AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON [May 27], 2003
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
[AMENDMENT NO. 1]
FORM S-[3/A]
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
----------
INTELLI-CHECK, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-3234779
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
246 CROSSWAYS PARK WEST FRANK MANDELBAUM,
WOODBURY, NEW YORK 11797 CHAIRMAN AND CHIEF EXECUTIVE OFFICER
(516) 992-1900 INTELLI-CHECK, INC.
246 CROSSWAYS PARK WEST
(Address, including zip code and telephone WOODBURY, NEW YORK 11797
number, including area code, of registrant's (516) 992-1900
principal executive offices) (Name address and telephone number,
including area code, of agent for service)
----------
Copies to:
DAVID H. LIEBERMAN, ESQ.
DIANE PHILLIPS, ESQ.
BECKMAN, LIEBERMAN & BARANDES, LLP
100 JERICHO QUADRANGLE
SUITE 225
JERICHO, NEW YORK 11753
(516) 822-4820
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box [ ].
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box [X].
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering [ ].
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box [ ].
CALCULATION OF REGISTRATION FEE
Proposed Proposed Maximum
Title of Each Class of Amount to be Maximum Offering Aggregate Offering Amount of
Securities to be Registered(1) Registered Price Per Security Price Registration Fee
Series A 8% Convertible Preferred
Stock, $.01 par value 30,000 $ (4) $ (2) $ -0-
Common stock, $.001par value,
underlying series A preferred stock (3) 454,545 $ 6.49(2) $2,949,997.00 (2) $ 238.95
Warrants 113,636 $ 6.49(5) $ 770,452.08 (5) $ 62.41
Common stock underlying Warrants (3) 113,636 $ (5) $ (5) $ -0-
Total $ 301.36
(1) The securities being registered hereby consist of the following securities
to be offered from time to time for resale by that certain selling
securityholder: Series A 8% Convertible Preferred Stock; Common Stock
underlying the Series A 8% Convertible Preferred Stock; Warrants; and
Common Stock underlying the Warrants. The securities may be sold by the
selling securityholder, affiliates of the selling securityholder, and other
transferees of the securities.
(2) Estimated solely for the purpose of calculating the registration fee based
upon the value of the Registrant's Common Stock into which the Series A 8%
Convertible Preferred Stock may be converted (presently 15.15 shares of
Common Stock per share of Series A 8% Convertible Preferred Stock for a
total of 454,545). There currently is no trading market for the Series A 8%
Convertible Preferred Stock. The Common Stock was valued pursuant to 457(c)
based upon the average of the high and low price of the Common Stock on the
American Stock Exchange on April 15, 2003 of $6.49.
(3) Includes an indeterminate number of shares of Common Stock as may be
issuable upon conversion of the Series A 8% Convertible Preferred Stock
and/or exercise of the Warrants registered hereunder pursuant to
antidilution provisions of such securities, for which no separate fee is
payable.
(4) As a registration fee is being paid on the underlying Common Stock, no
registration fee is payable on the Series A 8% Convertible Preferred Stock
pursuant to Rule 457(i).
(5) Pursuant to Rule 457(i), the registration fee for the Warrants and the
underlying common stock has been calculated based on Registrant's estimate
of the value of the Warrants, for which there currently is no trading
market, plus the exercise price.
--------------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
SUBJECT TO COMPLETION, DATED [May 27], 2003
The information contained in this prospectus is not complete and may be changed.
These securities may not be sold 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.
INTELLI-CHECK, INC.
SERIES A 8% CONVERTIBLE PREFERRED STOCK
WARRANTS
COMMON STOCK
This prospectus relates to the public resale, from time to time, of the
following securities, up to the amounts shown.
30,000 shares of Series A 8% Convertible Preferred Stock, par value
$.01 per share (the "Series A Preferred Stock").
Warrants to purchase 113,636 shares of common stock, par value $.01 per
share (the "Warrants").
568,181 shares of common stock, par value $.01 per share, (the "Common
Stock") issuable upon conversion of the Series A Preferred Stock and upon
exercise of the Warrants.
On March 27, 2003, we entered into a securities purchase agreement with
the selling securityholder. The agreement provided for the sale of 30,000 shares
of Series A Preferred Stock and the issuance of 113,636 Warrants. If the selling
securityholder converts all of its Series A Preferred Stock and exercises all of
the Warrants, we will issue up to a total of 568,181 shares of Common Stock,
subject to any adjustments.
Dividends on the Series A Preferred Stock are cumulative and payable
semi-annually beginning September 30, 2003 at the rate of $8 per share per
annum. Each share of Series A Preferred Stock is convertible at the option of
the holder, at any time, into 15.15 shares of our Common Stock, subject to
adjustment if certain events occur. We may redeem any or all of the Series A
Preferred Stock at any time after one year from the issuance date at a cash
redemption price of $100 per share, provided that the volume weighted average
price regular way of our common stock for any 20 out of 30 consecutive trading
days equals or exceeds 200% of the conversion price then in effect. We are
required to redeem all outstanding Series A Preferred Stock five years from the
issuance date. The Warrants permit the holders to purchase shares of Common
Stock at a price equal to $6.78 per share, subject to adjustment if certain
events occur.
1
These securities may be offered and sold by the entity listed on page
14 of this prospectus under the section entitled "Selling Securityholder", or by
its transferees. We refer to such persons as the selling securityholder.
We are registering the offered securities as required under the terms
of a registration rights agreement between the selling securityholder and us. We
will not receive any proceeds from any sales of the offered securities by the
selling securityholder, but will incur expenses in connection with the offering.
To the extent that any Warrants are exercised, we will receive an amount equal
to the number of shares of Common Stock purchased times the exercise price.
Neither our Series A Preferred Stock nor the Warrants are listed on any
securities exchange and there is no public market for these securities. The
Series A Preferred Stock have priority over our Common Stock in the payment of
dividends and in the event of liquidation. Holders of Series A Preferred Stock
are entitled to vote with the holders of our common stock as a single class on
all matters submitted to a vote of the Registrant on an "as converted" basis
subject to the applicable rules of the American Stock Exchange.
We will bear the expenses in connection with the offering, including
filing fees and our legal and accounting fees, estimated at $30,000.
Our common stock is quoted on the American Stock Exchange under the
symbol IDN. On [MAY] __, 2003, the last reported sales price of the common stock
on the American Stock Exchange was $.___.
INVESTING IN OUR COMMON STOCK, SERIES A PREFERRED STOCK AND
WARRANTS INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION 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.
The date of this prospectus is ________, 2003.
2
TABLE OF CONTENTS
RISK FACTORS.............................................................. 4
FORWARD-LOOKING STATEMENTS............................................... 10
USE OF PROCEEDS.......................................................... 11
PRICE RANGE OF COMMON STOCK.............................................. 11
DIVIDEND POLICY.......................................................... 12
ABOUT INTELLI-CHECK, INC................................................. 12
SELLING SECURITYHOLDER................................................... 14
PLAN OF DISTRIBUTION..................................................... 15
[DESCRIPTION OF SECURITIES............................................... 16]
LEGAL MATTERS.......................................................... [18]
EXPERTS................................................................ [19]
WHERE YOU CAN FIND MORE INFORMATION ABOUT US............................ [19]
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
3
As used in this prospectus, the terms "we," "us," "our," and "Intelli-Check"
mean Intelli-Check, Inc., unless we specify otherwise. We are incorporated under
the laws of the state of Delaware. Our executive offices are located at 246
Crossways Park West, Woodbury, New York 11797 and our telephone number is (516)
922-1900.
RISK FACTORS
You should carefully consider the factors described below and other
information contained in this prospectus before making a decision to buy any
securities registered hereunder. The risks and uncertainties described below are
not the only ones we face. Additional risks and uncertainties not presently
known to us, may also impair our business operations. If any of the following
risks actually occurs, our business, financial condition or results of
operations could be materially and adversely affected. In such case, the trading
price of our common stock could decline, and you may lose all or part of your
investment. This prospectus also contains forward-looking statements that
involve risks and uncertainties. Please refer to "Forward-Looking Statements" on
page 10.
FINANCIAL RISKS
WE HAVE INCURRED LOSSES SINCE INCEPTION AND LOSSES MAY CONTINUE, WHICH COULD
RESULT IN A DECLINE IN THE VALUE OF OUR SECURITIES AND A LOSS OF YOUR
INVESTMENT.
We sustained net losses of $5,550,234 for the fiscal year ended
December 31, 2002. We expect to incur additional expenditures in line with the
sales growth of our business. Consequently, if sales were to be below our sales
expectations, we would incur additional operating losses.
SHOULD WE BE UNABLE TO OBTAIN ADDITIONAL FINANCING IF NEEDED, WE WOULD BE
REQUIRED TO CURTAIL OUR MARKETING AND DEVELOPMENT PLANS AND POSSIBLY CEASE
OPERATIONS.
Our capital requirements have been and will continue to be significant.
We anticipate that our currently available cash including approximately
$2,800,000 we received from the net sale of our Series A Preferred Stock,
expected revenues and additional capital we expect to receive from the exercise
of in the money options will be sufficient to meet our anticipated working
capital and capital expenditure requirements of approximately $5,000,000, as
well as the potential payment of approximately $920,000 awarded to Early Bird
Capital through December 31, 2003. See "The finding against us in the Early Bird
lawsuit could have a material adverse effect on our ability to continue to fund
our operations". If we fail to attain significant sales or a positive cash flow,
or options are not exercised, we may be required to reduce certain costs or seek
additional equity or debt financing to fund the costs of our operations. We
cannot assure you that additional financing will be available to us when needed,
on commercially reasonable terms, or at all.
ISSUANCE OF EQUITY SECURITIES, SHOULD WE BE REQUIRED TO RAISE ADDITIONAL
CAPITAL, MAY BE ON TERMS THAT ARE DETRIMENTAL TO EXISTING SHAREHOLDERS.
Should we be required to raise additional working capital to meet our
capital requirements, we may continue to offer equity securities for sale, and
shareholders would then experience additional dilution. Any new equity
securities we issue may have rights, preferences or privileges senior to those
of existing holders of common stock. See "Future sales of a large number of
shares of our common stock may cause our stock price to decline."
4
THE FINDING AGAINST US IN THE EARLY BIRD LAWSUIT COULD FORCE US TO RAISE
ADDITIONAL CAPITAL WHICH MAY NOT BE AVAILABLE ON SATISFACTORY TERMS AND COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR ABILITY TO CONTINUE TO FUND OUR
OPERATIONS.
This lawsuit was brought as a demand for arbitration by Early Bird
Capital Inc. in January 2002, seeking monetary damages of $968,000 from an
alleged failure to issue warrants with registration rights pursuant to the terms
of a Financial Advisory and Investment Banking Agreement dated as of August 20,
2000. We had not issued the warrants because registration rights were not in the
agreement. The arbitration took place in December 2002 and January 2003.
$920,000 was awarded by the arbitrators to Early Bird Capital on April 10, 2003.
We are evaluating our options with respect to this award, however, payment of
the award would diminish the funds we have for working capital potentially
requiring us to raise additional capital, which may not be available on
satisfactory terms and could have a material adverse affect on our ability to
continue to fund our operations.
RISKS RELATED TO OUR BUSINESS
ANY DELAY IN THE SELECTION OF AND SECURING A SOURCE FOR THE NEW PLATFORM TO RUN
OUR PATENTED TECHNOLOGY BEFORE WE DEPLETE OUR INVENTORY COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR ABILITY TO FULFILL ORDERS FOR OUR PRODUCTS.
Hand Held Products Inc., formerly known as Welch Allyn, Inc. (HHP),
supplies us with our hardware terminals, which run our patented software. HHP
has informed us that as of July 9, 2003, they will discontinue manufacturing
this model. We are in discussions with HHP and other manufacturers as to which
platform we will select as the replacement for our current model. Any delay in
securing a new source on satisfactory terms or within the time frame to meet our
sales goals could have a material adverse effect on our sales and marketing
plans. Additionally, since we do not have direct control over the manufacturing
process, the possibility of delays and inconsistencies in quality could result
in the failure to fulfill sales orders and the cancellation of potential orders,
which could damage our reputation and cause us to lose sales orders.
TECHNOLOGICAL OBSOLESCENCE DUE TO CHANGES IN HARDWARE TECHNOLOGY BEFORE WE SELL
OUR EXISTING INVENTORY COULD CAUSE US TO TAKE AN ADJUSTMENT AGAINST INVENTORY,
WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.
Our inventory consists primarily of ID-Check terminals that run our
patented software. The inventory was originally received in December 1999.
Shortly thereafter, it was returned to the manufacturer for upgrade and became
available for sale in the fourth quarter of 2000. We periodically evaluate the
current market value of our inventory, taking into account any technological
obsolescence that may occur due to changes in hardware technology and the
acceptance of the product in the marketplace. We believe that a sufficient
market exists to sell with margin the current inventory as well as the remaining
units required to be purchased from our manufacturer for which we have paid a
deposit of $600,000 for which we took a reserve during the fourth quarter of
2002. The current terminal, for which this deposit was paid, is fully capable of
running our patented software since it utilizes a state-of-the art
imager/scanner and magnetic stripe reader. Since our policy is to periodically
evaluate the market value of the inventory, should we determine in a future
period that an adjustment is necessary, we would record such adjustment at that
time, which could have a material effect on our results of operations.
5
IF GOVERNMENTAL AGENCIES WERE TO STOP SHARING DATA WITH US, OUR BUSINESS WOULD
BE DAMAGED.
Currently, a number of states and Canadian provinces which conform to
the guidelines established by standardization bodies cooperate with us by
providing sample driver licenses and identification cards so that we may program
the ID-Check terminal to read and analyze the encoded information found on the
driver licences and identification cards. We cannot assure you that these
jurisdictions will continue to cooperate with us.
FUTURE GOVERNMENT REGULATION RESTRICTING ACCESS TO INFORMATION ELECTRONICALLY
STORED ON DRIVER LICENSES COULD ADVERSELY AFFECT OUR BUSINESS.
Our products can be used to capture information from driver licenses.
Currently, only a small number of our customers are legally restricted from
using this information for their own use without customer consent. Because
issues of personal privacy are currently a major topic of public policy debate,
it is possible that in the future additional customers may be restricted from
capturing this information. In that event, we could anticipate an adverse effect
on our business.
THE REFOCUSING OF OUR MARKETING EFFORTS HAS EXPOSED US TO LONG SALES AND
IMPLEMENTATION CYCLES FOR OUR PRODUCTS.
Since we have refocused our marketing efforts for Intelli-Check's
ID-Check technology from the age verification market to the document
verification and access control markets which consist of large
retailers and government agencies, we have exposed ourselves to longer sales and
implementation cycles for our products. The sales cycle for these prospective
customers is lengthy requiring multiple meetings, presentations and a test
period, which continues to impact our sales. In addition, budgetary constraints
and the slowing of the economy may also continue to delay purchasing decisions
by prospective customers. As a result, the time between initial contact with a
potential customer and conclusion of a sale of these products typically
comprises a period of months and is subject to delays, many of which are beyond
our control. We cannot assure you that the refocusing of our marketing efforts
will produce sales that will be substantial enough to have a material impact on
our revenues or results of operations.
FAILURE TO MANAGE OUR OPERATIONS IF THEY EXPAND COULD IMPAIR OUR FUTURE GROWTH.
If we are able to expand our operations, particularly through multiple
sales to large retailers and government agencies, the expansion will place
significant strain on our management, financial controls, operating systems,
personnel and other resources. Our ability to manage future growth, should it
occur, will depend to a large extent upon several factors, including our ability
to do the following:
o build and train our sales force;
o establish and maintain relationships with distributors;
o develop customer support systems;
o develop expanded internal management and financial controls adequate
to keep pace with growth in personnel and sales, if they occur; and
o manage the use of third-party manufacturers and suppliers.
6
If we are able to grow our business but do not manage our growth
successfully, we may experience increased operating expenses, loss of customers,
distributors or suppliers and declining or slowed growth of revenues.
OUR ABILITY TO COMPETE MAY BE DAMAGED AND OUR REVENUES MAY BE REDUCED IF WE ARE
UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS ADEQUATELY.
Our success depends upon maintaining the confidentiality and
proprietary nature of our software and other intellectual property rights. To
protect these rights, we rely principally on a combination of:
o contractual arrangements providing for non-disclosure and
prohibitions on use;
o patents and pending patent applications;
o trade secret, copyright and trademark laws; and
o certain technical measures.
Patent, trade secret, copyright and trademark laws provide limited
protection. Because patent applications in the United States are not publicly
disclosed until the relevant patent is issued, applications may have been filed,
which, if issued as patents, could relate to our services and products as
currently designed or as we may modify them in the future to meet the market's
requirements. Trade secret, copyright and trademark laws, in combination with
the steps we take to protect our proprietary rights, may not adequately prevent
misappropriation of those rights. We may be required to bring proceedings in the
United States Patent and Trademark office or other legal action to enforce our
patents, trademarks or copyrights. We may find it necessary to litigate to
protect our trade secrets and know-how. Any legal actions would be costly,
timing consuming, and would divert the attention of management and technical
personnel.
The protections provided by laws protecting intellectual property
rights do not prevent our competitors from developing, independently, products
similar or superior to our products and technologies. In addition, effective
protection of copyrights, trade secrets, trademarks, and other proprietary
rights may be unavailable or limited in certain foreign countries.
Our inability or failure to protect our proprietary technology could
damage our ability to compete, reduce our revenues and damage our prospects for
achieving growth and profitability.
IF OUR FUTURE PRODUCTS INCORPORATE TECHNOLOGY THAT INFRINGES THE PROPRIETARY
RIGHTS OF THIRD PARTIES AND WE DO NOT SECURE LICENSES FROM THEM, WE COULD BE
LIABLE FOR SUBSTANTIAL DAMAGES THAT WOULD CAUSE A MATERIAL REDUCTION IN REVENUES
AND IMPAIR OUR PROSPECTS FOR ACHIEVING GROWTH AND PROFITABILITY.
We are not aware of our current products infringing on the proprietary
rights of third parties. However, in furtherance of the development of our
services or products, we may need to acquire licenses
7
for intellectual property to avoid infringement of third party rights or claims
of infringement. These licenses may not be available on commercially reasonable
terms, if at all. Claims for infringement if made, could damage our business
prospects, our results of operations and financial condition, whether or not the
claims have merit, by:
o consuming substantial time and financial resources required to
defend against them;
o diverting the attention of management from growing our
business and managing operations;
o resulting in costly litigation; and
o disrupting product sales and shipments.
If any third party prevails in an action against us for infringement of
its proprietary rights, we could be required to pay damages and either enter
into costly licensing arrangements or redesign our products so as to exclude the
infringing technology. As a result, we would incur substantial costs, delays in
product development, sales and shipments, our revenues may decline substantially
and we may not be able to achieve the growth required for us to achieve
profitability.
FAILURE TO ATTRACT AND RETAIN MANAGEMENT AND OTHER PERSONNEL MAY DAMAGE OUR
OPERATIONS AND FINANCIAL RESULTS AND CAUSE OUR STOCK PRICE TO DECLINE.
We depend to a significant degree on the skills, experience and efforts
of our executive officers and other key management, technical, finance, sales
and other personnel. Our failure to attract, integrate, motivate and retain
existing or additional personnel could disrupt or otherwise harm our operations
and financial results. Although we have employment agreements with each of Frank
Mandelbaum, our Chairman and Chief Executive Officer, Edwin Winiarz, our Senior
Vice President - Treasurer and Chief Financial Officer and W. Robert Holloway,
our Senior Executive Vice President - Sales, securing their employment for
varying terms, we do not carry key man life insurance policies covering any
employees. The loss of services of certain of our key employees, an inability to
attract or retain qualified personnel in the future, or delays in hiring
additional personnel could delay the development of our business and have a
negative impact on our operating results and financial condition.
8
RISKS RELATED TO THE OFFERING
CONTINUED VOLATILITY IN OUR STOCK PRICE COULD ADVERSELY AFFECT YOUR INVESTMENT.
The market price of our common stock, like the price of shares of
technology companies generally, has been and may continue to be volatile. From
January 1, 2002 to March 31, 2003, the closing bid price of our common stock has
varied from a high of $19.45 to a low of $2.10 per share, as reported on the
American Stock Exchange. If our future operating results are below the
expectations of stock market analysts and investors, our stock price may
decline. Public announcement of our financial results and business developments
may have a significant impact on the market price of our common stock. For
example, each of the following could have the effect of temporarily or
permanently driving down the market price of our common stock:
o shortfalls in revenues or cash flows from operations;
o conversions of preferred stock into common stock;
o delays in development or roll-out of any of our product; and
o announcements by one or more competitors of new product
introductions, acquisitions or technological innovations.
In addition, the stock market experiences extreme fluctuations in price and
volume that particularly affect the market prices of shares of emerging
technology companies, such as ours. These price and volume fluctuations are
often unrelated or disproportionate to the operating performance of the affected
companies. Because of this volatility, we may fail to meet the expectations of
our shareholders or of securities analysts, and our stock price could decline as
a result. Declines in our stock price for any reason, as well as broad-based
market fluctuations or fluctuations related to our financial results or other
developments, may adversely affect your ability to sell your shares at a price
equal to or above the price at which you purchased them. Decreases in the price
of our common stock may also lead to de-listing of our common stock.
FUTURE SALES OF A LARGE NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE OUR STOCK
PRICE TO DECLINE.
At March 31, 2003, 8,875,302 shares of our common stock were issued and
outstanding. Assuming conversion of all of the shares of Series A Preferred
Stock and exercise of all the Warrants there would be 9,443,483 shares issued
and outstanding as of the effective date of this prospectus. Of these shares,
7,522,702 shares are presently eligible for resale without restriction, and
568,181 shares being registered for resale under this prospectus will be
transferable without restriction under the Securities Act of 1933 after the
effective date of this prospectus. Another 1,352,600 shares are eligible for
resale subject to the restrictions on volume, manner of sale and other
conditions of Rule 144 promulgated under the Securities Act. Sales of large
amounts of these shares in the public market could depress the market price of
our common stock and impair our ability to raise capital through offerings of
our equity securities. Resale of shares of common stock that may be received by
holders of outstanding warrants or convertible preferred stock may also dilute
substantially the net tangible book value of shares of common stock, which would
further impair its liquidity.
9
WE WILL NOT RECEIVE ANY PROCEEDS OF THE OFFERING OF SECURITIES COVERED BY THIS
PROSPECTUS FROM WHICH TO RECOUP THE EXPENSES WE INCURRED.
Intelli-Check will not receive any proceeds from the offering of
securities covered by this prospectus. We have incurred expenses of
approximately $30,000.00 in connection with the offering, including expenses of
preparation of this prospectus and the related registration statement and fees
payable to the SEC, which we cannot recoup from offering proceeds. See "Use of
Proceeds."
THERE IS NO MARKET FOR OUR SERIES A PREFERRED STOCK OR THE WARRANTS AND HOLDERS
OF THESE SECURITIES MAY HAVE DIFFICULTY SELLING THEM IN THE FUTURE.
There has been no market for either our Series A Preferred Stock or the
Warrants and we cannot assure you that a market will develop and that if such a
market develops, there will be sufficient liquidity to permit purchases of these
securities in this offering to sell them in the future at or near the offering
price.
THE ABSENCE OF ARTHUR ANDERSEN'S CONSENT TO THE USE OF ITS OPINION MAY LIMIT THE
REMEDIES AVAILABLE TO PURCHASERS OF SECURITIES PURSUANT TO THIS PROSPECTUS.
Our inability to obtain Arthur Andersen's consent to the use of its
opinion for our financial statements for the 2001 year and the absence of a
signed opinion may limit the remedies available to you since your claims against
Arthur Andersen LLP under the Securities Act of 1933, as amended, (the
"Securities Act") based on these financial statements may be limited. Moreover,
even if claims against Arthur Andersen LLP are permitted, Arthur Andersen LLP
may not have the financial resources to satisfy any judgment. In addition,
notwithstanding that we have not filed the written consent of Arthur Andersen,
LLP, our directors and officers may still be able to establish a due diligence
defense to any claim relating to those financial statements on the basis that
they were made on the authority of our expert which could limit your ability to
asset a claim against them.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents we have filed with the Securities and
Exchange Commission (SEC) which we have referenced under "Where You Can Find
More Information About Us" on page 10 contains forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements represent our judgment regarding
future events. Although we would not make forward-looking statements unless we
believe we have a reasonable basis for doing so, we cannot guarantee their
accuracy and actual results may differ materially from those we anticipated due
to a number of uncertainties, many of which we are not aware. We urge you to
consider the risks and uncertainties discussed under "Risk Factors" and
elsewhere in this prospectus and in the other documents filed with the SEC in
evaluating our forward-looking statements. We have no plans to update our
forward-looking statements to reflect events or circumstances after the date of
this prospectus. We generally identify forward-looking statements with the words
"believe", "intend," "plan," "expect," "anticipate," "estimate," "will,"
"should" and similar expressions.
10
USE OF PROCEEDS
We will not receive any of the proceeds of this offering. To the extent
that the Warrants are exercised, we will receive an amount equal to the number
of shares of common stock purchased times the exercise price. We cannot predict
when or how much we will receive from the exercise, if any, of the Warrants.
PRICE RANGE OF COMMON STOCK
Our common stock has been traded on the American Stock Exchange under
the symbol "IDN." since November 1999. The following table sets forth, for the
calendar periods indicated, the high and low closing sales prices of our common
stock as reported by the American Stock Exchange.
2001 LOW HIGH
------------- ----- -------
First Quarter $ 3.70 $11.625
Second Quarter $ 4.50 $10.60
Third Quarter $ 7.40 $14.75
Fourth Quarter $10.20 $19.45
2002
--------------
First Quarter $11.30 $18.19
Second Quarter $ 4.85 $15.75
Third Quarter $ 2.10 $ 5.90
Fourth Quarter $ 2.90 $ 9.87
2003
-------------
January $ 6.35 $ 8.44
February $ 5.80 $ 7.66
March $ 6.01 $ 7.70
[APRIL $ 6.15 $ 8.12]
As of [MAY 15], 2003, there were approximately 67 holders of record of the
Common Stock which does not include individual participants in security
position listings. On [MAY] ___, 2003, the closing sales price of our common
stock was $______ per share.
There is no market for the Series A Preferred Stock or the Warrants.
11
DIVIDEND POLICY
We have never declared or paid any cash dividends on our Common Stock
and do not presently intend to do so. Future dividend policy will be determined
by our Board of Directors on the basis of our earnings, capital requirements,
financial condition and other factors deemed relevant.
Dividends on the Series A Preferred Stock are cumulative and payable
semi-annually beginning September 30, 2003 at the rate of $8.00 per share per
annum.
ABOUT INTELLI-CHECK, INC.
OVERVIEW
Our company was formed to develop, manufacture and market an advanced
document verification system to enable a user to detect altered, tampered or
fake IDs to:
(i) reduce check cashing, credit card and other types of fraud such as
identity theft, the fastest growing crime in America, which principally
utilizes fake driver licenses as proof of identity;
(ii) increase security and deter terrorism at airports, shipping
ports, rail and bus terminals, military installations, high profile
buildings and other sites where security is a concern; and
(iii) determine the customer's age and validity of th ID to detect and
prevent the use of fraudulent identification for the purchase of alcohol,
tobacco and other age-restricted products and to reduce the risk to the
retailer of substantial monetary fines, criminal penalties and license
revocation for the sale of age-restricted products to minors.
Our advanced document verification software, which we have licensed to
third parties and is contained in our ID-Check unit (terminal) reads in one
swipe or scan the encoded data contained on U.S. and Canadian driver licenses,
state issued identification cards and military IDs that comply with the
standards of the American Association of Motor Vehicle Administrators (AAMVA),
the American National Standards Institute (ANSI) and the International Standards
Organization (ISO).
Our terminal or licensed software helps merchants prevent economic loss
resulting from identity theft. The availability of high-tech fake ID's exposes
retailers to many forms of fraud utilizing fake ID's, which our unit has the
capability of helping to detect.
The terminal or the licensed software are effective tools to enhance
security and deter terrorism at airports and other sites where security is
increasing. The terminals have been installed in over a dozen major airports to
verify the identity of employees and prevent access to secure areas. One major
airport recently reordered terminals. Since the tragic events of September 11,
2001, there has been increased interest in our technology to control access and
to help deter the threat of terrorism.
Additionally, in an effort to combat the problems of underage drinking
and smoking, the federal government and many states and Canadian provinces have
enacted laws requiring businesses that sell age-restricted products to verify
the ID of potential customers to determine that they are of legal age to
purchase these products. These laws impose stringent penalties for violations.
In addition, many states and local governments have set up undercover "sting"
operations to detect violations.
12
The product we have designed and developed, the IDC-1400 is based on
our patented ID-Check (TM) technology. ID-Check provides businesses with a
reliable, simple and cost-effective way to reduce economic loss supported by
fake or altered driver licenses and to verify age and reduce the risk of severe
penalties for non-compliance with laws pertaining to age restricted products.
Effective July 9, 2003, our manufacturer will discontinue manufacturing the
IDC-1400 terminal and has introduced a new model to replace the existing
IDC-1400. We are in discussions with our manufacturer as well as other
manufacturers to select a new platform to run our patented software.
On December 18, 2001, we acquired substantially all the assets of The
IDentiScan Company, LLC, a provider of age verification terminals. The
IDentiScan products are targeted to the age verification market and they have
broadened our product line to better penetrate that market. IDentiScan has been
selected to be the exclusive provider of age verification terminals to Sunoco,
Inc.
Our new product, IDN-DLL, is a software application designed to
supplement our existing products by replicating the features of ID-Check using a
customer's existing hardware (or with minimal additional hardware components)
included in Point-Of-Sale (POS) terminals for multi-lane retailers such as
grocery and mass-retail stores. Currently, we have five (5) license agreements
executed with third parties for integration and sub-licensing of this
application.
We believe the ID-Check solution is the most advanced, reliable and
effective technology, which provides users with an easy, reliable, and
cost-effective method of document and age verification. We have received
encoding formats from most jurisdictions that conform to AAMVA standards. This
information, combined with our patented technology, enables the ID-Check
software to read, decode and process the information electronically stored on
driver licenses. As jurisdictions and AAMVA change their documents and
guidelines, we believe our software, together with our programmable terminal,
can be adapted to these changes.
ID-Check terminals do not require a connection to a central database to
operate thus negating privacy concerns. Our terminals have the ability to
operate add-on peripherals such as printers, bar code scanners, fingerprint
readers and other devices. Additionally, our terminals can communicate with
personal computers, which could enhance the functionality of the terminals and
potentially create the opportunity for sales of other software products by us.
The ID-Check process is quick, simple and easy to use. After matching
the (driver license) photograph to the person presenting the document for
identification, the user simply swipes the driver license through the ID-Check
terminal if the card has a magnetic stripe or scans it if it has a bar code. The
terminal quickly determines if the document:
(i) is valid;
(ii) has been altered or tampered with;
(iii) has expired; and
(iv) has a date of birth equal to or greater than th legal age to
purchase age restricted products, such as alcohol and tobacco, in
the retailer's location.
13
Then, the terminal will automatically:
(i) respond to the user by displaying the results i words on the
terminal's screen;
(ii) save information that is permissible by law to the terminal's own
memory;
(iii) print a record of the transaction including the results on a
roll of paper similar to that used in cash registers, if an
optional printer has been installed; and
(iv) send the results to a personal computer ("PC") which has
Microsoft Windows 95/98/ME/NT/2000/XP for permanent storage when
used in conjunction with our Q-Link or C-Link software, which
simplifies record keeping by downloading comprehensive ID-Check
due diligence data into a PC. This provides a merchant with
secure back-up files that include individual and cumulative
transaction records, where permitted by law.
Our initial marketing focus was targeted towards retailers of
age-restricted products such as alcohol and tobacco. Because of our technology's
enhanced ability to verify the validity of military ID's, driver licenses and
state issued ID cards, containing either magnetic stripes or bar codes that
conform to AAMVA/ANSI/ISO standards, we have refocused our marketing efforts to
address the markets being affected by the cost to industry of "Identity Theft"
and the need for enhanced security. As a result of our ID-Check product having
the ability to verify the encoded formats of the documents described above, we
have already sold our ID-Check unit to some of the largest companies in the
gaming industry, a state Port Authority, military establishments, airports,
nuclear power plants, high profile buildings and have completed successful tests
of our technology in one of the largest mass merchandisers in the United States
and a large quasi-government department. We are currently in the test phase with
some major public companies. In addition, we have recently signed agreements
with some high profile organizations which will promote our technology, such as
Northrup Grumman, Mothers Against Drunk Driving (MADD) and the American
Association of Airport Executives (AAAE).
SELLING SECURITYHOLDER
The selling securityholder may resell the offered securities from time
to time as provided under the section entitled "Plan of Distribution" in this
prospectus or as described in a prospectus supplement. We are registering the
offered securities as required under the terms of a registration rights
agreement between us and the selling securityholder dated as of March 27, 2003.
We have agreed, among other things, to bear certain expenses in connection with
the registration and sale of the securities being offered by the selling
securityholder. See "Plan of Distribution".
The following table sets forth the ownership of the selling
securityholder, the number of shares of Series A Preferred Stock, Common Stock
and Warrants beneficially owned by the selling securityholder, and the number of
shares which may be offered for resale pursuant to this prospectus. The selling
securityholder has not had any position, office or other material relationship
with us or our predecessors or affiliates within the past three years. The
information included below is based upon information provided by the selling
securityholder. Because the selling securityholder may offer all, some or none
of its shares, the "After Offering" column of the table assumes the sale of all
of its securities; however, we do not know that this will actually occur.
The selling securityholder has obtained the shares of Series A
Preferred Stock and Common Stock underlying the Series A Preferred Stock, the
Warrants and the Common
14
Stock underlying the Warrants covered in this prospectus through private
transactions. Gryphon Master Fund, L.P. is an accredited investor which acquired
30,000 shares of our Series A Preferred Stock and Warrants to purchase 113,636
shares of our Common Stock pursuant to a private placement by us solely to
Gryphon Master Fund, L.P. in March 2003 for an aggregate purchase price of $3
million. The Series A Preferred Stock is convertible into 454,545 shares of our
common stock subject to adjustment if certain events occur. The issuance of the
Series A Preferred Stock and the Warrants in the March 2003 private placement is
deemed to be exempt from the registration requirements of the Securities Act,
pursuant to Section 4(2) thereof, and was made, in each case, without general
solicitation or advertising. We agreed to register for resale the securities
being offered by this prospectus under the terms of the registration rights
agreement executed in connection with these transactions.
Gryphon Master Fund, L.P. [IS NOT A REGISTERED BROKER-DEALER, IS NOT AN
AFFILIATE OF A REGISTERED BROKER-DEALER AND] is the only selling securityholder
[WITH] sole voting and investment power over all of the securities set forth
below:
SECURITY NUMBER OF SECURITIES OWNED
-------- -------------------------------------------------
BEFORE OFFERING AFTER OFFERING
---------------- -----------------
Series A 8% Convertible Preferred Stock 30,000 -0-
Common Stock underlying Series A
8% Convertible Preferred Stock 454,545 -0-
Warrants 113,636 -0-
Common Stock underlying Warrants 113,636 -0-
[THE NATURAL PERSONS WHO HAVE VOTING AND INVESTMENT CONTROL OVER THE SECURITIES
BEING SOLD BY GRYPHON MASTER FUND L.P. ARE E.B. LYON III AND E.B. LYON IV.]
PLAN OF DISTRIBUTION
Our shares of common stock are traded on the American Stock Exchange
under the symbol IDN. We are registering the Warrants and the shares of Series A
Preferred Stock and the Common Stock on behalf of the selling securityholder.
The Warrants and the shares of Series A Preferred Stock and the Common Stock may
be sold in one or more transactions at fixed prices, at prevailing market prices
at the time of sale, at prices related to the prevailing market prices, at
varying prices determined at the time of sale, or at negotiated prices. These
sales may be effected at various times in one or more of the following
transactions, or in other kinds of transactions:
o transactions on the American Stock Exchange or on any national
securities exchange or U.S. inter-dealer system of a
registered national securities association on which the
Warrants and the Series A Preferred Stock and the Common Stock
may be listed or quoted at the time of sale; in the
o over-the-counter market;
o in private transactions and transactions otherwise than on
these exchanges or systems or in the over-the-counter market;
o in connection with short sales of the shares;
15
o by pledge to secure or in payment of debt and other
obligations;
o through the writing of options, whethe the options are listed
on an options exchange or otherwise;
o in connection with the writing of non-traded and
exchange-traded call options, in hedge transactions and in
settlement of other transactions in standardized or
over-the-counter options; or
o through a combination of any of the above transactions.
The selling securityholder and its successors, including its
transferees, pledgees or donees or their successors, may sell the Warrants,
Series A Preferred Stock and the Common Stock directly to purchasers or through
underwriters, broker-dealers or agents, who may receive compensation in the form
of discounts, concessions or commissions from the selling securityholder or the
purchasers. These discounts, concessions or commissions as to any particular
underwriter, broker-dealer or agent may be in excess of those customary in the
types of transactions involved.
In addition, any securities covered by this prospectus which qualify
for sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144
rather than pursuant to this prospectus.
We entered into a registration rights agreement for the benefit of the
selling securityholder to register the Warrants and our Series A Preferred Stock
and the Common Stock under applicable federal and state securities laws. The
registration rights agreement provides for cross-indemnification of the selling
securityholder and us and our respective directors, officers and controlling
persons against specific liabilities in connection with the offer and sale of
the Warrants, Series A Preferred Stock and the Common Stock, including
liabilities under the Securities Act. We will pay substantially all of the
expenses incurred by the selling securityholder incident to the offering and
sale of the Warrants, Series A Preferred Stock and the Common Stock.
[WE HAVE ADVISED THE SELLING SECURITYHOLDER THAT DURING THE TIME IT MAY
BE ENGAGED IN A DISTRIBUTION OF THE SECURITIES OFFERED BY THIS PROSPECTUS, IT IS
REQUIRED TO COMPLY WITH REGULATION M PROMULGATED UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). WITH CERTAIN EXCEPTIONS,
REGULATION M PRECLUDES ANY SELLING SECURITYHOLDER, ANY AFFILIATED PURCHASERS AND
ANY BROKER-DEALER OR OTHER PERSON WHO PARTICIPATES IN THE DISTRIBUTION FROM
BIDDING FOR OR PURCHASING, OR ATTEMPTING TO INDUCE ANY PERSON TO BID FOR OR
PURCHASE, ANY SECURITY WHICH IS THE SUBJECT OF THE DISTRIBUTION UNTIL THE ENTIRE
DISTRIBUTION IS COMPLETE. REGULATION M ALSO PROHIBITS ANY BIDS OR PURCHASES MADE
IN ORDER TO STABILIZE THE PRICE OF A SECURITY IN CONNECTION WITH AN AT THE
MARKET OFFERING SUCH AS THIS OFFERING. ALL OF THE FOREGOING MAY AFFECT THE
MARKETABILITY OF THE SECURITIES.
DESCRIPTION OF OUR SECURITIES
CAPITAL STOCK
OUR AUTHORIZED CAPITAL STOCK CONSISTS OF 20,000,000 SHARES OF COMMON
STOCK, PAR VALUE $.001 PER SHARE AND 1,000,000 SHARES OF PREFERRED STOCK, PAR
VALUE $.01 PER SHARE.
16
COMMON STOCK
GENERAL. WE HAVE 20,000,000 AUTHORIZED SHARES OF COMMON STOCK. ALL OF
OUR SHARES OF COMMON STOCK OUTSTANDING WILL BE VALIDLY ISSUED, FULLY PAID AND
NON-ASSESSABLE.
VOTING RIGHTS. EACH SHARE OF COMMON STOCK ENTITLES ITS HOLDER TO ONE
VOTE, EITHER IN PERSON OR BY PROXY, AT MEETINGS OF STOCKHOLDERS. OUR BOARD OF
DIRECTORS CONSISTS OF THREE CLASSES EACH OF WHICH SERVES FOR A TERM OF THREE
YEARS. AT EACH ANNUAL MEETING OF THE STOCKHOLDERS, THE DIRECTORS IN ONLY ONE
CLASS WILL BE ELECTED. THE HOLDERS ARE NOT PERMITTED TO VOTE THEIR SHARES
CUMULATIVELY. ACCORDINGLY, THE HOLDERS OF MORE THAN FIFTY PERCENT (50%) OF THE
ISSUED AND OUTSTANDING SHARES OF COMMON STOCK CAN ELECT ALL OF OUR DIRECTORS.
DIVIDEND POLICY. ALL SHARES OF COMMON STOCK ARE ENTITLED TO PARTICIPATE
RATABLY IN DIVIDENDS WHEN AND AS DECLARED BY OUR BOARD OF DIRECTORS OUT OF THE
FUNDS LEGALLY AVAILABLE FOR PAYMENT OF DIVIDENDS. ANY DIVIDENDS MAY BE PAID IN
CASH, PROPERTY OR ADDITIONAL SHARES OF COMMON STOCK. WE PRESENTLY EXPECT THAT
ANY EARNINGS WILL BE USED TO DEVELOP OUR BUSINESS AND THAT NO CASH DIVIDENDS ON
THE SHARES OF COMMON STOCK WILL BE DECLARED IN THE FORESEEABLE FUTURE. PAYMENT
OF FUTURE CASH DIVIDENDS WILL BE SUBJECT TO THE DISCRETION OF OUR BOARD OF
DIRECTORS, THEREFORE, CASH DIVIDENDS ON OUR COMMON STOCK MAY NOT BE PAID IN THE
FUTURE.
MISCELLANEOUS RIGHTS AND PROVISIONS. HOLDERS OF COMMON STOCK DO NOT HAVE:
o PREEMPTIVE OR OTHER SUBSCRIPTION RIGHTS;
o CONVERSION RIGHTS;
o REDEMPTION; OR
o SINKING FUND PROVISIONS.
IN THE EVENT OF OUR LIQUIDATION OR DISSOLUTION, WHETHER VOLUNTARY OR
INVOLUNTARY, EACH SHARE OF COMMON STOCK IS ENTITLED TO SHARE RATABLY IN ANY
ASSETS AVAILABLE FOR DISTRIBUTION TO OUR HOLDERS OF COMMON STOCK AFTER
SATISFACTION OF ALL LIABILITIES, INCLUDING PAYMENTS TO HOLDERS OF OUR PREFERRED
STOCK.
PREFERRED STOCK
OF THE 1,000,000 SHARES OF PREFERRED STOCK, 30,000 SHARES ARE
DESIGNATED AS SERIES A 8% CONVERTIBLE PREFERRED STOCK, PAR VALUE $.01 PER SHARE.
SERIES A 8% CONVERTIBLE PREFERRED STOCK
(I) FACE AMOUNT: THE FACE AMOUNT PER SHARE OF THE SERIES A PREFERRED
STOCK IS $100.00.
(II) DIVIDENDS: DIVIDENDS ON THE SERIES A 8% CONVERTIBLE PREFERRED
STOCK ARE PAYABLE IN CASH SEMI-ANNUALLY BEGINNING ON SEPTEMBER 30, 2003 UNTIL
CONVERTED OR REDEEMED AT THE RATE OF $8.00 PER SHARE PER YEAR. DIVIDENDS ON THE
SERIES A PREFERRED STOCK WILL BE PAID IN PREFERENCE TO ANY DIVIDENDS PAID TO THE
HOLDERS OF OUR COMMON STOCK OR ANY OTHER SERIES OF OUR PREFERRED STOCK MADE
JUNIOR TO THE SERIES A PREFERRED
17
STOCK OF ANY AMOUNTS PAID SUCH HOLDERS ON THE REDEMPTION, REPURCHASE OR
RETIREMENT OF ANY SUCH OTHER STOCK.
(III) LIQUIDATION: (A) UPON ANY LIQUIDATION, DISSOLUTION OR WINDING UP
OF THE COMPANY, WHETHER VOLUNTARY OR INVOLUNTARY, THE HOLDERS OF THE SHARES OF
SERIES A CONVERTIBLE PREFERRED STOCK SHALL BE ENTITLED, BEFORE ANY DISTRIBUTIONS
SHALL BE MADE TO THE HOLDERS OF THE COMMON STOCK, OR ANY OTHER CLASS OF OUR
CAPITAL STOCK RANKING JUNIOR TO THE SERIES A CONVERTIBLE PREFERRED STOCK, TO BE
PAID AN AMOUNT (THE "SERIES A LIQUIDATION AMOUNT") EQUAL TO $100 PER SHARE PLUS
THE AMOUNT OF ANY ACCRUED AND UNPAID DIVIDENDS TO THE PAYMENT DATE. WRITTEN
NOTICE OF SUCH LIQUIDATION, DISSOLUTION OR WINDING UP, STATING A PAYMENT DATE,
THE SERIES A LIQUIDATION AMOUNT AND THE PLACE WHERE SAID SUMS SHALL BE PAYABLE
SHALL BE GIVEN BY MAIL, POSTAGE PREPAID, NOT LESS THAN 30 DAYS PRIOR TO THE
PAYMENT DATE STATED THEREIN, TO THE HOLDERS OF RECORD OF THE SERIES A
CONVERTIBLE PREFERRED STOCK, SUCH NOTICE TO BE ADDRESSED TO EACH SHAREHOLDER AT
HIS POST OFFICE ADDRESS AS SHOWN BY OUR RECORDS.
(IV) CONVERSION RIGHTS: EACH SHARE OF THE SERIES A PREFERRED STOCK WILL
BE CONVERTIBLE AT THE TIME OF THE HOLDERS' OPTION INTO SHARES OF OUR COMMON
STOCK AT A CONVERSION PRICE OF $6.60 PER SHARE, SUBJECT TO ANTI-DILUTION
ADJUSTMENTS.
(V) VOTING RIGHTS: HOLDERS OF SERIES A PREFERRED STOCK WILL HAVE VOTING
RIGHTS ON AN AS IF CONVERTED BASIS AND WILL VOTE AS A SINGLE CLASS WITH HOLDERS
OF OUR COMMON STOCK WITH EACH SHARE OF PREFERRED STOCK HAVING 15.15 VOTES PER
SHARE. FRACTIONAL VOTES WILL NOT BE PERMITTED. ANY FRACTIONAL VOTING RIGHTS
RESULTING AFTER AGGREGATING ALL SHARES SHALL BE ROUNDED TO THE NEAREST WHOLE
NUMBER (WITH ONE-HALF BEING ROUNDED UPWARD).
(VI) SALE OF SHARES AT PRICES BELOW THE INITIAL CONVERSION PRICE: IF AT
ANY TIME OR FROM TIME TO TIME, SUBSEQUENT TO THE ISSUANCE DATE WE ISSUE OR SELL,
OR ARE DEEMED TO HAVE ISSUED OR SOLD SHARES OF OUR CAPITAL STOCK FOR
CONSIDERATION OF A PRICE OF LESS THAN $6.60 PER SHARE, THE CONVERSION PRICE
SHALL BE ADJUSTED.
FOR PURPOSES OF THIS PARAGRAPH, SALES OR ISSUANCES OF OUR CAPITAL STOCK
SHALL NOT INCLUDE ANY COMMON STOCK ISSUED OR TO BE ISSUED (I) PURSUANT TO THE
EXERCISE OF ANY STOCK OPTIONS OR WARRANTS OUTSTANDING AS OF MARCH 27, 2003 OR
OPTIONS OR WARRANTS ISSUED AFTER THE DATE HEREOF HAVING AN EXERCISE PRICE EQUAL
TO OR GREATER THAN OUR CURRENT MARKET PRICE, AS DEFINED, OR (II) PURSUANT TO ANY
COMPENSATION OR INCENTIVE PLAN FOR OFFICERS, DIRECTORS, EMPLOYEES OR CONSULTANTS
OF OUR COMPANY WHICH HAS BEEN APPROVED BY OUR COMPENSATION COMMITTEE.
(VII) REDEMPTION: WE ARE REQUIRED TO REDEEM ALL SERIES A PREFERRED
STOCK OUTSTANDING ON MARCH 27, 2008 AND WE HAVE THE OPTION TO REDEEM ALL OR ANY
PORTION THEREOF AFTER MARCH 27, 2004 IF THE VOLUME WEIGHTED AVERAGE PRICE
REGULAR WAY PER SHARE OF OUR COMMON STOCK IS AT LEAST
200% OF THE THEN CURRENT CONVERSION PRICE FOR ANY 20 OUT OF 30 CONSECUTIVE
TRADING DAYS AFTER MARCH 27, 2004 AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION CAN BE SOLD WITHOUT RESTRICTION ON RESALE UNDER U.S. SECURITIES LAWS.
THE REDEMPTION PRICE IS $100 PER PREFERRED SHARE.
WARRANTS
WE HAVE ISSUED TO THE HOLDER OF THE SERIES A PREFERRED STOCK A WARRANT
TO PURCHASE 113,636 SHARES OF OUR COMMON STOCK, EXERCISABLE AT ANY TIME UNTIL
MARCH 27, 2008 AT AN EXERCISE PRICE OF $6.78. IF AT ANY TIME OR FROM TIME TO
TIME, SUBSEQUENT TO THE ISUANCE DATE WE ISSUE OR SELL, OR ARE
18
DEEMED TO HAVE ISSUED RIGHTS, WARRANTS, OPTIONS OR CONVERTIBLE OR EXCHANGEABLE
SECURITIES AT A PRICE PER SHARE LESS THAN $6.78, THE EXERCISE PRICE SHALL BE
ADJUSTED.]
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be passed
upon for us by the law firm of Beckman, Lieberman & Barandes, LLP, in Jericho,
New York.
EXPERTS
The financial statements of Intelli-Check, Inc. at December 31, 2002, and for
the year then ended, have been audited by Grant Thornton LLP, independent
auditors, and at December 31, 2001 and for the year ended December 31, 2001 and
December 31, 2000, by Arthur Andersen LLP, independent auditors; as indicated in
their reports thereon. These financial statements are incorporated by reference
herein and in the Registration Statement, and are included in reliance upon such
reports given on the authority of such firms as experts in accounting and
auditing. After reasonable efforts, we have been unable to obtain the consent of
Arthur Andersen LLP ("Andersen") to the incorporation by reference in the
Registration Statement of which this prospectus is a part of Andersen's reports
of its audits of our financial statements at December 31, 2001 and for the two
years in the period ended December 31, 2001. Under these circumstances, under
Rule 437(a) under the Securities Act of 1933 (the "Act") we may file the
Registration Statement without Andersen's consent. In the absence of Andersen's
consent, persons acquiring shares of the Company's common stock pursuant to this
prospectus will be unable to assert a claim against Andersen under Section 11(a)
of the Act in the event of any untrue statement of material fact or any material
omission in the financial statements audited by Andersen or in its reports with
respect thereto.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington,
D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further information on
the operation of the Public Reference Rooms. Our SEC filings are also available
to the public on the SEC's Website at "http://www.sec.gov."
We have filed with the SEC a registration statement on Form S-3 under the
Securities Act with respect to the securities to be sold in this offering. This
prospectus does not contain all of the information set forth in the registration
statement. We have omitted certain parts of the registration statement in
accordance with the rules and regulations of the SEC. For further
information about us and the securities, you should refer to the registration
statement. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
you should refer to the copy of such contract or document filed as an exhibit to
or incorporated by reference in the registration statement. Each statement as to
the contents of such contract or document is qualified in all respects by such
reference. You may obtain a copy of the registration statement, or any of our
other filings with the SEC, from the SEC's principal office in Washington, D.C.
upon payment of the fees prescribed by the SEC.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The
19
information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings we will make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. The documents
we are incorporating by reference are:
o Our annual report on Form 10-K for our fiscal year ended December 31,
2002;
o Our reports on Form 8-K dated June 12, 2002 and October 4, 2002;
o The description of our securities contained in our registration
statement on Form SB-2, File No. 333-87797, dated November 21, 1999;
o The description of the rights distributed to our shareholders in
October 2001 contained in our registration statement on Form S-3, File
No. 333-59595, dated October 5, 2001; and
o The descriptions of our Series A 8% Convertible Preferred Stock and
the Warrants issued therewith contained in our current report on Form
8-K dated April 8, 2003.
You may request a copy of these filings at no cost, by writing or
telephoning our secretary at the following address:
Intelli-Check, Inc.
246 Crossways Park West
Woodbury, New York 11797
(516) 992-1900
20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
SEC Registration Fee...................... $ 167
Accounting Fees and Expenses.............. 5,000
Legal Fees and Expenses................... 20,000
Miscellaneous............................. 4,833
----------
Total..................................... $30,000
==========
Item 15. Indemnification of Directors and Officers
Intelli-Check's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Section 145 of the Delaware General
Corporation Law. Delaware law provides that the directors of a corporation will
not be personally liable to such corporation or its stockholders for monetary
damages for breach of their fiduciary duties as directors, except for liability
(i) for any breach of their duty of loyalty to the corporation or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derives an improper personal benefit.
Intelli-Check's By-laws provide that the Company shall indemnify its directors
and officers under certain circumstances, including those circumstances in which
indemnification would otherwise be discretionary, and the Company is required to
advance expenses to its officers and directors as incurred in connection with
proceedings against them for which they may be indemnified.
II-1
Item 16. Exhibits
3.1 Certificate of Incorporation, as amended (Incorporated by reference to
Exhibit 3.1 to Registrant's Registration Statement on Form SB-2, File No.
333-87797
3.2 Certificate of Designation of Preferred Stock of Intelli-Check, Inc.
(Incorporated by reference to Exhibit 3.3 to Registrant's Annual Report on
Form 10-K filed March 31, 2003).
4.1 Specimen Common Stock Certificate (Incorporated by reference to Exhibit 4.1
to the Registrant's Registration Statement on Form SB-2, File No.
333-87797)
4.2 Warrant to Gryphon Master Fund, L.P. (Incorporated by reference to Exhibit
4.3 to Registrant's Annual Report on Form 10-K filed March 31, 2003).
5 Opinion of Beckman, Lieberman & Barandes, LLP *
10.1 Securities Purchase Agreement between Intelli-Check, Inc. and Gryphon
Master Fund, L.P. dated March 27, 2003 (Incorporated by reference to
Exhibit 10.16 to Registrant's Annual Report on Form 10-K filed March 31,
2003).
10.2 Registration Rights Agreement between Intelli-Check, Inc. and Gryphon
Master Fund, L.P. dated March 27, 2003 (Incorporated by reference to
Exhibit 10.17 to Registrant's Annual Report on Form 10-K filed March 31,
2003).
23.1 Consent of Grant Thornton LLP
23.2 Consent of Arthur Andersen, LLP **
23.4 Consent of Beckman, Lieberman & Barandes, LLP (included in Exhibit 5
hereof) 24 Powers of Attorney (included in the signature pages hereof)
--------
* To be filed by amendment
** Pursuant to Rule 437a promulgated under the Securities Act, no consent is
filed herewith.
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 of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the Registration Statement or any
material change to such information in the
Registration Statement; provided, however, that
paragraphs (a)(l)(i) and (a)(l)(ii) do not apply if
the information required to be included in a
post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant
II-2
pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated
by reference in the Registration Statement.
(2) That, for the purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Act"), each filing of the Registrant's annual report pursuant to Section 13 (a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to securityholders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report to securityholders that is specifically incorporated
by reference in the prospectus and to provide such interim financial
information.
(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in [WOODBURY], New York on the [27TH] day of [MAY], 2003.
Intelli-Check, Inc.
By: /s/ Frank Mandelbaum
--------------------------
Frank Mandelbaum
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on [MAY 27], 2003 by the following
persons in the capacities indicated [:]
Signature Title
--------- -----
/s/ Frank Mandelbaum
---------------------
Frank Mandelbaum Chairman of the Board and Chief Executive Officer
/s/ Edwin Winiarz
---------------------
Edwin Winiarz Senior Executive Vice President, Treasurer,
Chief Financial Officer