As filed with the
Securities and Exchange Commission on September 21, 2007
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SILVERSTAR
HOLDINGS
(Exact name of registrant as specified in its charter)
Bermuda
|
|
Not Applicable
|
(State or other jurisdiction
of
Incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
Clarendon House, Church Street
Hamilton HM CX Bermuda
(441) 295-1422
|
|
|
(Address, including zip code,
and telephone number,
Including area code, of registrant's principal executive offices)
|
|
|
Clive Kabatznik
1900 Glades Road, Suite 435
Boca Raton, FL 33431
(561) 479-0040
|
|
|
(Name,
address, including zip code, and telephone number,
Including area code, of agent for service)
|
|
|
Copy to:
|
|
|
Henry I. Rothman, Esq.
Troutman Sanders LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
(212) 704-6000
|
|
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 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.
If
this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same
offering.
__________
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities
Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
__________
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please check the
following box.
CALCULATION OF REGISTRATION FEE
Title of Each Class
of Securities to be Registered
|
Amount to be
Registered
(1)
|
Proposed Maximum
Offering Price
per Share
(2)
|
Proposed Maximum Aggregate Offering Price
(2)
|
Amount of
Registration Fee
|
Common Stock, par value $.01 per share
|
7,141,126
|
$2.49
|
$17,781,404
|
$546
|
(1)
|
|
Consists of
(i) 4,149,396 shares of common stock that Silverstar Holdings Ltd. issued to
investors in a private placement on September 6, 2007;
(ii) 2,904,593 additional shares of common stock issuable upon the exercise of
warrants that Silverstar Holdings Ltd. issued to investors in the private placement
on September 6,2007; (iii) 87,137 additional shares of common stock issuable upon
the exercise of warrants that Silverstar Holdings Ltd. issued to the placement
agent in connection with the private placement on September 6, 2007; and (iv) an
indeterminate number of additional shares of common stock as may from time to time
be issued with respect to the foregoing securities as a result of stock splits,
stock dividends, reclassifications, recapitalizations, combinations or similar
events, which shares shall be deemed registered hereunder pursuant to Rule 416
under the Securities Act of 1933, as amended.
|
(2)
|
|
Estimated
solely for purposes of calculating the registration fee pursuant to Rule 457(c)
under the Securities Act of 1933, as amended, based upon the average of the high
and low price per share of the common stock as reported on the Nasdaq Capital
Markets on September 19, 2007.
|
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 this Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
The
information 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 nor is it seeking an offer to buy
these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION,
DATED
SEPTEMBER
21
, 2007
PROSPECTUS
SILVERSTAR HOLDINGS LTD.
7,141,12
6
Shares of Common Stock
We are registering up to 7,141,126
shares of our common stock
acquired in connection with a private placement on September
6, 2007 (including 2,991,730
shares of which are
issuable upon exercise of warrants) for resale by the selling shareholders from time to
time.
The
selling shareholders will receive all of the proceeds from the sale of the shares of our
common stock offered by this prospectus, less any brokerage commissions or other expenses
incurred by them. We will not receive any proceeds from the sale of shares of our common
stock by the selling shareholders. See “Selling Shareholders” beginning on
page 14
of this prospectus for a complete
description of the selling shareholders.
NASDAQ Capital Market Symbol:
“SSTR”
Our
common stock is traded on the NASDAQ Capital Market under the symbol “SSTR.” On
September 20, 2007, the closing price of one share of our common stock on the NASDAQ
Capital Market was $2.47.
This investment involves a high degree of risk. You should
carefully consider the factors described under the caption “Risk Factors”
beginning on page
3
of this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or
disapproved these securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Our
principal executive offices are located at Clarendon House, Church Street, Hamilton HM CX
Bermuda. Our telephone number is (441) 295-1422.
The date of this prospectus
is_________ __, 2007
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This
prospectus is part of a registration statement we filed with the U.S. Securities and
Exchange Commission (the "Commission"). You should rely on the information provided in this
prospectus. Neither we nor the selling shareholders listed in this prospectus have
authorized anyone to provide you with information different from that contained in or
incorporated by reference in this prospectus. The selling shareholders are offering to sell
and seeking offers to buy shares of common stock only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this prospectus or of
any sale of common stock.
Unless
the context otherwise requires, throughout this prospectus the words
“Silverstar”, “we”, “us” and “our” refer to
Silverstar Holdings Ltd. and its subsidiaries.
PROSPECTUS SUMMARY
This
summary highlights important features of this offering and the information included or
incorporated by reference in this prospectus. This summary does not contain all of the
information that you should consider before investing in our common stock. You should read
the entire prospectus carefully, especially the risks of investing in our common stock
discussed under “Risk Factors.”
The
Company
We are a holding company that seeks to acquire businesses
fitting a predefined investment strategy. We are the parent company of Empire Interactive,
PLC, a leading worldwide publisher of interactive entertainment software for all game
platforms, as well as Strategy First, Inc., a leading worldwide publisher of entertainment
software for the Personal Computer (PC). We are also a minority shareholder in Magnolia
Broadband Wireless, a development stage company which is developing mobile wireless
broadband products.
Private placement
On September 6, we completed the second part of a two-part
sale of our securities in a private placement transaction pursuant to a purchase agreement,
dated July 2, 2007, by and among the Company and the purchasers named therein. Pursuant to
the purchase agreement, we sold an aggregate of 6,206,891
shares (the "Shares") of our common stock and warrants (the
"Warrants") to purchase up to 4,344,827
shares of our
common stock at an exercise price of $2.10 per share, at a price per unit of
$1.45.
The
sale and issuance of the Shares and Warrants was
completed in two closings. The first closing (the "First
Closing") was completed on July 5, 2007, pursuant to which we sold and issued an aggregate
of 2,057,495 Shares and Warrants to purchase up to an aggregate of 1,440,234 shares of our
common stock. The second closing (the "Second Closing") was completed on September 6, 2007,
pursuant to which we sold and issued an aggregate of 4,149,396
shares of our common stock and warrants to purchase up to
2,904,593
shares of our common
stock.
Roth
Capital Partners, LLC acted as placement agent.
1
The Offering
Common Stock Offered by the
Selling Shareholders:
|
|
7,141,126
shares of our common stock, including
2,991,730
shares issuable upon the
exercise of warrants, held by the selling shareholders, are being offered by
this prospectus. All of the shares offered are being sold by the selling
shareholders.
|
|
|
|
Common Stock Outstanding as of
September 12, 2007:
|
|
18,127,469
shares.
|
|
|
|
Use of Proceeds:
|
|
We will not receive any of the
proceeds from the sale of the shares by the selling shareholders.
We may receive proceeds in connection with the
exercise of warrants, the underlying shares of which may be sold by the selling
shareholders under this
prospectus
.
|
|
|
|
Risk Factors:
|
|
An investment in our securities
involves a high degree of risk and could result in a loss of your entire
investment. Prior to making an investment decision, you should carefully
consider all of the information in this prospectus and, in particular, you
should evaluate the risk factors set forth under the caption “Risk
Factors” beginning on page 3.
|
|
|
|
Nasdaq Capital Market
Symbol:
|
|
SSTR.
|
CONCURRENT OFFERING OF
COMMON STOCK
On August 31, 2007, our registration statement on Form S-3
(File No. 333-144770) was declared effective by the Commission. That prospectus relates to
the resale of up to 3,968,544
shares
of our common stock and consists of:
|
·
|
2,057,495
shares of our common stock that
we sold to the selling shareholders
at the First Closing;
|
|
·
|
1,440,234
shares of our common stock
issuable upon the exercise of warrants that we issued to the selling
shareholders
that
purchased our common stock at the First Closing
;
|
|
·
|
43,207
shares of our common stock issuable upon the
exercise of a warrant that we issued to the placement agent in connection with
the First Closing;
|
|
·
|
56,180 shares of our common stock
that we issued to RPC International and Catacando Properties Limited issued in
connection with our acquisition of Empire Interactive, plc on December 5, 2006;
and
|
|
·
|
371,428 shares of our common stock that we sold
to Ronald Heller IRA and Barry Honig in a private placement on November 22,
2006
.
|
2
RISK FACTORS
Our business is subject to many risks and uncertainties,
which may affect our future financial performance. If any of the events or circumstances
described below occurs, our business and financial performance could be harmed, our actual
results could differ materially from our expectations and the market value of our
securities could decline. The risks and uncertainties discussed below are not the only ones
we face. There may be additional risks and uncertainties not currently known to us or that
we currently do not believe are material that may harm our business and financial
performance. You should consider carefully these risk factors, together with all of the
other information in this prospectus and the documents we have incorporated by reference in
the section “Where You Can Find More Information,” before you decide to
purchase shares of our common stock.
Risks Associated with Our Subsidiaries
Many
of our titles have short lifecycles and fail to generate significant
revenues.
The
market for entertainment software is characterized by short product lifecycles and frequent
introduction of new products. Many software titles do not achieve sustained market
acceptance or do not generate a sufficient level of sales to offset the costs associated
with product development. A significant percentage of the sales of new titles generally
occurs within the first three months following their release. Therefore, our continued
profitability depends upon our ability to acquire and sell new, commercially successful
titles and to replace revenues from titles in the later stages of their lifecycles. Any
competitive, financial, technological or other factor which delays or impairs our ability
to introduce and sell our software could adversely affect our future operating
results.
We
may fail to anticipate changing consumer preferences.
Our business is speculative and is subject to all of the
risks generally associated with the entertainment software industry, which has been
cyclical in nature and has been characterized by periods of significant growth followed by
rapid declines. Our future operating results will depend on numerous factors beyond our
control, including:
|
·
|
the popularity, price and timing of new software
and hardware platforms being released and distributed by us and our
competitors;
|
|
·
|
international, national and regional economic conditions, particularly economic
conditions adversely affecting discretionary consumer spending;
|
|
·
|
changes in consumer demographics;
|
|
·
|
the availability of other forms of entertainment; and
|
|
·
|
critical reviews and public tastes and
preferences, all of which change rapidly and cannot be predicted.
|
In
order to plan for acquisition and promotional activities, we must anticipate and respond to
rapid changes in consumer tastes and preferences. A decline in the popularity of
entertainment software or particular platforms could cause sales of our titles to decline
dramatically.
We
may not be able to protect our proprietary
rights
.
We
acquire proprietary software and technologies. We attempt to protect our software and
production related intellectual property under copyright, trademark and trade secret laws
as well as through contractual restrictions on disclosure, copying and
distribution.
3
Entertainment
software is susceptible to unauthorized copying. Unauthorized third parties may be able to
copy or to reverse engineer our software to obtain and use programming or production
techniques that we regard as proprietary. In addition, our competitors could independently
develop technologies substantially equivalent or superior to our
technologies.
We
may be subject to intellectual propriety
claims
.
As
the number of entertainment software products increases and the features and content of
these products continue to overlap, software developers increasingly may become subject to
infringement claims. Many of our products are highly realistic and feature materials that
are based on real world examples, which may inadvertently infringe upon the intellectual
property rights of others. Our products often utilize complex technology that may become
subject to the intellectual property rights of others. Although we believe that we make
reasonable efforts to ensure that our products do not violate the intellectual property
rights of others, it is possible that third-parties still may claim infringement. From time
to time, we receive communications from third-parties regarding such claims. Existing or
future infringement claims against us, whether valid or not, may be time consuming and
expensive to defend.
Intellectual
property litigation or claims could force us to do one or more of the following:
|
·
|
cease selling, incorporating or using products or
services that incorporate the challenged intellectual property
|
|
·
|
obtain a license from the holder of the infringed intellectual property, which
if available at all, may not be available on commercially favorable terms;
or
|
|
·
|
redesign the effected entertainment software
products, which could cause us to incur additional costs, delay introduction
and possibly reduce commercial appeal of our products. Any of these actions may
cause material harm to our business and financial results.
|
Rating
systems for entertainment software, potential legislation and consumer opposition could
inhibit sales of our products.
The
home video game industry requires entertainment software publishers to provide consumers
with information relating to graphic violence or sexually explicit material contained in
software titles. Certain countries have also established similar rating systems as
prerequisites for sales of entertainment software in such countries. We believe that we
comply with such rating systems and display the ratings received for our titles. Our
software titles generally receive a rating of “G” (all ages) or “T”
(age 13 and over), although certain of our titles receive a rating of “M” (age
18 and over), which may limit the potential markets for these
titles.
Several
proposals have been made for federal legislation to regulate the entertainment software,
motion picture and recording industries, including a proposal to adopt a common rating
system for entertainment software, television and music containing violence and sexually
explicit material and an inquiry by the Federal Trade Commission with respect to the
marketing of such material to minors. Consumer advocacy groups have also opposed sales of
entertainment software containing graphic violence and sexually explicit material by
pressing for legislation in these areas and by engaging in public demonstrations and media
campaigns. If any groups were to target our titles, we might be required to significantly
change or discontinue a particular title.
4
We
operate in a highly competitive
industry
.
The
entertainment software industry is intensely competitive and new entertainment software
products and platforms are regularly introduced. Our competitors vary in size from small
companies with limited resources to very large corporations with significantly greater
financial, marketing and product development resources than we have. Due to these greater
resources, certain of our competitors can spend more money and time on developing and
testing products, undertake more extensive marketing campaigns, adopt more aggressive
pricing policies, pay higher fees to licensors for desirable motion picture, television,
sports and character properties and pay more to third-party software developers than we
can. We believe that the main competitive factors in the entertainment software industry
include: product features and playability; brand name recognition; compatibility of
products with popular platforms; access to distribution channels; quality of products; ease
of use; price; marketing support; and quality of customer service.
We
also face increasing competition for the leisure and entertainment time of consumers. Our
publishing business competes with all other sources of information and entertainment,
including television, movies, music, live events, radio broadcasts, home video products,
print media and the Internet. Technological advancements, such as new streaming
capabilities and downloading entertainment via the Internet, have increased the number of
media and entertainment choices available to consumers and presents challenges as our
audience becomes more fragmented. The increasing number of choices available to consumers
could negatively impact demand for our products, or require us to use additional resources
to develop more sophisticated software, or both. If we do not respond effectively to
increases in the leisure and entertainment choices available to consumers, it could have an
adverse effect on our competitive position and revenues.
If
our products contain defects, our business could be harmed
significantly
.
Software
products as complex as the ones we publish may contain undetected errors when first
introduced or when new versions are released. Despite extensive testing prior to release,
we cannot be certain that errors will not be found in new products or releases after
shipment, that could result in loss of or delay in market acceptance. This loss or delay
could significantly harm our business and financial results.
We
rely on independent third parties to develop a number of our software
products
.
We
rely on independent third-party entertainment software developers to develop a number of
our software products. Since we depend on these developers we remain subject to the
following risks
|
·
|
continuing strong demand for
developers’ resources, combined with the recognition they receive in
connection with their work, may cause developers who worked for us in the past
either to work for our competitors in the future or to renegotiate our
agreements with them on terms less favorable for us;
|
|
·
|
limited financial resources and business
expertise and inability to retain skilled personnel may force developers out of
business prior to completing our products or require us to fund additional
costs; and
|
|
·
|
our competitors may acquire the businesses of key
developers or sign them to exclusive development arrangements. In either case,
we would not be able to continue to engage such developers’ services for
our products, except for those that they are contractually obligated to
complete for us.
|
Due
to the limited number of third-party developers and the limited control that we exercise
over them, these developers may not be able to complete titles for us on a timely basis or
within acceptable quality standards, if at all.
5
The
retail market for PC game software is decreasing which could have an adverse impact on our
financial condition.
The
changing characteristics of the worldwide consumer entertainment software market in recent
years have been impacted by many factors, such as:
|
·
|
An increasing number of technologically advanced
PCs with more powerful operating systems, enhanced graphics and video cards,
expanded memory chips, as well as higher capacities and faster speeds for CD
and hard drives in the home and office;
|
|
·
|
greater access by consumers to the Internet
through high-speed access modes (such as cable modems and DSL
connections);
|
|
·
|
increased interest in online game
play;
|
|
·
|
the increasing number of game console devices in the home; and
|
|
·
|
the development of increasingly advanced
technologies supporting game play (such as hand held game devices, mobile
phones and personal digital assistants).
|
As
a result of this increased competition in the overall consumer entertainment market, market
data suggests that the retail market for PC game software has decreased over the past two
years. If this trend continues it could have an adverse impact on our financial
condition.
The
PC software game market has gravitated towards mass merchant
retailers
.
The
PC software game market has gravitated toward mass merchant retailers thereby increasing
the competition for shelf space for PC games. This increased competition has emphasized the
importance of marketing, merchandising and brand name recognition. A significant result of
these market pressures is an industry trend toward the consolidation of consumer
entertainment PC software publishers and distributors, in addition to the diversification
of products offered by these companies. The trends toward industry consolidation and
increased competition for game content and retail shelf space are more pronounced in North
America than in international markets and are expected to continue for the foreseeable
future.
We
may face difficultly obtaining access to retail shelf space necessary to market and sell
our products effectively
.
Retailers
of our products typically have a limited amount of shelf space and promotional resources,
and there is intense competition among consumer entertainment software products for high
quality retail shelf space and promotional support from retailers. To the extent that the
number of products and platforms increases, competition for shelf space may intensify and
may require us to increase our marketing expenditures. Retailers with limited shelf space
typically devote the most and highest quality shelf space to those products expected to be
best sellers. We cannot be certain that our new products will achieve such “best
seller” status. Due to increased competition for limited shelf space, retailers and
distributors are in an increasingly better position to negotiate favorable terms of sale,
including price discounts, price protection, marketing and display fees and product return
policies. Our products constitute a relatively small percentage of any retailer’s
sales volume. We cannot be certain that retailers will continue to purchase our products or
to provide our products with adequate levels of shelf space and promotional support on
acceptable terms. A prolonged failure in this regard may significantly harm our business
and financial results.
6
We
permit our customers to return our products and to receive pricing concessions which could
reduce our net revenues and results of operations.
We
are exposed to the risk of product returns and price protection with respect to our
distributors and retailers. Return policies allow distributors and retailers to return
defective, shelf-worn and damaged products in accordance with terms granted. Price
protection, when granted and applicable, allows customers a credit against amounts they owe
us with respect to merchandise unsold by them. We may permit product returns from, or grant
price protection to, our customers under certain conditions. The conditions our customers
must meet to be granted the right to return products or price protection are, among other
things, compliance with applicable payment terms, delivery to us of weekly inventory and
sell-through reports, and consistent participation in the launches of our premium title
releases. We may also consider other factors, including the facilitation of slow-moving
inventory and other market factors. When we offer price protection, we offer it with
respect to a particular product to all of our retail customers; however, only those
customers who meet the conditions detailed above can avail themselves of such price
protection. Although we maintain a reserve for returns and price protection, and although
we may place limits on product returns and price protection, we could be forced to accept
substantial product returns and provide substantial price protection to maintain our
relationships with retailers and our access to distribution channels. Product returns and
price protection that exceed our reserves could significantly harm our business and
financial results.
Technology
changes rapidly in our business, and if we fail to anticipate or successfully implement new
technologies, the quality, timeliness and competitiveness of our products and services will
suffer.
Rapid
technology changes in our industry require us to anticipate, sometimes years in advance,
which technologies we must implement and take advantage of in order to make our products
and services competitive in the market. Therefore, we usually start our product development
with a range of technical development goals that we hope to be able to achieve. We may not
be able to achieve these goals, or our competition may be able to achieve them more quickly
than we can. In either case, our products and services may be technologically inferior to
our competitors’, less appealing to consumers, or both. If we cannot achieve our
technology goals within the original development schedule of our products and services,
then we may delay their release until these technology goals can be achieved, which may
delay or reduce revenue and increase our development expenses. Alternatively, we may
increase the resources employed in research and development in an attempt to accelerate our
development of new technologies, either to preserve our product or service launch schedule
or to keep up with our competition, which would increase our development
expenses.
Our
business is highly dependent on the success, timely release and availability of new video
game platforms, on the continued availability of existing video game platforms, as well as
our ability to have commercially successful products developed for these
platforms.
We
derive a majority of our revenue from the sale of products for play on video game platforms
manufactured by third parties, such as Sony’s PlayStation 2, PlayStation 3 and PSP;
and Microsoft’s Xbox, Xbox 360 and Nintendo Wii and DS. The success of our business
is driven in large part by the availability of an adequate supply of current generation
video game platforms (such as the PlayStation 2), the adequate supply, and, increasingly,
the success of new video game hardware systems (such as the Xbox 360, PlayStation 3 and the
Wii), our ability to accurately predict which platforms will be successful in the
marketplace, and our ability to have commercially successful products developed for these
platforms. We must make product development decisions and commit significant resources well
in advance of the anticipated introduction of a new platform. A new platform for which
products are being developed may not succeed or may have a shorter life cycle than
anticipated. Alternatively, a platform for which we have not devoted significant resources
could be more successful than we had initially anticipated, causing us to miss a meaningful
revenue opportunity. If the platforms for which products are being developed are not
available in adequate quantities to meet consumer demand or are lower than our
expectations, or do not attain wide market acceptance, our revenue will suffer and our
financial performance will be harmed.
7
anticipated,
causing us to miss a meaningful revenue opportunity. If the platforms for which products
are being developed are not available in adequate quantities to meet consumer demand or are
lower than our expectations, or do not attain wide market acceptance, our revenue will
suffer and our financial performance will be harmed.
The
video game hardware manufacturers set the royalty rates and other fees that we must pay to
publish games for their platforms, and therefore have significant influence on our costs.
If one or more of these manufacturers adopt a different fee structure for future game
consoles, our profitability will be materially impacted.
In
order to publish products for a video game system such as the Xbox 360, PlayStation 3 or
Wii, we must take a license from the manufacturer, which gives it the opportunity to set
the fee structure that we must pay in order to publish games for that platform. Similarly,
certain manufacturers have retained the flexibility to change their fee structures, or
adopt different fee structures for online gameplay and other new features for their
consoles. The control that hardware manufacturers have over the fee structures for their
platforms and online access makes it difficult for us to predict our costs, profitability
and impact on margins. Because publishing products for video game systems is the largest
portion of our business, any increase in fee structures would significantly harm our
ability to generate revenues and/or profits.
Risks
Associated with Our Operations
There
is no assurance that we can successfully implement our business plan that calls for the
acquisition of additional entertainment software businesses to create a larger presence in
the marketplace.
We
have engaged in, evaluated, and expect to continue to engage in and evaluate, a wide array
of potential strategic transactions, including (i) acquisitions of companies,
businesses, intellectual properties, and other assets, (ii) minority investments in
strategic partners, and (iii) investments in new interactive entertainment businesses.
Any of these strategic transactions could be material to our financial condition and
results of operations. Although we regularly search for opportunities to engage in
strategic transactions, we may not be successful in identifying suitable opportunities. We
may not be able to consummate potential acquisitions or investments or an acquisition or
investment may not enhance our business or may decrease rather than increase our
earnings.
If
we are unable to successfully integrate acquisitions, our revenue growth and future
profitability may be negatively impacted.
The
process of integrating an acquired business, technology or product may result in unforeseen
operating difficulties and expenditures and may absorb significant management attention and
capital that would otherwise be available for ongoing development of our business. In
addition, we may not be able to maintain the levels of operating efficiency that any
company we may acquire achieved or might have achieved separately. Additional risks we face
include:
|
·
|
the need to implement or remediate controls,
procedures and policies appropriate for a public company in an acquired company
that, prior to the acquisition, lacked these controls, procedures and
policies;
|
|
·
|
cultural challenges associated with integrating
employees from an acquired company or business into our
organization;
|
|
·
|
retaining key employees from the businesses we
acquire;
|
8
|
·
|
the need to integrate an acquired company's
accounting, management information, human resource and other administrative
systems to permit effective management; and
|
|
·
|
to the extent that we engage in strategic
transactions outside of the United States, we face additional risks, including
risks related to integration of operations across different cultures and
languages, currency risks and the particular economic, political and regulatory
risks associated with specific countries.
|
Future
acquisitions and investments could involve the issuance of our equity securities,
potentially diluting our existing shareholders, the incurrence of debt, contingent
liabilities or amortization expenses, write-offs of goodwill, intangibles, or acquired
in-process technology, or other increased expenses, any of which could harm our financial
condition. Our shareholders may not have the opportunity to review, vote on or evaluate
future acquisitions or investments.
Covenants
in our agreements relating to our Variable Rate Secured Convertible Debentures due April
30, 2010 may limit our flexibility and prevent us from taking certain actions, which could
adversely affect our ability to execute our business strategy.
Our
agreements relating to our Variable Rate Secured Convertible Debentures due April 30, 2010
contain significant restrictive covenants. These covenants could adversely affect us by
limiting our ability to plan for or react to market conditions, meet our capital needs and
execute our business strategy. These covenants, among other things, limit our ability to
issue or sell (i) any debt or equity securities that are convertible into, exchangeable or
exercisable for additional shares of our common stock either (1) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the trading prices of
or quotations for the shares of our common stock at any time after the initial issuance of
such debt or equity securities, or (2) with a conversion, exercise or exchange price that
is subject to being reset at some future date after the initial issuance of such debt or
equity security or upon the occurrence of specified or contingent events directly or
indirectly related to our business or the market for our common stock; or (ii) enter into
any equity line of credit. A breach of these covenants could result could result in the
Variable Rate Secured Convertible Debentures becoming immediately due and payable.
Additionally, these covenants could limit our flexibility in raising additional capital in
the future which could limit our ability to implement our business
strategies.
Since
a significant amount of our assets are denominated in foreign currency and since we conduct
business internationally, we are subject to currency and foreign regulatory
risks.
Strategy
First is incorporated in Canada and sells products throughout the United States and Europe.
Its functional currency is the Canadian Dollar. This has exposed the company to market risk
with respect to fluctuations in the relative value of the Euro, British Pound, the
Canadian Dollar, and the US Dollar.
Empire
PLC is incorporated in the United Kingdom and sells products throughout Europe and the
United States. Its functional currency is the British Pound. This has exposed us to market
risk with respect to fluctuations in the relative value of the Euro, British Pound and
the US Dollar.
Certain
of the Company’s cash balances and the remaining proceeds from the sale of its South
African subsidiaries are denominated in South African Rand. This has exposed the Company to
market risk with respect to fluctuations in the relative value of the South African Rand
against the US Dollar.
We
expect to repatriate our funds held in South Africa to the United States. We believe that
repatriation of the full amount is allowable under current South African foreign currency
regulations. Over the last eight years, we have, from time to time, repatriated funds from
South Africa without restriction. However, there can be no guarantee that the South African
foreign currency regulations will not change in the future in a manner that might restrict
our ability to repatriate the remaining assets.
9
We
currently are disputing a tax liability with the South African revenue service and we may
be forced to expense additional amounts in this matter
In
April 2006, our subsidiary, First South African Holdings, received a letter from the South
African Revenue Service (“SARS”) challenging certain tax treatment of dividends
and operating loss carry forwards for the years 2002 through 2004. On May 4, 2007, SARS
agreed in principle to drop the larger of its two assessments and on May 25 2007, SARS
formally approved this decision. We conceded the principle of SARS second assessment but
will continue to negotiate the ultimate liability due under this assessment. We have
recorded an estimated liability of approximately $599,000 in this regard but we may be
required to increase this amount to the assessed amount of $940,000 should we fail to
negotiate a lower assessment amount.
We
depend on the continued services of key
personnel
.
Our
success depends upon the continued contributions of our executive officers, some of whom
are also our principal shareholders, and the continued contributions of the management of
our operating subsidiaries. Our business could be adversely affected by the loss of
services of, or a material reduction in the amount of time devoted to us by our executive
officers or the executive officers of our subsidiary. We do not carry key man
insurance.
Risks
Relating to Our Common Stock
The price of our common stock is highly volatile.
The
price of our common stock is highly volatile. Fluctuations in the market price of our
common stock may be a result of any number of factors or a combination of factors
including, but not limited to:
|
·
|
the number of shares in the market and the number
of shares we may be required to issue in the future compared to market demand
for our shares;
|
|
·
|
our performance and meeting expectations of performance, including the
development and commercialization of our current and proposed products and
services;
|
|
·
|
market conditions for internet and media
companies in the small capitalization sector; and
|
|
·
|
general economic and market conditions.
|
Since
we do not intend to declare dividends in the foreseeable future, the return on your
investment will depend upon the appreciation of the market price of your
shares.
We
have never paid any dividends on our common stock. Our board of directors does not intend
to declare any dividends in the foreseeable future, but intends to retain all earnings, if
any, for use in our business operations. As a result, the return on your investment in us
will depend upon any appreciation in the market price of our common stock. The holders of
common stock are entitled to receive dividends when, as and if declared by the board of
directors out of funds legally available for dividend payments. The payment of dividends,
if any, in the future is within the discretion of our board of directors and will depend
upon our earnings, capital requirements and financial condition, and other relevant
factors.
10
Anti-takeover
measures in our Bye-laws could adversely affect the voting power of the holders of our
common stock
Our
Bye-laws authorize the issuance of up to 5,000,000 shares of preferred stock with such
designations, rights and preferences as may be determined from time to time by our board of
directors. Accordingly, our board of directors is empowered, without shareholder approval,
but subject to applicable government regulatory restrictions, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of our common stock. In the event of issuance,
the preferred stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of us. Although we have no present
intention to issue any shares of our preferred stock, we cannot assure we will not do so in
the future.
The
rights of shareholders under Bermuda law may not be as extensive as the rights of
shareholders under the laws of jurisdictions in the United
States.
Our
corporate affairs are governed by our Memorandum of Association and Bye-laws, as well as
the common law of Bermuda relating to companies and the Companies Act 1981. Our Bye-laws
limit the right of security holders to bring an action against our officers and directors.
The laws of Bermuda relating to shareholder rights, protection of minorities, fiduciary
duties of directors and officers, matters of corporate governance, corporate restructuring,
mergers and similar arrangements, takeovers, shareholder suits, indemnification of
directors and inspection of corporate records, may differ from those that would apply if we
were incorporated in a jurisdiction within the United States. The rights of shareholders in
a Bermuda company may not be as extensive as the rights of a shareholder of a United States
company and, accordingly, the holders of our shares of common stock may be more limited in
their ability to protect their interests in us. In addition, there is uncertainty whether
the courts of Bermuda would enforce judgments of the courts of the United States and of
other foreign jurisdictions. There is also uncertainty whether the courts of Bermuda would
enforce actions brought in Bermuda which are predicated upon the securities laws of the
United States.
Our
common stock may be delisted from NASDAQ.
The
National Association of Securities Dealers, Inc. has established certain standards for the
continued listing of a security on the NASDAQ Capital Market. The standards for continued
listing require, among other things, that the minimum bid price for the listed securities
be at least $1.00 per share. A deficiency in the bid price maintenance standard will be
deemed to exist if the issuer fails the individual stated requirement for thirty
consecutive trading days, with a 180-day cure period with respect to the NASDAQ Capital
Market. During November and December 2004 and March 2005 our common stock traded below a
price of $1.00 per share. There can be no assurance that we will continue to satisfy the
requirements for maintaining a NASDAQ Capital Market listing. If our common stock were to
be excluded from NASDAQ, the market price of our common stock and the ability of holders to
sell such stock would be adversely affected, and we would be required to comply with the
initial listing requirements to be relisted on NASDAQ.
Our
common stock may become subject to the Commission’s penny stock
rules.
If
our common stock is excluded from NASDAQ and the price per share of our common stock is
below $5.00, our securities would become subject to certain “penny stock” rules
promulgated by the Securities and Exchange Commission unless we satisfy certain net asset
and revenue tests. The application of these rules to our common stock may adversely impact
both your ability to resell our common stock (liquidity) and the market price of these
shares. The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk disclosure
document prepared by the Securities and Exchange Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The broker-dealer
also must provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction, and monthly
account statements showing the market value of each penny stock held in the
customer’s account. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from such rules, the broker-dealer must
make a special written determination of suitability of the investor purchasing the penny
stock.
11
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the information incorporated by reference herein contain forward-looking
statements regarding, among other things, our financial condition, results of operations,
plans, objectives, future performance and business. All statements contained or
incorporated by reference in this document other than historical information are
forward-looking statements. Forward-looking statements include, but are not limited to,
statements that represent our beliefs concerning future operations, strategies, financial
results or other developments, and contain words and phrases such as “may,”
“expects,” “believes,” “anticipates,”
“estimates,” “should,” or similar expressions. Because these
forward-looking statements are based on estimates and assumptions that are subject to
significant business, economic and competitive uncertainties, many of which are beyond our
control or are subject to change, actual results could be materially different. Although we
believe that our plans, intentions and expectations reflected in or suggested by these
forward-looking statements are reasonable, we cannot assure you that we will achieve or
realize these plans, intentions or expectations. Forward-looking statements are inherently
subject to risks, uncertainties and assumptions. Important factors that could cause results
or events to differ from current expectations are described in the section titled
“Risk Factors.”
Such
forward-looking statements should be regarded solely as our current plans, estimates and
beliefs. We do not intend, and expressly disclaim any obligation, to update any
forward-looking statements to reflect future events or circumstances after the date of this
prospectus supplement.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We
file annual, quarterly and special reports, proxy statements and other information with the
Commission. You may read and copy any document we file at the Commission’s public
reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for further information on the public reference room. Our Commission filings
are also available to the public over the Internet at the Commission’s Website at
“http://www.sec.gov.
We
have filed with the Commission a registration statement on Form S-3 to register the shares
being offered. This prospectus is part of that registration statement and, as permitted by
the Commission’s rules, does not contain all the information included in the
registration statement. For further information with respect to us and our common stock,
you should refer to the registration statement and to the exhibits and schedules filed as
part of the registration statement, as well as the documents discussed
below.
The
Commission 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 information incorporated by reference is an important part of this
prospectus, and information that we file later with the Commission will automatically
update or supersede this information.
This
prospectus may contain summaries of contracts or other documents. Because they are
summaries, they will not contain all of the information that may be important to you. If
you would like complete information about a contract or other document, you should read the
copy filed as an exhibit to the registration statement or incorporated in the registration
statement by reference.
We
incorporate by reference the documents listed below and any future filings we will make
with the Commission under Sections 13(a), 13(c), or 15(d) of the Securities Exchange Act of
1934 (File No. 0-27494) until all of the shares are sold, except that we do not incorporate
by reference any document or portion of a document that is deemed, under Commission rules,
not to be filed.
12
|
·
|
Annual Report on Form 10-K for the fiscal year
ended June 30, 2006 (as amended on Form 10-K/A filed with the Commission on
October 3, 2006 and October 5, 2006);
|
|
·
|
Quarterly Reports on Form 10-Q for the quarterly
periods ended September 30, 2006, December 31, 2006 (as amended on Form 10-Q/A
filed with the Commission on March 2, 2007) and March 31, 2007.
|
|
·
|
Current Reports on Form 8-K filed with the
Commission on July 6, 2006, August 2, 2006, October 24, 2006, November 28,
2006, December 8, 2006, February 28, 2007, May 5, 2007, July 3, 200, July 6,
2007, September 5, 2007, September
7, 2007
and September 21, 2007
and Current
Report on Form 8-K/As filed with the Commission on February 14, 2007 and June
1, 2007.
|
|
·
|
The description of our common stock contained in
the Registration Statement on Form 8-A, which was filed with the
Commission
on January 1, 1996 (File No.
0-24624) as amended on Form 8-A/A (filed on January 16, 1996).
|
Any
statement contained herein or in a document filed by us and incorporated or deemed
incorporated by reference shall be deemed modified or superseded for purposes hereof to the
extent that a statement contained in this prospectus or in any other subsequently filed
document that also is, or deemed to be, incorporated by reference modifies or supersedes
such statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this prospectus, except as so modified or
superseded.
You
may request a copy of these filings, at no cost, by writing to us at 1900 Glades Road,
Suite 435, Boca Raton, FL 33431, (561) 479-0040, Attention: Clive Kabatznik or by
e-mail at clive@silverstarholdings.com.
You
can review and copy the registration statement, its exhibits and schedules, as well as the
documents listed below, at the public reference facilities maintained by the Commission as
described above.
USE OF PROCEEDS
The
selling shareholders are selling all of the shares covered by this Prospectus for their own
account. Accordingly, we will not receive any proceeds from the sale of the
shares.
We
may receive proceeds in connection with the exercise of warrants, the underlying shares of
which may be sold by the selling shareholders. Although the timing of any such proceeds are
uncertain, such proceeds, if received, will be used for working
capital
DIVIDEND POLICY
We
have never declared or paid cash dividends on our common stock. We currently anticipate
that we will retain all available funds for use in the operation of our business. As such,
we do not anticipate paying any cash dividends on our common stock in the foreseeable
future.
13
SELLING SHAREHOLDERS
The
shares of common stock being sold by the selling shareholders consist of: (i)
4,149,396
shares of our common stock that we issued to
certain selling shareholders at the Second Closing on September 6, 2007; (ii)
2,904,593
shares of our common stock issuable upon the
exercise of warrants to purchase our common stock that we issued to the selling
shareholders in connection with their purchase of shares of our common stock at the Second
Closing
on September 6, 2007; and (iii) 87,137
additional shares of our common stock issuable upon the
exercise of warrants to purchase our common stock that we issued to the placement agent in
connection with the Second Closing on September 6, 2007.
The
table below has been prepared based upon the information furnished to us by the selling
shareholders as of September 12, 2007. We have also agreed to prepare and file amendments
and supplements to the registration statement to the extent necessary to keep the
registration statement effective for the period of time required under our agreements with
the selling shareholders.
Beneficial
ownership is determined in accordance with the rules of the Commission
and includes voting or investment power with respect to
shares of our common stock. Shares of common stock issuable upon exercise of warrants or
stock options that are exercisable within 60 days after September 12, 2007 are deemed to be
beneficially owned by the person holding the warrants or stock options for purposes of
calculating the percentage ownership of that person but are not deemed outstanding for
calculating the percentage ownership of any other person. Unless otherwise indicated below,
to our knowledge, all persons named in this table have sole voting and investment power
with respect to their shares of common stock, except to the extent authority is shared by
spouses under applicable law. The inclusion of any shares in this table does not constitute
an admission of beneficial ownership for the person named below.
We
do not know when or in what amounts a selling shareholder may offer shares for sale. The
selling shareholders might not sell any or all of the shares offered by this prospectus.
Because the selling shareholders may offer all or some of the shares pursuant to this
offering, and because there are currently no agreements, arrangements or understandings
with respect to the sale of any of the shares, we cannot estimate the number of the shares
that will be held by the selling shareholders after completion of the offering. However,
for purposes of this table, we have assumed that, after completion of the offering, none of
the shares covered by this prospectus will be held by the selling
shareholders.
None
of the selling shareholders are broker-dealers except for the selling shareholders
specified on the table below as a broker-dealer or an affiliate of a broker-dealer. We have
been advised that each of such selling shareholders purchased our common stock in the
ordinary course of business, not for resale, and that none of such selling shareholders
had, at the time of purchase, any agreements or understandings, directly or indirectly,
with any person to distribute the common stock.
To
our knowledge, none of the selling shareholders has, or has had within the past three
years, any position, office or other material relationship with us or any of our
predecessors or affiliates, other than their ownership of shares described below
and except that Clive Kabatznik currently serves as our
President, Chief Executive Officer, Chief Financial Officer and Vice Chairman of the Board
and Michael
Levy serves as our Chairman of the
Board.
14
Selling Shareholders(1)
|
Shares of Common
Stock Beneficially
Owned Prior to
Offering
|
Percent of
Class Owned
Prior to
Offering
|
Shares of Common Stock
to be Sold
|
Beneficial
Ownership
After Offering
if All Shares
are Sold
|
Percent of
Class Owned
After Offering
if All Shares
are Sold
|
Joseph W. &
Patricia G. Adams
|
|
504,456
|
(2)
|
2.7
|
%
|
58,619
|
(3)
|
469,974
|
|
2.6
|
%
|
Matthew Abrams
|
|
17,241
|
(4)
|
*
|
|
29,310
|
(5)
|
—
|
|
—
|
|
Sarah Adams
|
|
17,241
|
(6)
|
*
|
|
29,310
|
(7)
|
—
|
|
—
|
|
Basso Fund Ltd.
(8)
|
|
144,828
|
(9)
|
*
|
|
160,799
|
(10)
|
50,241
|
(11)
|
*
|
|
Basso Multi-Strategy Holding
Fund Ltd. (12)
|
|
820,689
|
(13)
|
4.5
|
%
|
911,180
|
(14)
|
284,701
|
(15)
|
1.6
|
%
|
Bristol Investment Fund,
Ltd. (16)
|
|
172,413
|
(17)
|
1.0
|
%
|
191,424
|
(18)
|
59,811
|
(19)
|
*
|
|
Capital Ventures
International #(20)
|
|
345,000
|
(21)
|
1.9
|
%
|
383,041
|
(22)
|
119,682
|
(23)
|
*
|
|
Credit Suisse Securities
(USA) LLC +(24)
|
|
689,655
|
(25)
|
3.8
|
%
|
765,698
|
(26)
|
239,245
|
(27)
|
1.3
|
%
|
Enable Growth Partners LP
(28)
|
|
586,207
|
(29)
|
3.2
|
%
|
650,844
|
(30)
|
203,358
|
(31)
|
1.1
|
%
|
Enable Opportunity Partners
LP (28)
|
|
68,966
|
(32)
|
*
|
|
76,572
|
(33)
|
23,924
|
(34)
|
*
|
|
Heller Capital Investments
(35)
|
|
500,000
|
(36)
|
2.8
|
%
|
555,132
|
(37)
|
173,452
|
(38)
|
1.0
|
%
|
Clive Kabatznik
|
|
1,573,572
|
(39)
|
8.7
|
%
|
234,483
|
(40)
|
1,435,641
|
(39)
|
7.9
|
%
|
Kircher Family Foundation
(41)
|
|
30,000
|
(42)
|
*
|
|
33,309
|
(43)
|
10,407
|
(44)
|
*
|
|
Kircher Family Irrevocable
Trust FBO Douglas S.
|
|
Kircher (41)
|
|
35,000
|
(45)
|
*
|
|
38,861
|
(46)
|
12,141
|
(47)
|
*
|
|
Kircher Family Trust FBO
Scott E. Kircher (41)
|
|
35,000
|
(48)
|
*
|
|
38,861
|
(49)
|
12,141
|
(50)
|
*
|
|
Kircher Family Trust
(41)
|
|
75,000
|
(51)
|
*
|
|
83,272
|
(52)
|
26,017
|
(53)
|
*
|
|
Michael Levy
|
|
798,885
|
(54)
|
4.4
|
%
|
117,241
|
(55)
|
729,920
|
(54)
|
4.0
|
%
|
Mara Gateway Associates, LP
(56)
|
|
200,000
|
(57)
|
1.1
|
%
|
222,053
|
(58)
|
69,381
|
(59)
|
*
|
|
Richard Molinsky
|
|
311,058
|
(60)
|
1.7
|
%
|
166,541
|
(61)
|
213,093
|
(62)
|
1.2
|
%
|
Newport Micro Fund II, LLC
(63)
|
|
100,000
|
(64)
|
*
|
|
111,027
|
(65)
|
34,690
|
(66)
|
*
|
|
Otago Partners, LLC
#(67)
|
|
103,448
|
(68)
|
*
|
|
114,856
|
(69)
|
35,886
|
(70)
|
*
|
|
Pierce Diversified Strategy
Master Fund LLC, Ena (28)
|
|
34,483
|
(71)
|
*
|
|
38,286
|
(72)
|
11,962
|
(73)
|
*
|
|
RHP Master Fund, Ltd.
(74)
|
|
150,690
|
(75)
|
*
|
|
167,308
|
(76)
|
52,274
|
(77)
|
*
|
|
Rockmore Investment Master
Fund Ltd. (78)
|
|
137,931
|
(79)
|
*
|
|
153,140
|
(80)
|
47,849
|
(81)
|
*
|
|
Roth Capital Partners, LLC
+(82)
|
|
-
|
(83)
|
-
|
|
87,137
|
(84)
|
-(85)
|
|
-
|
|
Slater Equity Partners, LP
(86)
|
|
365,517
|
(87)
|
2.0
|
%
|
405,821
|
(88)
|
126,799
|
(89)
|
*
|
|
Slater Equity Partners
Offshore Fund Ltd. (86)
|
|
48,275
|
(90)
|
*
|
|
53,600
|
(91)
|
16,746
|
(92)
|
*
|
|
Truk International Fund, LP
(93)
|
|
24,137
|
(94)
|
*
|
|
26,799
|
(95)
|
8,373
|
(96)
|
*
|
|
Truk Opportunity Fund, LLC
(97)
|
|
148,275
|
(98)
|
*
|
|
164,626
|
(99)
|
51,437
|
(100)
|
*
|
|
Vision Opportunity Master
Fund, Ltd. (101)
|
|
965,517
|
(102)
|
5.3
|
%
|
1,071,976
|
(103)
|
334,943
|
(104)
|
1.8
|
%
|
______________________________
*Less
than 1%
# Broker-Dealer Affiliate
+ Broker-Dealer
15
(1)
The term “selling shareholder” includes donees, pledgees, transferees or other
successors-in-interest selling shares received after the date of this prospectus from a
selling shareholder as a gift, pledge, partnership distribution or other non-sale related
transfer.
(2)
Does not include 24,137 shares of common stock issuable upon the exercise of
Warrants.
(3) Includes
24,137
shares of common stock issuable upon the
exercise of Warrants.
(4)
Does not include 12,069 shares
of common stock issuable upon the exercise of Warrants.
(5) Includes
12,069
shares of common stock issuable upon the
exercise of Warrants.
(6) Does
not include 12,069 shares of common stock issuable upon the exercise of
Warrants.
(7) Includes
12,069
shares of common stock issuable upon the
exercise of Warrants.
(8)
Basso Capital Management, L.P. ("Basso") is the Investment Manager to Basso Fund Ltd.
(“Basso Fund”). Howard Fischer is a managing member of Basso GP LLC, the
General Partner of Basso. Mr. Fischer has ultimate responsibility for trading with respect
to Basso Fund.
(9) Does
not include 101,380
shares of common stock issuable
upon the exercise of Warrants.
(10)
Includes 66,212
shares of common stock issuable upon
the exercise of Warrants.
(11) Does
not include 35,168 shares of common stock issuable upon the exercise of
Warrants.
(12)
Basso Capital Management, L.P. is the Investment Manager to Basso Multi-Strategy Holding
Fund Ltd. (“Basso Multi”). Howard Fischer is a managing member of Basso GP LLC,
the General Partner of Basso. Mr. Fischer has ultimate responsibility for trading with
respect to Basso Multi.
(13) Does
not include 574,482
shares of common stock issuable
upon the exercise of Warrants.
(14)
Includes 375,192
shares of common stock issuable upon
the exercise of Warrants.
(15) Does
not include 199,290 shares of common stock issuable upon the exercise of
Warrants.
(16)
Bristol Capital Advisors, LLC (“BCA”) is the Investment Advisor to Bristol
Investment Fund, Ltd. (“Bristol”). Paul Kessler is the manager of BCA and as
such has voting and investment control over the securities held by Bristol. Mr. Kessler
disclaims beneficial ownership of these securities.
(17) Does
not include 120,689 shares of common stock issuable upon the exercise of
Warrants.
(18)
Includes 78,822
shares of common stock issuable upon
the exercise of Warrants.
(19) Does
not include 41,867 shares of common stock issuable upon the exercise of
Warrants.
(20)
Heights Capital Management, Inc., the authorized agent of Capital Ventures International
(“CVI”), has discretionary authority to vote and dispose of the shares held by
CVI and may be deemed to be the beneficial owner of these shares. Martin Kobinger, in his
capacity as Investment Manager of Heights Capital Management, Inc., may also be deemed to
have investment discretion and voting power over the shares held by CVI. Mr. Kobinger
disclaims any such beneficial ownership of these shares.
(21) Does
not include 241,500 shares of common stock issuable upon the exercise of
Warrants.
(22)
Includes 157,723
shares of common stock issuable upon
the exercise of Warrants.
16
(23) Does
not include 83,777 shares of common stock issuable upon the exercise of
Warrants.
(24)
The natural person who has voting and dispositive power for these shares is Jeff Andreski,
Managing Director of Credit Suisse Securities (USA) LLC. Mr. Andreski disclaims beneficial
ownership of the shares except for his pecuniary interest. Credit Suisse Securities (USA)
LLC is a broker-dealer and, accordingly, an underwriter. Credit Suisse Securities (USA) LLC
has indicated to the issuer that it did not receive the securities as compensation for
investment banking services and the securities were acquired in the ordinary course of
business, and that at the time of the acquisition of securities, Credit Suisse Securities
(USA) LLC had no agreements or understandings, directly or indirectly, with any party to
distribute the securities.
(25) Does
not include 482,759 shares of common stock issuable upon the exercise of
Warrants.
(26)
Includes 315,288
shares of common stock issuable upon
the exercise of Warrants.
(27) Does
not include 167,471 shares of common stock issuable upon the exercise of
Warrants.
(28)
Mitch Levine maintains the power to vote or dispose of the shares of common stock held by
Enable Growth Partners LP, Enable Opportunity Partners LP and Pierce Diversified Strategy
Master Fund LLC, Ena.
(29) Does
not include 410,345 shares of common stock issuable upon the exercise of
Warrants.
(30)
Includes 267,995
shares of common stock issuable upon
the exercise of Warrants.
(31) Does
not include 142,350 shares of common stock issuable upon the exercise of Warrants.
(32) Does not include 48,276 shares of common stock issuable
upon the exercise of Warrants.
(33)
Includes 31,530
shares of common stock issuable upon
the exercise of Warrants.
(34) Does
not include 16,746 shares of common stock issuable upon the exercise of
Warrants.
(35) Ronald
I. Heller maintains the power to vote or dispose of the shares of common stock held by
Heller Capital Investments.
(36) Does
not include 350,000 shares of common stock issuable upon the exercise of
Warrants.
(37)
Includes 228,584
shares of common stock issuable upon
the exercise of Warrants.
(38) Does
not include 121,416 shares of common stock issuable upon the exercise of
Warrants.
(39) Includes
100,000 shares of common stock issuable upon the exercise of options, 500,000 of which are
immediately exercisable.
(40) Includes
96,552 shares of common stock issuable upon the exercise of
Warrants.
(41)
Stephen C. Kircher maintains the power to vote or dispose of the shares of common stock
held by the Kircher Family Foundation, Kircher Family Irrevocable Trust FBO Douglas S.
Kircher, Kircher Family Trust FBO Scott E. Kircher, and Kircher Family
Trust.
(42) Does
not include 21,000 shares of common stock issuable upon the exercise of
Warrants.
(43)
Includes 13,716
shares of common stock issuable upon
the exercise of Warrants.
17
(44) Does
not include 7,284 shares of common stock issuable upon the exercise of
Warrants.
(45) Does
not include 24,500 shares of common stock issuable upon the exercise of
Warrants.
(46)
Includes 16,002
shares of common stock issuable upon
the exercise of Warrants.
(47) Does
not include 8,498
shares of common stock issuable upon
the exercise of Warrants.
(48) Does
not include 24,500 shares of common stock issuable upon the exercise of
Warrants.
(49)
Includes 16,002
shares of common stock issuable upon
the exercise of Warrants.
(50) Does
not include 8,498 shares of common stock issuable upon the exercise of
Warrants.
(51) Does
not include 52,500 shares of common stock issuable upon the exercise of
Warrants.
(52)
Includes 34,289
shares of common stock issuable upon
the exercise of Warrants.
(53) Does
not include 18,211 shares of common stock issuable upon the exercise of
Warrants.
(54) Includes
70,000 shares of common stock issuable upon the exercise of options that are immediately
exercisable.
(55)
Includes
48,276 shares of common stock issuable upon
the exercise of Warrants.
(56) Lisa
Clark maintains the power to vote or dispose of the shares of common stock held by Mara
Gateway Associates, LP.
(57) Does
not include 140,000 shares of common stock issuable upon the exercise of
Warrants.
(58)
Includes 91,434
shares of common stock issuable upon
the exercise of Warrants.
(59) Does
not include 48,566 shares of common stock issuable upon the exercise of
Warrants.
(60) Does
not include 105,000 shares of common stock issuable upon the exercise of
Warrants.
(61)
Includes 68,576
shares of common stock issuable upon
the exercise of Warrants.
(62) Does
not include 36,424 shares of common stock issuable upon the exercise of
Warrants.
(63)
J. Scott Liolios maintains the power to vote or dispose of the shares of common stock held
by Newport Micro Fund II, LLC.
(64) Does
not include 70,000 shares of common stock issuable upon the exercise of
Warrants.
(65)
Includes 45,717
shares of common stock issuable upon
the exercise of Warrants.
(66) Does
not include 24,283 shares of common stock issuable upon the exercise of
Warrants.
(67)
Lindsay A. Rosenwald, M.D. is the managing member of Otago Partners, LLC. Dr. Rosenwald is
also the sole shareholder and chairman of Paramount BioCapital, Inc., an NASD member
broker-dealer, and Paramount BioCapital Asset Management, Inc., an investment adviser
registered with the Commission.
(68) Does
not include 72,414 shares of common stock issuable upon the exercise of
Warrants.
18
(69)
Includes 47,294
shares of common stock issuable upon
the exercise of Warrants.
(70) Does
not include 25,120 shares of common stock issuable upon the exercise of
Warrants.
(71) Does
not include 24,138 shares of common stock issuable upon the exercise of
Warrants.
(72)
Includes 15,765
shares of common stock issuable upon
the exercise of Warrants.
(73) Does
not include 8,373 shares of common stock issuable upon the exercise of
Warrants.
(74)
RHP Master Fund, Ltd. is a party to an investment management agreement with Rock Hill
Investment Management, L.P., a limited partnership of which the general partner is RHP
General Partner, LLC. Pursuant to such agreement, Rock Hill Investment Management directs
the voting and disposition of shares owned by RHP Master Fund. Messrs. Wayne Bloch and
Peter Lockhart own all shares of the interests in RHP General Partners. The aforementioned
entities and individuals disclaim beneficial ownership of the Company’s securities
owned by the RHP Master Fund.
(75) Does
not include 105,483
shares of common stock issuable
upon the exercise of Warrants.
(76)
Includes 68,892
shares of common stock issuable upon
the exercise of Warrants.
(77) Does
not include 36,591 shares of common stock issuable upon the exercise of
Warrants.
(78)
Rockmore Capital, LLC (“Rockmore Capital”) and Rockmore Partners, LLC
(“Rockmore Partners”), each a limited liability company formed under the laws
of the State of Delaware, serve as the investment manager and general partner,
respectively, to Rockmore Investments (US) LP, a Delaware limited partnership, which
invests all of its assets through Rockmore Investment Master Fund Ltd., an exempted company
formed under the laws of Bermuda (“Rockmore Master Fund”). By reason of such
relationships, Rockmore Capital and Rockmore Partners may be deemed to share dispositive
power over the shares of our common stock owned by Rockmore Master Fund. Rockmore Capital
and Rockmore Partners disclaim beneficial ownership of such shares of our common stock.
Rockmore Partners has delegated authority to Rockmore Capital regarding the portfolio
management decisions with respect to the shares of common stock owned by Rockmore Master
Fund and, as of July 16, 2007, Mr. Bruce T. Bernstein and Mr. Brian Daly, as officers of
Rockmore Capital, are responsible for the portfolio management decisions of the shares of
common stock owned by Rockmore Master Fund. By reason of such authority, Messrs. Bernstein
and Daly may be deemed to share dispositive power over the shares of our common stock owned
by Rockmore Master Fund. Messrs. Bernstein and Daly disclaim beneficial ownership of such
shares of our common stock and neither of such persons has any legal right to maintain such
authority. No other person has sole or shared voting or dispositive power with respect to
the shares of our common stock as those terms are used for purposes under Regulation 13D-G
of the Securities Exchange Act of 1934, as amended. No person or “group” (as
that term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended, or
the Commission’s Regulation 13D-G) controls Rockmore Master
Fund.
(79) Does
not include 96,552 shares of common stock issuable upon the exercise of
Warrants.
(80)
Includes 63,058
shares of common stock issuable upon
the exercise of Warrants.
(81) Does
not include 33,494 shares of common stock issuable upon the exercise of
Warrants.
(82)
Byron Roth, the chief executive officer, and Gordon Roth, the chief financial officer,
share voting and investment power over the securities held by Roth Capital Partners,
LLC.
(83) Does
not include 130,344 shares of common stock issuable upon the exercise of
Warrants.
19
(84)
Consists of 87,137
shares of common stock issuable
upon the exercise of Warrants.
(85) Does
not include 43,207 shares of common stock issuable upon the exercise of
Warrants.
(86)
Steven L. Martin maintains the power to vote or dispose of the shares of common stock held
by Slater Equity Partners, LP and Slater Equity Partners Offshore Fund
Ltd.
(87) Does
not include 255,862 shares of common stock issuable upon the exercise of
Warrants.
(88)
Includes 167,103
shares of common stock issuable upon
the exercise of Warrants.
(89) Does
not include 88,759 shares of common stock issuable upon the exercise of
Warrants.
(90) Does
not include 33,793 shares of common stock issuable upon the exercise of
Warrants.
(91)
Includes 22,071
shares of common stock issuable upon
the exercise of Warrants.
(92) Does
not include 11,722 shares of common stock issuable upon the exercise of
Warrants.
(93)
Michael E. Fein and Stephen E. Saltzstein, as principals of Atoll Asset Management, LLC,
the Managing Member of Truk International Fund, LP, exercise investment and voting control
over the securities owned by Truk International Fund, LP. Both Mr. Fein and Mr. Saltzstein
disclaim beneficial ownership of the securities owned by Truk International Fund,
LP.
(94) Does
not include 16,896 shares of common stock issuable upon the exercise of
Warrants.
(95)
Includes 11,035
shares of common stock issuable upon
the exercise of Warrants.
(96) Does
not include 5,861 shares of common stock issuable upon the exercise of
Warrants.
(97)
Michael E. Fein and Stephen E. Saltzstein, as principals of Atoll Asset Management, LLC,
the Managing Member of Truk Opportunity Fund, LLC, exercise investment and voting control
over the securities owned by Truk Opportunity Fund, LLC. Both Mr. Fein and Mr. Saltzstein
disclaim beneficial ownership of the securities owned by Truk Opportunity Fund,
LLC.
(98) Does
not include 103,793 shares of common stock issuable upon the exercise of
Warrants.
(99)
Includes 67,788
shares of common stock issuable upon
the exercise of Warrants.
(100) Does
not include 36,005 shares of common stock issuable upon the exercise of
Warrants.
(101)
Adam Benowitz maintains the power to vote or dispose of the shares of common stock held by
Vision Opportunity Master Fund, Ltd.
(102) Does
not include 675,862 shares of common stock issuable upon the exercise of
Warrants.
(103)
Includes 441,402
shares of common stock issuable upon
the exercise of Warrants.
(104) Does
not include 234,460
shares of common stock issuable
upon the exercise of Warrants.
20
DESCRIPTION OF SECURITIES
Our
authorized capital stock consists of an aggregate of 50,000,000 shares of common stock, par
value $.01 per share, 2,000,000 shares of Class B common stock, par value $.01 per
share, and 5,000,000 shares of Preferred Stock, par value $.01 per share. As
of September 12, 2007, 18,127,469
shares of
our common stock and no shares of our Class B common stock were outstanding. The
following statements describe the material provisions of the securities being registered
hereby and certain other of our securities. See “Anti-Takeover Protections” and
“Differences in Corporate Law” for a description of the Company’s
Memorandum of Association, Bye-laws and The Companies Act 1981 of Bermuda, regarding
anti-takeover provisions and related matters affecting us. Such statements and disclosure
do not purport to be complete and are qualified in their entirety by reference to the full
Memorandum of Association and Bye-laws which are exhibits to the Company’s
Registration Statement of which this Prospectus is a part.
Common
Stock
Holders of our common stock have one vote per share on each
matter submitted to a vote of the shareholders and a ratable right to our net assets upon
liquidation. Holders of our common stock do not have preemptive rights to purchase
additional shares of our common stock or other subscription rights. Our common stock
carries no conversion rights and is not subject to redemption or to any sinking fund
provisions. All shares of our common stock are entitled to share equally in dividends from
legally available sources as determined by our Board of Directors, subject to any
preferential dividend rights of our preferred stock. Upon our dissolution or liquidation,
whether voluntary or involuntary, holders of our common stock are entitled to receive our
assets available for distribution to the shareholders, subject to the preferential rights
of our preferred stock. All of the shares of our common stock offered hereby are validly
authorized and issued, fully paid and non-assessable.
Class
B Common Stock
Our
Class B common stock and our common stock are substantially identical on a share-for-share
basis, except that the holders of our Class B common stock have five votes per share
on each matter considered by shareholders, and the holders of our common stock have one
vote per share on each matter considered by shareholders, and except that the holders of
each class will vote as a separate class with respect to any matter requiring class voting
by The Companies Act 1981 of Bermuda.
Each
share of our Class B common stock is automatically converted into one share of common
stock upon:
|
·
|
the death of the original holder, or, if such
shares are subject to a shareholders agreement or voting trust granting the
power to vote such shares to another original holder of our Class B common
stock, then upon the death of such other original holder; or
|
|
·
|
the sale or transfer to any person other than the
following transferees:
|
|
o
|
the spouse of a holder of Class B common
stock;
|
|
o
|
a trust for the sole benefit of a Class B common
shareholder's lineal descendants, including adopted children;
|
|
o
|
a partnership made up exclusively of Class B
common shareholders and their lineal descendants, including adopted children or
a corporation wholly-owned by a holder of Class B common stock and their
lineal descendants; and
|
|
o
|
any other holder of Class B common
stock.
|
21
The
difference in voting rights increases the voting power of the holders of Class B
common stock and accordingly has an anti-takeover effect. The existence of our Class B
common stock may make us a less attractive target for a hostile takeover bid or render more
difficult or discourage a merger proposal, an unfriendly tender offer, a proxy contest, or
the removal of incumbent management, even if such transactions were favored by our
shareholders other than the holders of Class B common stock. Thus, the shareholders
may be deprived of an opportunity to sell their shares at a premium over prevailing market
prices in the event of a hostile takeover bid. Those seeking to acquire us through a
business combination will be compelled to consult first with the holders of Class B common
stock, if any,
in order to negotiate the terms of such
business combination. Any such proposed business combination will have to be approved by
our Board of Directors, which may be under the control of the holders of Class B
common stock, and if shareholder approval were required, the approval of the holders of
Class B common stock will be necessary before any such business combination can be
consummated.
Preferred
Stock
We
are authorized to issue up to 5,000,000 shares of preferred stock. Our Board of Directors
has the authority to issue this preferred stock in one or more series and to fix the number
of shares and the relative rights, conversion rights, voting rights and terms of
redemption, including sinking fund provisions, and liquidation preferences, without further
vote or action by the shareholders. Issuing shares of preferred stock with voting rights
could affect the voting rights of the holders of our common stock by increasing the number
of outstanding shares having voting rights, and by the creation of another class or series
with voting rights. If our Board of Directors authorizes the issuance of shares of
preferred stock with conversion rights, the number of shares of common stock outstanding
could potentially be increased. Issuance of preferred stock could, under certain
circumstances, have the effect of delaying or preventing a change in control and may
adversely affect the rights of holders of common stock. Also, preferred stock could
have preferences over the common stock and other series of preferred stock with respect to
dividend and liquidation rights. We currently have no plans to issue any preferred
stock.
Anti-Takeover
Protections
The
voting provisions of our common stock and Class B common stock and the broad
discretion conferred upon our Board of Directors with respect to the issuance of series of
preferred stock, including with respect to voting rights, could substantially impede the
ability of one or more shareholders acquiring sufficient influence over the election of
directors and other matters to effect a change in control or management, and our Board of
Directors’ ability to issue preferred stock could also be utilized to change our
economic and control structure. Those provisions, together with certain other provisions of
our Bye-laws summarized in the succeeding paragraph, may be deemed to have an anti-takeover
effect and may delay, defer or prevent a tender offer or takeover attempt that a
shareholder might consider in his, her or its best interest, including attempts that might
result in a premium over the market price for our common stock.
Our
Bye-laws establish an advance notice procedure for the nomination, other than by or at the
direction of our Board of Directors, of candidates for election as directors at annual
general meetings of shareholders. In general, notice of intent to nominate a director at
such meeting must be received by us not less than 90 days prior to the meeting and must
contain certain specified information concerning the person to be nominated and concerning
the shareholder submitting the proposal.
Differences
in Corporate Law
The
Companies Act 1981 of Bermuda differs in material respects from laws generally applicable
to United States corporations and their shareholders. Set forth below is a summary of
significant provisions of The Companies Act, including any modifications adopted pursuant
to our Bye-laws, applicable to us, which differ in general material respects from
provisions of Delaware corporate law. The following statements are summaries, and do not
purport to deal with all aspects of Bermuda law that may be relevant to us and our
shareholders.
22
Interested
Directors.
Our Bye-laws provide that any
transaction entered into by us in which a director has an interest is not voidable by us
nor can such director be liable to us for any profit realized pursuant to such transaction
provided the nature of the interest is disclosed at the first opportunity at a meeting of
directors, or in writing to the directors. Under Delaware law, no such transaction would be
voidable if:
|
·
|
the material facts as to such interested
directors’ relationship or interests are disclosed or are known to the
board of directors and the board in good faith authorizes the transaction by
the affirmative vote of a majority of the disinterested directors;
|
|
·
|
such material facts are disclosed or are known to the shareholders entitled to
vote on such transaction and the transaction is specifically approved in good
faith by vote of the shareholders; or
|
|
·
|
the transaction is fair as to the corporation as
of the time it is authorized, approved or ratified.
|
Under
Delaware law, such interested director could be held liable for any transaction for which
such director derived an improper personal benefit.
Merger
and Similar Arrangements.
We may merge with
another Bermuda exempted company or a company incorporated outside Bermuda and carry on
business within the objects of our Memorandum of Association. See “Description of
Securities - Certain Provisions of Bermuda Law.” In the event of a merger, a
shareholder may apply to a Bermuda court for a proper valuation of such shareholder’s
shares if such shareholder is not satisfied that fair value has been paid for such shares.
The court ordinarily would not disapprove a merger absent evidence of fraud or bad faith.
Under Delaware law, with certain exceptions, any merger, consolidation or sale of all or
substantially all the assets of a corporation must be approved by the board of directors
and a majority of the outstanding shares entitled to vote. Under Delaware law, a
shareholder of a corporation participating in certain major corporate transactions may,
under varying circumstances, be entitled to appraisal rights pursuant to which such
shareholder may receive cash in the amount of the fair market value of the shares held by
such shareholder, as determined by a court or by agreement of the corporation and the
shareholder, in lieu of the consideration such shareholder would otherwise receive in the
transaction. Delaware law does not provide shareholders of a corporation with voting or
appraisal rights when the corporation acquires another business through the issuance of its
stock or other consideration:
|
·
|
in exchange for the assets of the business to be
acquired;
|
|
·
|
in exchange for the outstanding stock of the corporation to be acquired; or
|
|
·
|
in a merger of the corporation to be acquired with a subsidiary of the
acquiring corporation.
|
Under
Bermuda law, our shareholders have the right to vote on:
|
·
|
any compromise or arrangement between us and our
shareholders;
|
|
·
|
a take-over scheme for 100% of our shares
enabling the compulsory acquisition of a 10% minority interest;
|
23
|
·
|
our discontinuance in Bermuda.
|
Takeover.
Bermuda law provides that where an offer is made for shares
of a company and, within four months of the offer the holders of not less than 90% of the
shares which are the subject of the offer accept, the offeror may by notice require the
nontendering shareholders to transfer their shares on the terms of the offer. Dissenting
shareholders may apply to the court within one month of the notice objecting to the
transfer. The burden is on the dissenting shareholders to show that the court should
exercise its discretion to enjoin the required transfer, which the court will be unlikely
to do unless there is evidence of fraud or bad faith or collusion as between the offeror
and the holders of the shares who have accepted the offer as a means of unfairly forcing
out minority shareholders. Delaware law provides that a parent corporation, by resolution
of its board of directors and without any shareholder vote, may merge with any 90% or more
owned subsidiary. Upon any such merger, dissenting shareholders of the subsidiary would
have appraisal rights.
Shareholder’s
Suit.
The rights of shareholders under Bermuda law
are not as extensive as the right of shareholders under legislation or judicial precedent
in many United States jurisdictions. Class actions and derivative actions are generally not
available to shareholders under the laws of Bermuda. However, the Bermuda courts ordinarily
would be expected to follow English case law precedent, which would permit a shareholder to
commence an action in our name to remedy a wrong done to us where the act complained of is
alleged to be beyond our corporate power or is illegal or would result in the violation of
our Memorandum of Association and Bye-laws. Our Bye-laws limit the right of securityholders
to bring an action against our officers and directors. Furthermore, consideration would be
given by the court to acts that are alleged to constitute a fraud against the minority
shareholders or where an act requires the approval of a greater percentage of our
shareholders than actually approved it. The winning party in such an action generally would
be able to recover a portion of attorneys fees incurred in connection with such action.
Class actions and derivative actions generally are available to shareholders under
Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions
not taken in accordance with applicable law. In such actions, the court has discretion to
permit the winning party to recover attorney fees incurred in connection with such
action.
Indemnification
of Directors.
We may indemnify our directors or
officers in their capacity as such in respect of any loss arising or liability attaching to
them by virtue of any rule of law in respect of any negligence, default, breach of
duty or breach of trust of which a director or officer may be guilty in relation to us
other than in respect of his own willful negligence, willful default, fraud or dishonesty.
Under Delaware law, a corporation may adopt a provision eliminating or limiting the
personal liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, except for breaches of the
director’s duty of loyalty, for acts or omission not in good faith or which involve
intentional misconduct or knowing violations of law, for improper payment of dividends or
for any transaction from which the director derived an improper personal benefit. Delaware
law has provisions and limitations similar to Bermuda regarding indemnification by a
corporation of its directors or officers, except that under Delaware law the statutory
rights to indemnification may not be as limited.
Inspection
of Corporate Records.
Members of the general
public have the right to inspect our public documents available at the office of the
Registrar of Companies in Bermuda which will include the Memorandum of Association,
including its objects and powers, and any alteration to the Memorandum of Association and
documents relating to an increase, reduction or other alteration of our share capital. The
shareholders have the additional right to inspect our Bye-laws, minutes of general meetings
and audited financial statements, which must be presented to the annual general meeting of
shareholders. Our register of shareholders is also open to inspection by shareholders
without charge, and to members of the public for a fee. We are required to maintain our
share register in Bermuda but may establish a branch register outside Bermuda. We are
required to keep at our registered office a register of its directors and officers which is
open for inspection by members of the public without charge. Bermuda law does not, however,
provide a general right for shareholders to inspect or obtain copies of any other corporate
records. Delaware law permits any shareholder to inspect or obtain copies of a
corporation’s shareholder list and its other books and records for any purpose
reasonably related to such person’s interest as a
shareholder.
24
Bermuda
Tax Considerations
The
following describes a summary of some of the material anticipated tax consequences of an
investment in our common stock under current Bermuda tax laws. This discussion does not
address the tax consequences under non-Bermuda tax laws and, accordingly, each prospective
investor should consult its own tax advisors regarding the tax consequences of an
investment in our common stock. The discussion is based upon laws and relevant
interpretation of current laws in effect, all of which are subject to
change.
Bermuda
Taxation
Currently,
there is no Bermuda:
|
·
|
corporation or profits tax;
|
payable
by us or our shareholders other than those who are ordinarily resident in Bermuda. We are
not subject to stamp or other similar duty on the issue, transfer or redemption of our
common stock.
We
have obtained an assurance from the Minister of Finance of Bermuda under the Exempted
Undertakings Tax Protection Act that, if there is enacted in Bermuda any legislation
imposing tax on any capital assets, gain or appreciation or any tax in the nature of estate
duty or inheritance tax, such tax shall not be applicable to us or any of our operations,
or to our shares or our other obligations until March 28, 2016. No reciprocal tax treaty
affecting us exists between Bermuda and the U.S.
As
an exempted company, we are liable to pay in Bermuda a registration fee based upon our
authorized share capital and the premium on our issued shares. The current annual fee
payable to the Bermuda government is $9,345.
Certain
Provisions of Bermuda Law
In
a September 1, 1995 letter to our Bermuda counsel, the Bermuda Monetary Authority
approved our application for “non-resident” status in Bermuda for exchange
control purposes.
The
issue of securities to persons regarded as resident outside Bermuda for exchange control
purposes and the subsequent transfer of securities between such persons may be effected
without specific consent under the Exchange Control Act 1972 and regulations thereunder.
Issues and transfers of up to 20% of our issued share capital from time to time to persons
regarded as resident in Bermuda for exchange control may also be effected without specific
prior approval under the Exchange Control Act 1972.
25
Consequently,
owners of our common stock who are non-residents of Bermuda for Bermuda exchange control
purposes are not restricted in the exercise of the rights to hold or vote their shares.
Because we have been designated as a non-resident for Bermuda exchange control purposes
there are no restrictions on our ability to transfer funds in and out of Bermuda or to pay
dividends to United States residents who are holders of our common stock, other than in
respect of local Bermuda currency.
In
accordance with Bermuda law, security certificates are only issued in the names of
corporations, partnerships or individuals. In the case of an applicant acting in a special
capacity, for example as a trustee, certificates may, at the request of the applicant,
record the capacity in which the applicant is acting. Notwithstanding the recording of any
such special capacity, we are not bound to investigate or incur any responsibility in
respect of the proper administration of any such trust.
We
will take no notice of any trust applicable to any of our securities whether or not we had
notice of such trust. Specifically, we have no obligation under Bermuda law to ensure that
a trustee who is holding our shares subject to a trust is properly carrying out the terms
of such trust.
As
an “exempted company”, we are exempt from Bermuda laws which restrict the
percentage of share capital that may be held by non-Bermudians. However, as an exempted
company, we may not participate in certain business transactions including:
|
·
|
the acquisition or holding of land in Bermuda,
except as required for our business and held by way of lease or tenancy for
terms of not more than 50 years;
|
|
·
|
the taking of mortgages on land in Bermuda to secure an amount in excess of
$50,000 without the consent of the Minister of Finance of Bermuda; or
|
|
·
|
the carrying on of business of any kind in
Bermuda other than with persons outside Bermuda, except in furtherance of our
business carried on outside Bermuda or under a license granted by the Minister
of Finance of Bermuda.
|
PLAN OF DISTRIBUTION
The selling shareholders and
any of their pledgees, donees, transferees, assignees and successors-in-interest may, from
time to time, sell any or all of their shares of our common stock on any stock exchange,
market or trading facility on which the shares are traded or in private transactions. These
sales may be at fixed or negotiated prices. The selling shareholders may use any one or
more of the following methods when selling shares:
|
·
|
ordinary brokerage transactions and transactions
in which the broker-dealer solicits investors;
|
|
·
|
block trades in which the broker-dealer will
attempt to sell the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
|
|
·
|
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;
|
26
|
·
|
to cover short sales made after the date that
this Registration Statement is declared effective by the Commission;
|
|
·
|
broker-dealers may agree with the Selling
Stockholders to sell a specified number of such shares at a stipulated price
per share;
|
|
·
|
a combination of any such methods of sale;
and
|
|
·
|
any other method permitted pursuant to applicable
law.
|
The selling shareholders may
also sell shares under Rule 144 under the Securities Act, if available, rather than under
this prospectus.
Broker-dealers engaged by the
selling shareholders may arrange for other brokers-dealers to participate in sales.
Broker-dealers may receive commissions or discounts from the selling shareholders (or, if
any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts
to be negotiated. The selling shareholders do not expect these commissions and discounts to
exceed what is customary in the types of transactions involved.
The selling shareholders may
from time to time pledge or grant a security interest in some or all of the shares owned by
them and, if they default in the performance of their secured obligations, the pledgees or
secured parties may offer and sell shares of our common stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus.
Upon the Company being notified
in writing by a selling shareholder that any material arrangement has been entered into
with a broker-dealer for the sale of our common stock through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a broker or
dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b)
under the Securities Act, disclosing (i) the name of each such selling shareholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at
which such the shares of our common stock were sold, (iv)the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set out or
incorporated by reference in this prospectus, and (vi) other facts material to the
transaction. In addition, upon the Company being notified in writing by a selling
shareholder that a donee or pledgee intends to sell more than 500 shares of our common
stock, a supplement to this prospectus will be filed if then required in accordance with
applicable securities law.
The selling shareholder also
may transfer the shares of our common stock in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling beneficial owners
for purposes of this prospectus.
The selling shareholder and any broker-dealers or agents that
are involved in selling the shares may be deemed to be “underwriters” within
the meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. Discounts, concessions, commissions
and similar selling expenses, if any, that can be attributed to the sale of Shares will be
paid by the selling shareholder and/or the purchasers. Each selling shareholder has
represented and warranted to the Company that it acquired the securities subject to this
registration statement in the ordinary course of such selling shareholder’s business
and, at the time of its purchase of such securities such selling shareholder had no
agreements or understandings, directly or indirectly, with any person to distribute any
such securities.
27
The Company has advised each
selling shareholder that it may not use shares registered on this Registration Statement to
cover short sales of our common stock made prior to the date on which this Registration
Statement shall have been declared effective by the Commission. If a selling shareholder
uses this prospectus for any sale of our common stock, it will be subject to the prospectus
delivery requirements of the Securities Act. The selling shareholders will be responsible
to comply with the applicable provisions of the Securities Act and Exchange Act, and the
rules and regulations thereunder promulgated, including, without limitation, Regulation M,
as applicable to such selling shareholders in connection with resales of their respective
shares under this Registration Statement.
The Company is required to pay
all fees and expenses incident to the registration of the shares, but the Company will not
receive any proceeds from the sale of our common stock. The Company has agreed to indemnify
the selling shareholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the securities
offered hereby will be passed upon Conyers Dill & Pearman, our Bermuda counsel.
EXPERTS
Our consolidated financial
statements at June 30, 2006 and 2005 and for each of the three years in the period ended
June 30, 2006 incorporated by reference in this prospectus and the registration statement
on Form S-3 have been audited by Rachlin Cohen & Holtz LLP, independent registered
public accounting firm, as set forth in their report thereon appearing therein. The
financial statements referred to above are included in reliance on such reports given upon
the authority of such firm as experts in accounting and auditing.
28
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND
DISTRIBUTION.
The following table sets forth
the various expenses which will be paid by us in connection with the issuance and
distribution of the securities being registered on this registration statement. All amounts
shown are estimates.
Filing fee for registration statement
|
$
546
|
Legal fees and expenses
|
$ 15,000
|
Accounting expenses
|
$ 10,000
|
Miscellaneous Expenses
|
$
5,000
|
Total
|
$
30,456
|
|
|
ITEM 15. INDEMNIFICATION OF DIRECTORS AND
OFFICERS.
Under Bermuda law and the registrant's Memorandum of Association and Bye-laws, the
directors, officers, liquidators and auditors of the registrant and their heirs, executors
and administrators are indemnified and held harmless out of the assets of the Company from
and against all actions, costs, charges, losses and expenses which they or any of them,
their heirs, executors or administrators, shall or may incur or sustain by or by reason of
any act done, concurred in or omitted in or about the execution of their duty, or supposed
duty, or in their respective offices or trusts, and none of them shall be answerable for
the acts, receipts, neglects or defaults of the others of them or for joining in any
receipts for the sake of conformity or for any loss, misfortune or damage which may happen
in the execution of their respective offices or trusts, or in relation thereto, provided
that, they are not entitled to indemnification in respect of any willful negligence,
willful default, fraud or dishonesty which may attach to them.
ITEM 16. EXHIBITS.
Exhibit
Number
|
Description
|
3.1
|
Memorandum of Association of the
Company
(1)
|
3.2
|
Amended and Restated Bye-Laws of
the Company
(
2
)
|
4.1
|
Indenture dated April 25, 1997 between the
Company and American Stock Transfer & Trust Company
(
3
)
|
4.2
|
Stock Option
Agreement
(
4
)
|
4.3
|
Registration Rights Agreement, dated October 19,
2006, between the Company and the purchaser named therein, as amended on June
28, 2007
(
5
)
|
4.4
|
Registration Rights Agreement, dated October 31,
2005, between the Company and the purchaser named therein as amended on June
28, 2007
(
6
)
|
4.5
|
Registration Rights Agreement, dated July 2,
2007, between the Company and the S
elling
Shareholders
(
7
)
|
4.6
|
Amended and Restated Variable Rate Secured
Convertible Debenture due October 31, 2008 in the principal amount of
$1,400,000
(
7
)
|
4.7
|
Amended and Restated Variable Rate Secured
Convertible Debenture due October 31, 2008 in the principal amount of
$3,600,000
(
7
)
|
10.1
|
Securities
Purchase Agreement, dated as of July 2, 2007,
among the Company and the Selling
Shareholders
(
7
)
|
10.2
|
Form of Warrant issued by the Company to each
Selling Shareholders
(
7
)
|
5.1
|
Opinion of
Conyers Dill & Pearman
|
23.1
|
Consent of Rachlin Cohen &
Holtz
|
23.2
|
Consent of
Conyers Dill & Pearman
(included in Exhibit
5.1)
|
_______________
(1) Incorporated by reference is the Company’s
Registration Statement on Form S-1 (No. 33-99180) (filed on November 9, 1995), as amended
on Form S-1/A No. 1, Form S-1/A No. 2, Form S-1/A No. 3 (filed on December 27, 1995,
January 16, 1996 and January 24, 1996, respectively) and Form 10-Q for the fiscal quarter
ended March 31, 2000.
(2) Incorporated by reference to the Company’s Current
Report on Form 8-K filed on September 9, 2007
(3) Incorporated by reference to the Company’s Current
Report on Form 8-K filed September 10, 1997.
(4) Incorporated by reference is the Company’s
Registration Statement on Form S-1 (No. 333-33561) filed on August 13, 1997 as amended on
Form S-1/A No. 1, Form S-1/A No. 2 and For S-1/A No. 3 filed on December 9, 1997, January
22, 1998 and February 11, 1998, respectively.
(5) Incorporated by reference to the Company’s Current
Report on Form 8-K filed October 24, 2006, as amended on Current Report on Form 8-K filed
July 3, 2007.
(6) Incorporated by reference to the Company’s Current Report on Form 8-K filed
November 4, 2005, as amended on Current Report on Form 8-K filed July 3, 2007.
(7) Incorporated by reference to the Company’s Current
Report on Form 8-K filed July 3, 2007.
ITEM 17. UNDERTAKINGS.
Item 512(a) of Regulation S-K.
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. Notwithstanding the foregoing, any increase or
decrease in the volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the effective
registration statement; and
(iii)
To include any material information with respect to the plan of distribution not previously
disclosed in this registration statement or any material change to such information in this
registration statement;
provided,
however
, that paragraphs (1)(i) and
(1)(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 with or furnished to
the Commission by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
2
(2) That, for the purposes of determining any liability under
the Securities Act, each 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 the 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.
(4) That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as
part of a registration statement relating 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 effectiveness.
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 is 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.
Item 512(b) of Regulation S-K.
The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each filing of the
registrant’s annual report pursuant to Section 13(a) or 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.
Item 512(h) of Regulation S-K.
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 indemnification provisions described herein, or otherwise,
the Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred or paid by
a director, officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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 on Form S-3 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boca Raton, State of
Florida on September 21, 2007.
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby
severally constitutes and appoints Clive Kabatznik and Michael Levy and each of them, his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments) to the
Registration Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite or necessary fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and confirming all that
each said attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement on
Form S-3 has been signed below by the following persons in the capacities indicated on the
date indicated.
Signature
|
Title
|
Date
|
/s/ Michael
Levy
Michael Levy
|
Chairman of the Board of Directors
|
September 21, 2007
|
/s/ Clive Kabatznik
Clive Kabatznik
|
President, Vice Chairman of the Board, President,
Chief Financial Officer, Controller and Director (Principal Executive Officer
and Principal Financial Officer)
|
September 21, 2007
|
/s/ Cornelius J. Roodt
Cornelius J. Roodt
|
Director
|
September 21, 2007
|
/s/ Douglas
Brisotti
Douglas Brisotti
|
Director
|
September 21, 2007
|
/s/ Edward Roffman
Edward Roffman
|
Director
|
September 21, 2007
|
4
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
_____________
EXHIBITS TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________
SILVERSTAR
HOLDINGS LTD.
(EXACT NAME OF ISSUER AS SPECIFIED
IN ITS CHARTER)
September
21
, 2007
Exhibit
Number
|
Description
|
3.1
|
Memorandum of Association of the
Company
(1)
|
3.2
|
Amended and Restated Bye-Laws of
the Company
(
2
)
|
4.1
|
Indenture dated April 25, 1997 between the
Company and American Stock Transfer & Trust Company
(
3
)
|
4.2
|
Stock Option
Agreement
(
4
)
|
4.3
|
Registration Rights Agreement, dated October 19,
2006, between the Company and the purchaser named therein, as amended on June
28, 2007
(
5
)
|
4.4
|
Registration Rights Agreement, dated October 31,
2005, between the Company and the purchaser named therein as amended on June
28, 2007
(
6
)
|
4.5
|
Registration Rights Agreement, dated July 2,
2007, between the Company and the S
elling
Shareholders
(
7
)
|
4.6
|
Amended and Restated Variable Rate Secured
Convertible Debenture due October 31, 2008 in the principal amount of
$1,400,000
(
7
)
|
4.7
|
Amended and Restated Variable Rate Secured
Convertible Debenture due October 31, 2008 in the principal amount of
$3,600,000
(
7
)
|
10.1
|
Securities
Purchase Agreement, dated as of July 2, 2007,
among the Company and the Selling
Shareholders
(
7
)
|
10.2
|
Form of Warrant issued by the Company to each
Selling Shareholders
(
7
)
|
5.1
|
Opinion of
Conyers Dill & Pearman
|
23.1
|
Consent of Rachlin Cohen &
Holtz
|
23.2
|
Consent of
Conyers Dill & Pearman
(included in Exhibit
5.1)
|
______________
(1) Incorporated by reference is the Company’s
Registration Statement on Form S-1 (No. 33-99180) (filed on November 9, 1995), as amended
on Form S-1/A No. 1, Form S-1/A No. 2, Form S-1/A No. 3 (filed on December 27, 1995,
January 16, 1996 and January 24, 1996, respectively) and Form 10-Q for the fiscal quarter
ended March 31, 2000.
(2) Incorporated by reference to the Company’s Current
Report on Form 8-K filed on September 9, 2007
(3) Incorporated by reference to the Company’s Current
Report on Form 8-K filed September 10, 1997.
(4) Incorporated by reference is the Company’s
Registration Statement on Form S-1 (No. 333-33561) filed on August 13, 1997 as amended on
Form S-1/A No. 1, Form S-1/A No. 2 and For S-1/A No. 3 filed on December 9, 1997, January
22, 1998 and February 11, 1998, respectively.
(5) Incorporated by reference to the Company’s Current
Report on Form 8-K filed October 24, 2006, as amended on Current Report on Form 8-K filed
July 3, 2007.
(6) Incorporated by reference to the Company’s Current Report on Form 8-K filed
November 4, 2005, as amended on Current Report on Form 8-K filed July 3, 2007.
(7) Incorporated by reference to the Company’s Current
Report on Form 8-K filed July 3, 2007.
Grafico Azioni Silverstar (NASDAQ:SSTR)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Silverstar (NASDAQ:SSTR)
Storico
Da Lug 2023 a Lug 2024