-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WivKGuhL0B9+v2zRlIbZ9b336jNF0SrYq9xKBw7HhQnIgBeYdbu0N1VWKtN+SB10 ER/eCycp9SpYnNoAaE0nbw== 0000892569-98-002301.txt : 19980817 0000892569-98-002301.hdr.sgml : 19980817 ACCESSION NUMBER: 0000892569-98-002301 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRISTOL RETAIL SOLUTIONS INC CENTRAL INDEX KEY: 0001016657 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLIES [5040] IRS NUMBER: 582235556 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: SEC FILE NUMBER: 333-50385 FILM NUMBER: 98686982 BUSINESS ADDRESS: STREET 1: 5000 BIRCH ST STREET 2: STE 205 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 7144750800 MAIL ADDRESS: STREET 1: 5000 BIRCH ST STREET 2: STE 205 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FORMER COMPANY: FORMER CONFORMED NAME: BRISTOL TECHNOLOGY SYSTEMS INC DATE OF NAME CHANGE: 19960924 S-3/A 1 AMENDMENT #3 TO FORM S-3 1 As filed with the Securities and Exchange Commission on August 14, 1998 Registration No. 333-50385 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 3 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 BRISTOL RETAIL SOLUTIONS, INC. (Exact name of registrant as specified in its charter) DELAWARE 5044 58-2235556 (State or other jurisdiction of (Primary standard industrial (I.R.S. Employer incorporation or organization) classification code number) Identification No.)
5000 BIRCH STREET, SUITE 205, NEWPORT BEACH, CALIFORNIA 92660 (949) 475-0800 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) RICHARD H. WALKER PRESIDENT BRISTOL RETAIL SOLUTIONS, INC. 5000 BIRCH STREET, SUITE 205, NEWPORT BEACH, CALIFORNIA 92660 (949) 475-0800 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: NICK E. YOCCA, ESQ. MICHAEL E. FLYNN, ESQ. MARK L. SKAIST, ESQ. STRADLING, YOCCA, CARLSON & RAUTH, A PROFESSIONAL CORPORATION 660 NEWPORT CENTER DRIVE, SUITE 1600 NEWPORT BEACH, CALIFORNIA 92660 PHONE: (949) 725-4000 FAX: (949) 725-4100 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement. --------------- If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration 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(d) 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. [ ] 2
CALCULATION OF REGISTRATION FEE =================================================================================================== TITLE OF EACH CLASS AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF OF SECURITIES TO BE REGISTERED OFFERING PRICE AGGREGATE OFFERING REGISTRATION REGISTERED (1) PER SHARE (2) PRICE (2) FEE =================================================================================================== Common Stock ($.001 par 1,218,342 $3.000 $3,655,026 (3) value) ===================================================================================================
(1) The number of shares of the Company's common stock, $.001 par value (the "Common Stock") registered hereunder includes 569,408 shares of Common Stock which are issued and outstanding, 175,000 shares of Common Stock which are issuable upon exercise of warrants to purchase shares of Common Stock (the "Warrants") and 473,934 shares of Common Stock which represents the Company's good faith estimate of a presently indeterminate number of shares which may be issued upon conversion of the Company's Series A Convertible Preferred Stock (the "Preferred Stock"). Such estimate was based on the assumption that all shares of Preferred Stock were converted on April 15, 1998 at a conversion price per share of Preferred Stock of $2.71, which conversion price represents seventy eight percent (78%) of the average of the five lowest closing bid prices of the Common Stock in the twenty-five (25) day trading period prior to April 15, 1998. Pursuant to Rule 416, this Registration Statement also covers an indeterminate number of additional shares of Common Stock which may become issuable upon conversion of the Preferred Stock by reason of reductions of the conversions price, in accordance with the terms of the Securities Purchase Agreement between the Company and Precision Capital Investors Limited Partnership I dated March 18, 1998 (the "Securities Purchase Agreement"). (2) The offering price is estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c), using the closing price reported by the Nasdaq SmallCap Market for the Common Stock on April 15, 1998 which was $3.000 per share. (3) A registration fee of $1,608.29 was previously paid to the Commission. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. 3 Dated August 13, 1998 PROSPECTUS BRISTOL RETAIL SOLUTIONS, INC. 1,218,342 SHARES OF COMMON STOCK, $.001 PAR VALUE This Prospectus (the "Prospectus") covers the registration for possible resale of 1,218,342 shares (the "Shares") of Common Stock, par value $.001 (the "Common Stock") of Bristol Retail Solutions, Inc., a Delaware corporation (the "Company") that have either been issued to, or that may in the future be issued to, certain stockholders of the Company (the "Selling Stockholders"), including shares of Common Stock issuable upon the conversion or exercise of shares of the Company's 6% convertible preferred stock (the "Preferred Stock") or warrants to purchase the Company's common stock (the "Warrants") that have been issued to certain of the Selling Stockholders. (The Shares, Preferred Stock and Warrants are referred to collectively as the "Securities"). Of the 1,218,342 Shares being registered hereby, 473,934 Shares will be issuable upon the conversion of 10,000 shares of the Preferred Stock. The Company issued the Preferred Stock on March 18, 1998 to Precision Capital Investors Limited Partnership I for an aggregate purchase price of $1,000,000. The shares of Preferred Stock will be converted into shares of Common Stock at a discount from the average of the lowest market trading price for any five days, consecutive or otherwise, during the twenty five (25) day period prior to conversion. See "Selling Stockholders" and "Plan of Distribution." Of the 1,218,342 Shares being registered hereby, 175,000 Shares will be issuable upon the exercise of outstanding warrants to purchase 175,000 shares of the Company's Common Stock. The Company issued the warrants on March 18, 1998. See "Selling Stockholders" and "Plan of Distribution." Of the 1,218,342 Shares being registered hereby, 569,408 were issued by the Company in May 1997 in connection with the Company's acquisition of Smyth Systems, Inc. The issuance of such shares was exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"). See "Selling Stockholders" and "Plan of Distribution." The distribution of the shares of Common Stock offered hereby may be effected from time to time in one or more transactions. All or a portion of the Common Stock offered by this Prospectus may be offered for sale, from time to time, by the Selling Stockholders, or by permitted transferees or successors of the Selling Stockholders, in private or negotiated transactions, in open market transactions on the National Association of Securities Dealers Automated Quotation SmallCap Market ("Nasdaq"), or on one or more exchanges or otherwise, or a combination of these methods, at prices and terms then obtainable, at fixed prices, at prices then prevailing at the time of sale, at prices related to such prevailing prices, or at negotiated prices, or otherwise. The shares of Common stock offered hereby may be sold by one or more of the following: (i) through underwriters; (ii) through dealers or agents (which may include underwriters) including: (a) a block trade in which the broker or dealer so engaged will attempt to sell the shares of Common Stock as agent, but may position and resell a portion of the block as principal to facilitate the transaction; (b) purchases by a broker or dealer and resale by such broker or dealer as a principal for its account pursuant to this Prospectus; (c) ordinary brokerage transactions and (d) transactions in which the broker solicits purchasers; or (iii) directly to one or more purchasers. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the Selling Stockholders. Concurrently with sales under this Prospectus, the Selling Stockholders may effect other sales of Common Stock under Rule 144 or other exempt resale transactions. The Selling Stockholders and any underwriters, dealers, brokers, or agents executing selling orders on behalf of the Selling Stockholders may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), in which event commissions received by such persons may be deemed to be underwriting commission under the Securities Act. 4 The Company will not receive any of the proceeds from the sale of the Common Stock offered hereby. To the extent required, the specific amount of Common Stock to be sold, the public offering price, the names of any such broker, dealer underwriter or agent, any applicable commission or discount with respect to the particular offer will be set forth in a Prospectus Supplement. The Company has agreed to bear substantially all expenses of registration of the Common Stock under federal and state securities laws, other than such expenses as are in the nature of commissions incurred in connection with the sale of shares of Common Stock by the Selling Stockholders, and to indemnify the Selling Stockholders against certain liabilities under the Securities Act. See "Plan of Distribution" and "Selling Stockholders." The Common Stock is traded on the Nasdaq SmallCap Market ("Nasdaq") under the symbol "BRTL". On July 20, 1998, the last reported sale price of the Common Stock was $2.4375 per share. _____________________________ THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. POTENTIAL PURCHASERS SHOULD NOT INVEST IN THESE SECURITIES UNLESS THEY CAN AFFORD A LOSS OF THEIR INVESTMENT HEREIN. SEE "RISK FACTORS" COMMENCING AT PAGE 6. _____________________________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is August 13, 1998 _________________ 2 5 ____________________________ TABLE OF CONTENTS
PAGE ---- AVAILABLE INFORMATION .......................................... 3 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ................ 4 THE COMPANY .................................................... 5 RISK FACTORS ................................................... 6 USE OF PROCEEDS ................................................ 12 SELLING STOCKHOLDERS ........................................... 12 PLAN OF DISTRIBUTION ........................................... 14 LEGAL MATTERS .................................................. 14 EXPERTS ........................................................ 14 LIMITATION ON LIABILITY AND DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES .. 15
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as a "small business issuer" as defined under Regulation S-B promulgated under the Securities Act. In accordance with the Exchange Act, the Company files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information may be inspected and copied at, and copies of such materials can be obtained at prescribed rates from, the Public Reference Branch of the Commission located at 450 Fifth Street, N.W., Washington, D.C. and at the Commission's Pacific Regional Office located at 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California, the Commission's Northeast Regional Office located at 7 World Trade Center Suite 1300, New York, New York and at the Commission's Midwest Regional Office located at Citicorp Center, 500 W. Madison Street Suite 1400, Chicago, Illinois. In addition, the Company has filed the registration statement and other filings pursuant to the Exchange Act with the Commission through its Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system, and such filings are publicly available through the Commission's site on the World Wide Web on the Internet, located at http://www.sec.gov. This Prospectus does not contain all of the information set forth in the Registration Statement on Form S-3 of which this Prospectus is a part and which the Company has filed with the Commission. For further information with respect to the Company and the securities offered hereby, reference is made to the Registration Statement, including the exhibits filed as a part thereof, copies of which can be inspected at, or obtained at prescribed rates from, the Public Reference Section of the Commission at the address set forth above. Additional updating information with respect to the Company may be provided in the future by means of appendices or supplements to this Prospectus. The Company's Common Stock and Class A Redeemable Common Stock Purchase Warrants are quoted on the Nasdaq SmallCap Market under the symbols "BRTL" and "BRTLW", respectively. Reports, proxy statements and other 3 6 information concerning the Company may be inspected at the National Association of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The documents listed below have been filed by the Company with the Commission under the Exchange Act and are incorporated by reference herein: a. The Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997, filed with the Commission on April 15, 1998 (and the amendments thereto filed with the Commission on April 16, 1998, June 11, 1998, August 5, 1998 and August 13, 1998). b. The Company's Quarterly Reports on Form 10-QSB for the quarter ended March 31, 1997, filed with the Commission on May 14, 1997, for the quarter ended June 30, 1997, filed with the Commission on August 13, 1997, for the quarter ended September 30, 1997, filed with the Commission on November 14, 1997, and for the quarter ended March 31, 1998, filed with the Commission on May 15, 1998 (and the amendment thereto filed with the Commission on June 11, 1998). c. The Company's Current Reports on Form 8-K filed January 15, 1997 (and the amendment thereto filed with the Commission on March 14, 1997), April 17, 1997, May 23, 1997 (and the amendment thereto filed with the Commission on July 30, 1997), May 29, 1997, June 12, 1997 (and the amendment thereto filed with the Commission on July 29, 1997), June 20, 1997 (and the amendments thereto filed with the Commission on August 12, 1997 and on June 11, 1998), July 21, 1997 and October 7, 1997. d. The description of the Company's Common Stock which is contained in the Company's registration statement on Form 8-A under the Exchange Act, filed with the Commission on October 28, 1996. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Prospectus and to be part hereof from the date of filing such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein, or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein, modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide, without charge, to each person to whom a copy of this Prospectus is delivered, upon written or oral request of such person, a copy of any and all of the information that has been or may be incorporated by reference herein (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents). Such requests should be directed to Bristol Retail Solutions, Inc., Attention: Chief Financial Officer, 5000 Birch Street, Suite 205, Newport Beach, California 92660, telephone number (949) 475-0800. 4 7 THE COMPANY The Company is a leading dealer of retail point-of-sale ("POS") systems in the United States with operations in 17 cities in eight states. The Company sells, installs, and supports POS systems, which retail establishments use to collect and process data at the "point-of-sale" during sales transactions with customers. The Company has installed systems in more than 15,400 retail locations, primarily in supermarkets, table-service and fast food restaurants, and golf courses and resorts, which are the three markets on which the Company currently focuses. The Company installs POS systems manufactured by NCR Corporation ("NCR"), International Business Machines Corp. ("IBM"), Matsushita Electronic Corporation of America ("Panasonic"), ICL Retail systems (*"ICL-Fujitsu"), Micro Systems, Incorporated ("Micros"), and several other manufacturers. The Company has developed and is marketing software specifically designed for golf course and resort applications and has license agreements with several software companies for specific applications for its other target markets. The Company plans to become a national distribution organization for POS systems through selective acquisitions of independent dealers and systems integrators that sell, install, and support POS systems for use in retail establishments. The Company has acquired seven dealers since its establishment in April 1996. The following table sets forth certain information with respect to the Company's acquisitions to date.
ACQUISITIONS DATE BUSINESS LOCATIONS - ------------------------------------- ------------ ------------------ ------------------- Cash Registers, Incorporated June 1996 POS Dealer Kentucky and Ohio Automated Register Systems, Inc. December 1996 POS Dealer Washington MicroData, Inc. April 1997 POS Dealer Illinois Smyth Systems, Inc. May 1997 POS Dealer and VAR Ohio, California, Colorado and Utah Electronic Business Machines, Inc. June 1997 POS Dealer Indiana Pacific Cash Register and Company, Inc. August 1997 POS Dealer California Quality Business Machines, Inc. May 1998 POS Dealer California
The POS computer systems sold by the Company serve a wide range of functions that retailers require in order to be competitive. These functions include faster customer checkout service, tracking customer purchases and preferences, monitoring inventory on a real-time basis, integration of scanning operations, promotional and electronic funds transfer systems, and security monitoring. Retailers that outgrow the limitations of electronic cash registers ("ECRs") represent a major source of new business for the Company. The Company also expects additional demand for its products to come from retailers seeking to upgrade existing, under-performing POS systems as well as from retailers seeking new systems. The Company provides POS systems and support services to retailers on a purchase or a lease basis. Through an arrangement with a third party, the Company currently offers a customized lease designed specifically for the products it sells. By offering a financing program, the Company affords retailers the opportunity to purchase systems with more capabilities and a higher level of service and maintenance support. Based on industry surveys and its own operating experience, the Company believes that as a consequence of competitive pressures within the retail industry and the "Year 2000" problem, demand for POS systems is strong and will be into the next millennium. The driving forces in retailing in the United States are the need to attract and retain new customers with a variety of goods and services that meet the ever-changing tastes of consumers, to increase the average sale per visit, and to maximize internal productivity and efficiency in order to generate higher operating profits. Retailers are seeking automation tools to help obtain key consumer information and to improve efficiency by matching or adjusting their current products and services to the ever-changing demand of consumers. The modern POS system provides a means of capturing and processing enormous amounts of information at the point-of-sale while at the same time performing the basic cash control functions of its predecessor, the electronic cash register. The Company targets supermarkets, table-service and fast food restaurants and golf courses and resorts. The Company believes the portion of annual market for POS systems addressable by the Company and other dealers is approximately $350 million for supermarkets, $1.2 billion in the table-service and fast food restaurants, and $75 million for golf courses and resorts. In addition, the Company believes that the total annual market for POS system maintenance and related services is approximately 35% of systems sales. 5 8 The Company intends to capitalize upon the significant consolidation opportunities available in the highly fragmented POS systems dealer industry by acquiring additional dealers and improving their performance and profitability through the implementation of the Company's operating strategies. One of the Company's primary goals is to establish, prior to the end of 1999, a national network of operations that will enhance its ability to attract regional and national retailers to its customer base. To accomplish that goal, the Company is pursuing a dual priority acquisition focus of increasing its substantial West Coast and Mid-West market penetration while seeking to acquire dealerships in other strategically located geographic markets not served by the Company. The Company intends to focus on acquisition targets that are profitable after they are integrated into the Company's operations. When permitted by manufacturer agreements, the Company plans to offer throughout its existing and acquired dealerships product lines that previously have been offered only at certain of its locations. The Company also intends to create a uniform group of products and support services that can be provided from each of its locations. The Company plans to further increase the operating efficiencies of its dealerships to enhance internal growth and profitability. The Company is centralizing certain administrative functions at the corporate level, such as accounting, finance, purchasing, insurance coverage, employee benefits, inventory control, warehousing and distribution. The Company also is installing a management information system to enhance the Company's ability to integrate successfully and quickly the operations of acquired dealerships and future acquisitions. To generate greater recognition and receptivity for the Company and its products to targeted retailers, the Company plans during the second half of 1998, to convert the existing business names of companies it has acquired to the "Bristol Retail Solutions" name and to undertake a brand identity program supported by public relations, advertising, and direct mail. The Company was incorporated in Delaware on April 3, 1996. The Company completed an initial public offering of its Common Stock on November 13, 1996. Unless the context requires otherwise, references herein to the "Company" includes Bristol Retail Solutions, Inc., its subsidiaries, operating divisions, and predecessors. The Company's executive and administrative offices are located at 5000 Birch Street, Suite 205, Newport Beach, California 92660. The Company's telephone number is (949) 475-0800. RISK FACTORS The purchase of the shares of Common Stock offered hereby involves a high degree of risk. In addition to the other information set forth elsewhere in this Prospectus, the following factors relating to the Company and this offering should be considered when evaluating an investment in the Common Stock offered hereby. This Prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1993 and Section 21E of the Securities Exchange Act of 1934. The Company's actual results may differ materially from the results projected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, the following: Limited Operating History. The Company was founded in April 1996 and, prior to the acquisition of CRI in June 1996, the Company had no operations upon which an evaluation of the Company and its prospects could be based. There can be no assurance that the Company will be able to implement successfully its strategic plan, to generate sufficient revenue to meet its expenses or to achieve or sustain profitability. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Risks Related to the Company's Acquisition Strategy. The Company's strategy is to increase its revenue and the markets it serves through the acquisition of additional POS dealers and value added resellers serving retail end users. From its inception through March 31, 1998, the Company has completed six acquisitions. There can be no assurance that the Company will be able to identify, acquire or profitably manage additional companies or successfully integrate the operations of additional companies into those of the Company without encountering substantial costs, delays or other problems. In addition, there can be no assurance that companies acquired in the future will achieve sales and profitability that justify the Company's investment in them or that acquired companies will not have unknown liabilities that could materially adversely affect the Company's results of operations or financial condition. The Company may compete for acquisition and expansion opportunities with companies that have greater resources than the Company. There can be no assurance that suitable acquisition candidates will continue to be available, that financing for acquisitions will be obtainable on terms acceptable to the Company, that acquisitions can be consummated or that acquired businesses can be integrated successfully and profitably into the Company's operations. Further, the Company's results of operations in quarters immediately following a material acquisition may be materially adversely effected while the Company integrates the acquired business into its existing operations. The Company may acquire certain businesses that have either been unprofitable or that have had inconsistent profitability prior to their acquisition. An inability of the Company to improve the profitability of these acquired businesses could have a material adverse effect on the Company. Finally, the Company's acquisition strategy places significant demands on the Company's resources and there can be no assurance that the Company's management and operational systems and structure can be expanded to effectively support the Company's continued acquisition strategy. If the Company is unable to implement successfully its acquisition strategy, this inability may have a material adverse effect on the Company's business, results of operations, financial condition and cash flows. In connection with six of its acquisitions, the Company entered into employment agreements with certain individuals. Under the terms of such agreements, if certain performance standards of the acquired companies are met, the Company is obligated to pay a bonus to these individuals. The performance standards are based upon, among other things, the acquired companies' pre-tax profits. As of this date, none of the acquired companies have met the performance standards, and accordingly, the Company has not made any bonus payments under any of such employment agreements. The employment agreements also allow the Company to take certain remedial action in the event the acquired companies do not meet their respective performance standards. With respect to five of the acquisitions, the Company has taken remedial action against certain employees who did not meet (or whose company did not meet) the performance standards set out in their respective employment agreements. Such remedial action includes the geographic transfer of one employee, the placement of other employees on probation, and the restructuring of two of the acquisitions. Need for Additional Financing to Implement Acquisition Strategy. The Company currently intends to effect future acquisitions with cash generated from operations and future issuances of debt or equity securities. There can be no assurance that the Company will be able to obtain financing if and when it is needed on terms 6 9 the Company deems acceptable. Under the terms of the Securities Purchase Agreement, the Company may not enter into any subsequent offer or sale of Common Stock or securities convertible into Common Stock until the expiration of the 180-day period commencing with the effective date of this Registration Statement, without the prior written consent of Precision Capital Investors Limited Partnership I. The above prohibition does not apply to (i) Common Stock issued pursuant to Rule 144 under the Securities Act of 1933, as amended, provided the holder thereof holds such Common Stock for at least one year from the date of issuance; (ii) a secondary public offering of shares of Common Stock at market; (iii) an offering of convertible debentures at market or above; or (iv) the issuance of securities (other than for cash) in connection with a merger, consolidation, sale of assets, disposition or the exchange of the capital stock for assets, stock or other joint venture interests; provided, such securities would not be included in this Registration Statement and no registration statement in respect of such securities shall be filed prior to sixty (60) days after the effective date of this Registration Statement. The inability of the Company to obtain financing would have a material adverse effect on the Company's ability to implement its acquisition strategy, and as a result, could require the Company to diminish or suspend its acquisition strategy. Restrictions on Company's Ability to Enter into Certain Transactions. On December 17, 1998, the Company obtained a new line of credit. Pursuant to the terms of the line of credit, the Company is prohibited from engaging in certain transactions without first obtaining the written consent of the lender. Such transactions include, but are not limited to, (i) the sale or acquisition of assets with a value exceeding $50,000; (ii) the sale or transfer of any collateral under the line of credit, except for the sale of items in the Company's finished inventory in the ordinary course of business; (iii) the sale of inventory on a sale-or-return, guaranteed sale, consignment or other contingent basis; and (iv) any other transaction outside the ordinary course of business. No assurance can be given that these restrictions will not impair the Company's ability to conduct business in the future, even though the line of credit does not prohibit or restrict the Company from acquiring other companies (including acquisitions for amounts greater than $50,000) pursuant to its acquisition strategy. Consideration for Acquired Companies Exceeds Asset Value. Valuations of the companies acquired by the Company have not been undertaken based on independent appraisals, but have been determined through arm's-length negotiations between the Company and representatives of such companies. The consideration for each such company has been based primarily on the judgment of management as to the value of such company as a going concern and not on the book value of the acquired assets. Valuations of these companies determined solely by appraisals of the acquired assets may have been less than the consideration paid for the companies. No assurance can be given that the future performance of such companies will be commensurate with the consideration paid. Moreover, the Company has incurred and expects to incur significant amortization charges resulting from consideration paid in excess of the book value of the assets of the companies acquired and companies which may be acquired in the future. Specifically, during the fourth quarter of 1997, the Company determined that certain amounts recorded for goodwill from prior acquisitions were impaired and no longer recoverable. Such determination was made on an analysis of each subsidiary's projected revenues, profits and undiscounted cash flows at the date of acquisition compared to actual and projected revenues, profit and loss and undiscounted cash flows as of December 31, 1997. The total goodwill write-down recorded separately in the accompanying statement of operations was approximately $1,871,000 which consisted of $1,442,000 related to Smyth Systems, $419,000 related to CRI and $10,000 related to other subsidiaries. The goodwill write-downs are primarily due to fourth quarter decisions by the Company based on operating losses and lack of sales growth at both Smyth and CRI. Prior to the time of the acquisition, Smyth Systems had begun a marketing effort to penetrate the apparel and sporting goods markets. These markets were expected to grow rapidly and represented the major reason that the Company paid a purchase price in excess of book value for Smyth which was allocated to goodwill at the acquisition date. However, by mid-fourth quarter of 1997, it was apparent that Smyth was not able to penetrate these markets due to a lack of sales caused by an insufficient product line and that the costs to successfully sell into these markets were not reasonable given Smyth's operating losses. As a result, in the fourth quarter, a decision was made to discontinue the sales, marketing and promotional activities to penetrate this market and a goodwill impairment charge was recorded . At the date of CRI's acquisition of EBM, it was anticipated that sales from EBM would continue to expand and that EBM would move towards profitability as it expected an increase in sales volume to the fast-food and table-service restaurant market because of the ability to offer a certain product to a wider geographical area. However, the product did not sell as anticipated due to quality problems and by the fourth quarter of 1997, several key people associated with the marketing of this product had left the Company. This resulted in larger losses than anticipated and led to the impairment of the goodwill. After such write-downs, the company believes that the remaining goodwill amounts recorded for each subsidiary are recoverable over the remaining amortization period. No assurance can be given that the facts and circumstances surrounding past impairments of goodwill will not occur in the future, and that the Company will not have future impairment of goodwill resulting in additional write-downs. Substantial Competition. The POS industry is highly fragmented and competitive. Competitive factors within the industry include product prices, quality of products, service levels, and reputation and geographical location of dealers. The Company primarily competes with independent POS dealers and some of these dealers may have greater financial resources available to them than does the Company. In addition, there are original equipment manufacturers of POS equipment that compete in certain product areas. The Company's ability to make acquisitions will also be subject to competition. The Company believes that, during the next few years, POS dealers may seek growth through consolidation with entities other than the Company. In addition, no assurance can be given that the major manufacturers will not choose to effect or expand the distribution of their products through their own wholesale organizations or effect distribution directly to many of the retail accounts of the Company in the markets served by the Company. Any of these developments could have a material adverse effect on the Company's business, results of operations, financial condition and cash flows. Substantial Fluctuations in Future Operating Results. The Company may experience substantial fluctuations in its annual and quarterly operating results in future periods. The Company's operating results are affected by a number of factors, many of which are beyond the Company's control. A substantial portion of the Company's backlog is typically scheduled for delivery within 90 days. Delivery dates for products sold by the Company are subject to change due to customers changing the required installation date of a retail automation solution system. The changing of such delivery dates is beyond the Company's control. Quarterly sales and operating results therefore depend in large part on customer-driven delivery dates, which are subject to change. In addition, a significant portion of the Company's operating expenses are relatively fixed in nature and planned expenditures are based in part on anticipated orders. Any inability to adjust spending quickly enough to compensate for any revenue shortfall may magnify the adverse impact of such revenue shortfall on the Company's results of operations. Dependence on Manufacturers. A substantial portion of the Company's total revenue is and will be derived from the sale of POS systems, ECRs and related equipment, none of which are manufactured by the Company. The Company's business is dependent upon close relationships with manufacturers of POS equipment and the Company's ability to purchase equipment in the quantities necessary and upon competitive terms so that it will be able to meet the needs of its end user customers. For the year ended December 31, 1997, the Company purchased its hardware principally from three main vendors, Panasonic, ERC, a distributor of Panasonic products, and NCR. Sales of Panasonic, ERC and NCR products accounted for approximately 32% of net revenue for the year ended December 31, 1997. There can be no assurance that the relationships with these manufacturers will continue or that the Company's supply requirements can be met in the future. The Company's inability to obtain equipment, parts or supplies on competitive terms from its major manufacturers could have a material adverse effect on the Company's business, results of operations, financial condition and cash flows. 7 10 Fixed Fee Contracts. Many of the Company's service contracts are fixed fee contracts pursuant to which the customer pays a specified fee for the Company's performance of all necessary maintenance and remedial services during the contract's term. Under these agreements, the Company is responsible for all costs incurred in maintaining and repairing the equipment, including the cost of replacement parts, regardless of actual costs incurred. Accordingly, the Company can incur losses from fixed fee contracts if the actual cost of maintaining or repairing the equipment exceeds the costs estimated by the Company. Potential Inability to Market Newly Developed Products. The technology of POS systems, ECRs, VARs and related equipment is changing rapidly. There can be no assurance that the Company's existing manufacturers will be able to supply competitive new products or achieve technological advances necessary to remain competitive in the industry. Further, there can be no assurance that the Company will be able to obtain the necessary authorizations from manufacturers to market any newly developed equipment. The Company's Smyth Systems, Inc. ("Smyth") subsidiary operates in the VAR solutions segment, wherein it develops customized turnkey retail automation solutions, consisting of both hardware and software. There can be no assurance that Smyth will be able to develop commercially viable and technologically competitive VAR solutions at competitive prices. Reliance on Key Personnel. Implementation of the Company's acquisition strategy is largely dependent on the efforts of a few senior officers. In particular, the Company's operations are dependent to a great degree on the continued efforts of its Chief Executive Officer, Richard H. Walker. Furthermore, the Company will most likely continue to be dependent on the senior management of companies that are acquired. Competition for highly qualified personnel is intense, and the loss of any executive officer or other key employee, or the failure to attract and retain other skilled employees, could have a material adverse effect upon the Company's business, results of operations or financial condition. The Company is a party to employment agreements with Mr. Walker, as well as with Executive Vice President Paul Spindler. The agreements with Messrs. Walker and Spindler terminate in the years 2004 and 2001, respectively, unless terminated earlier pursuant to the agreements, and each contains confidentiality provisions and covenants not to compete. State laws, however, may limit the enforceability of the confidentiality and/or non-competition provisions therein. The Company is currently the beneficiary of a key man life insurance policy in the amount of $1,000,000 on the life of Mr. Walker for a term of three years. There can be no assurance that the Company will maintain the policy in effect or that the coverage will be sufficient to compensate the Company for the loss of the services of Mr. Walker. Anti-Takeover Effects of Certain Charter and Bylaw Provisions. Certain provisions of the Company's Certificate of Incorporation and Bylaws may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company. These provisions make it more difficult for stockholders to take certain corporate actions and could have the effect of delaying or preventing a change in control of the Company. For example, the Company has not elected to be excluded from the provisions of Section 203 of the Delaware General Corporation Law, which impose certain limitations on business combinations with interested stockholders upon acquiring 15% or more of the Common Stock. This statute may have the effect of inhibiting a non-negotiated merger or other business combination involving the Company, even if such event would be beneficial to the then-existing stockholders. In addition, the Company's Certificate of Incorporation authorizes the issuance of up to 4,000,000 shares of preferred stock with such rights and preferences as may be determined 8 11 from time to time by the Board of Directors. Accordingly, the Board of Directors may, without stockholder approval, issue preferred stock with dividends, liquidation, conversion, and voting or other rights, which could adversely affect the voting power or other rights of the holders of the Company's Common Stock. The issuance of preferred stock could have the effect of entrenching the Company's Board of Directors and making it more difficult for a third party to acquire a majority of the outstanding voting stock of the Company. As of March 31, 1998, the Company had issued 10,000 shares of Series A Convertible Preferred Stock, at an issue price of $100 per share. Each share of Series A Preferred Stock is convertible at the option of the holder thereof at any time into a number of shares of Common Stock determined by dividing the issue price by the conversion price, which is defined to be 78% of the lowest non-consecutive five-day average closing bid price for the Common Stock for the 25-day period prior to conversion. Each holder of shares of the Series A Preferred Stock is entitled to the number of votes equal to the number of shares of Common Stock into which it could be converted. The Company cannot, without the vote or written consent of at least 66-2/3% of the then outstanding shares of Series A Preferred Stock, (i) redeem, purchase or otherwise acquire for value any share of the Series A Preferred Stock; (ii) redeem, purchase or otherwise acquire any of the Company's Common Stock; (iii) authorize or issue any other equity security senior to or on parity with the Series A Preferred Stock as to voting rights, dividend rights, conversion rights, redemption rights or liquidation preferences; (iv) declare or pay any dividend or make any distribution with regard to any share of Common Stock; (v) sell, convey, lease or otherwise dispose of all or substantially all of its property or business; liquidate, dissolve or wind up the Company's business; or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary); (vi) effect any transaction or series of transactions in which more than 50% of the voting power of the Company is disposed of, unless the Company's stockholders of record as constituted immediately prior to such transaction will, immediately thereafter, hold at least a majority of the voting power of the surviving or acquiring entity; (vii) permit any subsidiary to issue or sell any of its capital stock (except to the Company); (viii) increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series A Preferred Stock; or (ix) alter or change the rights, preferences or privileges of the shares of Series A Preferred Stock so as to adversely affect the shares. In the event of any liquidation, dissolution or winding up of the Company, whether voluntarily or involuntarily, the holders of the Preferred Stock are entitled to receive, prior and in preference to any distribution to holders of common stock, an amount per share equal to $100 plus any declared but unpaid dividends. Volatility of Stock Price. The stock market from time to time experiences significant price and volume fluctuations that are unrelated to the operating performance of the particular companies. These broad market fluctuations may materially adversely affect the market price of the Company's common stock. In addition, the market price of the Company's common stock has been and may continue to be highly volatile. Factors such as possible fluctuations in the Company's business, results of operations or financial condition, failure of the Company to meet expectations of security analysts and investors, announcements of new acquisitions, the timing and size of acquisitions, the loss of suppliers or customers, the announcement of new or terminated supply agreements by the Company or its competitors, changes in regulations governing the Company's operations or its suppliers, the loss of the services of a member of senior management, litigation and changes in general market conditions all could have a material adverse affect on the market price of the Company's common stock. Maintenance Criteria for Nasdaq; Risks of Low-Priced Securities. The Company's common stock is presently traded on the Nasdaq SmallCap Market. To maintain inclusion on the Nasdaq SmallCap Market, the Company's common stock must continue to be registered under Section 12(g) of the Exchange Act, and the Company must continue to have at least $2,000,000 in net tangible assets or $500,000 in income in two of the last three years, a public float of at least 500,000 shares, $1,000,000 in market value of public float, a minimum bid price of $1.00 per share, at least two market makers and at least 300 stockholders. While the Company currently meets the maintenance standards, there is no assurance that the Company will be able to maintain the standards for Nasdaq SmallCap Market inclusion with respect to its securities. At December 31, 1997, the Company had $2,032,000 in net tangible assets. If the Company fails to maintain Nasdaq SmallCap Market listing, the market value of the Company's common stock likely would decline and stockholders would find it more difficult to dispose of or to obtain accurate quotations as to the market value of the common stock. 9 12 Indemnification and Limitation of Liability. The Company's Certificate of Incorporation (the "Certificate") and Bylaws include provisions that eliminate the directors' personal liability for monetary damages to the fullest extent possible under Delaware Law or other applicable law (the "Director Liability Provision"). The Director Liability Provision eliminates the liability of directors to the Company and its stockholders for monetary damages arising out of any violation by a director of his fiduciary duty of due care. Under Delaware Law, however, the Director Liability Provision does not eliminate the personal liability of a director for (i) breach of the director's duty of loyalty, (ii) acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends or repurchases or redemptions of stock other than from lawfully available funds, or (iv) any transaction from which the director derived an improper benefit. The Director Liability Provision also does not affect a director's liability under the federal securities laws or the recovery of damages by third parties. Absence of Dividends. The Company has not paid dividends on its Preferred Stock or Common Stock to date. The Company is obligated to pay, quarterly, cumulative dividends at a rate of six percent (6%) per annum of the issue price of the Preferred Stock, payable, at the holders' option, in cash or in Common Stock at the conversion price of the Preferred Stock. So long as any of shares Preferred Stock remain outstanding, the Company may not, without the vote or written consent of the holders of at least 66-2/3% of the then outstanding shares of Preferred Stock, voting together as a single class, declare or pay any dividend with regard to any share of Common Stock. Additionally, although the current line of credit does not expressly prohibit the Company from paying dividends, the line of credit does contain certain covenants which restrict the reduction or depletion of the Company's capital. The Company anticipates that future financing, including any lines of credit, may further restrict or prohibit the Company's ability to pay dividends. Under the terms of the underwriting agreement entered into by the Company in connection with its initial public offering, the Company is restricted until November 20, 1998, from paying dividends in excess of the amount of the Company's current or retained earnings derived from November 20, 1996, unless the consent of the underwriters is obtained. However, the underwriting agreement has since been terminated by the underwriter. See Anti-Takeover Effect of Certain Charter and Bylaw Provisions. Year 2000 Compliance. Many currently installed computer systems and software products are coded to accept only two digit entries in the date code field. These date code fields will need to accept four digit entries to distinguish 21st century dates from 20th century dates. As a result, in less than two years, computer systems and software used by many companies may need to be upgraded to comply with such "Year 2000" requirements. The Company's Smyth subsidiary is currently developing software for golf course applications. The Company estimates it will expend approximately $150,000 to $200,000 to make such software Year 2000 compliant. Although the Company believes that such software will be Year 2000 compliant, there can be no assurance that compliance will be achieved. In the event such compliance is not achieved, the business, operating results and financial condition of the Company may be materially adversely affected. In addition, the Company believes that the purchasing patterns of customers and potential customers may be affected by Year 2000 issues as companies expend significant resources to correct their current software systems for Year 2000 compliance. These expenditures may result in reduced funds available to purchase software products such as those offered by the Company. The Company is making inquiries of its vendors of POS systems and cash registers regarding whether the systems upon which they rely are Year 2000 compliant and whether they anticipate any impairment of their ability to deliver product and services as a result of Year 2000 issues. If the Company determines a particular vendor will be impacted by this problem, the Company may attempt to identify additional or replacement vendors, which could delay accessibility of the products and/or services provided by such vendors. Such a delay or failure to identify an additional or replacement vendor could have a material adverse effect on the Company's business, operating results and financial condition. Effect of Quarterly Fluctuations in Operating Results on Price of Common Stock. The Company's business is subject to seasonal influences. The POS dealers and system integrators which the Company has acquired to date have typically had lower net revenues in the quarters ending March 31 and December 31 primarily due to the lower level of new store openings by customers caused by inclement weather, budgetary concerns and/or holidays. The Company believes that this pattern of seasonality will continue in the foreseeable future. Quarterly results in the future may be materially affected by the timing and magnitude of acquisitions and costs related to such acquisitions, the timing and extent of staffing additions at corporate headquarters necessary to integrate acquired companies and support future growth and general economic conditions. Therefore, results for any quarter are not necessarily indicative of the results that the Company may achieve for any subsequent quarter or 10 13 for a full year. The effect of inflation on the Company's operations has not been significant to date. However, there can be no assurance that a high rate of inflation in the future would not have an adverse effect on the Company's future operating results. Shares Eligible for Future Sale. Sales of Common Stock in the public market, or the perception that sales could occur, could materially adversely affect the market price of the Common Stock and could impair the Company's future ability to obtain capital through an offering of securities. The Company had 5,740,022 shares of Common Stock outstanding at May 15, 1998 of which approximately 3,458,214 shares are "Restricted Securities" within the meaning of Rule 144 under the Securities Act and may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, including the exemption contained in Rule 144 (569,408 of such Restricted Shares are being registered hereby). In general, under Rule 144, as currently in effect, a person who has beneficially owned shares for at least one year is entitled to sell, within any three-month period, a number of "Restricted" shares that does not exceed the greater of 1% of the then outstanding shares of Common Stock or the average weekly trading volume during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to certain manner of sale limitations, notice requirements and the availability of current public information about the Company. Rule 144(k) provides that a person who is not deemed an "affiliate" and who has beneficially owned shares for at least two years is entitled to sell such shares at any time under Rule 144 without regard to the limitations described above. Presently, no shares may be sold pursuant to Rule 144(k). Of the 3,458,214 restricted shares, 474,878 shares are also subject to contractual restrictions on transferability. These restrictions expire at various times from December 31, 1998 to May 10, 2000. A total of 200,000 shares of Common Stock have been reserved for issuance under the Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan"). As of May 15, 1998, 8,236 shares of Common Stock are issued and outstanding under the Purchase Plan. Effect of Options, Warrants and Registration Rights. The Company has reserved an aggregate of 3,450,000 shares of Common Stock for issuance upon exercise of options granted under the Company's Stock Option Plan. As of April 15, 1998, options to acquire 1,565,000 shares of Common Stock had been granted pursuant to the Stock Option Plan. The exercise price of the options presently outstanding ranges from $2.875 per share to $3.188 per share. The Company has outstanding 718,750 Class A Warrants to purchase an aggregate of 718,750 shares of Common Stock at a price of $6.00 per share. In addition, the Company has sold to First Cambridge Securities Corporation, the lead Underwriter of its Initial Public Offering on November 12, 1996, or its Designees (the "Underwriter"), Underwriters' Stock Warrants to purchase up to 125,000 shares of Common Stock and Underwriters' Warrants, entitling the Underwriter to purchase 62,500 Class A Warrants, which in turn are exercisable into 62,500 shares of Common Stock. The Underwriters' Stock Warrants are exercisable at a price equal to $8.70 per share of Common Stock, while the Underwriters' Warrants are exercisable at a price equal to $.125 per Class A Warrant. On December 11, 1997, the Company issued to Coast Business Credit, a division of Southern Pacific Bank, a California corporation, warrants (the "Coast Warrants") to purchase 25,062 shares of Common Stock at an exercise price of $3.99 per share. In addition, the Company granted to Coast Business Credit certain demand and "piggyback" registration rights with respect to the shares of Common Stock underlying the Coast Warrants. On March 18, 1998, the Company issued warrants to purchase 125,000 shares of Common Stock, and agreed to issue, subject to the satisfaction of certain conditions, additional warrants to purchase 62,500 shares of Common Stock (collectively, the "Investor Warrants") on or prior to each of the dates that is thirty (30) and sixty (60) days after the Effective Date of the Registration Statement. On March 18, 1998, the Company also issued warrants to purchase 50,000 shares of Common Stock to certain Selling Stockholders (the "Placement Agent Warrants"). For the respective terms of the Underwriters' Stock Warrants, the Underwriters' Warrants, the Class A Warrants issuable upon exercise of the Underwriters' Warrants, the Coast Warrants, the Investor Warrants, Placement Agent Warrants and any options granted or that may be granted by the Company under the Company's Stock Option Plan, the holders thereof are given an opportunity to profit in the event of a rise, in the market price of the Common Stock or the Warrants, with a resulting dilution in the interest of the other stockholders or holders of Warrants, without assuming the risk of ownership. Further, the terms on which the Company may obtain additional equity financing during those periods may be materially adversely affected by the existence of the Warrants, Options and Plans. The holders of Options or Warrants to purchase Common Stock may exercise such Options or Warrants at a time when the Company might be able to obtain additional capital through new offerings of securities on terms more favorable than those provided by such Options or Warrants. In addition, the holders of the Underwriters' Stock Warrants and Underwriters' Warrants have demand and "piggyback" registration rights with respect to their securities. Exercise of the Demand Registration Rights may involve substantial expense to the Company. Additionally, if the Underwriters should exercise their Registration Rights to effect a distribution of the Underwriters' Stock Warrants and the Underwriters' Warrants or underlying Securities, the Underwriter, prior to and during such distribution, may be unable to make a market in the Company's Securities. If the Underwriter must cease making a market in the Company's Securities, the Market and Market Price for the Securities may be adversely affected. See "Description of Securities." Control by Management. The Officers and Directors of the Company and members of their families beneficially owned approximately 43.3% of the outstanding shares of Common Stock at April 15, 1998. Accordingly, these persons, if acting together, will likely be able to control substantially all matters requiring approval by the Stockholders of the Company, including the Election of Directors and the approval of Mergers or other business 11 14 combination transactions. This concentration of ownership could discourage or prevent a change in control of the Company. USE OF PROCEEDS The proceeds from the sale of the Selling Stockholders' Common Stock will belong to the Selling Stockholders. The Company will not receive any proceeds from such sales of the Common Stock. In the event the Warrants are exercised, the Company may receive proceeds from such exercise. The actual amount of proceeds to be received by the Company, if any, will depend on, among other things, the number of Warrants exercised, and whether any such exercise is effected pursuant to the "cashless exercise" provisions thereof (the Company will not receive any proceeds from the exercise of any Warrants which are exercised pursuant to "cashless exercise" provisions). The Company intends to use the proceeds received from the exercise of the Warrants, if any, for general working capital purposes. SELLING STOCKHOLDERS The following table sets forth certain information with respect to beneficial ownership of the Company's Common Stock as of April 15, 1998 by the Selling Stockholders as follows: (i) the name of each Selling Stockholder; (ii) the number of shares of Common Stock beneficially owned by each Selling Stockholder (including shares obtainable upon conversion of Preferred Stock or exercise of Warrants with 60 days of such date); (iii) the number of shares of Common Stock being offered hereby; and (iv) the number of the Company's outstanding shares of Common Stock to be beneficially owned by each Selling Stockholder after completion of the sale of Common Stock. Except as indicated in the footnotes to this table, the Selling Stockholders have not held any position or office or had a material relationship with the Company or any of its affiliates within the past three years. 12 15
NUMBER OF SHARES OF SHARES OF COMMON COMMON STOCK NUMBER OF SHARES STOCK OWNED AFTER BENEFICIALLY OWNED OF COMMON STOCK SELLING STOCKHOLDER STOCKHOLDER PRIOR TO OFFERING(2) REGISTERED HEREIN OFFERING (1) ----------- ------------------- ----------------- ------------------- Number Precision Capital Investors 1,197,867 1,197,867 0 Limited Partnership I (3) 0 Wharton Capital Partners 25,000 25,000 0 Ltd. (4) 0 HD Brous & Co., Inc. (5) 25,000 25,000 0 Larry D. Smyth & Diane L 129,744 129,744 0 Smyth (6) 0 Robert T. Smyth (7) 121,064 121,064 0 William A. Smyth (8) 113,016 113,016 0 Canat & Company 52,096 52,096 0 Harold Ziegler, Jr 23,104 23,104 0 George F. Merrill 16,536 16,536 0 Robert F. Webster 13,272 13,272 0 Richard D. Sutton 12,544 12,544 0 Margaret L. Christian 12,480 12,480 0 Majorie M. Culp & Gary L. Bricker 6,120 6,120 0 Louis B. Boettler 6,000 6,000 0 Marion Noble 5,240 5,240 0 James A. Merrill 4,560 4,560 0 Ruth S. Culp & Carolyn Smyth 4,480 4,480 0 Ruth S. Culp 4,480 4,480 0 Kathleen Midian 4,000 4,000 0 McDonald & Company 3,744 3,744 0 Dayna E. Smyth 3,344 3,344 0 Matthew D. Smyth 3,336 3,336 0 Dean G. Lauritzen 2,496 2,496 0 Mrs. J. R. Duncan 2,480 2,480 0 Carolyn Culp Smyth (9) 2,120 2,120 0 John Olofson, Jr. 1,680 1,680 0 Timothy Jon Smyth (9) 1,600 1,600 0 Roy Wild 1,600 1,600 0 David C. Ewing 1,600 1,600 0 Jane Christian Smyth 1,200 1,200 0 James R. Duncan (10) 1,080 1,080 0 J. Daniel Bernard 960 960 0 Thomas A. Schauer 896 896 0 Kenneth J. Scheetz (11) 840 840 0 William H. Belden 800 800 0 William C. Ziegler 800 800 0 William B. Badger 800 800 0 Richard Robert Smyth (9) 800 800 0 Melinda Sue Smyth Custar 800 800 0 Kjirsti Smyth Nicolaysen 800 800 0 Kathlene Kay Ewing 800 800 0 Inger Lee Nicolaysen 800 800 0 Hartru & Co - Harter Trust 800 800 0 Deydre Jayne Smyth 800 800 0 Daniel Joel Smyth 800 800 0 Ann Smyth Marris 800 800 0 James B. Steffen (12) 480 480 0 Todd M. Henderson 320 320 0 Paul J. Neischwitz 280 280 0 Bonita Neischwitz 280 280 0 Jack Dieringer (9) 240 240 0 Thomas J. Tschantz 176 176 0 Nicholas M. Mussulin & Doris S. 160 160 0 Mussulin Joseph M. Procario 80 80 0 Gail M. Meyer 80 80 0
- --------------- (1) Assumes all of the shares of Common Stock held by the Selling Stockholders and registered hereunder are sold. (2) The persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table. (3) The number of shares set forth in the table represents an estimate of the number of shares of Common Stock to be offered by such Selling Stockholder. The actual number of shares of Common Stock issuable upon conversion of Series A Preferred Stock and exercise of Warrants issued to such Selling Stockholder (the "Investor Warrants)" is indeterminate, is subject to adjustment and could be materially less or more than such estimated number depending on factors which cannot be predicted by the Company at this time, including, without limitation, the future market price of the Common Stock. The actual number of shares of Common Stock offered hereby, and included in the Registration Statement of which Prospectus is a part, includes such additional number of shares of Common Stock as may be issued or issuable upon conversion of the Series A Preferred Stock and exercise of the Investor Warrants by reason of the floating rate conversion price mechanism or other adjustment mechanisms described therein, or by reason of any stock split, stock dividend or similar transaction involving the Common Stock, in order to prevent dilution, in accordance with Rule 416 under the Securities Act. Pursuant to the terms of the Series A Preferred Stock, if the Series A Preferred Stock had been actually converted on April 15, 1998, the conversion price would have been $2.11 (seventy eight percent (78%) of the average of the five lowest traded prices of the Common Stock for the twenty five (25) trading days immediately preceding such date) at which price the Series A Preferred Stock would have been converted into approximately 947,867 shares of Common Stock. The Investor Warrants are initially exercisable at a per share price (the "Investor Warrant Exercise Price") equal to the lesser of (i) $2.693 (such price representing 110% of the average closing bid price of a share of Common Stock for the five (5) days preceding the date of issuance and (ii) 110% of the closing bid price of a share of Common Stock on the Effective Date of this Registration Statement. Pursuant to the terms of the Preferred Stock and Investor Warrants, shares of Preferred Stock and Investor Warrants are issuable only to the extent that the Common Stock issuable upon conversion of such shares of Preferred Stock and upon exercise of such Investor Warrants, together with the Common Stock issuable upon conversion of shares of Preferred Stock and exercise of Investor Warrants previously issued, would not result in the issuance of more than twenty percent (20%) of the Company's outstanding Common Stock in accordance with NASDAQ Rule 4310(c)(25)(H)(i)(d)(2). Accordingly, the number of shares of Common Stock set forth in the table for this Selling Stockholder may exceed the number of shares of Common Stock that this Selling Stockholder could own beneficially at any given time through its ownership of the Preferred Stock and Investor Warrants. In that regard, beneficial ownership of this Selling Stockholder set forth in this table may not determined in accordance with Rule 13d-3 under the Exchange Act. (4) Includes 25,000 shares of Common Stock which are issuable to such Selling Stockholder upon conversion of warrants. (5) Includes 25,000 shares of Common Stock which are issuable to such Selling Stockholder upon conversion of warrants. Such Selling Stockholder has been retained by the Company to provide investment banking services. (6) Larry D. Smyth has served as Senior Vice President of Smyth Systems, Inc., a wholly-owned subsidiary of the Company, since May 1997. (7) Robert T. Smyth has served as President of Smyth Systems, Inc., a wholly-owned subsidiary of the Company, since May 1997. (8) William A. Smyth has served as Senior Vice President of Smyth Systems, Inc., a wholly-owned subsidiary of the Company, since May 1997. (9) Such Selling Stockholder has been a non-executive employee of Smyth Systems, Inc., a wholly-owned subsidiary of the Company, since May 1997. (10) James R. Duncan has served as Senior Vice President of Smyth Systems, Inc., a wholly-owned subsidiary of the Company, since May 1997. (11) Kenneth J. Scheetz has served as Vice President -- Service of Smyth Systems, Inc., a wholly-owned subsidiary of the Company, since May 1997. (12) James B. Steffen has served as Vice President of Smyth Systems, Inc., a wholly-owned subsidiary of the Company, since May 1997. 13 16 PLAN OF DISTRIBUTION On March 18, 1998 the Company entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") with the Investor, pursuant to which the Investor purchased 10,000 shares of Preferred Stock at a price of $100 per share. The Preferred Stock can be converted by the Investor at any time within the five (5) year period commencing with the date of issuance at the conversion price stated in the Securities Purchase Agreement. In connection with such sale, the Company also granted to the Investor 125,000 Investor Warrants. The Securities Purchase Agreement also provides that, subject to the satisfaction of certain conditions (including, without limitation, the effectiveness of this Registration Statement and the maintenance of a minimum closing price of the Common Stock of the Company in excess of $2.50 (Two Dollars and Fifty Cents) per share for each of the five (5) trading days immediately preceding the closing date of any additional sale, and a minimum daily trading volume of at least 25,000 shares for the ten (10) trading days immediately preceding the closing date of any additional sale), the Company will sell to the Investor an additional 5,000 shares of Preferred Stock at a purchase price of $100 per share, and will grant to the Investor an additional 62,500 Investor Warrants, on or prior to each of the dates that is thirty (30) and sixty (60) days after the Effective Date of the Registration Statement. On July 20, 1998, the closing price of the Common Stock of the Company on the Nasdaq SmallCap Market was $2.4375 (Two and Seven Sixteenths of One Dollar), and the trading volume on such date 3,600 (Three Thousand Six Hundred) shares. On such date, neither the closing price nor the daily trading volume of the Common Stock were at the levels necessary, for the time periods necessary, to satisfy the conditions for an additional sale to the Investor. The Company granted each of HD Brous & Co. and Wharton Capital Partners Ltd. 25,000 Placement Agent Warrants. This Registration Statement has been filed by the Company pursuant to a Registration Rights Agreement between the Company and the Investor. In addition to shares of Common Stock into which shares of Preferred Stock are convertible and the Investor Warrants and Placement Agent Warrants are exercisable, this Registration Statement also registers 569,408 shares of Common Stock issued to certain Selling Stockholders. The distribution of the shares of Common Stock offered hereby may be effected from time to time in one or more transactions. All or a portion of the Common Stock offered by this Prospectus may be offered for sale, from time to time, by the Selling Stockholders, or by permitted transferees or successors of the Selling Stockholders, in private or negotiated transactions, in open market transactions on the National Association of Securities Dealers Automated Quotation SmallCap Market ("Nasdaq"), or on one or more exchanges or otherwise, or a combination of these methods, at prices and terms then obtainable, at fixed prices, at prices then prevailing at the time of sale, at prices related to such prevailing prices, or at negotiated prices, or otherwise. The shares of Common stock offered hereby may be sold by one or more of the following: (i) through underwriters; (ii) through dealers or agents (which may include underwriters) including: (a) a block trade in which the broker or dealer so engaged will attempt to sell the shares of Common Stock as agent, but may position and resell a portion of the block as principal to facilitate the transaction; (b) purchases by a broker or dealer and resale by such broker or dealer as a principal for its account pursuant to this Prospectus; (c) ordinary brokerage transactions and (d) transactions in which the broker solicits purchasers; or (iii) directly to one or more purchasers. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the Selling Stockholders. Concurrently with sales under this Prospectus, the Selling Stockholders may effect other sales of Common Stock under Rule 144 or other exempt resale transactions. The Selling Stockholders and any underwriters, dealers, brokers, or agents executing selling orders on behalf of the Selling Stockholders may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), in which event commissions received by such persons may be deemed to be underwriting commission under the Securities Act. The Company has agreed to indemnify certain of the Selling Stockholders against certain liabilities, including certain liabilities under the Securities Act. LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Stradling, Yocca, Carlson & Rauth, a Professional Corporation, Newport Beach, California. EXPERTS The consolidated financial statements of Bristol Retail Solutions, Inc. as of December 31, 1997, and for the fiscal year ended December 31, 1997 appearing in Bristol Retail Solutions, Inc.'s Annual Report (Form 10-KSB/A) for the year ended December 31, 1997, have been audited by Deloitte & Touche LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The consolidated financial statements of Bristol Retail Solutions, Inc. as of December 31, 1996, and for the period from inception (April 3, 1996) to December 31, 1996 appearing in Bristol Retail Solutions, Inc.'s Annual Report (Form 10-KSB) for the year ended December 31, 1996, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. 14 17 The financial statements of Automated Register Systems, Inc. as of December 31, 1996 and 1995, and for the years then ended appearing in Bristol Retail Solutions, Inc.'s Form 8-K/A dated March 14, 1997 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The financial statements of Electronic Business Machines, Inc. as of December 31, 1996 and May 31, 1997, and for each of the two years ended December 31, 1996 and the five-month period ended March 31, 1997 appearing in Bristol Retail Solutions, Inc.'s Form 8-K/A dated August 11, 1997 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The financial statements of Smyth Systems, Inc. for the years ended December 31, 1996 and 1995 incorporated in this prospectus by reference from the Bristol Retail Solutions, Inc. filing on Form 8-K/A on July 29, 1997 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. LIMITATION ON LIABILITY AND DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES The Bylaws of the Company provide for indemnification of the Company's directors and officers to the fullest extent permitted by law. Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or controlling persons of the Company pursuant to the Company's Certificate of Incorporation, as amended, Bylaws and the Delaware General Corporation Law (the "DGCL"), the Company has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in such Act and is therefore unenforceable. 15 18 - -------------------------------------------------------------------------------- 1,218,342 SHARES OF COMMON STOCK, $.001 PAR VALUE BRISTOL RETAIL SOLUTIONS, INC. PROSPECTUS AUGUST 13, 1998 - -------------------------------------------------------------------------------- 19 PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following sets forth the costs and expenses, all of which shall be borne by the Company, in connection with the offering of the securities pursuant to this Registration Statement on Form S-3: Registration Fee................................................. $ 1,608.29 Accounting Fees and Expenses..................................... $30,000.00 Legal Fees and Expenses.......................................... $15,000.00 ---------- Total..................................................... $46,608.29 ==========
- ---------- * Estimated Item 15. Indemnification of Directors and Officers. The Company's Certificate of Incorporation (the "Certificate") and Bylaws include provisions that eliminate the directors' personal liability for monetary damages to the fullest extend possible under Delaware Law or other applicable law (the "Director Liability Provision"). The Director Liability Provision eliminates the liability of Directors to the Company and its stockholders for monetary damages arising out of any violation by a director of his fiduciary duty of due care. Under Delaware Law, however, the Director Liability Provision does not eliminate the personal liability of a director for (i) breach of the director's duty of loyalty, (ii) acts or omissions not in good faith or involving intentional misconduct or knowing violation of law, (iii) payment of dividends or repurchases or redemption of stock other than from lawfully available funds, or (iv) any transactions from which the director derived an improper benefit. The Director Liability Provision also does not affect a director's liability under the federal securities laws or the recovery of damages by third parties. Furthermore, pursuant to Delaware Law, the limitation liability afforded by the Director Liability Provision does not eliminate a director's personal liability for breach of the director's duty of due care. Although the directors would not be liable for monetary damages to the corporation or its stockholders for negligent acts or commissions in exercising their duty of due care, the directors remain subject to equitable remedies, such as actions for injunction or rescission, although these remedies, whether as a result of timeliness or otherwise, may not be effective in all situations. With regard to directors who also are officers of the Company, these persons would be insulated from liability only with respect to their conduct as directors and would not be insulated from liability for acts or omissions in their capacity as officers. These provisions may cover actions undertaken by the Board of Directors, which may serve as the basis for a claim against the Company under the federal and state securities laws. The Company has been advised that it is the position of the Commission that insofar as the foregoing provisions may be involved to disclaim liability for damages arising under the Securities Act, such provisions are against public policy as expressed in the Act and are therefore unenforceable. Delaware Law provides a detailed statutory framework covering indemnification of directors, officers, employees or agents of the Company against liabilities and expenses arising out of legal proceedings brought against them by reason of their status or service as directors, officers, employees or agents. Section 145 of the Delaware General Corporation Law ("Section 145") provides that a director, officer, employee or agent of a corporation (i) shall be indemnified by the corporation for expenses actually and reasonably incurred in defense of any action or proceeding if such person is sued by reason of his service to the corporation, to the extent that such person has been successful in defense of such action or proceeding, or in defense of any claim, issue or matter raised in such litigation, (ii) may, in actions other than actions by or in the right of the corporation (such as derivative actions), be indemnified for expenses actually and reasonably incurred, judgments, fines and amounts paid in settlement of such litigation, even if he is not successful on the merits, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation (and in a criminal proceeding, if he did not have reasonable cause to believe his conduct was unlawful), and (iii) may be indemnified by the corporation for expenses actually and reasonably incurred (but not judgments or settlements) of any action by II-1 20 the Corporation or of a derivative action (such as a suit by a stockholder alleging a breach by the director or officer of a duty owed to the corporation), even if he is not successful, provided that he acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation, provided that no indemnification is permitted without court approval if the director has been adjudged liable to the corporation. Delaware Law also permits a corporation to elect to indemnify its officers, directors, employees and agents under a broader range of circumstances than that provided under Section 145. The Certificate contains a provision that takes full advantage of the permissive Delaware indemnification laws (the "Indemnification Provision") and provides that the Company is required to indemnify its officers, directors, employees and agents to the fullest extent permitted by law, including those circumstances in which indemnification would otherwise be discretionary, provided, however, that prior to making such discretionary indemnification, the Company must determine that the person acted in good faith and in a manner he or she believed to be in the best interests of the Company and, in the case of any criminal action or proceeding, the person had no reason to believe his or her conduct was unlawful. In furtherance of the objectives of the Indemnification Provision, the Company has also entered into agreements to indemnify its directors and executive officers, in addition to the indemnification provided for in the Company's Certificate and Bylaws (the "Indemnification Agreements"). The Company believes that the Indemnification Agreements are necessary to attract and retain qualified directors and executive officers. Pursuant to the Indemnification Agreements, an indemnitee will be entitled to indemnification to the extent permitted by Section 145 or other applicable law. In addition, to the maximum extent permitted by applicable law, an indemnitee will be entitled to indemnification for any amount or expense which the indemnitee actually and reasonably incurs as a result of or in connection with prosecuting, defending, preparing to prosecute or defend, investigating, preparing to be a witness, or otherwise participating in any threatened, pending or completed claim, suit, arbitration, inquiry or other proceeding (a "Proceeding") in which the indemnitee is threatened to be made or is made a party or participant as a result of his or her position with the Company, provided that the indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and had no reasonable cause to believe his or her conduct was unlawful. If the Proceeding is brought by or in the right of the Company and applicable law so provides, the Indemnification Agreement provides that no indemnification against expenses shall be made in respect of any claim, issue or matter in the Proceeding as to which the indemnitee shall have been adjudged liable to the Company. On or about August 7, 1997 a class action complaint was filed against the Company and certain of its officers and directors. Underwriters for the Company's initial public offering are also named as defendants. The class action plaintiffs are Lincoln Adair, Antique Prints, Ltd., and Martha Seamons, on behalf of themselves and all other similarly situated. The case is pending in the United States District Court for the Southern District of New York. In addition to seeking themselves declared proper plaintiffs and having the case certified as a class action, plaintiffs seek unspecified monetary damages. Plaintiffs complaint alleges claims under the federal securities laws for alleged misrepresentations and omissions in connection with purchases of securities. The Company disputes the allegations made in the complaint and intends to vigorously defend itself. Item 16. Exhibits. 3.1* Certificate of Incorporation, as amended, of the Company. 3.2* Bylaws of the Company. 4.1* Securities Purchase Agreement entered into between the Company and Precision Capital Investors Limited Partnership I dated as of March 18, 1998. 4.2* Registration Rights Agreement entered into between the Company and Precision Capital Investors Limited Partnership dated as of March 18, 1998. 4.3* Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock 4.4* Common Stock Purchase Warrant issued to Precision Capital Investors Limited Partnership I. 4.5* Warrant to purchase Common Stock issued to H D Brous & Co., Inc. 4.6* Warrant to Purchase Common Stock issued to Wharton Capital Partners Ltd. 5.1 Opinion of Stradling, Yocca, Carlson & Rauth, a Professional Corporation. 16.1* Letter on change in certifying accountant. Filed as Exhibit 16.1 to the Company's Form 8-K filed on October 7, 1997, and incorporated herein by reference.
II-2 21 23.1 Consent of Stradling, Yocca, Carlson & Rauth, a Professional Corporation (included in Exhibit 5.1). 23.2 Consent of Ernst & Young LLP. 23.3 Consent of Deloitte & Touche LLP. 23.4 Consent of Deloitte & Touche LLP. 24.1* Power of Attorney.
- -------------- * Previously filed. Item 17. Undertakings. (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (iii) Include any additional or changed information on the plan of distribution. (2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be deemed the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. (e) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer 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 small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 22 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 Amendment No. 3 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newport Beach, State of California, on the 13th day of August, 1998. BRISTOL RETAIL SOLUTIONS, INC. By: /s/ Richard H. Walker ------------------------------------- Richard H. Walker President and Chief Executive Officer
Signature Title Date --------- ----- ---- /s/ Richard H. Walker Chief Executive Officer, August 13, 1998 - ----------------------------- President and Director Richard H. Walker (principal executive officer) /s/ Michael Shimada(*) Vice President and Chief August 13, 1998 - ----------------------------- Financial Officer (principal Michael Shimada financial and accounting officer) /s/ Paul Spindler (*) Chairman of the Board of August 13, 1998 - ----------------------------- Directors, Executive Vice Paul Spindler President and Secretary /s/ Lawrence Cohen (*) Vice Chairman of the Board of August 13, 1998 - ----------------------------- Directors Lawrence Cohen /s/ Jack Borsting, Ph.D. (*) Director August 13, 1998 - ----------------------------- Jack Borsting, Ph.D. /s/ Peter Stranger(*) Director August 13, 1998 - ----------------------------- Peter Stranger (*) Richard Walker, as Power of attorney.
II-4 23 EXHIBIT INDEX
Exhibit Number Description ------- ----------- 3.1* Certificate of Incorporation, as amended, of the Company. 3.2* Bylaws of the Company. 4.1* Securities Purchase Agreement entered into between the Company and Precision Capital Investors Limited Partnership I dated as of March 18, 1998. 4.2* Registration Rights Agreement entered into between the Company and Precision Capital Investors Limited Partnership dated as of March 18, 1998. 4.3* Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock 4.4* Common Stock Purchase Warrant issued to Precision Capital Investors Limited Partnership I. 4.5* Warrant to Purchase Common Stock issued to H D Brous & Co., Inc. 4.6* Warrant to Purchase Common Stock issued to Wharton Capital Partners Ltd. 5.1 Opinion of Stradling, Yocca, Carlson & Rauth, a Professional Corporation. 16.1* Letter on change in certifying accountant. Filed as Exhibit 16.1 to the Company's Form 8-K filed on October 7, 1997, and incorporated herein by reference. 23.1 Consent of Stradling, Yocca, Carlson & Rauth, a Professional Corporation (included in Exhibit 5.1). 23.2 Consent of Ernst & Young LLP. 23.3 Consent of Deloitte & Touche LLP. 23.4 Consent of Deloitte & Touche LLP. 24.1* Power of Attorney.
- ---------- * Previously filed. EX-5.1 2 OPINION OF STRADLING YOCCA CARLSON & RAUTH 1 EXHIBIT 5.1 STRADLING YOCCA CARLSON & RAUTH A PROFESSIONAL CORPORATION ATTORNEYS AT LAW 660 NEWPORT CENTER DRIVE, SUITE 1600 NEWPORT BEACH, CALIFORNIA 92660-6441 TELEPHONE (949) 725-4000 FACSIMILE (949) 725-4100 SAN FRANCISCO OFFICE 44 MONTGOMERY STREET, SUITE 2950 SAN FRANCISCO, CALIFORNIA 94104 TELEPHONE (415) 283-2240 FACSIMILE (415) 283-2255 August 14, 1998 Bristol Retail Solutions, Inc. 5000 Birch Street, Suite 205 Newport Beach, California 92660 Re: Registration Statement on Form S-3 File No. 333-50385 ----------------------------------------------------------- Ladies and Gentlemen: At your request, we have examined Registration Statement on Form S-3, File No. 333-50385 (the "Registration Statement") being filed with the Securities and Exchange Commission by Bristol Retail Solutions, Inc., a Delaware corporation (the "Company"), in connection with the registration under the Securities Act of 1933, as amended, of an aggregate of (i) 175,000 shares of the Company's common stock, $0.001 par value ("Common Stock"), issuable pursuant to the exercise of Class A Redeemable Common Stock Purchase Warrants ("Class A Warrants"), (ii) 569,408 shares of Common Stock which are issued and outstanding and (iii) 473,934 shares of Common Stock which represent the Company's good faith estimate of a presently indeterminate number of shares which may be issued upon conversion of the Company's Series A Convertible Preferred Stock (the "Preferred Stock"). We have examined the proceedings heretofore taken and are familiar with the additional proceedings proposed to be taken by the Company in connection with the authorization, issuance and sale of the securities referred to above. Based on the foregoing, it is our opinion that that the 175,000 shares of the Company's Common Stock issuable pursuant to the exercise of the Class A Warrants, and 473,934 shares of Common Stock which represents the Company's good faith estimate of a presently indeterminate number of shares which may be issued upon conversion of the Company's Preferred Stock, when issued and paid for in the manner described in the Registration Statement, will be legally and validly issued, fully paid and nonassessable. The 569,408 shares of Common Stock which are issued and outstanding are legally and validly issued, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus which is a part of the Registration Statement. Very truly yours, /s/ STRADLING YOCCA CARLSON & RAUTH ----------------------------------- Stradling Yocca Carlson & Rauth EX-23.2 3 CONSENT OF ERNST & YOUNG 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in Amendment No. 3 to Registration Statement (Form S-3) and related Prospectus of Bristol Retail Solutions, Inc. for the registration of 1,218,342 shares of its common stock and to the incorporation by reference therein of our report dated March 27, 1997, with respect to the consolidated financial statements of Bristol Retail Solutions, Inc. included in its Annual Report on Form 10-KSB/A for the year ended December 31, 1996 (as amended on April 16, 1998, June 11, 1998, August 5, 1998 and on August 13, 1998); of our report dated March 5, 1997, with respect to the financial statements of Automated Register Systems, Inc. included in its Form 8-K/A dated March 14, 1997; and of our report dated July 15, 1997, with respect to the financial statements of Electronic Business Machines, Inc. included in its Form 8-K/A dated August 12, 1997 filed with the Securities and Exchange Commission. Ernst & Young LLP Orange County, California August 13, 1998 EX-23.3 4 CONSENT OF DELOITTE & TOUCHE 1 EXHIBIT 23.3 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 3 to Registration Statement No. 333-50385 of Bristol Retail Solutions, Inc. on Form S-3 of our report dated March 27, 1998, appearing in the Annual Report on Form 10-KSB/A of Bristol Retail Solutions, Inc., for the year ended December 31, 1997, and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/ Deloitte & Touche LLP Costa Mesa, California August 13, 1998 EX-23.4 5 CONSENT OF DELOITTE & TOUCHE 1 EXHIBIT 23.4 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 3 to Registration Statement No. 333-50385 of Bristol Retail Solutions, Inc. on Form S-3 of our report dated June 5, 1997 (relating to the financial statements of Smyth Systems, Inc.), appearing in the current report on Form 8-K/A of Bristol Retail Solutions, Inc. filed on July 29, 1997. /s/ DELOITTE & TOUCHE LLP Akron, Ohio August 13, 1998 -----END PRIVACY-ENHANCED MESSAGE-----