Registration No. 333-
SECURITIES
AND EXCHANGE COMMISSION
FORM
S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
FOCUS
ENHANCEMENTS, INC.
(Exact name of registrant
as specified in its charter)
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Delaware
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04-3144936
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(State
or Other Jurisdiction of Incorporation or Organization)
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(IRS
Employer Identification No.)
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1370 Dell Avenue
Campbell,
California 95008
(408)
866-8300
(Address,
including zip code, and telephone number, including area code, of principal
executive offices)
Gary L.
Williams
Executive
Vice President of Finance and Chief Financial Officer
FOCUS
Enhancements, Inc.
1370 Dell
Avenue
Campbell,
California 95008
(408)
866-8300
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
Jerrold
F. Petruzzelli, Esq. and Deniz Haupt, Esq.
Manatt
Phelps & Phillips, LLP
1001 Page
Mill Road, Building 2
Palo
Alto, CA 94304
(650)
812-1300
Facsimile: (650)
213-0260
Approximate
date of commencement of proposed sale to the public: From time to
time after the effective date of the 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.
o
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, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
o
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.
o
If this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box.
o
If this
Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box.
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “accelerated filer and large
accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large
accelerated filer:
o
Accelerated
filer:
o
Non-accelerated
filer:
o
smaller
reporting company:
x
CALCULATION OF REGISTRATION FEE
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Title
of Each Class of Securities to be Registered
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Amount
to
Be
Registered
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Proposed
Maximum Offering Price Per Share
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Proposed
Maximum Aggregate Offering Price
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Amount
of Registration
Fee
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Common
Stock, par value $0.01 per share underlying Series B and C Preferred
Stock
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3,161,000
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(1)
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$
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0.43
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$
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1,359,230.00
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$
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53.42
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(8)
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Common
Stock, par value $0.01 per share underlying warrants
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29,221,252
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(2)
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$
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0.80
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$
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23,377,002.40
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$
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918.72
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(9)
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Common
Stock, par value $0.01 per share underlying warrants
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93,750
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(3)
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$
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0.05
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$
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4,687.50
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$
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0.18
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(9)
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Common
Stock, par value $0.01 per share underlying warrants
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75,000
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(4)
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$
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0.80
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$
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60,000.00
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$
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2.36
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(9)
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Common
Stock, par value $0.01 per share underlying warrants
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96,296
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(5)
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$
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1.35
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$
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129,999.60
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$
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5.11
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(9)
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Common
Stock, par value $0.01 per share underlying warrants
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200,000
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(6)
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$
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0.40
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$
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80,000.00
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$
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3.14
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(9)
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Common
Stock, par value $0.01 per share underlying warrants
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75,000
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(7)
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$
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0.50
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$
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37,500.00
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$
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1.47
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(9)
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Common
Stock Purchase Warrants (shares of common stock underlying these warrants
are being registered above)
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29,713,150
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-
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-
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25,048,419.50
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$
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984.40
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(1)
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These
shares being registered consist of 3,161,000 of common stock issuable upon
the conversion of 2,744 shares of Series B Preferred Stock and 417 shares
of Series C Preferred Stock, under which each share of outstanding
preferred stock is convertible into 1,000 shares of common
stock.
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(2)
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The
shares being registered consist of (i) 26,000,003 shares issuable upon
exercise of a common stock purchase warrant outstanding as of the date
hereof issued in connection with a private placement to accredited
investors of senior secured notes and warrants and (ii) up to an
additional 3,221,250 shares that may be issued to accredited investors, if
additional senior secured notes and accompanying warrants are issued in
lieu of interest due on June 30, 2008 and December 30, 2008, and such
indeterminate number of additional shares of common stock issuable for no
additional consideration pursuant to the anti-dilution provisions of such
warrants and by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration, which results in an increase in the number of
outstanding shares of our common
stock.
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(3)
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The
shares being registered consist of (i) 60,000 shares of common stock
issuable upon the exercise of a common stock purchase warrant outstanding
as of the date hereof issued to a third party in connection with public
relation services and (ii) 33,750 shares of common stock issuable upon the
exercise of a common stock purchase warrant outstanding as of the date
hereof issued to a third party in connection with marketing services,
provided to the registrant, and such indeterminate number of additional
shares of common stock issuable for no additional consideration pursuant
to the anti-dilution provisions of such warrants and by reason of any
stock dividend, stock split, recapitalization or other similar transaction
effected without the receipt of consideration, which results in an
increase in the number of outstanding shares of our common
stock.
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(4)
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The
shares being registered consist of 75,000 shares of common stock issuable
upon exercise of a common stock purchase warrant outstanding as of the
date hereof issued to a third party in connection with a line of credit,
and such indeterminate number of additional shares of common stock
issuable for no additional consideration pursuant to the anti-dilution
provisions of such warrants and by reason of any stock dividend, stock
split, recapitalization or other similar transaction effected without the
receipt of consideration, which results in an increase in the number of
outstanding shares of our common
stock.
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(5)
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The
shares being registered consist of (i) 48,148 shares of common stock
issuable upon exercise of a common stock purchase warrant outstanding as
of the date hereof issued to a third party in connection with a line of
credit and (ii) 48,148 shares of common stock issuable upon exercise of a
common stock purchase warrant outstanding as of the date
hereof issued to an affiliate in connection with such
affiliate’s personal guarantee of the registrant’s line of credit, and
such indeterminate number of additional shares of common stock issuable
for no additional consideration pursuant to the anti-dilution provisions
of such warrants and by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration, which results in an increase in the number of
outstanding shares of our common
stock.
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(6)
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The
200,000 shares being registered are issuable upon exercise of a common
stock purchase warrant outstanding as of the date hereof issued to an
affiliate in connection with such affiliate’s personal guarantee of the
registrant’s line of credit, and such indeterminate number of additional
shares of common stock issuable for no additional consideration pursuant
to the anti-dilution provisions of such warrants and by reason of any
stock dividend, stock split, recapitalization or other similar transaction
effected without the receipt of consideration, which results in an
increase in the number of outstanding shares of our common
stock
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(7)
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The
shares being registered consist of (i) 37,500 shares of common stock
issuable upon the exercise of a common stock purchase warrant outstanding
as of the date hereof issued to a third party in connection with investor
relation services and (ii) 37,500 shares of common stock issuable upon the
exercise of a common stock purchase warrant outstanding as of the date
hereof issued to a third party in connection with investor relation
services, provided to the registrant, and such indeterminate number of
additional shares of common stock issuable for no additional consideration
pursuant to the anti-dilution provisions of such warrants and by reason of
any stock dividend, stock split, recapitalization or other similar
transaction effected without the receipt of consideration, which results
in an increase in the number of outstanding shares of our common
stock.
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(8)
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Proposed
maximum offering price per share estimated solely for the purpose of
calculating the registration fee, calculated pursuant to Rule 457(g) of
the Securities Act of 1933 based upon the average of the bid and asked
prices of the common stock of Focus Enhancements, Inc. in the consolidated
reporting system of the NASDAQ Capital Market as of May 27, 2008 at $0.43
per share.
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(9)
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The
registration fee is calculated pursuant to Rule 457(g) of the Securities
Act of 1933 based on the exercise price of the warrants issued to the
investors.
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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, as amended or until the registration statement shall
become effective on such date as the Securities Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. The selling
stockholders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.
Subject
to Completion, Dated May 30, 2008
PROSPECTUS
FOCUS
ENHANCEMENTS, INC.
32,922,298
SHARES OF COMMON STOCK
29,713,150
WARRANTS
This
prospectus relates to the proposed resale of up to 29,713,150 common stock
purchase warrants and up to 32,922,298 shares of our common stock, $0.01 par
value per share by the selling stockholders named in this prospectus. No
securities are being offered or sold by us pursuant to this prospectus. The
shares of common stock for resale include 3,161,000 shares of common stock
issuable upon conversion of shares of our Series B preferred stock and Series C
preferred stock and 29,761,298 shares of common stock issuable upon exercise of
warrants, which common stock may be acquired directly by the selling
stockholders upon conversion of the preferred stock or the exercise of the
warrants described herein. The securities covered by this prospectus
were issued by us in private placements that were exempt from the registration
requirements of federal and state securities laws. See page 12 under the heading
“Selling Stockholders.” Our filing of the registration statement, of which this
prospectus is a part, is intended to satisfy our obligations to the selling
stockholders identified in this prospectus to register for resale shares issued
to them.
Pursuant
to this prospectus, the selling stockholders may sell some or all of the
securities they hold through ordinary brokerage transactions, directly to market
makers of our shares, or through any of the other means described in the “Plan
of Distribution” section of this prospectus, beginning on page 16 of this
prospectus. The selling stockholders, and not us, will receive all of the
proceeds from any sales of the securities, less any brokerage or other expenses
of the sale incurred by them.
We will
pay all registration expenses including, without limitation, all Securities and
Exchange Commission (“SEC”) and blue sky registration and filing fees, printing
expenses, transfer agents’ and registrars’ fees, and the fees and disbursements
of our outside counsel in connection with this offering, but the selling
stockholders will pay all selling expenses including, without limitation, any
underwriters’ or brokers’ fees or discounts relating to the shares registered
hereby, or any additional fees or expenses of separate counsel to the selling
stockholders.
Each
selling stockholder and any broker executing selling orders on behalf of the
selling stockholders, may be deemed to be an “underwriter” as such term is
defined in the Securities Act of 1933, as amended, (the “Securities Act”) and
any commissions paid or discounts or concessions allowed to any such person and
any profits received on resale of the securities offered hereby may be deemed to
be underwriting compensation under the Securities Act.
Our
common stock is listed on the NASDAQ Capital Market with the ticker symbol
“FCSE.” On May 28, 2008, the closing price of our common stock on the NASDAQ
Capital Market was $0.42 per share. Our principal executive offices are located
at 1370 Dell Avenue, Campbell, California 95008, and our telephone number is
(408) 866-8300.
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Neither
the SEC nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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Investing
in our common stock involves a high degree of risk. Please carefully consider
the “Risk Factors” beginning on page 2 of this prospectus.
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The date
of this prospectus is May __, 2008.
TABLE
OF CONTENTS
Prospectus
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Page
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2
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2
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10
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10
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12
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12
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16
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19
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22
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22
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23
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23
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24
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We have
not authorized any person to give any information or make any statement that
differs from what is in this prospectus. If any person does make a statement
that differs from what is in this prospectus, you should not rely on it. This
prospectus is not an offer to sell, nor is it a solicitation of an offer to buy,
these securities in any state in which the offer or sale is not permitted. The
information in this prospectus is complete and accurate as of its date, but the
information may change after that date. You should not assume that
the information in this prospectus is accurate as of any date after its
date.
FOCUS
ENHANCEMENTS, INC.
Incorporated
in 1992, Focus Enhancements, Inc. and its subsidiaries develop and market
proprietary video technology in two areas: semiconductor and systems. Focus
markets its products globally to original equipment manufacturers (“OEMs”), and
dealers and distributors in the consumer and professional channels.
Semiconductor products include several series of Application Specific Standard
Products (“ASSPs”), which address the wireless video and data market using Ultra
Wideband (“UWB”) technology and the video convergence market. The UWB chipsets
are targeted for the wireless USB market while the video convergence chips are
deployed into portable media players, video conferencing systems, Internet TV,
media center and interactive TV applications. Focus’ systems products are
designed to provide solutions for the professional video production market
particularly for the video acquisition, media asset management and digital
signage markets. Focus markets its systems products primarily through the
professional channel. Focus production products include video scan converters,
video mixers, standard and high definition digital video disk recorders, MPEG
(Moving Picture Experts Group) recorders and file format conversion tools. Focus
media asset management systems products include network-based video servers,
long-duration program monitors and capture/playout components. Focus digital
signage and retail media solutions products include standard and high definition
MPEG players, servers.
Our main
address is 1370 Dell Avenue, Campbell, California 95008 and our telephone number
is (408) 866-8300. Our Web site is located at
http://www.Focusinfo.com. Information contained in our Web site is
not part of this prospectus. Unless the context otherwise requires,
the terms “Focus,” “Company,” “we,” “us” and “our” refer to Focus Enhancements,
Inc., a Delaware corporation, and our subsidiaries.
RISK
FACTORS
An
investment in our common stock involves a number of substantial
risks. Before making an investment decision to purchase
our common stock, you should carefully consider the following risks relating to
our business and our common stock, together with the other information described
elsewhere in this prospectus or in documents incorporated by reference into this
prospectus. If any of the following risks actually occur, our
business, results of operations and financial condition could be materially
affected, the trading price of our common stock could decline, and you may lose
all or part of your investment.
Risks Related to Our
Business
We
have a long history of operating losses.
As of
March 31, 2008, we had an accumulated deficit of $128.7 million. We incurred net
losses of $17.4 million, $15.9 million and $15.4 million for the years ended
December 31, 2007, 2006 and 2005, respectively. There can be no assurance that
we will ever become profitable. Additionally, our independent registered public
accounting firm has included an explanatory paragraph in its report on our
consolidated financial statements for the year ended December 31, 2007 with
respect to substantial doubt about our ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
We
will need to raise additional capital, which may not be available when we need
it.
Historically,
we have met our short- and long-term cash needs through debt issuances, the sale
of common stock or other convertible securities in private placements, because
cash flow from operations has been insufficient to fund our
operations.
We
received net proceeds of $9.3 million from the issuance of secured notes and
warrants to a group of private investors in February 2008. We received net
proceeds of $6.2 million and $4.9 million from the issuances of common stock to
groups of private investors in February 2007 and September 2007,
respectively. We believe that we will need to raise additional amounts before
September 30, 2008 to continue development and launch commercialization of our
next generation UWB products. The amount necessary will depend upon the results
of ongoing UWB development efforts and our Semiconductor and Systems businesses.
Our future capital requirements will remain dependent upon these and other
factors, including cash flow from operations, maintaining our gross margins at
current or increased levels, continued progress in research and
development programs, competing technological and market developments, and our
ability to market our new products successfully. There can be no assurance that
additional equity or debt financing, if required, will be available on
acceptable terms or at all. If we are unable to access equity or debt financings
when we need it, our business will be substantially harmed.
Our
future capital raising activities may dilute the ownership of our existing
stockholders.
We may
sell securities in the public and private equity markets if and when conditions
are favorable. Raising funds through the issuance of common stock
will dilute the ownership of our existing stockholders. Furthermore,
we may issue common stock, or securities convertible into or exercisable for our
common stock, at prices that represent a substantial discount to the market
price of our common stock, which could result in a decline in the trading price
of our common stock.
Currently
we do not meet the requirements to remain listed on the Nasdaq Capital
Market. If we are delisted, it could, among other things, decrease the
liquidity of our common stock, limit our ability to raise additional capital and
potentially accelerate the amounts due under our $20.8 million outstanding
principal amount of senior secured notes at the option of the holders of
such notes.
Our
voting common stock is traded on the Nasdaq Capital Market. There are various
quantitative listing requirements for a company to remain listed on the Nasdaq
Capital Market, including maintaining a minimum bid price of $1.00 per share of
common stock and stockholders’ equity of $2.5 million or market capitalization
of at least $35 million. On August 15, 2007, the Nasdaq Stock Market notified us
that for the previous 30 consecutive business days, the bid price of our common
stock had closed below the minimum $1.00 per share price requirement for
continued inclusion under Nasdaq Marketplace Rules. We were initially given
until February 11, 2008 to regain compliance. On February 12, 2008, we were then
advised of an additional six months extension or until August 11, 2008 to attain
compliance with the Nasdaq Capital Market $1.00 minimum bid price rule. At March
31, 2008, we had total stockholders’ deficit of $753,000. If we do not maintain
a market value in our securities of at least $35 million, we would likely
receive an additional notification from the Nasdaq Capital Market that we were
not in compliance with its continued listing criteria.
If we do
not regain compliance with the continued listing requirements within the
allotted compliance period (including the minimum bid price per share and the
market capitalization requirement), including any extensions that may be granted
by the Nasdaq Capital Market, the Nasdaq Capital Market would notify us that our
common stock will be delisted from the Nasdaq Capital Market, eliminating the
only established trading market for our shares. While we would then be entitled
to appeal this determination to a Nasdaq Listing Qualifications Panel and to
request a hearing, if we fail at such hearing in our efforts to retain our
listing, we would be delisted.
If we are
delisted from the Nasdaq Capital Market, our shares may be quoted on the OTC
Electronic Bulletin Board or some other quotation medium, such as the pink
sheets, depending on our ability to meet the specific listing requirements of
the specific quotation system and market makers’ willingness to quote our shares
on either of these mediums. As a result, an investor might find it more
difficult to trade, or to obtain accurate price quotations for, such shares.
Delisting might also reduce our ability to raise capital as well as the
visibility, liquidity, and price of our voting common stock. If our common stock
were not listed on the Nasdaq Capital Market or another established automated
over-the-counter trading market in the United States, all amounts outstanding
under our $20.8 million senior secured notes would become due and payable at the
option of the holders. We do not now have such capital, and we may not have
sufficient resources or access to additional capital at the time such demand is
made, to satisfy those note obligations at the time they would become due, which
would have a material adverse impact on our financial condition and results of
operations.
We
are dependent upon a significant stockholder to meet certain of our financing
needs, and there can be no assurance that this stockholder will continue to
provide such financing.
We have
relied upon Carl Berg, a director and significant owner of our common stock, for
interim financing needs. Mr. Berg has provided a personal guarantee to
Samsung Semiconductor Inc., one of our contract ASSP manufacturers, to secure
our working capital requirements for ASSP purchase order fulfillment and another
personal guarantee to our bank in connection with our existing $6.5 million line
of credit. In connection with this second guarantee, Mr. Berg maintains a
security interest in all the Company’s assets, subject to the bank’s lien on our
accounts receivable, and he has subordinated that security interest in our
accounts receivable to the holders of our $20.8 million in debt. There can be no
assurances that Mr. Berg will continue to provide such interim financing or
personal guarantees, should we need additional funds or increased credit
facilities with our vendors.
We
have a significant number of outstanding securities that will dilute existing
stockholders upon conversion or exercise.
At May 9,
2008, we had 3,161 shares of preferred stock issued and outstanding, 31,255,785
warrants and 5,519,128 options outstanding which are all exercisable for or
convertible into shares of common stock. The 3,161 shares of preferred stock are
convertible into 3,161,000 shares of our voting common stock. Furthermore, at
May 9, 2008, 2,533,984 additional shares of common stock were available for
grant to our employees, officers, directors and consultants under our current
stock option and incentive plans. We also may issue additional shares in
acquisitions. Any additional grant of options under existing or future plans or
issuance of shares in connection with an acquisition will further dilute
existing stockholders.
Delays
in product development could adversely affect our market position or customer
relationships.
We have
experienced repeated delays in product development in the past and may
experience similar future delays. Given the short product life cycles in the
markets for certain products, any delay or unanticipated difficulty associated
with new product introductions or product enhancements could cause us to lose
customers, damage our competitive position and fail to achieve anticipated
revenue targets. Prior delays have resulted from numerous factors,
such as:
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changing
product specifications;
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the
discontinuation of certain third party
components;
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difficulties
in hiring and retaining necessary
personnel;
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difficulties
in reallocating engineering resources and other resource
limitations;
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difficulties
with independent contractors;
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changing
market or competitive product
requirements;
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unanticipated
engineering complexity;
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undetected
errors or failures in software and hardware prior to or after product
releases; and
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delays
in the acceptance or shipment of products by
customers.
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The
development of new, technologically advanced products, including our significant
investment in UWB, is a complex and uncertain process requiring high levels of
innovation and highly skilled engineering and development personnel, as well as
the accurate anticipation of technological and market trends. In order to
compete, we must be able to deliver to customers products that are highly
reliable, operate with the customer’s existing equipment, lower the customer’s
costs of acquisition, installation and maintenance, and provide an overall
cost-effective solution. We may not be able to identify, develop, manufacture,
market or support new or enhanced products successfully, if at all, or on a
timely basis. Further, our new products may not gain market acceptance or we may
not be able to respond effectively to competitors’ new products, technological
changes or emerging industry standards. Our failure to respond effectively to
technological changes or to have our products accepted would significantly harm
our business. Finally, there can be no assurances we will be successful in our
product development efforts.
We
rely on certain vendors for a significant portion of our manufacturing. If these
vendors experience delays in the production and shipping of our products, this
would have an adverse effect on our results of operations.
For the
year ended December 31, 2007, approximately 83% of our products were
manufactured on a turnkey basis by four vendors: BTW Inc., Furthertec Company
Ltd., Samsung Semiconductor Inc. and Veris Manufacturing, the latter of which
ceased production of our mixers in October 2007. If our ongoing vendors
experience production or shipping problems for any reason, we in turn could
experience delays in the production and shipping of our products, which would
have an adverse effect on our results of operations.
A
significant portion of our semiconductor revenue is from products that are
designed for consumer goods. To the extent that consumers do not purchase those
products, demand for our products and our revenues will decline.
A
significant portion of our semiconductor revenue is subject to risks associated
with sales of certain end products through retail outlets, with a majority of
such sales occurring from October through December. As a result, our annual
operating results with respect to sales of our semiconductor chips incorporated
as components of consumer products depend, in large part, on the quantity
of anticipated consumer demand for certain end products during the
relatively brief holiday season.
We
are dependent on our suppliers. If our suppliers experience labor problems,
supply shortages or product discontinuations, this would have an adverse effect
on our results of operations.
We
purchase all of our parts from outside suppliers and from time-to-time
experience delays in obtaining some components or peripheral devices.
Additionally, we are dependent on sole source suppliers for certain
components. There can be no assurance that labor problems, supply
shortages or product discontinuations will not occur in the future, which could
significantly increase the cost, delay shipment, or cause us to cease production
of our products, which, in turn could adversely affect our results of
operations.
If
we fail to meet certain covenants required by our credit facility, we may not be
able to draw down on such facility and our ability to finance our operations
could be adversely affected
.
We have
access to a $6.5 million credit facility with our bank. The various agreements
in connection with the credit facility requires us to maintain certain
covenants. In the event we violate any covenants and are not able to obtain a
waiver, we will not be able to draw down on the line of credit or term loan, and
any amounts outstanding under such line of credit or term loan may become
immediately due and payable. Either event could have a material adverse impact
on our financial condition and results of operation.
Furthermore,
the restrictions contained in any of our credit facility documents, as well as
the terms of other indebtedness we may incur from time-to-time, could limit our
ability to plan for or react to market conditions or meet capital needs or
otherwise restrict our activities or business plans. These restrictions could
also adversely affect our ability to finance our operations, meet other capital
needs, or to engage in other business activities that would be in our
interest.
Certain
events will result in our senior secured notes becoming due and payable prior to
maturity or will require us to repurchase those senior secured notes prior to
maturity, either of which would adversely affect our ability to finance our
operations.
Our
senior secured notes, due January 1, 2011, provide that if we, among other
things: (i) default on any principal or interest payment on our senior secured
notes; (ii) fail to comply with any of our covenants in the documents governing
the issuance of our senior secured notes; (iii) do not pay at final maturity
(either at stated maturity or upon acceleration) any of our other indebtedness
with an aggregate principal amount of $1.0 million, then the outstanding
principal and accrued interest on all such senior secured notes will become due
and payable. In addition, the senior secured notes provide that, upon the
occurrence of any of the following events, the holders of the notes will have
the right to require us to repurchase any or all of such notes at a purchase
price equal to 101% of the principal amount of notes to be repurchased, plus
accrued and unpaid interest: (i) failure of our common stock to be traded on a
national securities exchange, Nasdaq Stock Market or another established
automated over-the-counter trading market in the United States or (ii)
acquisition of more than 50% of our outstanding voting stock or merger with
another company if our then existing stockholders do not continue to own a
majority of our outstanding voting stock. As of March 31, 2008, we owed $20.8
million under these senior secured notes. Repayment of this amount prior to the
stated maturity would adversely impact our ability to finance our operations or
other capital needs.
If
we are unable to renew or extend our existing credit facilities upon their
expiration dates, our ability to finance our operations could be adversely
affected
.
As of
March 31, 2008, we maintain a $6.5 million line of credit with Heritage Bank of
Commerce. This line of credit is guaranteed by Carl Berg, as described above.
Our $6.5 million line of credit expires on February 21, 2009. If we are unable
to renew the new credit facility on favorable terms upon expiration, we would be
required to immediately pay all outstanding obligations under this facility.
Repayment of the principal amounts and interest due could adversely affect our
other capital requirements, as well as our ability to finance our operations on
an ongoing basis.
We
depend on a few customers for a high percentage of our revenues, and the loss or
failure to pay of any one of these customers could result in a substantial
decline in our revenues and margins and affect our cash flow.
For the
three months ended March 31, 2008, our five largest customers collectively
provided 34% of our total revenue, and as of March 31, 2008, comprised 42% of
our accounts receivable balance. We do not have long-term contracts requiring
any customer to purchase any minimum amount of products. There can be no
assurance that we will continue to receive orders of the same magnitude as in
the past from existing customers or will be able to market our current or
proposed products to new customers to obtain similar revenues. The loss of any
major customer, the failure of any major customer to pay us, or failure of a
major customer to issue additional purchase orders, would have a material
adverse effect on our revenue, results of operation, and business as a whole,
absent the timely replacement of the associated revenues and gross margins
associated with such business. Furthermore, since many of our semiconductor
products are integrated into our customers’ products, these products are
dependent upon the overall success of our customers’ products, over which we
have no control.
The
loss of certain of our key personnel and any future potential losses of key
personnel or our failure to attract additional personnel could seriously harm
our company.
We rely
upon the continued service of a relatively small number of key technical, sales
and senior management personnel. Our future success depends on retaining our key
employees and our ability to retain, attract and train other highly qualified
technical, sales and managerial personnel.
Additional
changes to our organizational structure may result in further voluntary and
involuntary attrition and loss of key personnel. Our employees can typically
resign with little or no prior notice. Our loss of any of our key technical,
sales and senior management personnel, and the intellectual capital that they
possess, or our inability to retain, attract and train additional qualified
personnel could have a material adverse effect on our business, results of
operations, cash flow and financial condition.
Our
quarterly financial results are subject to significant fluctuations, and if
actual revenues are less than projected revenues, we may be unable to reduce
expenses proportionately, and our operating results, cash flows and liquidity
would likely be adversely affected.
We have
been unable in the past to forecast accurately our operating expenses and
revenue. Revenues currently depend heavily on volatile customer purchasing
patterns. If actual revenues are less than projected revenues, we may be unable
to reduce expenses proportionately, and our operating results, cash flows and
liquidity would likely be adversely affected.
Our
markets are subject to rapid technological change, and to compete effectively in
the absence of profitable operations, we must continually introduce new
products, requiring a significant influx of additional capital.
Many of
our markets are characterized by extensive research and development and rapid
technological change resulting in short product life cycles. Development by
others of better, new or improved products, processes or technologies may make
our products or proposed products obsolete or less competitive. We must devote
substantial efforts and financial resources to enhance our existing products and
to develop new products, such as our significant investment in UWB technology.
To fund such ongoing research and development in the absence of profitable
operations, we will require a significant influx of additional capital. There
can be no assurance that we will succeed with these efforts. Failure to
effectively develop such products, notably our UWB technology, could have a
material adverse effect on our financial condition and results of
operations.
We
may not be able to protect our proprietary information.
As of
March 31, 2008, we held five patents and had submitted five pending applications
in the United States. Certain of these patents have also been filed and issued
in countries outside the United States. We treat our technical data as
confidential and rely on internal non-disclosure safeguards, including
confidentiality agreements with employees, and on laws protecting trade secrets,
to protect our proprietary information. There can be no assurance that these
measures will adequately protect the confidentiality of our proprietary
information or prove valuable in light of future technological
developments.
In
addition, we occasionally receive notices by third parties of claims regarding
infringement by our products of intellectual property rights held by such third
parties. Since 2001, we have not had to engage in any material litigation or
incur material expenses regarding such claims. However, there can be no
assurance that third parties will not assert infringement claims against us in
the future or that such claims will not result in costly litigation or require
us to license intellectual proprietary rights from third parties. In addition,
there can be no assurance that any such licenses would be available on terms
acceptable to us, if at all.
If
we are unable to respond to rapid technological change in a timely manner, then
we may lose customers to our competitors.
To remain
competitive, we must continue to enhance and improve the responsiveness,
functionality and features of our products. Our industry is characterized by
rapid technological change, changes in user and customer requirements and
preferences and frequent new product and service introductions. If competitors
introduce products and services embodying new technologies, or if new industry
standards and practices emerge, then our existing proprietary technology and
systems may become obsolete. Our future success will depend on our
ability to do the following:
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both
license and internally develop leading technologies useful in our
business;
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enhance
our existing technologies;
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develop
new services and technology that address the increasingly sophisticated
and varied needs of our prospective customers;
and
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respond
to technological advances and emerging industry standards and practices on
a cost-effective and timely basis.
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Developing
proprietary technology entails significant technical and business risks. We may
use new technologies ineffectively, or we may fail to adapt our proprietary
technology and transaction processing systems to customer requirements or
emerging industry standards. If we face material delays in introducing new
services, products and enhancements, then our customers may abandon our products
and use of our services replacing them with those of our
competitors.
We typically operate without a
significant amount of backlog, which could have an adverse impact on our
operating results
.
We
typically operate with a small amount of backlog. Accordingly, we generally do
not have a material backlog of unfilled orders, and revenues in any quarter are
substantially dependent on orders booked in that quarter. Any significant
weakening in current customer demand for any of our primary products would
therefore have, and has had in the past, an almost immediate adverse impact on
our operating results.
Our
common stock price is volatile.
The
market price for our voting common stock is volatile and has fluctuated
significantly to date. For example, between January 1, 2007 and May 9, 2008, the
per share price has fluctuated between $0.33 and $1.57 per share, closing at
$0.48 on May 9, 2008. The trading price of our voting common stock is likely to
continue to be highly volatile and subject to wide fluctuations in response to
numerous factors including the following:
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actual
or anticipated variations in our quarterly operating
results;
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announcements
of technological innovations or failures, new sales formats or new
products or services by us or our
competitors;
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cyclical
nature of consumer products using our
technology;
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changes
in financial estimates by us or securities
analysts;
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changes
in the economic performance and/or market valuations of other multi-media,
or fabless semiconductor companies;
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announcements
by us of significant acquisitions, strategic partnerships, joint ventures
or capital commitments;
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additions
or departures of key personnel;
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additions
or losses of significant customers;
and
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sales
of common stock or issuance of other dilutive
securities.
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In
addition, the securities markets have experienced extreme price and volume
fluctuations in recent times, and the market prices of the securities of
technology companies have been especially volatile. These broad market and
industry factors may adversely affect the market price of our common stock,
regardless of our actual operating performance. In the past, following periods
of volatility in the market price of stock, many companies have been the object
of securities class action litigation, including us. If we are subject to a
securities class action, then it could result in additional substantial costs
and a diversion of management’s attention and resources.
We
do not intend to pay dividends in the future.
We have
never declared or paid any cash dividends on our common stock. We
currently intend to retain all available funds and any future earnings for use
in the operation of our business and do not anticipate paying any cash dividends
in the foreseeable future. In addition, the terms of our senior
secured convertible notes limit or ability to pay dividends, and our future debt
or credit facilities may preclude us from paying any dividends. As a
result, capital appreciation, if any, of our common stock will be your source of
potential gain for the foreseeable future.
Any
acquisitions of companies or technologies by us may result in distraction of our
management and disruptions to our business.
We may
acquire or make investments in complementary businesses, technologies, services
or products if appropriate opportunities arise. From time-to-time, we may engage
in discussions and negotiations with companies regarding the possibility of
acquiring or investing in their businesses, products, services or technologies.
We may not be able to identify suitable acquisition or investment candidates in
the future, or if we do identify suitable candidates, we may not be able to make
such acquisitions or investments on commercially acceptable terms, if at all. If
we acquire or invest in another company, we could have difficulty assimilating
that company’s personnel, operations, technology or products and service
offerings. In addition, the key personnel of the acquired company may decide not
to work for us. These difficulties could disrupt our ongoing business, distract
our management and employees, increase our expenses and adversely otherwise
affect operations. Furthermore, we may incur indebtedness or issue equity
securities to pay for any future acquisitions and/or pay for the legal,
accounting or finders fees typically associated with an acquisition. The
issuance of equity securities could be dilutive to our existing stockholders. In
addition, the accounting treatment for any acquisition transaction may result in
accounting for significant goodwill and intangible assets, which, if impaired,
will adversely affect our consolidated results of operations.
We
are exposed to potential risks from legislation requiring companies to evaluate
financial controls under Section 404 of the Sarbanes-Oxley Act of
2002.
Section 404
of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report on our
system of internal controls. We will not be required to file an auditor’s
attestation report on our internal control over financial reporting until we
file our annual report for the year ending December 31, 2008. Compliance with
Section 404 has been and will continue to be expensive and time-consuming.
We estimate that we will pay our auditors and third parties approximately
$300,000 to assist us with preparation of our management report and comply with
the auditor attestation report due with the filing of our December 31, 2008
annual report. If we fail to complete this evaluation in a timely manner, or if
our independent registered public accounting firm cannot timely attest to our
evaluation, we could be subject to regulatory scrutiny and a loss of public
confidence in our internal controls. In addition, any failure to implement
required new or improved controls, or difficulties encountered in their
implementation, could harm our operating results or cause us to fail to meet our
reporting obligations.
Risks Related to Our
Industry
International
sales are subject to significant risk.
Our
revenues from outside the United States are subject to inherent risks related
thereto, including currency rate fluctuations, and the general economic and
political conditions in each country. There can be no assurance that an economic
or currency crisis experienced in certain parts of the world will not reduce
demand for our products and therefore have a material adverse effect on our
revenue or operating results.
Our
businesses are very competitive.
The
computer peripheral and semiconductor markets are extremely competitive. We
currently compete with other developers of video conversion products and with
video-graphic integrated circuit developers. Many of our competitors have
greater market recognition and greater financial, technical, marketing and human
resources. There can be no assurance that we will be able to compete
successfully against existing companies or new entrants to the
marketplace.
Our
markets are also characterized by rapid technological change, new product
development and obsolescence, and evolving industry standards. Competition is
fragmented with several hundred manufacturers supplying a variety of products.
We anticipate increased competition from both existing manufacturers and new
market entrants. Competition and rapid technological advances could result in
price reductions, reduced margins and loss of market share, any of which could
materially and adversely affect our business, financial condition and results of
operations. There can be no assurance that we will be able to compete
successfully against current and future competitors in these
markets.
In
addition, some of our competitors also offer a wide variety of product offerings
which may confer a competitive advantage based upon their ability either to
bundle their equipment in certain large system sales or combine products more
cost effectively than we can offer.
We
are exposed to general economic conditions that have resulted in reduced sales
levels. If such adverse economic conditions were to continue or worsen, our
business, financial condition and operating results could be adversely
impacted.
If the
currently adverse economic conditions in the United States and throughout the
world economy continue or worsen, we may continue to experience a material
adverse impact on our business, operating results, and financial condition. We
continue to take actions and charges to reduce our cost of sales and operating
expenses in order to address these adverse conditions. However, a prolonged
continuation or worsening of existing trends may require additional actions and
charges to reduce cost of sales and operating expenses in subsequent quarters.
We may be unable to reduce cost of sales and operating expenses at a rate and to
a level consistent with such a future adverse sales environment. If we must
undertake further expense reductions, we may incur significant incremental
special charges associated with such expense reductions that are
disproportionate to sales, thereby adversely affecting our business, financial
condition and operating results. Continuing weakness in the economy could
decrease demand for our products, increase delinquencies in payments and
otherwise have an adverse impact on our business.
NOTE
ON FORWARD LOOKING STATEMENTS
From time
to time, information provided by Focus or statements made by its employees may
contain “forward looking” information within the meaning of the Section 27A of
the Securities Act and Section 21E of the Securities and Exchange Act of 1934,
as amended (the “Exchange Act”), and as such, may involve risks and
uncertainties. Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies, and expectations, are
generally identifiable by the use of words or phrases such as “believe,” “plan,”
“expect,” “intend,” “anticipate,” “estimate,” “project,” “forecast,” “may
increase,” “may fluctuate,” “may improve” and similar expressions or future or
conditional verbs such as “should,” “would,” and “could.” These forward-looking
statements relate to, among other things, expectations of the business
environment in which we operate, opportunities and expectations regarding
technologies, anticipated performance or contributions from new and existing
employees, proposed acquisitions, projections of future performance, possible
changes in laws and regulations, potential risks and benefits arising from the
implementation of our strategic and tactical plans, perceived opportunities in
the market, potential actions of significant stockholders and investment banking
firms, and statements regarding our mission and vision. Our actual results,
performance, and achievements may differ materially from the results,
performance, and achievements expressed or implied in such forward-looking
statements due to a wide range of factors. Factors that may cause such
differences include, without limitation, the availability of capital to fund our
future cash needs, reliance on major customers, history of operating losses,
failure to integrate new acquisitions, the actual amount of charges and
transaction expenses associated with the acquisitions, the ability to recognize
expected synergies upon acquisition and the related benefits envisioned by us,
market acceptance of our products, technological obsolescence, competition,
component supply problems and protection of proprietary information, as well as
the accuracy of our internal estimates of revenue and operating expense
levels. Each forward looking statement should be read in conjunction
with the “Risk Factors” included in this prospectus, together with the
information incorporated into this prospectus by reference. We do not undertake,
and specifically disclaim any obligation, to update any forward-looking
statements to reflect occurrences or unanticipated events or circumstances after
the date of such statements unless required by federal securities
laws.
THE
TRANSACTIONS
The
following discussion sets forth certain information regarding the transactions
by which the securities being registered were acquired or are
issuable. In each case, the securities were issued in compliance with
Section 4(2) of the Securities Act and the rules promulgated
thereunder.
Warrants
issued in connection with Senior Secured Debt
On February 11, 2008, Focus obtained an
investment in the amount of approximately $9.3 million through the sale of
additional indebtedness under revised terms of its then existing January 24,
2006
Senior Secured
Convertible Note Purchase Agreement (the “Original Agreement”). The Original
Agreement was
amended
through an “Amended and Restated Senior Secured Note Purchase Agreement” (the
“Amended Agreement”). The
Amended Agreement increased the amounts outstanding under the Original Agreement
from $11.5
million (after
amendments to date) to $20.8 million in new senior secured notes (“Notes”),
amended the terms of the Original Notes so they are no longer convertible into
Focus common stock, and issued to the holders of the new Notes a total of 26
million warrants under which
the holders have the right to purchase,
for each warrant, one share of Focus’ common stock for $0.80 per warrant share
(“Warrant”). The Notes
mature on January 1, 2011 and initially
bear interest at a 12% annual rate, increasing to 15% on October 1, 2008, with
payment dates
on June 30
and December 30 of each year the Notes remain outstanding. The Notes are secured
by all of the assets of the Company.
No placement agent fee or commissions
were payable in connection with this transaction
.
Under the Amended Agreement, the Company
may, in its discretion, elect to pay interest due on June 30, 2008 and
December 30, 2008 in cash
or by issuing additional Notes in the full amount of such interest payment, if
there has been no event of
default. If the Company elects to make
the interest payments by issuance of additional Notes, this would result in the
additional
issuance of up
to approximately $2,577,000 of Note principal and approximately 3,221,250
Warrants (at the same exercise price of
$0.80 per share).
The Warrants are exercisable at the
option of the holder at any time at the initial exercise price of $0.80 per
Warrant share for
one share
of Company’s common stock subject to standard adjustment for reverse and forward
stock splits, stock dividends, stock
combinations and other similar
transactions. Additionally, with some exceptions, if the Company subsequently
issues equity in a transaction, the primary purpose of which is raising capital,
and the equity is issued on a common stock equivalent per share basis at less
than $0.80 per share, then the Warrant exercise price shall be adjusted to the
greater of (i) the same price at which such equity was
issued or (ii) $0.35 per share. The
Warrants are redeemable as follows: beginning January 1, 2009, if the average
closing price of the Company’s common stock is above $1.30 for 30 calendar days,
the Company may repurchase the Warrants for one cent ($0.01) in tranches of 2.6
million Warrants every 30 days, subject to certain other conditions, including
the exercise of such Warrants by the holders thereof prior to the repurchase
date.
The Notes are redeemable, in whole or in
part, at any time at the Company’s option upon 30 days’
prior written notice to the
Note holders, at a
redemption price equal to 100% of the principal amount of the Notes then
outstanding plus accrued and unpaid
interest.
Investor
Relations Services
On
March 1, 2008, we issued warrants to Keith L. Lippert and John W.
Heilshorn to each purchase 37,500 shares of our common stock in connection with
financial communications services rendered to us. The warrants have an exercise
price of $0.50 per share. The warrants vest over a 10 month period and expire
three years from the date of grant.
Marketing
Services
On
March 1, 2008, we issued a warrant to purchase 33,750 shares of our common
stock to Marketing By Design, LLC, for marketing services. The warrant has an
exercise price of $0.05 per share. The warrant vests over a 10 month period and
expires three years from the date of grant.
Public
Relation Services
On
March 1, 2008, we issued a warrant to purchase 60,000 shares of our common
stock to FutureWorks PR, Inc., for public relation services. The warrant has an
exercise price of $0.05 per share. The warrant vests over a 10 month period and
expires three years from the date of grant.
Line
of Credit
Greater
Bay Bank
On March
19, 2007, we renewed our $6.5 million credit facility with Greater Bay Bank
(“GBB Bank”) through March 23, 2008. In connection with the renewal, GBB Bank
maintained its priority security interest in our accounts receivable. In
addition, Carl Berg, a director of Focus, personally guaranteed the credit
facility to GBB Bank. Mr. Berg maintained his security interest in all Focus’
assets, subject to the GBB Bank’s lien on accounts receivable. In connection
with the renewal, we issued to (i) GBB Bank a warrant to purchase 48,148 shares
of our common stock at an exercise price of $1.35 per share, which expires on
March 19, 2012 and (ii) Mr. Berg a warrant to purchase 48,148 shares of our
common stock at an exercise price of $1.35 per share, which expires on March 19,
2012.
Heritage
Bank of Commerce
On
February 22, 2008, we secured a $6.5 million line of credit from Heritage
Bank of Commerce (“Heritage Bank”). In connection with this line of credit,
Heritage Bank will obtain a priority security interest in our accounts
receivable. In addition, Mr. Berg personally guaranteed the line of credit to
Heritage Bank. Mr. Berg will maintain his security interest in all the company's
assets, subject to Heritage Bank’s lien on accounts receivable. In connection
with the line of credit, we issued to Heritage Bank a warrant to purchase 75,000
shares of our common stock at an exercise price of $0.80 per share, which
expires on February 22, 2015. On March 4, 2008, in connection with Mr. Berg’s
personal guarantee, we issued to Mr. Berg a warrant to purchase 200,000 shares
of our common stock at an exercise price of $0.40 per share, which expires on
March 4, 2013.
Conversion
of Debt
Between
May 7, 2001 and March 19, 2004, Carl Berg, a director and significant owner
of our stock, converted approximately $4.4 million in debt and accrued interest
outstanding into 2,744 shares of Series B preferred stock, and 417 shares
of Series C preferred stock. The issuance of stock was not registered as it
involved a private sale to Mr. Berg pursuant to the terms of previously
issued debt. Each share of preferred stock is convertible into 1,000 shares of
common stock for an aggregate amount of 3,161 shares of common stock. This
prospectus includes 3,161,000 shares of common stock held by
Mr. Berg.
USE
OF PROCEEDS
We will
not receive any of the proceeds from the sale of our securities offered by this
prospectus. We are paying the expenses of registration of the shares
being offered under this prospectus.
SELLING
STOCKHOLDERS
The
following table sets forth: (i) the number of shares of Focus common
stock beneficially owned by each selling stockholder as of May 9, 2008
(including shares issuable upon exercise of the warrants) and (ii) the number of
shares of Focus common stock to be offered hereby by each selling stockholder.
Other than as disclosed in this prospectus, no selling stockholder has had any
position, office or other material relationship with us during the past three
years.
The
following selling stockholders have participated in our convertible debt
offering dated January 27, 2006: Barbara Shingleton Trust, Brad Shingleton
Trust, CFG Trust #1, David R. Foote, Donald L. Foote Trust #1, Heritage Mark
Foundation, Inc., Ingalls & Snyder Value Partners, L.P., Kenneth J. Foote,
Rhonda Foote-Judy, Ronald Altman, Steven M. Foote, Steven M. Foote IRA and
Theresa Foote. The following selling stockholders purchased shares of
our common stock and warrants pursuant to our offerings conducted on February
20, 2007: Steadfast, LLC, Inky Investments, Blythefield Farms LC, Theresa Foote,
Heritage Mark Foundation, Inc., Steven M. Foote IRA, Kenneth J. Foote, First
National Bancshares. One of the selling stockholders, Carl Berg, is a director
of Focus and a significant owner of our common stock and Series B preferred
stock and Series C preferred stock. In addition, Carl Berg has
guaranteed Focus’ debt as described in further detail under the heading “The
Transactions” in this prospectus. For additional information
regarding our relationship with certain selling stockholders, see the heading
“The Transactions” in this prospectus. The information set forth
below is based on information provided by each selling stockholder.
Unless
otherwise indicated in the footnotes below, we believe that the persons and
entities named in the table have sole voting and investment power with respect
to all shares beneficially owned. The information regarding shares beneficially
owned after the offering assumes the sale of all shares offered by each of the
selling stockholders. The percentage ownership data is based on 84,998,990
shares of our common stock outstanding as of May 9, 2008. The
information below does not include shares of common stock that may be issued
upon the exercise of the additional warrants that will be issued if any
additional senior secured notes are issued in lieu of interest on the $20.8
million of senior secured notes.
The
securities covered by this prospectus may be sold by the selling stockholders,
by those persons or entities to whom they transfer, donate, devise, pledge or
distribute their shares or by other successors in interest.
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Security
Ownership (1)
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Name
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Shares
Beneficially Owned Prior to Offering
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Shares
to be Sold in the Offering
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Shares
Beneficially Owned After Offering (32)
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Barbara
Shingleton Trust
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359,169
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(2)
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359,169
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*
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Blake
Ashdown IRA
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312,500
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(3)
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312,500
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|
|
|
-
|
*
|
|
Blythefield
Farms LC
|
|
|
1,175,000
|
|
(4)
|
|
625,000
|
|
|
|
550,000
|
*
|
|
Brad
Shingleton Trust
|
|
|
437,500
|
|
(5)
|
|
437,500
|
|
|
|
-
|
*
|
|
CFG
Trust #1
|
|
|
437,500
|
|
(6)
|
|
437,500
|
|
|
|
-
|
*
|
|
David
R. Foote
|
|
|
718,339
|
|
(7)
|
|
718,339
|
|
|
|
-
|
*
|
|
Donald
L. Foote Trust #1
|
|
|
1,800,000
|
|
(8)
|
|
1,250,000
|
|
|
|
550,000
|
*
|
|
Ferguson
Children’s Trust
|
|
|
312,500
|
|
(9)
|
|
312,500
|
|
|
|
-
|
*
|
|
First
National Bancshares
|
|
|
1,175,000
|
|
(10)
|
|
625,000
|
|
|
|
550,000
|
*
|
|
Heritage
Mark Foundation, Inc.
|
|
|
2,705,353
|
|
(11)
|
|
1,436,678
|
|
|
|
1,268,675
|
*
|
|
Horace
Shepard Boone IRA
|
|
|
437,500
|
|
(12)
|
|
437,500
|
|
|
|
-
|
*
|
|
Ingalls
& Snyder Value Partners, L.P.
|
|
|
11,784,130
|
|
(13)
|
|
11,784,130
|
|
|
|
-
|
*
|
|
Inky
Investments LC
|
|
|
235,000
|
|
(14)
|
|
125,000
|
|
|
|
110,000
|
*
|
|
John
T Boone Rev Trust
|
|
|
362,500
|
|
(15)
|
|
187,500
|
|
|
|
175,000
|
*
|
|
Kenneth
J. Foote
|
|
|
828,339
|
|
(16)
|
|
718,339
|
|
|
|
110,000
|
*
|
|
MacBay
Partners LP
|
|
|
1,660,109
|
|
(17)
|
|
1,250,000
|
|
|
|
410,109
|
*
|
|
Rhonda
Foote-Judy
|
|
|
437,500
|
|
(18)
|
|
437,500
|
|
|
|
-
|
*
|
|
Ronald
Altman
|
|
|
875,000
|
|
(19)
|
|
875,000
|
|
|
|
-
|
*
|
|
Shannah
Ferguson
|
|
|
1,250,000
|
|
(20)
|
|
1,250,000
|
|
|
|
-
|
*
|
|
Steadfast
LLC
|
|
|
1,175,000
|
|
(21)
|
|
625,000
|
|
|
|
550,000
|
*
|
|
Steven
M. Foote
|
|
|
718,339
|
|
(22)
|
|
718,339
|
|
|
|
-
|
*
|
|
Steven
M. Foote IRA
|
|
|
634,169
|
|
(23)
|
|
359,169
|
|
|
|
275,000
|
*
|
|
Theresa
Foote
|
|
|
828,339
|
|
(24)
|
|
718,339
|
|
|
|
110,000
|
*
|
|
Carl
Berg
|
|
|
5,902,341
|
|
(25)
|
|
3,409,148
|
|
|
|
2,493,193
|
2.80%
|
|
Greater
Bay Bank, N.A.
|
|
|
165,334
|
|
(26)
|
|
48,148
|
|
|
|
117,186
|
*
|
|
Marketing
By Design, LLC
|
|
|
63,750
|
|
(27)
|
|
33,750
|
|
|
|
30,000
|
*
|
|
Keith
L. Lippert
|
|
|
55,000
|
|
(28)
|
|
37,500
|
|
|
|
17,500
|
*
|
|
John
W. Heilshorn
|
|
|
55,000
|
|
(29)
|
|
37,500
|
|
|
|
17,500
|
*
|
|
FutureWorks
PR, Inc.
|
|
|
60,000
|
|
(30)
|
|
60,000
|
|
|
|
-
|
*
|
|
Heritage
Commerce Corp.
|
|
|
75,000
|
|
(31)
|
|
75,000
|
|
|
|
-
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,701,048
|
|
|
|
|
|
|
*
|
|
Represents beneficial ownership of
less than one percent.
|
|
|
|
|
|
**
|
|
Plus up to an additional 3,221,250
shares of common stock which may be issued if additional Notes and
Warrants are issued in lieu of interest on the Notes and, which shares
would be allocated among the selling stockholders who then own Notes based
on the Notes then held by them. Information regarding such
additional shares would be set forth in a supplement to this
prospectus.
|
|
|
|
|
|
(1)
|
|
This
table has been prepared based solely upon information furnished to us as
of May 9, 2008 by the selling stockholders listed above. The selling
stockholders identified above may have sold, transferred or otherwise
disposed of shares of our common stock since May 9, 2008. In addition,
this table includes the shares of our common stock issuable upon exercise
of the warrants being registered pursuant to this prospectus, and such
warrants may be separately sold, transferred or otherwise
disposed.
|
|
|
|
|
|
(2)
|
|
Barbara Shingleton
Trust
.
Includes 359,169 shares of common stock
issuable upon exercise of warrants exercisable within 60 days of May 9,
2008. Barbara Shingleton as Trustee has voting and investment control. The
selling stockholder has notified us that it is not a broker-dealer or
affiliate of a broker-dealer.
|
|
|
|
|
|
(3)
|
|
Blake Ashdown
IRA
.
Includes 312,500 shares of common stock
issuable upon exercise of warrants exercisable within 60 days of May 9,
2008. Blake Ashdown as Trustee has voting and investment control. The
selling stockholder has notified us that it is not a broker-dealer or
affiliate of a broker-dealer.
|
|
|
|
|
|
(4)
|
|
Blythfield
Farms
.
Includes 675,000 shares of common stock
issuable upon exercise of warrants exercisable within 60 days of May 9,
2008. Kenneth Foote as Trustee has voting and investment control. The
selling stockholder has notified us that it is not a broker-dealer or
affiliate of a broker-dealer. Mr. Kenneth Foote also has voting
and investment control over the securities held by the Don L. Foote Trust
set forth in footnote 8, First National Bancshares set forth in footnote
10, the Heritage Mark Foundation set forth in footnote 11 and the
securities set forth in footnote 16, for an aggregate of 7,720,442 shares
in his voting and investment control.
|
|
|
|
|
|
(5)
|
|
Bradford Shingleton
Trust
.
Includes 437,500 shares of common stock
issuable upon exercise of warrants exercisable within 60 days of May 9,
2008. Bradford Shingleton as Trustee has voting and investment control.
The selling stockholder has notified us that it is not a broker-dealer or
affiliate of a broker-dealer.
|
|
|
|
|
|
(6)
|
|
CFG Trust
#1
.
Includes 437,500 shares of common stock
issuable upon exercise of warrants exercisable within 60 days
of May 9, 2008. Cheryl Groenendyke as Trustee has voting and investment
control. The selling stockholder has notified us that it is not a
broker-dealer or affiliate of a broker-dealer. Ms. Groenendyke
also has voting and investment control over the securities held by Inky
Investments set forth in footnote 14 for an aggregate of 953,339 shares in
voting and investment control.
|
|
|
|
|
|
(7)
|
|
David R.
Foote
.
Includes 718,339 shares of common stock
issuable upon exercise of warrants exercisable within 60 days of May 9,
2008. David Foote has voting and investment control. The selling
stockholder has notified us that he is not a broker-dealer or affiliate of
a broker-dealer.
|
|
|
|
|
|
(8)
|
|
Donald L. Foote Trust
#1
.
Includes 1,300,000 shares of common stock
issuable upon exercise of warrants exercisable within 60 days of May 9,
2008. Kenneth Foote as Trustee has voting and investment control. The
selling stockholder has notified us that it is not a broker-dealer or
affiliate of a broker-dealer. Mr. Kenneth Foote also has
voting and investment control over the securities held by Blythfield Farms
set forth in footnote 4, First National Bancshares set forth in footnote
10, the Heritage Mark Foundation set forth in footnote 11 and the
securities set forth in footnote 16, for an aggregate of 7,720,442 shares
in his voting and investment control.
|
|
|
|
|
|
(9)
|
|
Ferguson Children’s
Trust
.
Includes 312,500 shares of common stock
issuable upon exercise of warrants exercisable within 60 days of May 9,
2008. Rhonda Foote-Judy has voting and investment control. The selling
stockholder has notified us that she is not a broker-dealer or affiliate
of a broker-dealer.
|
|
|
|
|
|
(10)
|
|
First National
Bancshares
.
Includes 675,000 shares of common
stock issuable upon exercise of warrants exercisable within 60 days of May
9, 2008. Kenneth Foote has voting and investment control. The selling
stockholder has notified us that he is not a broker-dealer or affiliate of
a broker-dealer. Mr. Kenneth Foote also has voting and
investment control over the securities held by Blythfield Farms set forth
in footnote 4, the Don L. Foote Trust set forth in footnote 8, the
Heritage Mark Foundation set forth in footnote 11 and the securities set
forth in footnote 16, for an aggregate of 7,720,442 shares in his voting
and investment control.
|
|
|
|
|
|
(11)
|
|
Heritage Mark
Foundation
.
Includes 1,555,353 shares of common
stock issuable upon exercise of warrants exercisable within 60 days of May
9, 2008. Kenneth Foote and Frederick Foote both have voting and investment
control. The selling stockholder has notified us that it is not a
broker-dealer or affiliate of a broker-dealer. Mr. Kenneth
Foote also has voting and investment control over the securities held by
Blythfield Farms set forth in footnote 4, the Don L. Foote Trust set forth
in footnote 8, First National Bancshares set forth in footnote 10 and the
securities set forth in footnote 16, for an aggregate of 7,720,442 shares
in his voting and investment control.
|
|
|
|
|
|
(12)
|
|
Horace Shepard Boone
IRA
.
Includes 437,500 shares of common stock
issuable upon exercise of warrants exercisable within 60 days of May 9,
2008. Horace Boone has voting and investment control. The selling
stockholder has notified us that it is an affiliate of a broker-dealer but
at the time they purchased our securities he did not have any agreement or
understanding, directly or indirectly, with any person to distribute the
securities being sold pursuant to this
prospectus.
|
|
(13)
|
|
Ingalls & Snyder
Value Partners L.P
.
Includes 11,784,130 shares of
common stock issuable upon exercise of warrants exercisable within 60 days
of May 9, 2008. In accordance with rule 13d-3 under the Exchange Act,
Thomas Boucher Jr, Robert L. Gipson and Adam Janovic, the general
partners, share voting and investment control, of the shares owned by such
entity. The selling stockholder has notified us that it is an affiliate of
a broker-dealer, but at the time it purchased our securities, it did not
have any agreement or understanding, directly or indirectly, with any
person to distribute the securities being sold pursuant to this
prospectus.
|
|
|
|
|
|
(14)
|
|
Inky
Investments
.
Includes 135,000 shares of common
stock issuable upon exercise of warrants exercisable within 60 days of May
9, 2008. Cheryl Groenendyke has voting and investment control. The selling
stockholder has notified us that it is not a broker-dealer or affiliate of
a broker-dealer. Ms. Groenendyke also has voting and investment
control over the securities held by CFG Trust #1 set forth in footnote 6
for an aggregate of 953,339 shares in voting and investment
control.
|
|
|
|
|
|
(15)
|
|
John T. Boone Rev
Trust
.
Includes 187,500 shares of common stock
issuable upon exercise of warrants exercisable within 60 days of May 9,
2008. John Boone Jr. and Horace Boone as trustees have voting and
investment control. The selling stockholder has notified us that it is an
affiliate of a broker-dealer, but at the time it purchased our securities,
it did not have any agreement or understanding, directly or indirectly,
with any person to distribute the securities being sold pursuant to this
prospectus.
|
|
|
|
|
|
(16)
|
|
Kenneth
Foote
.
Includes 728,339 shares of common stock
issuable upon exercise of warrants, exercisable within 60 days of May 9,
2008. Kenneth Foote has voting and investment control. The selling
stockholder has notified us that he is not a broker-dealer or affiliate of
a broker-dealer. Mr. Kenneth Foote also has voting and
investment control over the securities held by Blythfield Farms set forth
in footnote 4, the Don L. Foote Trust set forth in footnote 8, First
National Bancshares set forth in footnote 10 and the Heritage Mark
Foundation set forth in footnote 11, for an aggregate of 7,720,442 shares
in his voting and investment control.
|
|
|
|
|
|
(17)
|
|
MacBay
Partners
.
Includes 1,250,000 shares of common
stock issuable upon exercise of warrants exercisable within 60 days of May
9, 2008. Horace Boone has voting and investment control. The selling
stockholder has notified us that it is an affiliate of a broker-dealer but
at the time they purchased our securities it did not have any agreement or
understanding, directly or indirectly, with any person to distribute the
securities being sold pursuant to this prospectus.
|
|
|
|
|
|
(18)
|
|
Rhonda
Foote-Judy
.
Includes 437,500 shares of common
stock issuable upon exercise of warrants, exercisable within 60 days of
May 9, 2008. Rhonda Foote-Judy has voting and investment control. The
selling stockholder has notified us that she is not a broker-dealer or
affiliate of a broker-dealer.
|
|
|
|
|
|
(19)
|
|
Ronald
Altman
.
Includes 875,000 shares of common stock
issuable upon exercise of warrants, exercisable within 60 days of May 9,
2008. Ronald Altman has voting and investment control. The selling
stockholder has notified us that he is not a broker-dealer or affiliate of
a broker-dealer.
|
|
|
|
|
|
(20)
|
|
Shannah
Ferguson
.
Includes 1,250,000 shares of common
stock issuable upon exercise of warrants exercisable within 60 days of May
9, 2008. Shannah Ferguson has voting and investment control. The selling
stockholder has notified us that she is not a broker-dealer or affiliate
of a broker-dealer.
|
|
|
|
|
|
(21)
|
|
Steadfast
LLC
.
Includes 675,000 shares of common stock
issuable upon exercise of warrants exercisable within 60 days of May 9,
2008. Steven Foote has voting and investment control. The selling
stockholder has notified us that he is an affiliate of a broker-dealer,
but at the time he purchased our securities, he did not have any agreement
or understanding, directly or indirectly, with any person to distribute
the securities being sold pursuant to this
prospectus. Mr. Steven Foote also has voting and
investment control over the securities set forth in footnotes 22 and 23
for an aggregate of 2,527,508 shares of common stock in his voting and
investment control.
|
|
|
|
|
|
(22)
|
|
Steven M.
Foote
.
Includes 718,339 shares of common stock
issuable upon exercise of warrants, exercisable within 60 days of May 9,
2008. Steven Foote has voting and investment control. The selling
stockholder has notified us that he is an affiliate of a broker-dealer,
but at the time he purchased our securities, he did not have any agreement
or understanding, directly or indirectly, with any person to distribute
the securities being sold pursuant to this
prospectus. Mr. Steven Foote also has voting and
investment control over the securities held by Steadfast LLC set forth in
footnote 21 and the securities set forth in footnote 23, for an aggregate
of 2,527,508 shares in his voting and investment
control.
|
|
(23)
|
|
Steven Foote
IRA.
Includes 384,169 shares of common stock
issuable upon exercise of warrants, exercisable within 60 days of May 9,
2008. Steven Foote has voting and investment control. The selling
stockholder has notified us that it is an affiliate of a broker-dealer,
but at the time it purchased our securities, it did not have any agreement
or understanding, directly or indirectly, with any person to distribute
the securities being sold pursuant to this prospectus. Mr.
Steven Foote also has voting and investment control over the securities
held by Steadfast LLC set forth in footnote 21 and the securities set
forth in footnote 22, for an aggregate of 2,527,508 shares in his voting
and investment control.
|
|
|
|
|
|
(24)
|
|
Theresa
Foote
.
Includes 728,339 shares of common stock
issuable upon exercise of warrants exercisable within 60 days of May 9,
2008. Theresa Foote as Trustee has voting and investment control. The
selling stockholder has notified us that she is not a broker-dealer or
affiliate of a broker-dealer.
|
|
|
|
|
|
(25)
|
|
Carl
Berg
.
Includes 2,744 shares of Series B preferred stock and
417 shares of Series C preferred stock, convertible into 3,161,000 shares
of common stock and 248,148 shares of common stock issuable upon exercise
of warrants exercisable within 60 days of May 9, 2008. Carl Berg has
voting and investment control. The selling stockholder has notified us
that he is not a broker-dealer or affiliate of a
broker-dealer.
|
|
(26)
|
|
Greater Bay Bank,
N.A
.
Includes 165,334 shares of common stock
issuable upon exercise of warrants within 60 days of May 9, 2008. The
selling stockholder has notified us that it is not a broker-dealer or
affiliate of a broker-dealer and that it believes that it is not required
to be broker-dealer.
|
|
|
|
|
|
(27)
|
|
Marketing By Design,
LLC
.
Includes 63,750 shares of common stock
exercisable upon conversion of warrants. Such warrants vest monthly in
equal installments between March 30 and December 30, 2008. As of May 9,
2008, an aggregate amount of 43,500 warrants have vested and are
exercisable within 60 days of this date. Susan McDonald has voting and
investment control. The selling stockholder has notified us that it is not
a broker-dealer or affiliate of a broker-dealer.
|
|
|
|
|
|
(28)
|
|
Keith L.
Lippert
.
Includes 55,000 shares of common stock
issuable upon exercise of warrants. Such warrants vest monthly in equal
installments between March 30 and December 30, 2008. As of May 9, 2008, an
aggregate amount of 32,500 warrants have vested and are exercisable within
60 days of this date. Keith L. Lippert has voting and investment
control. The selling stockholder has notified us that he is not
a broker-dealer or affiliate of a broker-dealer.
|
|
|
|
|
|
(29)
|
|
John W.
Heilshorn
.
Includes 55,000 shares of common stock
issuable upon exercise of warrants. Such warrants vest monthly in equal
installments between March 30 and December 30, 2008. As of May
9, 2008, an aggregate amount of 32,500 warrants have vested and are
exercisable within 60 days of this date. John W. Heilshorn has voting and
investment control. The selling stockholder has notified us
that he is not a broker-dealer or affiliate of a
broker-dealer.
|
|
|
|
|
|
(30)
|
|
FutureWorks PR,
Inc
.
Includes 60,000 shares of common stock exercisable upon
conversion of warrants. Such warrants vest monthly in equal installments
between March 30 and December 30, 2008. As of May 9, 2008, an aggregate
amount of 24,000 warrants have vested and are exercisable within 60 days
of this date. Brian Solis has voting and investment control. The selling
stockholder has notified us that it is not a broker-dealer or affiliate of
a broker-dealer.
|
|
(31)
|
|
Heritage Commerce
Corp
.
Includes 75,000 shares of common stock
issuable upon exercise of warrants within 60 days of May 9, 2008. The
selling stockholder has notified us that it is not a broker-dealer or
affiliate of a broker-dealer and that it believes that it is not required
to be a broker-dealer.
|
|
|
|
|
|
(32)
|
|
Assumes
all shares being offered by this prospectus are
sold.
|
PLAN
OF DISTRIBUTION
We are
registering the securities being offered by this prospectus for resale in
accordance with certain registration rights granted to the selling stockholders,
including their pledgees, donees, transferees, assignees or other
successors-in-interest, who may sell the securities from time to time, or who
may also decide not to sell any or all of the securities that may be sold under
this prospectus. We will pay all registration expenses including, without
limitation, all the SEC and blue sky registration and filing fees, printing
expenses, transfer agents’ and registrars’ fees, and the fees and disbursements
of our outside counsel in connection with this offering, but the selling
stockholders will pay all selling expenses including, without limitation, any
underwriters’ or brokers’ fees or discounts relating to the securities
registered hereby, or the fees or expenses of separate counsel to the selling
stockholders.
The
selling stockholders and any of their pledgees, donees, transferees, assignees
and successors-in-interest may, from time to time, sell any or all of their
securities on any stock exchange, market or trading facility on which the
securities are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares of common stock, and to the extent
applicable, the warrants:
|
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the securities as
agent but may position and resell a portion of the block as principal to
facilitate the transactions;
|
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
|
·
|
privately
negotiated transactions;
|
|
|
·
|
settlement
of short sales;
|
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number of such
securities at a stipulated price per
share;
|
|
|
·
|
a
combination of any such methods of
sale;
|
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
or
|
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell securities under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other broker-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.
Each selling stockholder does not expect these commissions and discounts
relating to its sales of securities to exceed what is customary in the types of
transactions involved.
In
connection with the sale of our securities 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
securities in the course of hedging the positions they assume. The selling
stockholders may also sell the securities short and deliver these
securities to close out their short positions, or loan or pledge the securities
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 that require the delivery to such broker-dealer or other
financial institution of the securities offered by this prospectus, which
securities 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 securities may be deemed to be “underwriters” within the meaning of
the Securities Act in connection with such sales. The selling stockholders,
Ingalls & Snyder Value Partners L.P., Horace Shepard Boone, John T Boone,
MacBay Partners LP, Steadfast LLC, and Steven M. Foote, have informed us that
they are each an affiliate of a broker-dealer, but at the time they purchased
our securities, they did not have any agreement or understanding, directly or
indirectly, with any person to distribute the securities being sold pursuant to
this prospectus. All other stockholders have told us that at the time they
purchased our securities they were not broker-dealers and did not have any
agreement or understanding, directly or indirectly, with any person to
distribute the common stock being sold pursuant to this prospectus.
We are
required to pay certain fees and expenses incurred by us incident to the
registration of the securities. We have 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, unless such requirement is inapplicable by reason of rule
of the SEC promulgated thereunder. In addition, any securities
covered by this prospectus that 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
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
securities may be resold by the selling stockholders without registration and
without volume restrictions pursuant to Rule 144(k) as determined by our counsel
pursuant to a written opinion letter to such effect, addressed and acceptable to
our transfer agent and the selling stockholders or (ii) all of the securities
have been sold pursuant to the prospectus or Rule 144 under the Securities Act
or any other rule of similar effect.
The
securities will be sold only through registered or licensed brokers or dealers
if required under applicable state securities laws. In addition, in certain
states, the securities 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 common stock may not simultaneously engage in market
making activities with respect to our 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 our securities 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.
We will
not receive any of the proceeds from the selling stockholders’ sale of our
securities. In the event that the selling stockholders exercise their
warrants for cash, we will receive proceeds from their exercise.
Unless
otherwise permitted by law, if the securities are to be sold pursuant to this
prospectus by pledgees, donees, assignees, transferees of, or other successors
in interest to the selling stockholders, then we must file an amendment to the
registration statement of which this prospectus is a part under applicable
provisions of the Securities Act amending the list of the selling stockholders
to include the pledgee, donee, transferee, assignee or other successor in
interest as selling stockholders under this prospectus.
DESCRIPTION
OF SECURITIES
General
We are
authorized to issue up to 150,000,000 shares of common stock, $0.01 par value
per share, and 3,000,000 shares of preferred stock, $0.01 par value per share.
As of May 9, 2008, 84,998,990 shares of common stock, 2,744
shares of Series B
convertible preferred stock and 417
shares of Series C
convertible preferred stock were issued and outstanding. All of the outstanding
capital stock is, and will be, fully paid and non-assessable.
Common
Stock
Holders
of common stock are entitled to one vote per share. All actions submitted to a
vote of stockholders are voted on by holders of common stock voting together as
a single class. Holders of common stock are not entitled to cumulative voting in
the election of directors. Our board of directors is divided into three classes,
each serving staggered three-year terms. As a result, one class of directors
will be elected at each annual meeting of our stockholders, with the other
classes continuing for the remainder of their respective terms. This provision
in our charter may have the effect of delaying or preventing changes in control
or management.
Holders
of common stock are entitled to receive dividends in cash or in property on an
equal basis, if and when dividends are declared on the common stock by our board
of directors, subject to any preference in favor of outstanding shares of
preferred stock, if there are any.
In the
event of liquidation of our company, all holders of common stock will
participate on an equal basis with each other in our net assets available for
distribution after payment of our liabilities and payment of any liquidation
preferences in favor of outstanding shares of preferred stock.
Holders
of common stock are not entitled to preemptive rights and the common stock is
not subject to redemption.
The
rights of holders of common stock are subject to the rights of holders of any
preferred stock that we designate or have designated. The rights of preferred
stockholders may adversely affect the rights of the common
stockholders.
Preferred
Stock
Our board
of directors has the ability to issue up to 3,000,000 shares of preferred stock
in one or more series, without stockholder approval. The board of
directors may designate for the series:
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·
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the
number of shares and name of the
series,
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·
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the
voting powers of the series, including the right to elect directors, if
any,
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·
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the
dividend rights and preferences, if
any,
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·
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redemption
terms, if any,
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·
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liquidation
preferences and the amounts payable on liquidation or dissolution,
and
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·
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the
terms upon which such series may be converted into any other series or
class of our stock, including the common stock and any other terms that
are not prohibited by law.
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It is
impossible for us to state the actual effect it will have on common stock
holders if the board of directors designates a new series of preferred stock.
The effects of such a designation will not be determinable until the rights
accompanying the series have been designated. The issuance of preferred stock
could adversely affect the voting power, liquidation rights or other rights held
by owners of common stock or other series of preferred stock. The board of
directors’ authority to issue preferred stock without stockholder approval could
make it more difficult for a third party to acquire control of our company, and
could discourage any such attempt. We have no present plans to issue any
additional shares of preferred stock.
Series
B Preferred Stock
The board
of directors of Focus adopted a Certificate of Designation whereby a total of
3,000 shares of Series B preferred stock, $0.01 par value per share, are
authorized for issuance. Each share has a liquidation preference in the amount
of $1,190.48 plus all accrued or declared, but unpaid dividends. Cash dividends
on the stock are non-cumulative and are paid at the option of the board of
directors. If paid, the rate shall be seven percent per annum. The board does
not presently intend to pay dividends on the stock. At the option of the holder,
each share is convertible into 1,000 shares of our common stock. At May 9, 2008,
there were 2,744 shares of Series B preferred stock outstanding.
Series
C Preferred Stock
The board
of directors of Focus adopted a Certificate of Designation whereby a total of
500 shares of Series C preferred stock, $0.01 par value per share, are
authorized for issuance. Each share has a liquidation preference in the amount
of $1,560.00 plus all accrued or declared, but unpaid dividends. Cash dividends
on the stock are non-cumulative and are paid at the option of the board of
directors. If paid, the rate shall be seven percent per annum. The board does
not presently intend to pay dividends on the stock. At the option of the holder,
each share is convertible into 1,000 shares of our common stock. At May 9, 2008,
there were 417 shares of Series C preferred stock outstanding.
Options,
Warrants and Notes
As of May
9, 2008, 5,519,128 options to purchase shares of common stock were outstanding
under our approved stock option plans and 2,533,984 shares of common stock were
available for future grants under our stock option plans. Holders of options do
not have any of the rights or privileges of our stockholders, including voting
rights, prior to exercise of the options. The number of shares of common stock
for which these options are exercisable and the exercise price of these options
are subject to proportional adjustment for stock splits and similar changes
affecting our common stock.
As of May
9, 2008, we have issued warrants to purchase 31,225,785 shares of common stock.
We have reserved sufficient shares of authorized common stock to cover the
issuance of common stock subject to the options and warrants, including an
additional 3,221,250 shares of common stock for warrants that may be issued
along with additional notes in lieu of cash interest payments due on June 30,
2008 and December 30, 2008 on our senior secured notes.
Holders
of our warrants do not have any rights or privileges of our stockholders,
including voting rights, prior to exercise of the warrants. The number of shares
of common stock for which these warrants are exercisable and the exercise price
of these warrants are subject to proportional adjustment for stock splits and
similar changes affecting our common stock. Each of the warrants
registered herein have different exercise prices and expiration dates, and may
have additional differing terms. The following is a description of
our warrants registered pursuant to this prospectus. However, for a description
of the exercise price and the expiration date of each of the warrants registered
pursuant to this prospectus, see the heading “The Transactions.”
Holders
of the warrants may exercise their warrants to purchase shares of our common
stock on or before the expiration date by delivering (i) an exercise
notice, appropriately completed and duly signed, and (ii) payment of the
exercise price for the number of shares with respect to which the warrant is
being exercised. Our warrants may be exercised in whole or in part,
but only for full shares of common stock, and any portion of a warrant not
exercised prior to the expiration date shall be and become void and of no
value. The shares of common stock issuable on exercise of all
warrants registered herein will be, when issued in accordance with the warrants,
duly and validly authorized, issued and fully paid and
non-assessable.
Upon the
holder’s exercise of a warrants registered herein, we will promptly, but in no
event later than five trading days after the exercise date, issue and deliver,
or cause to be issued and delivered, a certificate for the shares of common
stock issuable upon exercise of the warrant, free of restrictive legends unless
there is no effective registration statement covering the issuance of the shares
of common stock or the shares of common stock issuable upon exercise of the
warrant are not freely transferable without volume restrictions pursuant to Rule
144(k) under the Securities Act. Share certificates issued at times
when there is not a then effective registration statement covering the issuance
of the underlying common stock will include customary legends restricting
transfer to the extent we determine necessary to ensure our compliance with the
applicable laws.
The
exercise price and the number of shares of common stock purchasable upon the
exercise of the warrants are subject to adjustment upon the occurrence of
specific events, including stock dividends, stock splits, and combinations or
reclassifications of our common stock. Upon any such event, each holder’s
warrant will become the right to receive, upon exercise of such warrant, in
addition to the number of shares of common stock issuable under the warrant, the
same kind and amount of securities, cash or other property as it would have been
entitled to receive upon the occurrence of such transaction, if the warrant had
been exercised immediately prior to such transaction.
For the
warrants held by Greater Bay Bancorp and Heritage Commerce Corp. we allow for
the conversion of their warrants, in whole or in part, into a number of shares
equal to the aggregate fair market value of the shares less the aggregate
warrant price of the shares underlying their warrants divided by the fair market
value of one share of the common stock underlying these warrants. For
the Warrants issued in connection with the Senior Secured Debt and the warrants
held by Carl Berg, we provide for a “cashless exercise” option if, at any time
of exercise, there is no effective registration statement registering the resale
of the warrant shares. This option entitles the warrant holder to
elect to receive fewer shares of common stock without paying the cash exercise
price. The number of shares to be issued would be determined by a
formula based on the total number of shares to which the warrant holder is
entitled, the market price of the common stock on the date of exercise and the
applicable exercise price of the warrants.
Additionally,
the Warrants issued in connection with the Senior Secured Debt provide for
certain buy-in rights to a holder if we fail to deliver the shares of common
stock underlying the Warrants by the fifth trading day after the date on which
delivery of such stock certificate is required by the Warrant. The buy-in rights
apply if after such fifth trading day, but prior to cure by us, the holder
purchases (in an open market transaction or otherwise) shares of our common
stock to deliver in satisfaction of a sale by the holder of the Warrant shares
that the holder anticipated receiving from us upon exercise of the
Warrant. In this event, at the request of and in the holder’s
discretion, we will pay cash to the holder in an amount equal to the amount by
which the holder’s total purchase price (including brokerage commissions, if
any) for the shares of common stock so purchased exceeds the product of
(A) such number of shares of common stock as we were required to delivered
to the holder, times (B) the price at which the sell order giving rise to
such purchase obligation was executed, and at the option of the holder, either
reinstate the portion of the Warrant and equivalent number of common stock to be
issued pursuant to the Warrant for which such exercise was not honored or
deliver to the holder a certificate or certificates representing the shares of
common stock underlying the exercised Warrant that would have been issued had we
timely complied with our exercise and delivery obligations.
If, at
any time while the Warrants issued in connection with the Senior Secured Debt
are outstanding, (1) we effect any merger or consolidation with or into
another person or entity after which our shareholders as of immediately prior to
the transaction own less than a majority of the outstanding stock of the
surviving entity, (2) we effect any sale of all or substantially all of our
property, assets or business in one or a series of related transactions, or
(3) we effect any reclassification of the common stock or any compulsory
share exchange pursuant to which the common stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a
“Fundamental Transaction”), then the holder shall have the right thereafter to
receive, upon exercise of the warrant, the same amount and kind of securities,
cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of the number of warrant shares then
issuable upon exercise of the warrant. In the case of any such Fundamental
Transaction, the surviving entity or the corporation purchasing or otherwise
acquiring such assets shall expressly assume the due and punctual performance of
each and every covenant and condition of the warrant, and the other obligations
and liabilities under the warrant.
Commencing
on after January 1, 2009 and prior to December 21, 2010, if the average of the
closing prices of the Company’s common stock for 30 consecutive days is greater
than $1.30 per share, the Company may, upon ten days’ written notice to the
holders of the Warrants, redeem 2,600,000 Warrants on a pro rata basis among the
holders of such Warrants at a redemption price of $0.01 per Warrant share then
unexercised, on a date no earlier than ten trading days following the Company’s
transmission of the redemption notice given to the holders of the
Warrants. In addition, 20 days after the Company has given its first
redemption notice, and the applicable ten trading days have passed, the Company
may issue additional redemption notices provided that as of the date of each
additional redemption notice, the common stock then listed or quoted for trading
has previously been for 30 consecutive calendar days greater than $1.30 per
share, and the Company may thereafter redeem 2,600,000 Warrants in the same
manner as set forth above. Subject to its meeting the applicable
conditions, the Company may continue to exercise its redemption rights every 30
days in the manner set forth above until no further Warrants remain
outstanding.
In
addition, the exercise price of the Warrants issued in connection with the
Senior Secured Debt will be adjusted, without any change in the number of
securities purchasable under the Warrants if the Company issues at a net
effective price to the Company of less than $0.80 per share of common stock, any
equity or equity linked securities, in connection with a financing the primary
purpose of which is to raise equity capital, with certain
exclusions. If the Company makes such an issuance, then the exercise
price of the Warrants issued and then outstanding will be adjusted so that the
exercise price to purchase one share of common stock pursuant to the Warrant
shall be the net effective price received by the Company in the financing;
provided, however, that such adjustment to the exercise price may not cause or
result in the exercise price of less than $0.35 per share.
The above
summary of certain terms and provisions of the warrants registered herein is
qualified in its entirety by reference to the detailed provisions of the
warrants, which are filed as exhibits to this prospectus and incorporated herein
by reference. We are not required to issue fractional shares upon the exercise
of the warrants. No holders of the warrants will possess any rights as a
shareholder under those warrants until the holder exercises those warrants. The
warrants may be transferred independent of the common stock they were issued
with, on a form of assignment, subject to all applicable laws.
LEGAL
MATTERS
Manatt,
Phelps & Phillips LLP, Palo Alto, California, will pass upon the validity of
our securities and certain other legal matters in connection with our offering
of our securities.
EXPERTS
The
consolidated financial statements incorporated in this prospectus by reference
to the Annual Report on Form 10-K for the year ended December 31, 2007, have
been so incorporated in reliance on the report (which contains an explanatory
paragraph relating to the Company’s ability to continue as a going concern as
described in Note 2 to the consolidated financial statements) of Burr, Pilger
& Mayer LLP, an independent registered public accounting firm given on the
authority of said firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We file
annual and quarterly reports, proxy statements and other information with the
SEC. You may read and copy any document we file at the SEC’s public reference
rooms in Washington, D.C., 100 F Street N.E., Washington D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Copies of these materials can be obtained at prescribed rates from the Public
Reference Section of the SEC at its principal office at 100 F Street, N.E.,
Washington, D.C. 20549. Our SEC filings are also available to the public from
the SEC’s Website at “http://www.sec.gov.”
This
prospectus provides you with a general description of the securities being
registered. This prospectus is part of a registration statement that
we have filed with the SEC. To see more detail, you should read the exhibits and
schedules filed with our registration statement. You may obtain copies of the
registration statement and the exhibits and schedules to the registration
statement as described above.
Statements
contained herein as to the contents of any contract or any other document
referred to are not necessarily complete, and where such contract or other
document is an exhibit to a document we have filed with the SEC, each such
statement is qualified in all respects by the provisions of such exhibit, to
which reference is now made.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
This
prospectus "incorporates by reference" information that we have filed with the
SEC under the Exchange Act, which means that we are disclosing important
information to you by referring you to those documents. Any statement contained
in this prospectus or in any document incorporated or deemed to be incorporated
by reference into this prospectus will be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained in this
prospectus or any subsequently filed document that also is, or is deemed to be,
incorporated by reference into this prospectus modifies or supersedes that
statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this prospectus. We
incorporate by reference the following documents we filed with the SEC with the
exception of those items deemed to be only furnished with the SEC:
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Our SEC Filings (File
No. 1-11860)
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Date of
Filing
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Annual
Report on Form 10-K for the year ended December 31, 2007
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March
28, 2008
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Annual
Report on Form 10-K/A for the year ended December 31, 2007
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April
29, 2008
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Current
Report on Form 8-K
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February
15, 2008
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Current
Report on Form 8-K
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February
25, 2008
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Current
Report on Form 8-K
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March
6, 2008
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Current
Report on Form 8-K
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March
17, 2008
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Quarterly
Report on Form 10-Q for the quarter ended March 31, 2008
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May
15, 2008
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We are
also incorporating by reference any future documents that we file with the SEC
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, as amended
after the date of the filing of the Registration Statement for which this
prospectus is a part and prior to the time all of the securities offered by this
prospectus are sold. In no event, however, will any information that we furnish
under Item 2.02 or Item 7.01 of any Current Report on Form 8-K or other
information that we may from time to time furnish to the SEC (rather than file)
be incorporated by reference into, or otherwise become a part of, this
prospectus.
You may
request a copy of these filings, at no cost, by writing or telephoning us at the
following address:
Focus
Enhancements, Inc.
1370 Dell
Avenue
Campbell,
California 95008
Attention: Investor
Relations
Phone: (408)
866-8300
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
The
Delaware General Corporation Law and our certificate of incorporation and bylaws
provide for indemnification of our directors and officers for liabilities and
expenses that they may incur in such capacities. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of Focus pursuant to
the foregoing provisions, 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.
You
should rely only on the information incorporated by reference or contained in
this prospectus or any supplement. We have not authorized anyone else
to provide you with different or additional information. You should
not assume that the information in this prospectus or any supplement is accurate
as of any date other than the date on the front of this prospectus or any
supplement that may have a later date. The selling stockholders are
not making an offer of the securities in any state where the offer is not
permitted.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution
The
following statement sets forth the estimated amounts of expenses to be borne by
the Company in connection with the offering described in this Registration
Statement:
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Registration
fee under securities act
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$
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250
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Blue
sky fees and expenses
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2,500
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Legal
fees and expenses
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80,000
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Accounting
fees and expenses
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7,500
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Printing
and mailing costs
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250
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Miscellaneous
fees and expenses
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100
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Total
expenses *
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$
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90,600
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Item
15. Indemnification of Directors and Officers
Section
145 of the Delaware General Corporation Law authorizes a court to award, or
permits a Delaware corporation to grant, indemnity to present or former
directors and officers, as well as certain other persons serving at the request
of the corporation in related capacities. This permitted indemnity is
sufficiently broad to permit indemnification for liabilities arising under the
Securities Act, including reimbursement for expenses incurred.
The
indemnification authorized under Delaware law is not exclusive and is in
addition to any other rights granted to officers and directors under the
Certificate of Incorporation or Bylaws of the corporation or any agreement
between officers and directors and the corporation. The registrant’s Certificate
of Incorporation provides for the indemnification of directors, former directors
and officers to the maximum extent permitted by Delaware law. The
registrant’s Certificate of Incorporation also provides that it may purchase and
maintain insurance on behalf of a director or officer against liability asserted
against the director or officer in such capacity.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the issuer pursuant
to the foregoing provisions, or otherwise, the issuer has 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.
Item
16. Exhibits.
The
following documents have been previously filed as Exhibits and are incorporated
herein by reference except those exhibits indicated with an asterisk which are
filed herewith:
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Exhibit
No.
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Description
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3.1(a)
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Second
Restated Certificate of Incorporation of Focus (Exhibit to
Registration Statement on Form SB-2 (No. 33-60248-B) filed with
the SEC, and incorporated herein by reference).
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3.1(b)
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Certificate
of Amendment to the Second Restated Certificate of Incorporation of Focus
(Exhibit to Form 10-QSB, filed with the SEC, and incorporated
herein by reference).
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3.1(c)
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Certificate
of Amendment of the Certificate of Incorporation of Focus dated
July 25, 1997 (Exhibit to Form 10-QSB, filed with the SEC
on August 14, 1997, and incorporated herein by
reference).
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3.1(d)
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Certificate
of Designation - Series B Preferred Stock dated June 14, 2001
(Exhibit to Amendment No. 1 to Registration Statement on
Form SB-2 (No. 333-55178) filed with the SEC on August 9,
2001, and incorporated herein by reference).
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3.1(e)
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Certificate
of Amendment to the Second Restated Certificate of Incorporation of Focus
dated January 16, 2001 (Exhibit to Form 10-KSB filed with
the SEC on March 31, 2003, and incorporated herein by
reference).
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3.1(f)
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Certificate
of Amendment to Second Amended and Restated Certificate of Incorporation
of Focus dated January 8, 2003 (Exhibit to Form 10-KSB
filed with the SEC on March 31, 2003, and incorporated herein by
reference).
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3.1(g)
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Certificate
of Amendment of the Certificate of Incorporation of Focus dated
March 12, 2004 (Exhibit to Form 10-K filed with the SEC on
March 16, 2004, and incorporated herein by
reference).
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3.1(h)
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Certificate
of Designation - Series C Preferred Stock dated March 12, 2004
(Exhibit to Form 10-K filed with the SEC on March 16, 2004,
and incorporated herein by reference).
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3.1(i)
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Certificate
of Amendment of the Second Restated Certificate of Incorporation of Focus
dated November 17, 2006 (Exhibit to Registration Statement on
Form S-3 filed with the SEC on December 8, 2006
(No. 333-139224), and incorporated herein by
reference).
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3.1(j)
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Certificate
of Designation of Series B Preferred Stock dated September 29,
2005 (Exhibit to Form 8-K filed with the SEC on October 4,
2005, and incorporated herein by reference).
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3.2
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Restated
Bylaws of Focus (Exhibit to Form 10-Q filed with the SEC on
November 14, 2007, and incorporated herein by
reference).
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4.1
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Common
Stock Purchase Form of Warrant (Ingalls & Snyder), dated February 11,
2008 (Exhibit to Form 8-K filed with the SEC on February 15, 2008, and
incorporated herein by reference).
|
|
|
|
|
|
4.2
|
|
Amended
and Restated Registration Rights Agreement by and among Focus, the
Purchasers and Ingalls & Snyder LLC, dated as of February 7, 2008
(Exhibit to Form 8-K filed with the SEC on February 15, 2008, and
incorporated herein by reference.)
|
|
|
|
|
|
4.3
|
|
Warrant
to purchase stock issued to Greater Bay Bancorp, dated March 19, 2007
(Exhibit to Form 8-K filed with the SEC on March 23, 2007, and
incorporated herein by reference).
|
|
|
|
|
|
4.4
|
|
Registration
Rights Agreement between Focus and Greater Bay Bancorp, dated March 19,
2007 (Exhibit to Form 8-K filed with the SEC on March 23, 2007, and
incorporated herein by reference).
|
|
|
|
|
|
4.5
|
|
Common
stock purchase warrant issued to Carl E. Berg, dated March 19, 2007
(Exhibit to Form 8-K filed with the SEC on March 23, 2007, and
incorporated herein by reference).
|
|
|
|
|
|
4.6
|
|
Piggyback
Registration Rights Agreement between Focus and Carl E. Berg, dated March
19, 2007 (Exhibit to Form 8-K filed with the SEC on March 23, 2007, and
incorporated herein by
reference).
|
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
4.7
|
|
Warrant
to purchase stock issued to Heritage Bank of Commerce, dated February 22,
2008 (Exhibit to Form 8-K filed with the SEC on March 6, 2008, and
incorporated herein by reference).
|
|
|
|
|
|
4.8
|
|
Registration
Rights Agreement between Heritage Bank of Commerce and Focus dated
February 22, 2008 (Exhibit to Form 10-Q filed with the SEC on May 15,
2008, and incorporated herein by reference)
|
|
|
|
|
|
4.9
|
|
Common
stock purchase warrant issued to Marketing By Design, dated March 1, 2008
(Exhibit to Form 10-Q filed with the SEC on May 15, 2008, and incorporated
herein by reference)
|
|
|
|
|
|
4.10
|
|
Piggyback
Registration Rights Agreement between Marketing By Design and Focus dated
March 1, 2008 (Exhibit to Form 10-Q filed with the SEC on May 15, 2008,
and incorporated herein by reference)
|
|
|
|
|
|
4.11
|
|
Common
stock purchase warrant issued to Keith L. Lippert, dated March 1, 2008
(Exhibit to Form 10-Q filed with the SEC on May 15, 2008, and incorporated
herein by reference)
|
|
|
|
|
|
4.12
|
|
Common
stock purchase warrant issued to John W. Heilshorn, dated March 1, 2008
(Exhibit to Form 10-Q filed with the SEC on May 15, 2008, and incorporated
herein by reference)
|
|
|
|
|
|
4.13
|
|
Piggyback
Registration Rights Agreement between Lippert/Heilshorn & Associates
and Focus dated March 1, 2008 (Exhibit to Form 10-Q filed with the SEC on
May 15, 2008, and incorporated herein by reference)
|
|
|
|
|
|
4.14
|
|
Common
stock purchase warrant issued to FutureWorks, dated March 1, 2008 (Exhibit
to Form 10-Q filed with the SEC on May 15, 2008, and incorporated herein
by reference)
|
|
|
|
|
|
4.15
|
|
Piggyback
Registration Rights Agreement between FutureWorks and Focus dated March 1,
2008 (Exhibit to Form 10-Q filed with the SEC on May 15, 2008, and
incorporated herein by reference)
|
|
|
|
|
|
4.16
|
|
Common
stock purchase warrant issued to Carl E. Berg (Heritage Bank of Commerce),
dated March 4, 2008 (Exhibit to Form 8-K filed with the SEC on March 6,
2008, and incorporated herein by reference).
|
|
|
|
|
|
4.17
|
|
Piggyback
Registration Rights Agreement between Carl Berg and Focus dated March 4,
2008 (Exhibit to Form 10-Q filed with the SEC on May 15, 2008, and
incorporated herein by reference)
|
|
|
|
|
|
4.18
|
|
Amended
and Restated Senior Secured Note issued to Ingalls and Snyder LLC, dated
February 11, 2008 (Exhibit to Form 8-K filed with the SEC on
February 15, 2008, and incorporated herein by
reference).
|
|
|
|
|
|
5.1
|
|
Opinion
of Manatt, Phelps & Phillips, LLP.*
|
|
|
|
|
|
10.1
|
|
Affirmation
of Guaranty and Security Agreement of October 26, 2000 between Focus and
Carl Berg, dated February 22, 2008 (Exhibit to Form 10-K/A filed with the
SEC on April 29, 2008, and incorporated herein by
reference)
|
|
|
|
|
|
10.2
|
|
Amended
and Restated Security Agreement by and among Focus, the Purchasers and
Ingalls & Snyder LLC, dated as of February 7, 2008 (Exhibit to Form
8-K filed with the SEC on February 15, 2008, and incorporated herein by
reference).
|
|
|
|
|
|
10.3
|
|
Loan
and Security Agreement between Heritage Bank of Commerce and Focus
Enhancements, Inc., dated February 22, 2008 (Exhibit to Form 8-K filed
with the SEC on March 6, 2008, and incorporated herein by
reference).
|
|
|
|
|
|
10.4
|
|
Amended
and Restated Senior Secured Note Agreement by and among Focus and the
purchasers, dated as of February 7, 2008 (Exhibit to Form 8-K filed with
the SEC on February 15, 2008, and incorporated herein by
reference).
|
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
10.5
|
|
Amendment
No. 2 to Intercreditor Agreement by and among Carl Berg, Greater Bay
Venture Banking, a division of Greater Bay Bank, N.A., the Purchasers and
Ingalls & Snyder LLC, dated as of February 7, 2008 (Exhibit to Form
8-K filed with the SEC on February 15, 2008, and incorporated herein by
reference).
|
|
|
|
|
|
10.6
|
|
Amendment
No. 3 to Intercreditor Agreement among Carl Berg, Heritage Bank of
Commerce, the Purchasers, Ingalls & Snyder LLC and Thomas O. Boucher,
Jr., as agent, dated February 22, 2008(Exhibit to Form 10-K/A filed with
the SEC on April 29, 2008, and incorporated herein by
reference).
|
|
|
|
|
|
10.7
|
|
Amended
and Restated Intercreditor Agreement by and among Carl Berg, the
Purchasers and Ingalls & Snyder LLC, dated as of February 7, 2008
(Exhibit to Form 8-K filed with the SEC on February 15, 2008, and
incorporated herein by reference).
|
|
|
|
|
|
23.1
|
|
Consent
of Burr, Pilger & Mayer LLP.*
|
|
|
|
|
|
23.3
|
|
Consent
of Manatt, Phelps & Phillips, LLP (see Exhibit
5.1).*
|
|
|
|
|
|
24.1
|
|
A
power of attorney is set forth on the signature page of the Registration
Statement*
|
|
|
|
|
|
*
|
|
Included.
|
Item
17. Undertakings
(a) 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;
(ii)
to reflect in the prospectus any facts
or events arising after the effectiv
e date of the registration statement (or
the most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, a
n
y 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
f
orm of prospectus filed with the SEC
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
i
n the effective registration statement;
and
(iii)
to include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
provided, however
, that the
undertakings set forth in paragraphs (i), (ii) and (iii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in reports filed with or furnished to the SEC by the
registrant pursuant to Section 13 or 15(d) of the Exchange Act that are
incorporated by reference in the registration statement, or is contained in a
form of prospectus filed pursuant to Rule 424(b) that is part of the
registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;
(3)
to remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering; and
(4)
That, for the purpos
e of determining liability under the
Securities Act to any purchaser:
(i) If the
registrant is relying on Rule 430B:
(A)
Each prospectus filed by the registrant
pursuant to Rule 424(b)(3) shall be deemed to be part of the registration
statement as of th
e date
the filed prospectus was deemed part of and included in the registration
statement; and
(B)
Each prospectus required to be filed
pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to a
n offering made pursuant to Rule
415(a)(i), (vii), or (x) for the purpose of providing the information required
by section 10(a) of the Securities Act shall be deemed to be part of and
included in the registration statement as of the earlier of the date
s
u
ch form of prospectus is first used
after effectiveness or the date of the first contract of sale of securities in
the offering described in the prospectus. As provided in Rule 430B,
for liability purposes of the issuer and any person that is at that
dat
e
an underwriter, such date shall be
deemed to be a new effective date of the registration statement relating to the
securities in the registration statement to which that prospectus relates, and
the offering of such securities at that time shall be deemed
to be the initial bona fide offering
thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the r
e
gistration statement or prospectus that
is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such effective date, supersede or modify any statement
that was made in the registration statement or prospectus
that was part of the registration
statement or made in any such document immediately prior to such effective date;
or
(ii) If the registrant is
subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relati
ng to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiven
e
ss. Provided, however, that
no statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that i
s
part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or
made in any such document immediately
prior to such date of first use.
(b) The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the registrant’s annual
report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement related to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(c) 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 small business issuer
has 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 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 to 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, the registrant certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing
on Form S-3 and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Campbell,
State of California, on May 22, 2008.
|
|
FOCUS
ENHANCEMENTS, INC.
|
|
|
/s/ Brett A.
Moyer
|
|
|
Brett A. Moyer
|
|
|
President and Chief Executive officer
|
|
|
(Principal Executive officer)
|
POWER
OF ATTORNEY
Each
person whose signature appears below hereby constitutes and appoints each of
Brett Moyer and Gary L. Williams, his true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) and additions to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act, this registration statement has been
signed by the following persons in the capacities and on the dates
indicated.
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Brett A. Moyer
|
|
President,
Chief Executive
|
|
May
22, 2008
|
|
Brett
A. Moyer
|
|
Officer
and Director
|
|
|
|
|
|
|
|
|
|
/s/ Gary L. Williams
|
|
Executive
Vice President of
|
|
May
22, 2008
|
|
Gary
L. Williams
|
|
Finance
& Chief Financial
|
|
|
|
|
|
Officer
(Principal Financial
|
|
|
|
|
|
and
Accounting officer)
|
|
|
|
|
|
|
|
|
|
/s/ N William Jasper, Jr.
|
|
Chairman
of the Board
|
|
May
22, 2008
|
|
N
William Jasper, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Carl E. Berg
|
|
Director
|
|
May
25, 2008
|
|
Carl
E. Berg
|
|
|
|
|
|
|
|
|
|
|
|
/s/ William B. Coldrick
|
|
Director
|
|
May
22, 2008
|
|
William
B. Coldrick
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Michael L. D’Addio
|
|
Director
|
|
May
22, 2008
|
|
Michael
L. D’Addio
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Tommy Eng
|
|
Director
|
|
May
22, 2008
|
|
Tommy
Eng
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Sam Runco
|
|
Director
|
|
May
22, 2008
|
|
Sam
Runco
|
|
|
|
|
EXHIBIT
INDEX
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
3.1(a)
|
|
Second
Restated Certificate of Incorporation of Focus (Exhibit to
Registration Statement on Form SB-2 (No. 33-60248-B) filed with
the SEC, and incorporated herein by reference).
|
|
|
|
|
|
3.1(b)
|
|
Certificate
of Amendment to the Second Restated Certificate of Incorporation of Focus
(Exhibit to Form 10-QSB, filed with the SEC, and incorporated
herein by reference).
|
|
|
|
|
|
3.1(c)
|
|
Certificate
of Amendment of the Certificate of Incorporation of Focus dated
July 25, 1997 (Exhibit to Form 10-QSB, filed with the SEC
on August 14, 1997, and incorporated herein by
reference).
|
|
|
|
|
|
3.1(d)
|
|
Certificate
of Designation - Series B Preferred Stock dated June 14, 2001
(Exhibit to Amendment No. 1 to Registration Statement on
Form SB-2 (No. 333-55178) filed with the SEC on August 9,
2001, and incorporated herein by reference).
|
|
|
|
|
|
3.1(e)
|
|
Certificate
of Amendment to the Second Restated Certificate of Incorporation of Focus
dated January 16, 2001 (Exhibit to Form 10-KSB filed with
the SEC on March 31, 2003, and incorporated herein by
reference).
|
|
|
|
|
|
3.1(f)
|
|
Certificate
of Amendment to Second Amended and Restated Certificate of Incorporation
of Focus dated January 8, 2003 (Exhibit to Form 10-KSB
filed with the SEC on March 31, 2003, and incorporated herein by
reference).
|
|
|
|
|
|
3.1(g)
|
|
Certificate
of Amendment of the Certificate of Incorporation of Focus dated
March 12, 2004 (Exhibit to Form 10-K filed with the SEC on
March 16, 2004, and incorporated herein by
reference).
|
|
|
|
|
|
3.1(h)
|
|
Certificate
of Designation - Series C Preferred Stock dated March 12, 2004
(Exhibit to Form 10-K filed with the SEC on March 16, 2004,
and incorporated herein by reference).
|
|
|
|
|
|
3.1(i)
|
|
Certificate
of Amendment of the Second Restated Certificate of Incorporation of Focus
dated November 17, 2006 (Exhibit to Registration Statement on
Form S-3 filed with the SEC on December 8, 2006
(No. 333-139224), and incorporated herein by
reference).
|
|
|
|
|
|
3.1(j)
|
|
Certificate
of Designation of Series B Preferred Stock dated September 29,
2005 (Exhibit to Form 8-K filed with the SEC on October 4,
2005, and incorporated herein by reference).
|
|
|
|
|
|
3.2
|
|
Restated
Bylaws of Focus (Exhibit to Form 10-Q filed with the SEC on
November 14, 2007, and incorporated herein by
reference).
|
|
|
|
|
|
4.1
|
|
Common
Stock Purchase Form of Warrant (Ingalls & Snyder), dated February 11,
2008 (Exhibit to Form 8-K filed with the SEC on February 15, 2008, and
incorporated herein by reference).
|
|
|
|
|
|
4.2
|
|
Amended
and Restated Registration Rights Agreement by and among Focus, the
Purchasers and Ingalls & Snyder LLC, dated as of February 7, 2008
(Exhibit to Form 8-K filed with the SEC on February 15, 2008, and
incorporated herein by reference.)
|
|
|
|
|
|
4.3
|
|
Warrant
to purchase stock issued to Greater Bay Bancorp, dated March 19, 2007
(Exhibit to Form 8-K filed with the SEC on March 23, 2007, and
incorporated herein by reference).
|
|
|
|
|
|
4.4
|
|
Registration
Rights Agreement between Focus and Greater Bay Bancorp, dated March 19,
2007 (Exhibit to Form 8-K filed with the SEC on March 23, 2007, and
incorporated herein by reference).
|
|
|
|
|
|
4.5
|
|
Common
stock purchase warrant issued to Carl E. Berg, dated March 19, 2007
(Exhibit to Form 8-K filed with the SEC on March 23, 2007, and
incorporated herein by reference).
|
|
|
|
|
|
4.6
|
|
Piggyback
Registration Rights Agreement between Focus and Carl E. Berg, dated March
19, 2007 (Exhibit to Form 8-K filed with the SEC on March 23, 2007, and
incorporated herein by reference).
|
|
|
|
|
|
4.7
|
|
Warrant
to purchase stock issued to Heritage Bank of Commerce, dated February 22,
2008 (Exhibit to Form 8-K filed with the SEC on March 6, 2008, and
incorporated herein by reference).
|
|
|
|
|
|
4.8
|
|
Registration
Rights Agreement between Heritage Bank of Commerce and Focus dated
February 22, 2008 (Exhibit to Form 10-Q filed with the SEC on May 15,
2008, and incorporated herein by reference)
|
|
|
|
|
|
4.9
|
|
Common
stock purchase warrant issued to Marketing By Design, dated March 1, 2008
(Exhibit to Form 10-Q filed with the SEC on May 15, 2008, and incorporated
herein by reference)
|
|
Exhibit
No.
|
|
Description
|
|
|
|
|
|
4.10
|
|
Piggyback
Registration Rights Agreement between Marketing By Design and Focus dated
March 1, 2008 (Exhibit to Form 10-Q filed with the SEC on May 15, 2008,
and incorporated herein by reference)
|
|
|
|
|
|
4.11
|
|
Common
stock purchase warrant issued to Keith L. Lippert, dated March 1, 2008
(Exhibit to Form 10-Q filed with the SEC on May 15, 2008, and incorporated
herein by reference)
|
|
|
|
|
|
4.12
|
|
Common
stock purchase warrant issued to John W. Heilshorn, dated March 1, 2008
(Exhibit to Form 10-Q filed with the SEC on May 15, 2008, and incorporated
herein by reference)
|
|
|
|
|
|
4.13
|
|
Piggyback
Registration Rights Agreement between Lippert/Heilshorn & Associates
and Focus dated March 1, 2008 (Exhibit to Form 10-Q filed with the SEC on
May 15, 2008, and incorporated herein by reference)
|
|
|
|
|
|
4.14
|
|
Common
stock purchase warrant issued to FutureWorks, dated March 1, 2008 (Exhibit
to Form 10-Q filed with the SEC on May 15, 2008, and incorporated herein
by reference)
|
|
|
|
|
|
4.15
|
|
Piggyback
Registration Rights Agreement between FutureWorks and Focus dated March 1,
2008 (Exhibit to Form 10-Q filed with the SEC on May 15, 2008, and
incorporated herein by reference)
|
|
|
|
|
|
4.16
|
|
Common
stock purchase warrant issued to Carl E. Berg (Heritage Bank of Commerce),
dated March 4, 2008 (Exhibit to Form 8-K filed with the SEC on March 6,
2008, and incorporated herein by reference).
|
|
|
|
|
|
4.17
|
|
Piggyback
Registration Rights Agreement between Carl Berg and Focus dated March 4,
2008 (Exhibit to Form 10-Q filed with the SEC on May 15, 2008, and
incorporated herein by reference)
|
|
|
|
|
|
4.18
|
|
Amended
and Restated Senior Secured Note issued to Ingalls and Snyder LLC, dated
February 11, 2008 (Exhibit to Form 8-K filed with the SEC on
February 15, 2008, and incorporated herein by
reference).
|
|
|
|
|
|
|
|
Opinion
of Manatt, Phelps & Phillips, LLP
|
|
|
|
|
|
10.1
|
|
Affirmation
of Guaranty and Security Agreement of October 26, 2000 between Focus and
Carl Berg, dated February 22, 2008 (Exhibit to Form 10-K/A filed with the
SEC on April 29, 2008, and incorporated herein by
reference)
|
|
|
|
|
|
10.2
|
|
Amended
and Restated Security Agreement by and among Focus, the Purchasers and
Ingalls & Snyder LLC, dated as of February 7, 2008 (Exhibit to Form
8-K filed with the SEC on February 15, 2008, and incorporated herein by
reference).
|
|
|
|
|
|
10.3
|
|
Loan
and Security Agreement between Heritage Bank of Commerce and Focus
Enhancements, Inc., dated February 22, 2008 (Exhibit to Form 8-K filed
with the SEC on March 6, 2008, and incorporated herein by
reference).
|
|
|
|
|
|
10.4
|
|
Amended
and Restated Senior Secured Note Agreement by and among Focus and the
purchasers, dated as of February 7, 2008 (Exhibit to Form 8-K filed with
the SEC on February 15, 2008, and incorporated herein by
reference).
|
|
|
|
|
|
10.5
|
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Amendment
No. 2 to Intercreditor Agreement by and among Carl Berg, Greater Bay
Venture Banking, a division of Greater Bay Bank, N.A., the Purchasers and
Ingalls & Snyder LLC, dated as of February 7, 2008 (Exhibit to Form
8-K filed with the SEC on February 15, 2008, and incorporated herein by
reference).
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10.6
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Amendment
No. 3 to Intercreditor Agreement among Carl Berg, Heritage Bank of
Commerce, the Purchasers, Ingalls & Snyder LLC and Thomas O. Boucher,
Jr., as agent, dated February 22, 2008(Exhibit to Form 10-K/A filed with
the SEC on April 29, 2008, and incorporated herein by
reference).
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10.7
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Amended
and Restated Intercreditor Agreement by and among Carl Berg, the
Purchasers and Ingalls & Snyder LLC, dated as of February 7, 2008
(Exhibit to Form 8-K filed with the SEC on February 15, 2008, and
incorporated herein by reference).
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Consent
of Burr, Pilger & Mayer LLP
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23.3
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Consent
of Manatt, Phelps & Phillips, LLP (see Exhibit 5.1)
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24.1
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A
power of attorney is set forth on the signature page of the Registration
Statement
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