data centers contain tanks for the storage of diesel fuel for our generators
and significant quantities of lead acid batteries used to provide back-up power
generation for uninterrupted operation of our customers' equipment. We cannot
assure you that our systems will be free from leaks or that use of our systems
will not result in spills. Any leak or spill, depending on such factors as the
nature and quantity of the materials involved and the environmental setting,
could result in interruptions to our operations and the incurrence of
significant costs; particularly to the extent we incur liability under
applicable environmental laws. This could have a material adverse effect on our
business, financial position and results of operations.
RISKS RELATING TO OUR CLASS A COMMON STOCK
THE LIQUIDITY OF OUR CLASS A COMMON STOCK IS UNCERTAIN; THE LIMITED TRADING
VOLUME OF OUR CLASS A COMMON STOCK MAY DEPRESS THE PRICE OF SUCH STOCK OR CAUSE
IT TO FLUCTUATE SIGNIFICANTLY.
Although shares of our Class A common stock are listed on the American Stock
Exchange (the "AMEX"), there has been a limited public market for our Class A
common stock and there can be no assurance that an active trading market for our
common stock will develop. As a result, you may not be able to sell your shares
of Class A common stock in short time periods, or possibly at all. The absence
of an active trading market may cause the price per share of our Class A common
stock to fluctuate significantly.
SUBSTANTIAL RESALES OF OUR CLASS A COMMON STOCK COULD DEPRESS OUR STOCK PRICE.
The market price for our Class A common stock could decline, perhaps
significantly, as a result of resales of a large number of shares of Class A
common stock in the public market or even the perception that such resales could
occur, including resales of the shares being registered hereunder pursuant to
the registration statement of which this prospectus is a part. In addition, we
have a substantial number of options, warrants and other securities convertible
into shares of our Class A common stock outstanding that may be exercised in the
future. Certain holders of these warrants and convertible securities, as well as
holders of our outstanding shares of Class A common stock, have piggy-back
registration rights and the holder of shares of Class A common stock issuable in
exchange for its shares of preferred stock and certain warrants has demand and
piggy-back registration rights. These factors could also make it more difficult
for us to raise funds through future offerings of our equity securities.
YOU WILL INCUR SUBSTANTIAL DILUTION AS A RESULT OF CERTAIN FUTURE EQUITY
ISSUANCES.
We have a substantial number of options, warrants and other securities currently
outstanding which may be immediately converted into shares of our Class A common
stock. To the extent that these options, warrants or similar securities are
exercised or converted, as the case may be, there will be further dilution to
holders of shares of our Class A common stock.
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND DELAWARE LAW COULD MAKE IT
MORE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US.
Provisions of our certificate of incorporation, as well as of Section 203 of the
Delaware General Corporation Law (the "DGCL") could make it more difficult for a
third party to acquire us, even if doing so might be beneficial to our
stockholders.
Our certificate of incorporation authorizes the issuance of 15,000,000 shares of
preferred stock. The terms of our preferred stock may be fixed by the company's
board of directors without further stockholder action. The terms of any
outstanding series or class of preferred stock may include priority claims to
assets and dividends and special voting rights, which could adversely affect the
rights of holders of our Class A common stock. Any future issuance(s) of
preferred stock could make the takeover of the company more difficult,
discourage unsolicited bids for control of the company in which our stockholders
could receive premiums for their shares, dilute or subordinate the rights of
holders of Class A common stock and adversely affect the trading price of our
Class A common stock.
Under Section 203 of the DGCL, Delaware corporations whose securities are listed
on a national securities exchange, like the AMEX, may not engage in business
combinations such as mergers or acquisitions with any interested stockholders,
defined as an entity or person beneficially owning 15% or more of our
outstanding common stock without obtaining certain prior approvals. As a result
of the application of Section 203, potential acquirers of the company may be
discouraged from attempting to effect an acquisition transaction with the
company, thereby depriving holders of the company's securities of opportunities
to sell or otherwise dispose of the securities at prices above prevailing market
prices.
16
WE MAY NOT BE ABLE TO MAINTAIN LISTING ON THE AMEX, WHICH MAY ADVERSELY AFFECT
THE ABILITY OF PURCHASERS IN THIS OFFERING TO RESELL THEIR SECURITIES IN THE
SECONDARY MARKET.
Our Class A common stock is presently listed on the AMEX. However, we cannot
assure you that the company will meet the criteria for continued listing on the
AMEX. If the company is unable to meet the continued listing criteria of the
AMEX and became delisted, trading of the Class A common stock could thereafter
be conducted in the over-the-counter market in the so-called "pink sheets" or,
if available, the NASD's Electronic Bulletin Board. In such case, an investor
would likely find it more difficult to dispose of, or to obtain accurate market
quotations for, the company's securities.
If the shares of Class A common stock were delisted from the AMEX, they may
become subject to Rule 15g-9 under the Exchange Act, which imposes sales
practice requirements on broker-dealers that sell such securities to persons
other than established customers and "accredited investors." Application of this
Rule could adversely affect the ability and/or willingness of broker-dealers to
sell the company's securities and may adversely affect the ability of purchasers
in this offering to resell their securities in the secondary market.
USE OF PROCEEDS
We will receive no proceeds from the sale of any of or all of the shares being
offered by the selling security holders under this prospectus. We may receive an
amount of up to approximately $5,250,025 upon the exercise of the warrants, if
exercised, as to which we are registering the resale of the underlying shares of
Class A common stock. Any proceeds that we receive from the exercise of
outstanding warrants will be used by us for general working capital. The actual
allocation of proceeds realized from the exercise of these securities will
depend upon the amount and timing of such exercises, our operating revenues and
cash position at such time and our working capital requirements. There can be no
assurances that any of the outstanding warrants will be exercised.
17
SELLING STOCKHOLDERS
The following table sets forth as of August 15, 2005, certain information with
respect to the beneficial ownership of the Class A common stock as to each
selling stockholder.
SHARES WHICH
MAY BE
SHARES BENEFICIALLY OFFERED SHARES BENEFICIALLY
OWNED PRIOR TO PURSUANT TO OWNED AFTER
OFFERING (A) THIS OFFERING OFFERING
-------------------------------------------------------------------------------------------------------------
NAME NUMBER PERCENT NUMBER NUMBER(B) PERCENT(A)
-------------------------------------------------------------------------------------------------------------
Leonardo, L.P.
c/o Angelo Gordon & Co.
245 Park Avenue, 26th Floor 894,737(c)(nn) 7.68% 894,737 -- --
New York, NY 10167
Hare & Co. F/B/O John
Hancock Small Cap
Equity Fund,
c/o John Hancock 375,000 (d) 3.25% 375,000 (d) -- --
Advisers, LLC,
101 Huntington Ave.,
7th Fl.,
Boston, MA 02199-7603
Basso Fund Ltd.
c/o Basso Capital
Management 148,027(e)(f) 1.29% 148,027(e)(f) -- --
1266 East Main Street
Stamford, CT 06902
Basso Private Opportunity
Holding Fund Ltd.
c/o Basso Capital 323,115(g)(f) 2.76% 94,737(h)(f) 228,379 1.95%
Management (oo)
1266 East Main Street
Stamford, CT 06902
Basso Multi-Strategy Holding
Fund Ltd.
c/o Basso Capital 862,993(i)(f) 7.02% 53,288(j)(f) 809,705 6.59%
Management (pp)
1266 East Main Street
Stamford, CT 06902
Bonanza Master Fund Ltd.
c/o Bonanza Capital
300 Crescent Court 197,369(k) 1.71% 197,369(k) -- --
Suite 1740
Dallas, TX 75201
18
Lagunitas Partners LP
c/o Gruber & McBaine
Capital Management 324,065(l)(m)(kk) 2.81% 88,815(l)(m) 235,250(kk) 2.04%
50 Osgood PL-PH
San Francisco, CA 94133
Gruber & McBaine
International
c/o Gruber & McBaine
Capital Management 69,448 (ll) * 16,448 (n) 53,000(ll) *
50 Osgood PL-PH
San Francisco, CA 94133
Berman Brand & Weiner
Partnership
c/o Gruber & McBaine
Capital Management 2,566 (o)(m) * 2,366 (o)(m) 200 *
50 Osgood PL-PH
San Francisco, CA 94133
Donaghy Sales Inc.
c/o Gruber & McBaine
Capital Management 8,393(p)(q) * 7,893 (p)(q) 500 *
50 Osgood PL-PH
San Francisco, CA 94133
TTEES Hamilton College
c/o Gruber & McBaine
Capital Management 17,290 (r)(s) * 15,790 (r)(s) 1,500 *
50 Osgood PL-PH
San Francisco, CA 94133
The Wallace Foundation
c/o Gruber & McBaine
Capital Management
50 Osgood PL-PH 11,791 (t)(s) * 10,791 (t)(s) 1,000 *
San Francisco, CA
94133
J. Patterson McBaine
c/o Gruber & McBaine
Capital Management 65,712 * 17,762 (u)(q) 47,950 *
50 Osgood PL-PH (u)(q)(mm) (mm)
San Francisco, CA 94133
Jon D. Gruber & Linda
W. Gruber
c/o Gruber & McBaine 65,212 * 17,762(u)(v) 47,450 *
Capital Management (u)(v)(mm) (mm)
50 Osgood PL-PH
San Francisco, CA 94133
JMG Triton Offshore
Fund, Ltd c/o Pacific
Assets Management
11601 Wilshire 75,250 (w)(x) * 73,750 (w)(x) 1,500 *
Boulevard
Suite 2180
Los Angeles, CA 90025
19
JMG Capital Partners, LP
c/o JMG Capital
Management
11601 Wilshire 75,250 (w)(y) * 73,750 (w)(y) 1,500 *
Boulevard
Suite 2180
Los Angeles, CA 90025
Alexandra Global
Master Fund Ltd. c/o
Alexandra Investment
Management LLC 339,996(z) 2.9% 98,684(ii) 241,312 2.06%
767 Third Avenue, 39th (qq)
Floor
New York, NY 10017
Smithfield Fiduciary LLC
c/o Highbridge Capital
Management, LLC 65,790 (aa) * 65,790 (aa) -- --
9 West 57th Street,
27th Floor
New York, NY 10019
Northwood Capital
Partners, LP
c/o Lancaster Investment 50,000 (bb) * 50,000 (bb) -- --
Partners
1150 First Avenue,
Suite 600
King of Prussia, PA
19406
Truk Opportunity Fund, LLC
One East 52nd Street, 35,250 (cc) * 35,250 (cc) -- --
Sixth Floor
New York, NY 10022
Truk International
Fund, LP
One East 52nd Street, 2,250 (dd) * 2,250 (dd) -- --
Sixth Floor
New York, NY 10022
Omicron Master Trust
c/o Omicron Capital, L.P.
650 Fifth Avenue, 24th 42,894 (ee) * 32,894 (hh) 10,000(rr) *
Floor
New York, NY 10019
Kircher Family Trust
dtd 03-24-04
c/o Stephen C. Kircher 9,862 (ff) * 9,862 (ff) -- --
6000 Greystone Place
Granite Bay, CA 95746
Kircher Family Foundation
Inc. c/o Stephen C. Kircher
6000 Greystone Place 3,375 (gg) * 3,375 (gg) -- --
Granite Bay, CA 95746
MidMark Equity Partners
177 Madison Avenue 2,214,879 19.31% 2,214,879 -- --
Morristown, NJ 07960
20
CMNY Capital II, L.P.
900 Third Avenue, 33rd Floor
New York, NY 10022 338,496 (jj) 2.90% 157,927 180,569(jj) 1.55%
Attn: Robert Davidoff
James M. Weichert
1625 State Route 10
Morris Plains, NJ 531,588 4.63% 481,588 50,000 *
07950-2933
Sterling/Carl Marks Capital,
Inc.
175 Great Neck Road
Great Neck, New York 11021 51,025 * 51,025 -- --
Attn: Harvey
Rosenblatt, Executive VP
-------------------------------------------------------------------------------------------------------------
Total Selling Stockholders 7,201,623 53.41% 5,291,809 1,909,814 14.68%
Stockholders
-------------------------------------------------------------------------------------------------------------
--------------------
* Less than 1%
(a) Applicable percentage of ownership is based on 11,473,004 shares of
Class A common stock outstanding as of August 15, 2005 together with
all applicable options, warrants and other securities convertible into
shares of our Class A common stock for such stockholder. Beneficial
ownership is determined in accordance with the rules of the SEC, and
includes voting and investment power with respect to shares. Shares of
Class A common stock subject to options, warrants or other convertible
securities exercisable within 60 days after August 15, 2005 are deemed
outstanding for computing the percentage ownership of the person
holding such options, warrants or other convertible securities, but
are not deemed outstanding for computing the percentage of any other
person. Certain warrants for which the underlying shares are being
offered hereby included in the table are not exercisable until
February 19, 2006. Except as otherwise noted, the named beneficial
owner has the sole voting and investment power with respect to the
shares shown.
(b) Assumes sale of all shares offered under this prospectus.
(c) Includes 178,947 shares of Class A common stock underlying warrants.
(d) Includes 75,000 shares of Class A common stock underlying warrants.
(e) Includes 29,606 shares of Class A common stock underlying warrants.
(f) Howard I. Fischer is a managing member of Basso GP, LLC, the General
Partner of Basso Capital Management, L.P. which is the investment
manager to the selling stockholder and may be deemed to beneficially
own its shares. Mr. Fischer disclaims beneficial ownership of these
securities.
(g) Includes: (i) 175,676 shares of Class A common stock underlying
convertible debentures; (ii) 52,702 shares of Class A common stock
underlying debenture warrants; and (iii) 18,947 shares of Class A
common stock underlying warrants.
(h) Includes 18,947 shares of Class A common stock underlying warrants.
(i) Includes: (i) 622,850 shares of Class A common stock underlying
convertible debentures; (ii)186,855 shares of Class A common stock
underlying debenture warrants; and (iii) 10,657 shares of Class A
common stock underlying warrants.
(j) Includes 10,657 shares of Class A common stock underlying warrants.
(k) Includes 39,474 shares of Class A common stock underlying warrants.
(l) Includes 17,763 shares of Class A common stock underlying warrants.
(m) Gruber & McBaine Capital Management ("Gruber CM") is the general
partner of the selling stockholder and has voting and investment
power. Gruber CM disclaims beneficial ownership of the shares held by
the selling stockholder.
(n) Includes 3,289 shares of Class A common stock underlying warrants.
Gruber CM is the investment advisor for the selling stockholder.
Gruber CM disclaims beneficial ownership of the shares held by the
selling stockholder.
(o) Includes 473 shares of Class A common stock underlying warrants.
21
(p) Includes 1,587 shares of Class A common stock underlying warrants.
(q) Gruber CM is the investment advisor of the selling stockholder and has
voting and investment power. Gruber CM disclaims beneficial ownership
of the shares held by the selling stockholder.
(r) Includes 3,158 shares of Class A common stock underlying warrants.
(s) Gruber CM is a trustee of the selling stockholder and has voting and
investment power. Gruber CM disclaims beneficial ownership of the
shares held by the selling stockholder.
(t) Includes 2,158 shares of Class A common stock underlying warrants.
(u) Includes 3,552 shares of Class A common stock underlying warrants.
(v) Mr. Jon D. Gruber is a trustees of the selling stockholder and has
voting and investment power. Mr. Gruber disclaims beneficial ownership
of the shares held by the selling stockholder.
(w) Includes 14,750 shares of Class A common stock underlying warrants.
(x) JMG Triton Offshore Fund, Ltd. (the "Fund") is an international
business company organized under the laws of the British Virgin
Islands. The Fund's investment manager is Pacific Assets Management
LLC, a Delaware limited liability company (the "Manager") that has
voting and dispositive power over the Fund's investments, including
the Registrable Securities. The equity interests of the Manager are
owned by Pacific Capital Management, Inc., a California corporation
("Pacific") and Asset Alliance Holding Corp., a Delaware corporation.
The equity interests of Pacific are owned by Messrs. Roger Richter,
Jonathan M. Glaser and Daniel A. David. Messrs. Glaser and Richter
have sole investment discretion over the Fund's portfolio holdings.
(y) JMG Capital Partners, L.P. ("JMG Partners") is a California limited
partnership. Its general partner is JMG Capital Management, LLC (the
"Manager"), a Delaware limited liability company and an investment
adviser that has voting and dispositive power over JMG Partners'
investments, including the Registrable Securities. The equity
interests of the Manager are owned by JMG Capital Management, Inc.,
("JMG Capital") a California corporation, and Asset Alliance Holding
Corp., a Delaware corporation. Jonathan M. Glaser is the Executive
Officer and Director of JMG Capital and has sole investment discretion
over JMG Partners' portfolio holdings.
(z) Includes: (i) 55,283 shares of Class A common stock underlying
debenture warrants; (ii) 184,275 shares of Class A common stock
underlying convertible debentures; and (iii) 19,737 shares of Class A
common stock underlying warrants. Mikhail A. Filimonov and Dimitri
Sogoloff are managing members of Alexandra Investment Management, LLC
which is the investment advisor to this selling stockholder and, by
reason of such relationships, each may be deemed to share dispositive
power over this selling stockholder's shares. Each of Messrs.
Filimonov and Sogoloff and Alexandra Investment Management, LLC
disclaim beneficial ownership of this selling stockholder's shares.
(aa) Includes 13,158 shares of Class A common stock underlying warrants.
Highbridge Capital Management, LLC is the trading manager of
Smithfield Fiduciary LLC and consequently has voting control and
investment discretion over securities held by Smithfield. Glenn Dubin
and Henry Swieca control Highbridge. Each of Highbridge, Glenn Dubin
and Henry Swieca disclaims beneficial ownership of the securities held
by Smithfield.
(bb) Includes 10,000 shares of Class A common stock underlying warrants.
(cc) Includes 7,050 shares of Class A common stock underlying warrants.
Michael E. Fein and Stephen E. Saltzstein, as principals of Atoll
Asset Management, LLC, the Managing Member of Truk Opportunity Fund,
LLC, exercise investment and voting control over the securities owned
by Truk Opportunity Fund, LLC. Both Mr. Fein and Mr. Saltzstein
disclaim beneficial ownership of the securities owned by Truk
Opportunity Fund, LLC.
(dd) Includes 450 shares of Class A common stock underlying warrants.
Michael E. Fein and Stephen E. Saltzstein, as principals of Atoll
Asset Management, LLC, the Managing Member of Truk International Fund,
L.P., exercise investment and voting control over the securities owned
by Truk International Fund, L.P. Both Mr. Fein and Mr. Saltzstein
disclaim beneficial ownership of the securities owned by Truk
Opportunity Fund, LLC.
(ee) Includes 16,579 shares of Class A common stock underlying warrants.
(ff) Includes 1,972 shares of Class A common stock underlying warrants. Mr.
Stephen C. Kircher is a trustee of the selling stockholder and has
voting and investment power. Mr. Kircher disclaims beneficial
ownership of these shares held by the selling stockholder.
22
(gg) Includes 675 shares of Class A common stock underlying warrants. Mr.
Stephen C. Kircher is a trustee of the selling stockholder and has
voting and investment power. Mr. Kircher disclaims beneficial
ownership of these shares held by the selling stockholder.
(hh) Includes 6,579 shares of Class A common stock underlying warrants.
(ii) Includes 19,737 shares of Class A common stock underlying warrants.
(jj) Includes 180,570 shares of Class A common stock underlying convertible
subordinated notes. Mr. Robert Davidoff serves as a director of this
selling stockholder and has voting and investment power. Mr. Davidoff
disclaims beneficial ownership of these shares held by this selling
stockholder.
(kk) Includes 37,500 shares of Class A common stock underlying warrants.
(ll) Includes 12,500 shares of Class A common stock underlying warrants.
(mm) Includes 7,500 shares of Class A common stock underlying warrants.
(nn) Leonardo Capital Management, Inc.("LCMI") is the sole general partner
of Leonardo, L.P. Angelo, Gordon & Co., L.P. ("Angelo, Gordon") is the
sole director of LCMI. John M. Angelo and Michael L. Gordon are the
principal executive officers of Angelo, Gordon & Co., L.P. Each of
Angelo, Gordon & Co., L.P. and Messrs. Angelo and Gordon disclaim
beneficial ownership of the shares held by Leonardo, L.P.
(oo) Includes (i) 175,676 shares of Class A common stock underlying
convertible debentures and (ii) 52,702 of Class A common stock
underlying debenture warrants.
(pp) Includes (i) 622,850 shares of Class A common stock underlying
convertible debentures and (ii) 186,855 shares of Class A common stock
underlying debenture warrants.
(qq) Includes 55,283 shares of Class A common stock underlying convertible
debentures. Mikhail A. Filimonov and Dimitri Sogoloff are managing
members of Alexandra Investment LLC, which is the investment advisor
to the selling stockholder. By reason of such relationships, each may
be deemed to share dispositve power over this selling stockholder's
shares. Each of Messrs. Filimonov and Sogoloff and Alexandra
Investment Management LLC disclaim beneficial ownership of this
selling stockholders shares.
(rr) Includes 10,000 shares of Class A common stock underlying warrants.
No selling stockholder has held a position as a director or officer nor has had
a material relationship with us or any of our affiliates, or our or their
predecessors, within the past three years.
PLAN OF DISTRIBUTION
Each selling stockholder of the Class A common stock of the company and
any of their pledgees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of Class A common stock on the Trading
Market or any other stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. A selling stockholder may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;
23
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise; or
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended, if available, rather than under this
prospectus.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.
In connection with the sale of the Class A common stock or interests
therein, the selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in
short sales of the Class A common stock in the course of hedging the positions
they assume. The selling stockholders may also sell shares of the Class A common
stock short and deliver these securities to close out their short positions, or
loan or pledge the Class A common stock to broker-dealers that in turn may sell
these securities. The selling stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions or the creation
of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker~dealers or agents 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. Each selling stockholder has
informed the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the Class A
common stock. In no event shall any broker-dealer receive fees, commissions and
markups which, in the aggregate, would exceed eight percent (8%).
The Company is required to pay certain fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the selling stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because selling stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than under this prospectus. Each selling
stockholder has advised us that they have not entered into any written or oral
agreements, understandings or arrangements with any underwriter or broker-dealer
regarding the sale of the resale shares. There is no underwriter or coordinating
broker acting in connection with the proposed sale of the resale shares by the
selling stockholders.
We agreed to keep this prospectus effective until the earlier of (i) the
date on which the shares may be resold by the selling stockholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
24
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale shares may not simultaneously engage
in market making activities with respect to the Class A common stock for a
period of two business days prior to the commencement of the distribution. In
addition, the selling stockholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including Regulation
M, which may limit the timing of purchases and sales of shares of the Class A
common stock by the selling stockholders or any other person. We will make
copies of this prospectus available to the selling stockholders and have
informed them of the need to deliver a copy of this prospectus to each purchaser
at or prior to the time of the sale.
LEGAL MATTERS
The validity of the offered shares of Class A common stock has been passed
on for us by Kelley Drye & Warren LLP of New York, New York.
EXPERTS
The consolidated financial statements of AccessIT at March 31, 2004 and
for the fiscal year in the period ended March 31, 2004 incorporated by reference
into this prospectus have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of AccessIT at March 31, 2005 and
for the fiscal year in the period ended March 31, 2005 incorporated by reference
into this prospectus have been so incorporated in reliance on the report of
Eisner LLP, an independent registered public accounting firm, given on the
authority of said firm as experts in auditing and accounting.
INDEMNIFICATION AGAINST LIABILITY UNDER THE SECURITIES ACT
Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to our directors, officers and controlling persons
pursuant to any arrangement, provision or otherwise, we have been advised that
in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by any of our directors, officers or
controlling persons 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, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
25
TABLE OF CONTENTS
PAGE
About this prospectus........................................ 1
Where you can find more information.......................... 1
Incorporation of certain documents by reference.............. 1
Forward looking statements................................... 2
Prospectus summary........................................... 4
Risk factors................................................. 9
Use of proceeds.............................................. 17
Selling stockholders......................................... 18
Plan of distribution......................................... 23
Legal matters................................................ 25
Experts...................................................... 25
Indemnification against liability under the Securities Act... 25
5,291,809 Shares
Class A common stock
PROSPECTUS
August 31, 2005