5
other costs. In addition, strikes or other service interruptions by the postal
service or third party couriers could adversely affect the Company's ability to
deliver products on a timely basis.
Additionally, the Company's operating results could be adversely affected
by a delay in the intro duction of a major new software product or upgrading of
more specialized products. Purchasers of software may delay the ordering of new
software applications in the period immediately preceding such introduction for
fear of technological obsolescence. The Company believes that software
publishers often delay the release of related software products so as to
coordinate with the release of these major new products or delay development of
new products until after the importance of these new products can be evaluated.
Delayed introductions of these new products could result in the delay or
reduction of sales because the unreleased product cannot be delivered and could
also adversely affect sales in that the Company, which often coordinates new
catalog drops and marketing initiatives with such introductions and product
upgrades, would be focusing catalog marketing on such unreleased products.
CHANGING METHODS OF SOFTWARE DISTRIBUTION
The software distribution industry is undergoing significant change and
consolidation. Software distributors are consolidating operations and acquiring
or merging with other distributors or retailers to achieve economies of scale
and increased efficiency. The current consolidation trend could cause the
industry to become even more competitive and make it more difficult for the
Company to maintain its operating margins. The manner in which software products
are distributed and sold is also changing, and new methods of distribution and
sale may emerge or expand. Software developers and publishers have sold, and may
intensify their efforts to sell, their products directly to end users. The
emergence of the Internet as a viable platform in which to conduct business
transactions has both lowered the barriers for competition and broadened
customers' access to products and information. This transition has heightened
the Company's awareness to maintain a competitive edge in this market. From time
to time certain developers and publishers have instituted programs for the
direct sale of large order quantities of software to certain major corporate
accounts. These types of programs may continue to be developed and used by
various developers and publishers. While Microsoft Corporation ("Microsoft") and
other vendors currently sell their products directly to end users, they have not
attempted to completely bypass the reseller channel. Future efforts by such
entities to bypass third-party sales channels could materially and adversely
affect the Company's operations.
In addition, certain major publishers, including Microsoft, have
implemented programs for the master copy distribution or site licensing of
software. These programs generally grant an organization the right to make a
number of copies of software for distribution within the organization provided
that the organization pays a fee to the developer for each copy made. Also,
resellers and publishers may attempt to increase the volume of software products
distributed electronically through down-loading to end users' microcomputers,
through CD-ROM unlocking technology, through CD-ROM-based subscription services
and through on-line shopping services. Any of these competitive programs, if
successful, could have a material adverse effect on the Company's operations and
financial condition.
DEPENDENCE UPON VENDORS
As is customary in the industry, the Company has no long-term supply
contracts with any of its suppliers. Substantially all the Company's contracts
with its vendors are terminable upon 30 days' notice or less. Termination or
interruption of the Company's relationships with its suppliers or modification
of the terms of or discontinuance of their agreements with the Company could
adversely affect the Company's operating results.
Certain of the products offered by the Company may be subject to
manufacturer allocations, which limit the number of units of manufacturers'
products available to resellers, including the Company. The Company's business
may be adversely affected if certain products become unavailable to the Company
or if the number of units allocated to the Company becomes limited, whether such
unavailability or limitation is due to the loss of authorized dealer status,
allocation limitations or other conditions. Many key vendors finance portions of
the cost of catalog
6
publication and distribution based upon the amount of coverage given in the
catalogs to their respective products. A reduction in or discontinuation of this
practice could have a material adverse effect on the Company.
RAPID CHANGES IN SOFTWARE PRODUCTS AND RISK OF INVENTORY OBSOLESCENCE
The software products industry is characterized by rapid technological
change and the frequent introduction of new products and product enhancements.
The Company's success depends in large part on its ability to identify and
obtain the right to market products that will meet the changing requirements of
the marketplace. The Company has sought to minimize its inventory exposure
through a variety of inventory control procedures and policies, including formal
and informal vendor price protection programs. In order to satisfy customer
demand and to obtain greater purchasing discounts, the Company expects to carry
increased inventory levels of certain products in the future. In addition, large
software firms continue to develop products that include the features of utility
and subroutine products published and/or sold by the Company in their software
languages, thus rendering certain of such products unnecessary. Additionally, if
the growth rate of the personal computer market were to decrease, with a
corresponding decrease in demand for computer software, the Company's operating
results could be adversely affected. There can be no assurance that the Company
will be able to identify and offer products necessary to remain competitive or
avoid losses related to obsolete inventory, or that unexpected new product
introductions will not have a material adverse effect on the demand for the
Company's inventory.
STOCK VOLATILITY
The technology sector of the United States stock markets has experienced
substantial volatility in recent periods. Numerous conditions which impact the
technology sector or the stock market in general or the Company in particular,
whether or not such events relate to or reflect upon the Company's operating
performance, could adversely affect the market price of the Company's Common
Stock. Furthermore, fluctuations in the Company's operating results,
announcements regarding litigation, the loss of a significant vendor, increased
competition, reduced vendor incentives and trade credit, higher postage and
operating expenses, and other developments, could have a significant impact on
the market price of the Company's Common Stock.
ACQUISITIONS STRATEGY
The Company plans to continue to pursue acquisitions of complementary
businesses. However, there can be no assurance that suitable acquisitions will
be available to the Company on acceptable terms, that financing for future
acquisitions will be available on acceptable terms, that future acquisitions
will be advantageous to the Company or that anticipated benefits of such
acquisitions will be realized. The pursuit, timing and integration of possible
future acquisitions may cause substantial fluctuations in operating results.
STATE SALES TAX COLLECTION
The Company presently collects state sales tax, or other similar tax, only
on sales of products to residents of the state of New Jersey. Various states
have tried to impose on direct marketers the burden of collecting state sales
taxes on the sale of products shipped to state residents. The United States
Supreme Court has affirmed its position that it is unlawful for a state to
impose state sales tax collection obligations on an out-of-state mail order
company whose only contacts with the state are the distribution of catalogs and
other advertising materials through the mail and subsequent delivery of
purchased goods by parcel post and interstate common carriers. However, it is
possible that legislation may be passed to overturn such decision or the Supreme
Court may change its position. Additionally, it is currently uncertain as to
whether electronic commerce, which will likely include the Company's Internet
sales activities, will be subject to state sales tax. The imposition of new
state sales tax collection obligations on the Company in states to which it
ships products would result in additional administrative expenses to the Company
and could result in price increases to the customer, which could adversely
affect the Company's business, financial condition and results of operations.
7
YEAR 2000 COMPLIANCE
The Company presently believes that with minor modifications to existing
operating systems, the Year 2000 Issue will not pose significant operational
problems for its computer systems. The Company expects the costs for these
modifications to be minimal.
The Company uses software and related technologies throughout its business
that will be affected by the Year 2000 problem common to most businesses
concerning the inability of information systems, primarily computer software
programs, to properly recognize and process date sensitive information as the
year 2000 approaches. The Company is evaluating its software operating systems
to improve its operations and achieve Year 2000 compliance. While the Company's
review and assessment of its internal systems is still in process, the Company
expects that any required modifications will not have a material effect on the
Company's operating results. However, in the event that the Company's key
vendors cannot provide the Company with software products that meet Year 2000
requirements on a timely basis, or if customers delay or forego software
purchases based upon Year 2000 related issues, the Company's operating results
could be materially adversely affected. In general as a reseller of software
products, the company only passes through to its customers the applicable
vendors' warranties. The Company's operating results could be materially
adversely affected, however, if it were held liable for the failure of software
products resold by the Company to be year 2000 compliant despite its disclaimer
of software product warranties.
USE OF PROCEEDS
The shares covered by this prospectus are being offered by certain selling
security holders and not by our company. Consequently, we will not receive any
proceeds from the sale of these shares. However, we may receive the proceeds
from the exercise of certain stock options as described below.
The shares that may be sold under this prospectus consist of shares that
the selling security holders may acquire in the future pursuant to certain stock
options that we have granted to them. In order for a selling security holder to
acquire any such shares, the selling security holder will be required to pay to
us the exercise price specified in the relevant option. We intend to use any
proceeds that we receive from the exercise of such options for working capital
and our general corporate purposes.
SELLING STOCKHOLDERS
The selling security holders identified in this prospectus may sell, from
time to time, up to 1,344,951 shares of our common stock. These shares may be
sold over an extended period of time.
The selling security holders that may sell shares pursuant to this
prospectus are the current and former officers, directors and employees of our
company that are identified on the table attached as Annex I hereto. The table
shows the number of shares that each selling security holder may sell pursuant
to this prospectus. If a selling security holder transfers any of the shares
shown in the table, the transferee will be considered a selling security holder
for purposes of this prospectus, provided that (1) the transfer was a private
placement and (2) the transferee is identified in a supplement to this
prospectus. The table does not list certain selling security holders who are
non-affiliates of the Company and who hold less than 1,000 of the shares
issuable under the plans to which this prospectus relates. These unnamed persons
may also use this prospectus to sell their shares.
8
PLAN OF DISTRIBUTION
The selling security holders may sell shares:
o through the Nasdaq National Market System, in the over-the-counter
market, in privately negotiated transactions or otherwise;
o directly to purchasers or through agents, brokers, dealers or
underwriters; and
o at market prices prevailing at the time of sale, at prices related to
such prevailing market prices, or at negotiated prices.
If a selling security holder sells shares through agents, brokers, dealers
or underwriters, such agents, brokers, dealers or underwriters may receive
compensation in the form of discounts, commissions or concessions. Such
compensation may be greater than customary compensation.
To the extent required, we will use our best efforts to file one or more
supplements to this prospectus to describe any material information with respect
to the plan of distribution not previously disclosed in this prospectus or any
material change to such information.
Sales of the Shares offered hereby may be made on NASDAQ/NMS or the
over-the-counter market or otherwise at prices and on terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions.
LEGAL MATTERS
Certain legal matters relating to the shares of common stock that may be
offered pursuant to this prospectus will be passed upon for us by Golenbock,
Eiseman, Assor & Bell, 437 Madison Avenue, New York, New York 10022.
9
ANNEX I
Number of Shares Number of
of Common Stock Shares of Number of Shares of
Beneficially Common Common Stock Beneficially
Relationship with Owned Prior to Stock Owned After Completion of
Selling Stockholder the Company Offering(1) Offered(1) the Offering(2)
------------------- ----------------- -------------- ---------- -------------------------
Percentage
of Total
Shares
Number Outstanding
------ -----------
William H. Willett President, Chief 228,750 200,000 28,750 *
Executive Officer
and Director
Peter W. Lorenz Vice President - 321,594 50,000 271,594 5.3
European
Corporate
Reseller
Operations
John P. Broderick Chief Financial 101,500 68,500 33,000 *
Officer, Vice
President -
Finance and
Treasurer
Jeffrey Largiader Vice President - 91,050 42,300 48,750 1.0
Marketing
Kathleen Innacelli Vice President - 53,400 25,900 27,500 *
Advertising
F. Duffield Director 46,275 15,000 31,275 *
Meyercord
Edwin Morgens Director 164,921 15,000 149,921 3.0
Allan Weingarten Director 34,750 33,750 1,000 *
Roger Paradis Former President, 65,000 50,000 1,000 *
Chief Executive
Officer and
Director
Joseph V. Popolo Former Executive 116,350 30,100 86,250 1.7
Vice President
Thomas P. DeGarmo Former Vice 15,400 15,400 0 *
President
10
Number of Shares Number of
of Common Stock Shares of Number of Shares of
Beneficially Common Common Stock Beneficially
Relationship with Owned Prior to Stock Owned After Completion of
Selling Stockholder the Company Offering(1) Offered(1) the Offering(2)
------------------- ----------------- -------------- ---------- -------------------------
Percentage
of Total
Shares
Number Outstanding
------ -----------
Jane Altar Employee 4,000 1,750 2,250 *
Russell Betts Employee 1,500 1,500 0 *
Joan Carlson Employee 3,250 1,000 2,250 *
Mauro Ciacci Employee 3,250 2,000 1,250 *
William Cloherty Employee 1,500 1,500 0
John Funck Employee 3,000 1,750 1,250 *
Marcia Galvez Employee 2,000 2,000 0
Ronald Gutman Employee 7,500 7,500 0
Daniel Jamieson Employee 2,500 2,500 0
Nancy Cotter Employee 5,301 2,751 2,550 *
Thorston Kolbinger Employee 3,500 3,500 0
Steve McNamara Employee 5,000 5,000 0
David LeCat Employee 6,000 6,000 0
Vito Legrottaglie Employee 7,500 7,500 0
Peter Lindsey Managing 31,000 31,000 0
Director-
Systematika Ltd.
Colleen Minton Employee 2,500 2,500 0
Simon Ninjens Employee 5,000 5,000 0
Susan Orr Employee 3,500 3,500 0
Karen Ruane Employee 2,000 1,250 750 *
Jack Schwinn National Sales 20,640 11,000 9,640 *
Director
Peter Smith Employee 1,000 1,000 0
Allison Sorrento Employee 2,000 2,000 0
Douglas Stevens Employee 4,000 1,750 2,250 *
11
Number of Shares Number of
of Common Stock Shares of Number of Shares of
Beneficially Common Common Stock Beneficially
Relationship with Owned Prior to Stock Owned After Completion of
Selling Stockholder the Company Offering(1) Offered(1) the Offering(2)
------------------- ----------------- -------------- ---------- -------------------------
Percentage
of Total
Shares
Number Outstanding
------ -----------
Dagobert Von Employee 4,750 1,000 3,750 *
Schneyder
Edgar Von Schneyder Employee 1,000 1,000 0
Frans Van der Helm Vice President 20,000 20,000 0
and COO-Europe
Harry Van der Voort Employee 10,000 10,000 0
Ruud Van Noort Managing 30,000 30,000 0
Director-
Logicsoft B.V.
Lynda Wechkus Employee 1,500 1,500 0
----------
* Less than 1%.
(1) To the Company's knowledge, includes all shares of Common Stock
previously acquired by the Selling Stockholder under the Plans or
issuable to the Selling Stockholder upon exercise of outstanding
options granted under the Plans, including options which had not
vested as of, or would not vest within 60 days of, the date of this
Prospectus. Also includes shares that may be jointly owned with such
Selling Stockholders' spouse and other shares as to which the Selling
Stockholder disclaims beneficial ownership.
(2) Assumes that all options are exercised and all shares offered hereby
are sold, that no additional shares will be acquired and that no
shares other than those offered hereby will be sold. |
