Registration No. 333-108043
As filed with the Securities and Exchange Commission
on September 29, 2003
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
=================
Amemdment No. 1 to
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
=================
INTELLI-CHECK(R), INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-3234779
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
246 CROSSWAYS PARK WEST
WOODBURY, NEW YORK 11797
(516) 992-1900
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
=================
FRANK MANDELBAUM
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
INTELLI-CHECK(R), INC.
246 CROSSWAYS PARK WEST
WOODBURY, NEW YORK 11797
(516) 992-1900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
=================
Copies to:
MITCHELL S. NUSSBAUM, ESQ. RICHARD DISTEFANO, ESQ.
LOEB & LOEB LLP BLANK ROME LLP
345 PARK AVENUE 405 LEXINGTON AVENUE
NEW YORK, NY 10154 NEW YORK, NY 10174
PHONE: (212) 407-4000 PHONE: (212) 885-5000
FAX: (212) 407-4990 FAX: (212) 885-5047
=================
Approximate Date of Commencement of Proposed Sale to the Public:
As soon as practicable after this registration statement becomes
effective.
=================
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, as amended, check the following box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. / /
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, as amended, 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 of 1933, as amended, 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 of 1933, as amended, 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, check
the following box. / /
=================
CALCULATION OF REGISTRATION FEE
================================================================================================================
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
================================================================================================================
Common stock, $0.001 par value 1,150,000 $9.20 $10,580,000 $855.92
================================================================================================================
Underwriter's Warrants, each to 100,000 $.001 $100 $.01(2)
purchase one share of common stock(3)
----------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value, 100,000 $11.04 $1,104,000 $89.31
issuable upon exercise of the
Underwriter's Warrant(3)
----------------------------------------------------------------------------------------------------------------
Total Registration Fee $945.24
(1) Includes 150,000 shares that the underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended.
Based on the average of the high and low sale prices reported in the
consolidated reporting system of the American Stock Exchange on August
12, 2003.
(3) Pursuant to Rule 416, there are also being registered such indeterminable
additional shares of Common Stock as may become issuable pursuant to
anti-dilution provisions contained in the Underwriter's Warrants
=================
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
================================================================================
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and it is not soliciting offers to buy these
securities in any state in which the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 2003
PROSPECTUS
[LOGO]INTELLI-CHECK(R), INC.
1,000,000 Shares of Common Stock
$____ per share
We are offering 1,000,000 shares of our common stock. Our common stock
trades on the American Stock Exchange under the symbol "IDN". On August 13, 2003
the last reported sale price of our common stock was $9.70 per share.
The net proceeds from this offering are estimated to be $8,545,500, based
upon an assumed public offering price of $9.70 per share and after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us. We plan to use the net proceeds for general corporate purposes, including
purchase of equipment, product development, sales and marketing, consultant fees
and working capital.
Please see "Risk Factors" beginning on page 4 to read about certain factors
you should consider before buying shares of our common stock.
--------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
--------------------
Per Share Total
-------------------------------------------------------------------------------
Public offering price:
-------------------------------------------------------------------------------
Underwriting discounts
and commissions:
-------------------------------------------------------------------------------
Estimated offering expenses
-------------------------------------------------------------------------------
Net proceeds to Intelli-Check
-------------------------------------------------------------------------------
We have granted the underwriter a 45-day option to purchase up to an
additional 150,000 shares of common stock to cover over-allotments. The
underwriter is offering the shares on a firm commitment basis. The underwriter
expects to deliver the shares of common stock to purchasers on ______________,
2003.
We have agreed to sell to the underwriter warrants to purchase up to an
additional 100,000 shares of our common stock.
The Shemano Group [LOGO]
This prospectus is dated ___, 2003
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY.............................................................2
RISK FACTORS...................................................................4
FORWARD-LOOKING STATEMENTS....................................................10
THE COMPANY...................................................................12
USE OF PROCEEDS...............................................................18
PRICE RANGE OF COMMON STOCK...................................................19
DILUTION .....................................................................20
DESCRIPTION OF CAPITAL STOCK..................................................21
UNDERWRITING..................................................................22
LEGAL MATTERS.................................................................25
EXPERTS.......................................................................24
ADDITIONAL INFORMATION AND INFORMATION INCORPORATED BY REFERENCE..............26
RECENT DEVELOPMENTS...........................................................27
APPENDIX I- FORM 10-K/A FOR THE YEAR ENDED DECEMBER 31, 2002..................27
APPENDIX II- FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2003.....................89
You should rely only on information contained in or incorporated by
reference into this prospectus. We have not authorized anyone to provide you
with information different from that contained in or incorporated by reference
into this prospectus. We are offering to sell, and seeking offers to buy, shares
of our common stock only in jurisdictions where offers and sales are permitted.
The information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of any
sale of our common stock. Updated information can be obtained as described under
"Additional Information and Information Incorporated by Reference."
All references to "we," "us," "our," "Intelli-Check" or "the Company" in
this prospectus mean Intelli-Check, Inc.
Intelli-Check and the names of our systems and software are tradenames or
trademarks of Intelli-Check. This prospectus also contains trademarks and
tradenames of other companies.
PROSPECTUS SUMMARY
You should read the following summary, together with the more detailed
information regarding our company and the common stock being sold in this
offering, including "Risk Factors" and our financial statements and notes to
those statements appearing in this prospectus and incorporated by reference in
this prospectus.
Our Company
We have developed and are currently marketing systems and software which
incorporate document verification technologies to assist federal, state and
local governments, law enforcement agencies, merchants and others in detecting
and thus assisting in the prevention of, the use of fraudulent driver licenses
and state issued non-driver and military identification cards, all three
referred to in this prospectus as identification cards. Our systems and software
enable the reading, analyzing and validation of encoded information contained on
a majority of identification cards.
The Offering
Common stock offered by us 1,000,000 shares
Common stock to be outstanding 9,957,739 shares. Our outstanding shares
after this offering do not include:
o 100,000 shares reserved for
issuance upon exercise of the
underwriter's warrants;
o 128,061 shares reserved for
conversion of warrants outstanding;
o 1,694,866 shares reserved for
issuance upon exercise of options
granted under our stock option
plans, of which 1,273,131 are
currently exercisable;
o 313,509 shares reserved for
issuance upon exercise of options
available for future grants under
our stock option plans;
o 1,064,425 shares reserved for
issuance upon exercise of non-plan
options granted, of which 741,925
are currently exercisable;
o 454,545 shares issuable upon
conversion of outstanding preferred
stock (subject to adjustment for
anti-dilution protection);
o 682,470 shares reserved for
issuance under a rights offering
commenced in March 2001; and
o 150,000 shares reserved for
issuance in this offering to cover
over-allotments, if any, by the
underwriters.
2
Use of proceeds We intend to use the net proceeds of
this offering for general corporate
purposes, including purchase of
equipment, product development, sales
and marketing, consultant fees and
working capital.
Risk factors Investing in our common stock involves a
high degree of risk . You should
carefully review and consider the
disclosure under "Risk Factors"
beginning on page 4.
AMEX symbol IDN
Other Information
We were originally incorporated in New York in October 1994. In August
1999, we changed our state of incorporation to Delaware. Our principal executive
offices are located at 246 Crossways Park West, Woodbury, New York 11797. Our
telephone number is (516) 992-1900. Our website address is www.intellicheck.com.
The information contained in our website is not part of this prospectus.
3
RISK FACTORS
You should carefully consider the factors described below and other
information contained in, or incorporated by reference in, this prospectus
before making an investment in our common stock. The risks and uncertainties
described below are not the only ones we face. Additional risks and
uncertainties not presently known to us, may also impair our business
operations. If any of the following risks actually occurs, our business,
financial condition or results of operations could be materially and adversely
affected. In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment. You should also refer to other
information set forth in this prospectus, or incorporated by reference herein,
including our financial statements and the related notes.
Risks Related to Our Business and Industry
We have incurred losses since inception and losses may continue, which could
result in a decline in the value of our securities and a loss of your
investment.
We sustained net losses of $5,550,234 and $4,070,239 for the fiscal year
ended December 31, 2002 and six months ended June 30, 2003, respectively. We
expect to incur additional expenditures in line with the sales growth of our
business. We cannot assure you that we will achieve operating profits in the
future.
We may be unable to meet our future capital requirements.
Our capital requirements have been and will continue to be significant. We
anticipate that the proceeds from this offering, together with our currently
available cash, will be sufficient to meet our anticipated working capital and
capital expenditure requirements for at least 18 months following the date of
this prospectus. Should we be unsuccessful in completing this offering, we would
be required to raise additional capital within 12 months. In the event we are
unable to raise additional capital, we plan to implement cost saving measures to
sustain business activities on a reduced level. Unplanned acquisition and
development opportunities and other contingencies may arise, which could require
us to raise additional capital. If we raise additional capital through the sale
of equity, including preferred stock, or convertible debt securities, the
percentage ownership of our then existing stockholders will be diluted.
We currently do not have a credit facility or any commitments for
additional financing. We cannot be certain that additional financing, should it
be needed, will be available when and to the extent required. If adequate funds
are not available on acceptable terms, we may be unable to fund our expansion,
develop or enhance our products or respond to competitive pressures. Such
limitation could have a material adverse effect on our business, financial
condition and results of operations.
For those markets which require hardware platforms, we rely on third party
equipment manufacturers to provide hardware platforms, and we are currently
lacking a relationship with a manufacturer for our next generation hardware
platform.
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We are substantially dependent on the ability of a manufacturer to provide an
adequate supply of our IDC-1400 and next generation hardware platforms on a
timely basis and on favorable terms. The current supplier of our IDC-1400
hardware platform for our ID-Check(R) System is Hand Held Products Inc., or HHP,
formerly known as Welch Allyn, Inc. HHP has advised us that they ceased
production of the IDC-1400 in August 2003. However, we are currently in further
discussions with HHP to extend this. We are also currently in discussions with
HHP and other hardware manufacturers regarding the production of the next
generation hardware platform, which we will use as our new ID-Check platform.
Any disruption in establishing our arrangements with a manufacturer or
unsatisfactory performance by a manufacturer could have an adverse effect on our
operations.
We may not be able to keep up with rapid technological change. Advances in
hardware technology before we sell our existing inventory could cause us to take
an adjustment against inventory.
Our market is characterized by frequent new product announcements and rapid
advancements in hardware technology. Significant technological change could
render our existing technology obsolete. If we are unable to successfully
respond to these developments or do not respond in a cost-effective way, our
business, financial condition and results of operations will be materially
adversely affected. Furthermore, our inventory consists primarily of ID-Check
System terminals that run our patented software on the IDC-1400 hardware
platform. We periodically evaluate the current market value of our inventory,
taking into account any technological obsolescence that may occur due to
advances in hardware technology and the acceptance of the product in the
marketplace. We determined that an inventory reserve of $800,000 was an
appropriate adjustment to our results of operations for the period ended June
30, 2003. Should we determine in a future period that an adjustment to market
value of the inventory is necessary, we would record such adjustment at that
time, which could have a material adverse effect on our results of operations.
Our proprietary software relies on reference data provided by government and
quasi-government agencies. If these governmental and quasi-government agencies
were to stop sharing data with us, the utility of our proprietary software would
be diminished in those jurisdictions and our business would be damaged.
Currently, 46 states, 7 Canadian provinces and the District of Columbia
which conform to the guidelines established by certain organizations responsible
for implementing industry standards cooperate with us by providing sample
identification cards so that we may modify the ID-Check System terminal and
other software products to read and analyze the encoded information found on
identification cards. We cannot assure you that each of these jurisdictions will
continue to cooperate with us. In the event that one or more of these
jurisdictions do not continue to provide this reference data, the utility of our
proprietary software may be diminished in those jurisdictions.
Future government regulation restricting the capture of information
electronically stored on identification cards could adversely affect our
business.
5
Our proprietary software products are designed to read and capture
information from identification cards. Currently, those customers located in New
Hampshire, North Carolina and Texas are legally restricted from using this
information for their own use without customer consent. Because issues of
personal privacy continue to be a major topic of public policy debate, it is
possible that in the future additional customers in these and other
jurisdictions may be restricted from capturing this information. Therefore, the
implementation of unfavorable regulations or unfavorable interpretations of
existing regulations by courts or regulatory bodies could require us to incur
significant compliance costs, cause the development of the affected markets to
become impractical and otherwise adversely affect our business, financial
condition and results of operations.
Our refocused business strategy exposes us to long sales and implementation
cycles for our products.
Our target customers in the commercial fraud protection, access control and
age verification markets include large retailers and government agencies, which
typically require longer sales and implementation cycles for our products than
do our potential customer base solely interested in age verification, such as
restaurant, bar and convenience store operators. The longer sales and
implementation cycles for larger retail companies continue to have an adverse
impact on the timing of realizing our revenues. In addition, budgetary
constraints and economic slowdowns may also continue to delay purchasing
decisions by these prospective customers. These initiatives have costs
associated with them, and we cannot assure you that they ultimately will prove
successful or result in an increase to our revenues or profitability.
In addition, the loss or significant reduction in government spending by
government entities could materially limit our ability to obtain government
contracts. These limitations, if significant, could also have a material adverse
effect on our business, financial condition and results of operations. In
addition, we will need to develop additional strategic relationships with large
government contractors in order to successfully compete for government
contracts. Our inability to develop these strategic relationships may limit our
ability to implement our business strategy.
The market for our systems and software is evolving and its growth is uncertain.
Demand and market acceptance for recently introduced and existing systems
and software, and sales from such systems and software, are subject to a high
level of uncertainty and risk. Our business may suffer if the market develops
more slowly than anticipated and does not sustain market acceptance.
Failure to manage our operations if they expand could impair our future growth.
If we are able to expand our operations, particularly through multiple
sales to large retailers and government agencies in the document verification
market, the expansion will place significant strain on our management, financial
controls, operating systems, personnel and other resources. Our ability to
manage future growth, should it occur, will depend to a large extent upon
several factors, including our ability to do the following:
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o build and train our sales force;
o establish and maintain relationships with distributors;
o develop customer support systems;
o develop expanded internal management and financial controls adequate
to keep pace with growth in personnel and sales, if they occur; and
o manage the use of third-party manufacturers and suppliers.
If we are able to grow our business but do not manage our growth successfully,
we may experience increased operating expenses, loss of customers, distributors
or suppliers and declining or slowed growth of revenues.
We are subject to risks associated with product failure and technological flaws.
Products as complex as those offered by us may contain undetected errors or
result in failures when first introduced or when new versions are released.
Despite vigorous product testing efforts and testing by current and potential
customers, it is possible that errors will be found in a new product or
enhancement after commencement of commercial shipments. The occurrence of
product defects or errors could result in adverse publicity, delay in product
introduction, diversion of resources to remedy defects, loss of or a delay in
market acceptance or claims by customers against us, or could cause us to incur
additional costs, any of which could adversely affect our business.
Our failure to protect our proprietary technology may impair our competitive
position.
We continue to allocate significant resources to develop new and innovative
technologies which we utilize in our products and systems. We consider such
allocation to be fundamental to our continued success as such success depends,
to a significant degree, upon our ability to provide products and systems that
provide superior functionality and performance compared to those of our
competitors. Accordingly, we must protect our technology from unauthorized use.
This is done by processes aimed at identifying and seeking appropriate
protection for newly developed intellectual property, i.e., patents, trade
secrets, copyrights and trademarks, as well as policies aimed at identifying
unauthorized use of such property in the marketplace. These processes include:
o contractual arrangements providing for non-disclosure of proprietary
information;
o maintaining and enforcing issued patents and filing patent
applications on innovative solutions to commercially important
problems;
o protecting our trade secrets;
o protecting our copyrights and trademarks by registration and other
appropriate means;
o establishing internal processes for identifying and appropriately
protecting new and innovative technologies; and
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o establishing practices for identifying unauthorized use of our
intellectual property.
While we actively protect our intellectual property, it does not follow
that others will not intentionally or innocently use such intellectual property.
Accordingly, at times we may be required to bring legal proceedings to preclude
such unauthorized use. We are mindful that such measures can be costly and
timing consuming and we undertake such measures only as a last resort.
These polices and practices with respect to our intellectual property
rights do not prevent our competitors from independently developing products
similar or superior to our products and technologies. It merely protects our
property rights - rights created as a result of our allocating significant
portions of our technical and monetary resources. Further, an inability or
failure to protect this property could have a material adverse effect on our
future business and financial condition.
If our future products incorporate technologies that infringe the proprietary
rights of third parties, and we do not secure licenses from them, we could be
liable for substantial damages.
We are not aware that our current products infringe the intellectual
property rights of any third parties. We also are not aware of any third party
intellectual property rights that may hamper our ability to provide future
products and services. However, we recognize that the development of our
services or products may require that we acquire intellectual property licenses
from third parties so as to avoid infringement of those parties' intellectual
property rights. These licenses may not be available at all or may only be
available on terms that are not commercially reasonable. We recognize that third
parties could make infringement claims against us which, whether or not they are
upheld, could have a negative impact on our business and financial condition,
by:
o consuming substantial time and financial resources;
o diverting the attention of management from growing our business and
managing operations; and
o disrupting product sales and shipments.
If any third party prevails in an action against us for infringement of its
proprietary rights, we could be required to pay damages and either enter into
costly licensing arrangements or redesign our products so as to exclude any
infringing use. As a result, we would incur substantial costs, delays in product
development, sales and shipments, our revenues may decline substantially and we
may not be able to achieve the minimum, necessary growth for our continued
success.
Failure to attract and retain management and other personnel may damage our
operations and financial results and cause our stock price to decline.
We depend to a significant degree on the skills, experience and efforts of
our executive officers and other key management, technical, finance, sales and
other personnel. Our failure to attract, integrate, motivate and retain existing
8
or additional personnel could disrupt or otherwise harm our operations and
financial results. Although we have employment agreements with each of Frank
Mandelbaum, our Chairman and Chief Executive Officer, and Edwin Winiarz, our
Senior Vice President - Treasurer and Chief Financial Officer, securing their
employment until December 31, 2004, we do not carry key man life insurance
policies covering any employees. The loss of services of certain of our key
employees, an inability to attract or retain qualified personnel in the future,
or delays in hiring additional personnel could delay the development of our
business and could have a material adverse effect on our business, financial
condition and results of operations.
Changes in accounting standards or our accounting policy relating to stock-based
compensation may negatively affect our operating results.
We currently are not required to record stock-based compensation charges if
the employee's stock option exercise price equals or exceeds the deemed fair
value of our common stock at the date of grant and the award has not been
modified. However, several companies have recently elected to change their
accounting policies and begun to record the fair value of stock options as an
expense. In addition, we understand that discussions of potential changes to
applicable accounting standards are ongoing. If the standards for accounting for
stock-based compensation change, or if we elect to change our accounting policy,
then the amount of our operating expenses could increase and our operating
results could be adversely affected.
Risks Related to the Offering
Our share price may be volatile and could decline substantially
The market price of our common stock, like the price of shares of
technology companies generally, has been and may continue to be volatile. From
January 1, 2002 to July 31, 2003, the closing bid price of our common stock has
varied from a high of $19.45 to a low of $2.10 per share, as reported on the
American Stock Exchange. Many factors may cause the market price for our common
stock to decline following this offering, including:
o shortfalls in revenues, cash flows or continued losses from operations;
o conversions of preferred stock into common stock;
o delays in development or roll-out of any of our products;
o announcements by one or more competitors of new product acquisitions or
technological innovations; and
o unfavorable outcomes from outstanding litigation.
In addition, the stock market experiences extreme fluctuations in price and
volume that particularly affect the market prices of shares of emerging
technology companies, such as ours. These price and volume fluctuations are
often unrelated or disproportionate to the operating performance of the affected
9
companies. Because of this volatility, we may fail to meet the expectations of
our shareholders or of securities analysts, and our stock price could decline as
a result. Declines in our stock price for any reason, as well as broad-based
market fluctuations or fluctuations related to our financial results or other
developments, may adversely affect your ability to sell your shares at a price
equal to or above the price at which you purchased them. Decreases in the price
of our common stock may also lead to de-listing of our common stock.
Future sales of a large number of shares of our common stock may cause our stock
price to decline.
At August 5, 2003, 8,957,739 shares of our common stock were issued and
outstanding. Upon completion of this offering and assuming the conversion of all
of the shares of our Series A Preferred Stock and exercise of all outstanding
warrants and exercisable options but not including the exercise of any rights
outstanding that were declared as dividends to stockholders in March 2001, there
would be 12,555,401 shares issued and outstanding. Of these shares, 7,465,571
shares are presently eligible for resale without restriction, and all 1,000,000
shares being registered under this prospectus will be transferable without
restriction under the Securities Act of 1933, as amended, after the effective
date of the registration statement of which this prospectus is a part. Another
1,492,168 shares are eligible for resale subject to the restrictions on volume,
manner of sale and other conditions of Rule 144 promulgated under the Securities
Act of 1933, as amended. Sales of large amounts of these shares in the public
market could depress the market price of our common stock and impair our ability
to raise capital through offerings of our equity securities.
Risks Related to Arthur Andersen LLP
The absence of Arthur Andersen LLP's consent to the use of its opinion may
limit the remedies available to purchasers of securities pursuant to this
prospectus.
Our inability to obtain Arthur Andersen LLP's consent to the use of its
opinion for our financial statements for the 2001 year and the absence of a
signed opinion may limit the remedies available to you since your claims against
Arthur Andersen LLP under the Securities Act of 1933, as amended, based on these
financial statements may be limited. Moreover, even if claims against Arthur
Andersen LLP are permitted, Arthur Andersen LLP may not have the financial
resources to satisfy any judgment. In addition, notwithstanding that we have not
filed the written consent of Arthur Andersen, LLP, our directors and officers
may still be able to establish a due diligence defense to any claim relating to
those financial statements on the basis that they were made on the authority of
our expert which could limit your ability to assert a claim against them.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We intend the forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements in these sections. All statements regarding our expected financial
position and operating results, our business strategy and our plans are
10
forward-looking statements. These statements can sometimes be identified by our
use of words such as "may," "anticipate," "expect," "intend," "estimate" or
similar expressions. Our expectations in any forward-looking statements may not
turn out to be correct. Our actual results could be materially different from
those discussed in or implied by these statements, and you may consider these
differences important to your investment decision. Important factors that could
cause our actual results to be materially different include those discussed
under "Risk Factors." You should not place undue reliance on the forward-looking
statements, which speak only as of the date the statements were made.
We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. The risk factors described
in the preceding pages, as well as any cautionary language in this prospectus,
provide examples of risks, uncertainties and events that may cause our actual
results to differ materially from the expectations we describe in our
forward-looking statements. Before you invest in our common stock, you should be
aware that the occurrence of the events described in these risk factors and
elsewhere in this prospectus could materially and adversely affect our business,
operating results and financial condition.
11
THE COMPANY
General
We have developed and are currently marketing an advanced document
verification system to enable a user to detect altered and tampered
identification cards and to address problems such as:
Commercial Fraud - which may lead to economic losses to merchants from
check cashing, debit and credit card and other types of fraud such as
identity theft which principally utilizes fraudulent identification
cards as proof of identity;
Unauthorized Access - by verifying identification, our systems and
software are designed to increase security and deter terrorism at
airports, shipping ports, rail and bus terminals, military
installations, high profile buildings and infrastructure where
security is a concern; and
Underage Access to Age Restricted Products and Services - by verifying
identification, our systems and software are designed to determine the
customer's age and validity of the identification card to detect and
prevent the use of fraudulent identification for the purchase of
alcohol, tobacco and other age-restricted products and services and to
reduce the risk to the retailer of substantial monetary fines,
criminal penalties and the potential for license revocation for the
sale of age-restricted products to minors.
Our Products and Services
Our advanced document verification technology contained in our ID-Check
unit reads in one swipe or scan the encoded data contained on U.S. and Canadian
identification cards that, in most instances, comply with the standards of the
American Association of Motor Vehicle Administrators (AAMVA), the American
National Standards Institute (ANSI) and the International Standards Organization
(ISO).
The product we have designed and developed, the IDC-1400, is based on our
patented ID-Check (TM) technology. Our recently introduced product, IDN-DLL, is
a software only application which can be used with a customer's existing
hardware, or with minimal additional hardware components, included in
Point-Of-Sale (POS) terminals for multi-lane retailers such as grocery and
mass-retail stores. Currently, we have entered into six (6) license agreements
executed with third parties for integration and sub-licensing of this
application.
We believe the ID-Check solution is the most advanced, reliable and
effective technology, which provides users with an easy, reliable, and
cost-effective method of document and age verification. We have received
encoding formats from most jurisdictions that conform to AAMVA standards. This
information, combined with our patented technology, enables our ID-Check
software to read, decode and process the information electronically stored on
12
identification cards. As jurisdictions make changes to their identification
cards, we believe our software, together with our programmable terminal, can be
adapted to these changes.
Our C-Link software works in conjunction with the ID-Check terminal where
permitted by law. It allows the user to instantly view data for further
verification and archives it into a personal computer. C-Link can be used on a
stand alone personal computer or network environment. It contains features such
as alerts, watch lists, and recurring entry.
ID-Check terminals do not require a connection to a central database to
operate, thus negating privacy concerns. Our terminals have the ability to
operate add-on peripherals such as printers, bar code scanners, fingerprint
readers and other devices. Additionally, our terminals can communicate with
personal computers, which could enhance the functionality of the terminals and
potentially create the opportunity for sales of other software products by us.
The ID-Check process is quick, simple and easy to use. After matching the
photograph on the identification card to the person presenting the document for
identification, the user simply swipes the identification card through the
ID-Check terminal if the card has a magnetic stripe or scans it if it has a bar
code. The terminal quickly determines if the document:
o is valid;
o has been altered or tampered with;
o has expired; or
o has a date of birth equal to or greater than the legal age to
purchase age restricted products, such as alcohol and tobacco, in
the retailer's location.
Then, the terminal will automatically:
o respond to the user by displaying the results in words on the
terminal's screen;
o save information that is permissible by law to the terminal's own
memory;
o print a record of the transaction including the results on a roll
of paper similar to that used in cash registers, if an optional
printer has been installed; and
o send the results to a personal computer which has Microsoft
Windows 95/98/ME/NT/2000/XP for permanent storage when used in
conjunction with our software, which simplifies record keeping by
downloading comprehensive ID-Check due diligence data into a
personal computer. This provides a merchant with secure back-up
files that include individual and cumulative transaction records,
where permitted by law.
13
Strategy
Our objective is to be a leading provider of identity verification
technology systems and software in the age verification, commercial fraud
protection and access control markets. Key elements of our strategy are as
follows:
Expand Marketing Relationships with Trade Associations and Public Interest
Groups. We have entered into marketing agreements with The American Association
of Airport Executives (AAAE), the largest professional organization for airports
in the world, Credit Union National Association (CUNA), the premier trade
association for credit unions, and Mothers Against Drunk Driving (MADD), one of
the highest profile public interest groups, to market our systems and software
to their members. We intend to continue to expand our relationships with trade
associations and public interest groups that can help expand our customer base.
Develop Additional Strategic Alliances with Providers of Security
Solutions. We have entered into strategic alliances with Bioscrypt Inc., Identix
Corporation, Ultra-Scan Inc., biometric companies; E-Certify, an information
security company; Lenel Systems International, a provider of integrated security
solutions; and Northrop Grumman Mission Systems, an integrator in the defense
industry, to utilize our systems and software as the proposed or potential
enrollment application for their technologies and to jointly market these
security applications. We believe these relationships have broadened our
marketing reach through their sales efforts and we intend to develop additional
strategic alliances with additional providers of security solutions.
Strengthen Sales and Marketing Efforts. We intend to capitalize on the
growth in demand for age and document verification by continuing to market and
support our systems and software. We have recently re-organized our sales and
marketing staff to better reach our targeted markets by dividing the United
States territory into three regions covered by a regional sales manager and by
appointing a director of strategic business development to concentrate on
developing partnerships and licensing arrangements, and a director of corporate
and government sales to concentrate on major commercial and government accounts.
Enter into Additional Licensing Agreements. We intend to continue to
license our software for use with a customer's system. We are currently
licensing our IDN-DLL and C-Link software products for Windows and Windows CE
platforms. Our software is intended to be used with a compatible hardware input
device. We have entered into six (6) licensing agreements to date.
Protect Intellectual Property. We intend to strongly protect our
intellectual property portfolio in order to preserve value and obtain favorable
settlements where warranted. For example, in February 2003, we filed suit
against CardCom, Inc. d/b/a CardCom Technology, Inc. claiming that CardCom had
infringed one of our patents. Subsequently, we entered into a patent licensing
agreement with CardCom effective March 2003 which provides for a non-exclusive
three year license in connection with the manufacture, use and sale of CardCom's
age verification products in the United States and Canada. We also recently
filed a patent infringement lawsuit against Tricom Card Technologies, Inc. in
July 2003.
14
Our Revenue Sources
We derive our revenue from the following sources:
o Sales of our systems by our own direct sales force and marketing partners;
o Royalties and licensing fees from licensing our patented technology to
third parties;
o Revenue sharing and marketing arrangements through strategic alliances and
partnerships; and
o Sale of software upgrades and extended maintenance programs.
Our Target Markets
The target markets of our systems and software include those for Commercial
Fraud Protection, Access Control and Age Verification:
o Commercial fraud protection
- Banks and other financial institutions
- Credit unions
- Credit card issuers
- Check cashing services
- Pharmacies
- Auto dealerships and rental car agencies
- Casino cage operations
- Mass merchandisers and retailers
- Hospitals and health plans
- Lodging Industry
o Access control
- Airports and airlines
- Departments of Motor Vehicles
- Prisons
- Law enforcement agencies
- Notable buildings
- Court houses
- Nuclear facilities
- Oil refineries and storage facilities
- Military establishments
- U.S. Post Office
- Department of Homeland Security
- Bus, rail and port facilities
o Age verification market
- Bars and night clubs
- Convenience stores
15
- Grocery chains
- Restaurants
- Stadiums and arenas
- Casinos and gaming establishments
- Sellers of sexually explicit material
- Firearm dealers
Current Customers
We have generated revenues from our customers from the sale of systems,
licensing of software and sale of software upgrades. The following
representative customers are using our systems and software for commercial fraud
protection:
o MGM Grand
o Caesar's Palace
o Foxwoods Resorts and Casino
o Comerica Bank
o The Cooperative Bank
The following representative customers are using our systems and software
for access control:
o JFK Airport in New York, O'Hare International Airport in Chicago
and Reagan National Airport in Washington D.C.
o American Stock Exchange
o Fort Sam Houston and Fort Hood
o New York, Vermont and Delaware Department of Motor Vehicles
o Port Authority of New York and New Jersey
The following representative customers are using our systems and software
for age verification:
o U.S. Smokeless Tobacco, Co.
o Sunoco
o Darden Restaurants
o Houston's Restaurants
o Anton Airfoods, Inc.
Intellectual Property
In January 1999, the U.S. Patent and Trademark Office granted us a patent
on our ID-Check software technology. In October 2002, we were granted another
patent relating to our document authentication and age verification technology.
At present, we have another patent application pending in the U.S. Patent and
Trademark Office. These patents cover commercially important aspects of our
capabilities relating to the authentication of a document, such as a driver's
license, along with the verification of the age of an individual associated with
that document. Upon our acquisition of the assets of IdentiScan, we also
received equitable ownership and sole ownership rights to intellectual property,
16
including other patents and patent applications relating to age verification
technology.
We have also been granted multiple copyrights in the United States, which
are effective in Canada and in other major industrial countries. In addition,
the copyright protection covers software source codes and supporting graphics
relating to the operation of ID-Check and other software products. We also have
several trademarks relating to our company, its product names and logos.
In connection with the sales or licensing of our intellectual property, we
have entered into an agreement with Mr. Kevin Messina, our former Senior
Executive President and Chief Technology Officer, under which we will pay
royalties equal to 0.005% of gross sales from $2,000,000 to $52,000,000 and
0.0025% of gross sales, in excess of $52,000,000.
17
USE OF PROCEEDS
We estimate that we will receive net proceeds from the sale of 1,000,000
shares of our common stock in this offering of approximately $8,545,500 million,
based upon an assumed public offering price of $9.70 per share and after
deducting the underwriting discount and estimated offering expenses payable by
us. If the underwriter's over-allotment option is exercised in full we estimate
that net proceeds will be $9,807,700.
We expect to use the net proceeds from this offering for general corporate
purposes, including purchase of equipment, product development, sales and
marketing, consultant fees and working capital. We intend to purchase equipment
for transactions in which we receive a transaction fee for purchasing hardware
and bundling it with our software to provide an identity verification product. A
portion of the proceeds will be used for product development, which encompasses
both hardware and software development. We anticipate using some of the proceeds
for sales and marketing and a portion of the proceeds will also be used for
consultant fees for government lobbyists. Pending our use of the net proceeds of
this offering, we intend to invest the net proceeds in short-term,
investment-grade, investment-bearing securities.
The allocation of the net proceeds from this offering set forth above
represents our best estimate based upon our currently proposed plans and
assumptions relating to our operations and certain assumptions regarding general
economic conditions. If any of these factors change, we may find it necessary or
advisable to reallocate some of the proceeds within the above-described
categories or to use portions for other purposes.
We anticipate that the net proceeds of this offering, together with
projected revenues from our operations, will be sufficient to fund our
operations and capital requirements for at least 18 months following this
offering. We cannot assure you, however, that such funds will not be expended
earlier due to unanticipated changes in economic conditions or other
circumstances that we cannot foresee. In the event our plans change or our
assumptions change or prove to be inaccurate, we could be required to seek
additional financing sooner than currently anticipated. We also expect that,
when the opportunity arises, we may acquire or invest in complementary
businesses, products or technologies. We have no present understandings,
commitments or agreements with respect to any material acquisition or
investment.
18
DILUTION
Dilution represents the difference between the amount per share paid by
purchasers of common stock in the offering and the net tangible book value per
share of common stock immediately after the offering. Our tangible book value
was approximately $592,777 at June 30, 2003, or $.07 per share. After
adjusting for the receipt of the net proceeds of the sale of 1,000,000 shares of
common stock in the offering at $9.70 per share, the pro forma book value at
June 30, 2003 would be approximately $9,138,277, or $.92 per share. As the table
below shows, this would represent an immediate dilution of $8.78 per share to
investors in the offering, based on the difference between pro forma book value
and the offering price.
Offering price per share $ 9.70
Net tangible book value per share before the offering $ .07
Increase in net tangible book value per share attributable
to the offering $ .85
Pro forma net tangible book value per share after the offering $ .92
------
Dilution to investors in the offering, per share $ 8.78
======
The foregoing table excludes 2,579,662 shares of common stock issuable
pursuant to currently exercisable outstanding options and warrants and issuable
upon conversion of outstanding preferred stock which are expected to be
outstanding after the consummation of this offering. If all options, warrants
and preferred Stock outstanding as of June 30, 2003, were included above, the
pro forma net tangible book value per share at June 30, 2003, after giving
effect to this offering, would have been $.73 and the dilution to new investors
would have been $8.97.
19
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 20,000,000 shares of common stock,
par value $0.001 per share, and 1,000,000 shares of preferred stock, par value
$0.01 per share, of which 30,000 shares are designated as Series A 8%
Convertible Redeemable Preferred Stock. As of August 5, 2003, there were
8,957,739 outstanding shares of common stock, and 30,000 outstanding shares of
Series A 8% Convertible Preferred Stock. Below is a summary description of the
material provisions of our capital stock.
Common Stock
We are authorized to issue 20,000,000 shares of common stock. All the
issued and outstanding shares of common stock are validly issued, fully paid and
non-assessable. Each outstanding share of common stock has one vote on all
matters requiring a vote of the shareholders. There is no right to cumulative
voting. In the event of a voluntary or involuntary liquidation, all shareholders
are entitled to a pro rata distribution after payment of liabilities and after
provision has been made for each class of stock, having preference over the
common stock. The holders of the common stock have no preemptive rights with
respect to our offerings of shares of our common stock. Holders of common stock
are entitled to dividends if, as and when declared by the Board out of the funds
legally available therefor. It is our present intention to retain earnings, if
any, for use in our business. Dividends are, therefore, unlikely in the
foreseeable future.
Series A 8% Convertible Redeemable Preferred Stock
In March 2003, the Board of Directors adopted a resolution issuing a series
of preferred stock, par value $0.01 per share, consisting of 30,000 shares
designated as Series A 8% Convertible Redeemable Preferred Stock, convertible,
at the option of the holder, into 454,545 shares of common stock based on a
conversion price of $6.60 per share. Each holder of Series A 8% Convertible
Redeemable Preferred Stock is entitled to the number of votes equal to the
number of shares of common stock into which such shares could be converted. The
holders of Series A 8% Convertible Redeemable Preferred Stock are entitled to
receive dividends at a rate of $8.00 per share per annum, which are fully
cumulative, senior and prior to common stock, pari-passu with any additional
series of preferred stock which may in the future be issued and designated as
ranking equal with the Series A 8% Convertible Redeemable Preferred Stock and
junior to any additional series of preferred stock which may in the future be
issued and designated as ranking senior to the Series A 8% Convertible
Redeemable Preferred Stock. The dividends on the Series A 8% Convertible
Redeemable Preferred Stock accrue from the date of issuance of each share and
are payable on September 30 and March 31 of each year commencing on September
30, 2003. In addition, holders of the Series A 8% Convertible Redeemable
Preferred Stock are entitled to a liquidation value of $100 per share plus an
amount equal to the cash value $100 per share of the dividends accrued and
unpaid thereon in the event of a liquidation, dissolution or winding up. The
company must redeem all of the Convertible Redeemable Preferred Stock
outstanding on March 27, 2008 at a redemption price of $100 per share.
20
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement between
us and The Shemano Group, Inc., the underwriter of this offering, a copy of
which agreement is to be filed as an exhibit to the registration statement of
which this prospectus forms a part, we have agreed to sell to the underwriter,
and the underwriter has agreed to purchase all of the 1,000,000 shares of our
common stock offered in this offering.
The underwriting agreement is subject to a number of terms and conditions
and provides that the underwriter must buy all of the shares if its buys any of
them.
The underwriter has advised us that it proposes to offer the shares as set
forth on the cover page of this prospectus, which includes the underwriting
discounts and commissions indicated there, and that it will initially allow
concessions not in excess of $___ per share on sales to certain dealers. After
the public offering, concessions to dealer terms may be changed by the
underwriter.
The underwriter has advised us that it does not intend to confirm sales of
the shares to any account over which it exercises discretionary authority in an
aggregate amount in excess of five (5%) percent of the total securities offered
hereby.
We have granted to the underwriter an option which expires 45 days after
the date of this prospectus, exercisable as provided in the underwriting
agreement, to purchase up to an additional 150,000 shares of our common stock at
the public offering price set forth on the cover page of this prospectus, less
underwriting discounts and commissions, which option may be exercised only for
the purpose of covering over-allotments, if any. If the underwriter exercises
its over-allotment in full, and assuming an offering price of $9.70 per share,
the total price to the public would be $1,455,000, the total underwriting
discounts and commissions would be $116,400, and the total proceeds (before
payment of the expenses of this offering) to our company would be $1,338,600.
The underwriting agreement provides that we will reimburse the underwriter
for its expenses on a non-accountable basis in the amount equal to 2.5% of the
gross proceeds of this offering, of which $30,000 has been paid to date, and the
balance of which shall be paid on the closing of this offering. We have also
agreed to pay all expenses in connection with qualifying the shares offered
under the laws of such states as the underwriter may designate, including
expenses of counsel retained for such purposes by the underwriter. We estimate
the expenses of this offering to be $378,500, or $454,900 if the underwriter's
over-allotment option is completely exercised.
The underwriting agreement provides for reciprocal indemnification between
us and the underwriter against certain liabilities in connection with the
registration statement, including liabilities under the Securities Act of 1933,
as amended.
Subject to the approval of the National Association of Securities Dealers,
Inc., at the closing of this offering, we will sell to the underwriter or its
designees at an aggregate purchase price of $100, warrants to purchase up to an
aggregate of 100,000 shares of our common stock for a period of four years
commencing one year from the effective date of this offering. The exercise price
of the warrants is 120% of the price at which our shares of common stock are
sold pursuant to this offering. The warrants contain a cashless exercise
provisions and provision that protect their holders against dilution by
adjustment of the exercise price and number of shares issuable upon exercise on
the occurrence of specific events, including stock dividends or other changes in
the number of our outstanding shares. No holder of these warrants will possess
any rights as a stockholder unless the warrant is exercised. The warrants may
not be sold, transferred, assigned or hypothecated for a period of one year from
the effective date of this offering, except to officers or partners (but not
directors) of the underwriter and members of the selling group and/or their
officers or partners. During the exercise period, the holders of the
underwriter's warrants will have the opportunity to profit from a rise in the
market price of the common stock, which will dilute the interests of our
stockholders. We expect that the underwriter's warrants will be exercised when
we would, in all likelihood, be able to obtain any capital needed on terms more
favorable than those provided by the underwriter's warrants. Any profit realized
by the underwriter on the sale of the underwriters' warrants or the underlying
shares of common stock may be deemed additional underwriting compensation.
21
We have agreed to include the underwriter's warrant and the shares of
common stock underlying the underwriter's warrants in any appropriate
registration statement which is filed by us under the Securities Act of 1933, as
amended, during the seven years following the date of this prospectus.
The exercise of the underwriter's over-allotment option will not result in
an increase in the number of shares of common stock underlying the underwriter's
warrants or in the granting of any additional warrants to the underwriter.
The underwriter may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and "passive" market making in
accordance with Regulation M under the Securities Exchange Act of 1934, as
amended. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
the shares of common stock or warrants in the open market after the distribution
has been completed in order to cover syndicate short positions. Penalty bids
permit the underwriter to reclaim a selling concession from a syndicate member
when the shares of common stock or warrants originally sold by such syndicate
member are purchased in a syndicate covering transaction to cover syndicate
short positions. In "passive" market making, market makers in the securities who
are underwriters or prospective underwriters may, subject to certain
limitations, make bids for or purchases of the securities until the time, if
any, at which a stabilizing bid is made. These stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
common stock to be higher than they would otherwise be in the absence of these
transactions. These transactions may be effected on the AMEX or otherwise and,
if commenced, may be discontinued at any time.
In connection with the offering, the underwriter may make short sales of
our shares and may purchase our shares on the open market to cover positions
created by short sales. Short sales involve the sale by the underwriter of a
greater number of shares than they are required to purchase in the offering.
"Covered" short sales are sales made in an amount not greater than the
underwriter's over-allotment option to purchase additional shares in the
offering. The underwriter may close out any covered short position by either
exercising its over-allotment option or purchasing shares in the open market. In
determining the source of shares to close out the covered short position, the
underwriter will consider, among other things, the price of shares available for
purchase in the open market as compared to the price at which it may purchase
shares through the over-allotment option. "Naked" short sales are sales in
excess of the over-allotment option. The underwriter must close out any naked
short position by purchasing shares in the open market. A naked short position
is more likely to be created if the underwriter is concerned that there might be
downward pressure on the price of the shares in the open market after pricing
that could adversely affect investors who purchase in the offering. Similar to
other purchase transactions, the underwriter's purchases to cover the short
sales may have the effect of raising or maintaining the market price of our
common stock or preventing or retarding a decline in the market price of our
common stock. As a result, the price of our common stock may be higher than the
price that might otherwise exist in the open market.
Our common stock is listed on the American Stock Exchange under the symbol
"IDN". We plan to file an application to have the shares of common stock that we
are selling in this public offering listed on the American Stock Exchange.
22
Howard Davis, Senior Vice President of The Shemano Group, Inc., is a
director and securityholder of our company. Mr. Davis beneficially owns
approximately 1% of our outstanding common stock on a fully-diluted basis,
assuming he exercises all of his outstanding stock options. The Shemano Group,
Inc. and its affiliates may provide us with investment banking, financial
advisory, or commercial banking services in the future, for which they each may
receive customary compensation.
23
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for us by Loeb & Loeb LLP, New York, New York. Certain legal matters
in connection with the offering will be passed upon by the underwriter by Blank
Rome LLP, New York, New York.
EXPERTS
The financial statements of Intelli-Check, Inc. at December 31, 2002, and
for the year then ended, have been audited by Grant Thornton LLP, independent
certified public accountants, and at December 31, 2001 and for the years ended
December 31, 2001 and December 31, 2000, by Arthur Andersen LLP, independent
auditors; as indicated in their reports thereon. These financial statements are
incorporated by reference herein and in the Registration Statement, and are
included in reliance upon such reports given on the authority of such firms as
experts in accounting and auditing. After reasonable efforts, we have been
unable to obtain the consent of Arthur Andersen LLP to the incorporation by
reference in the Registration Statement of which this prospectus is a part of
Arthur Andersen LLP's reports of its audits of our financial statements at
December 31, 2001 and for the two years in the period ended December 31, 2001.
Under these circumstances, under Rule 437(a) under the Securities Act of 1933,
as amended, we may file the Registration Statement without Arthur Andersen LLP's
consent. In the absence of Arthur Andersen LLP's consent, persons acquiring
shares of our common stock pursuant to this prospectus will be unable to assert
a claim against Arthur Andersen LLP under Section 11(a) of the Securities Act of
1933, as amended, in the event of any untrue statement of material fact or any
material omission in the financial statements audited by Arthur Andersen LLP or
in its reports with respect thereto.
24
ADDITIONAL INFORMATION AND INFORMATION INCORPORATED BY REFERENCE
We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended, and file reports, proxy statements
and other information with the SEC. Our SEC filings are available to the public
over the Internet at the SEC's website at http://www.sec.gov. You may also read
and copy any document we file with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of its Public Reference
Room. We incorporate by reference into this prospectus the information contained
in the documents listed below that we have filed with the SEC and which is
considered to be a part of this prospectus:
-Our annual report on Form 10-K and amended annual report on Form 10-K/A for the
year ended December 31, 2002, which contains audited financial statements for
the most recent fiscal year for which we have filed audited financial
statements;
-Our quarterly reports on Form 10-Q for the quarters ended March 31 and June 30,
2003, as filed with the SEC; and
-Our current reports on Form 8-K dated and filed on the following dates:
April 8, 2003, July 2, 2003, August 19, 2003, and August 28, 2003.
This prospectus is accompanied by a copy of our latest annual report on
Form 10-K, as amended and latest quarterly report on Form 10-Q. The
information in this prospectus should be read together with the information and
financial statements (including notes thereto) that appear in the Form 10-K, as
amended and the documents delivered with this prospectus. This prospectus
incorporates documents by reference that are not delivered with this prospectus.
These documents are available without charge, upon written or oral request by
any person to whom this prospectus has been delivered, from the Secretary,
Intelli-Check, Inc., 246 Crossways Park West, Woodbury, NY 11797, (516) 992-1900
or by e-mail at our website, www.intellicheck.com.
Any statement contained in a document incorporated by reference herein is
modified or superceded for all purposes to the extent that a statement contained
in this prospectus modifies or replaces such statement.
25
RECENT DEVELOPMENTS
Certain material developments with respect to us have occurred since the
end of the latest fiscal year for which certified financial statements were
included in the latest Form 10-K, as amended, Forms 10-Q, and Forms 8-K filed
with the SEC on EDGAR and incorporated by reference. A list of such Forms 8-K
are set forth above under Additional Information and Information Incorporated by
Reference.
26
PROSPECTUS [_____], 2003
[LOGO]INTELLI-CHECK(R), INC.
1,000,000 Shares of Common Stock
The Shemano Group [LOGO]
================================================================================
Neither we nor any of the underwriters have authorized anyone to provide
information different from that contained in this prospectus. When you make a
decision about whether to invest in our common stock, you should not rely upon
any information other than the information in this prospectus. Neither the
delivery of this prospectus nor the sale of our common stock means that
information contained in this prospectus is correct after the date of this
prospectus. This prospectus is not an offer to sell or solicitation of an offer
to buy these shares of common stock in any circumstances under which the offer
or solicitation is unlawful.
================================================================================
27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table indicates the expenses (other than the underwriting
discounts, commissions and non-accountable expense allowance) we will incur in
connection with the offering described in this registration statement. All
amounts are estimates, other than the SEC registration fee and the AMEX fee.
SEC registration fee $ 945
NASD Filing Fee $ 1,668
AMEX fee $ 22,500
Accounting fees and expenses $ 25,000
Legal fees and expenses $ 80,000
Printing and engraving $ 887
Blue sky fees and expenses $ 5,000
===============================================================
Total $136,000
===============================================================
----------
Item 15. Indemnification of Directors and Officers.
Intelli-Check's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Section 145 of the Delaware General
Corporation Law. Delaware law provides that the directors of a corporation will
not be personally liable to such corporation or its stockholders for monetary
damages for breach of their fiduciary duties as directors, except for liability
(i) for any breach of their duty of loyalty to the corporation or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derives an improper personal benefit.
Intelli-Check's By-laws provide that the Company shall indemnify its directors
and officers under certain circumstances, including those circumstances in which
indemnification would otherwise be discretionary, and the Company is required to
advance expenses to its officers and directors as incurred in connection with
proceedings against them for which they may be indemnified.
Item 16. Exhibits and Financial Statement Schedules.
a. Exhibits
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended (Incorporated by reference to
Registrant's Registration Statement on Form SB-2, File No. 333-87797)
3.2 Certificate of Designation of Preferred Stock of Intelli-Check, Inc.
(Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 31, 2003)
4.1 Specimen Common Stock Certificate (Incorporated by reference to the
Registrant's Registration Statement on Form SB-2, File No. 333-87797)
4.2 Warrant to Gryphon Master Fund, L.P. (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 31, 2003)
4.3 Form of Underwriter's Warrant Agreement including form of Warrant
Certificate
28
5.1 Opinion of Loeb & Loeb
10.1 1998 Stock Option Plan (Incorporated by reference to Registration
Statement on Form SB-2 (File No. 333-87797) filed September 24, 1999)
10.5 Agreement of Lease between the Company and Industrial and Research
Associates, dated as of October 15, 2000 (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 29, 2001)
10.6 1999 Stock Option Plan (Incorporated by reference to Registration
Statement on Form SB-2 (File No. 333-87797) filed September 24, 1999)
10.7 Development and Supply Agreement between the Company and Welch Allyn
Data Collection Inc., dated July 9, 1999 (Incorporated by reference to
Registration Statement on Form SB-2 (File No. 333-87797) filed September
24, 1999)
10.8 Agreement between the Company and Northern Leasing Systems Inc., dated
as of August 13, 1999 (Incorporated by reference to Registration
Statement on Form SB-2 (File No. 333-87797) filed September 24, 1999)
10.10 Agreement between the Company and Kevin Messina, individually and d/b/a
K.M. Software Development, dated as of May 3, 1999 (Incorporated by
reference to Registration Statement on Form SB-2 (File No. 333-87797)
filed September 24, 1999)
10.11 Memorandum of Understanding between AAMVAnet, Inc. and Intelli-Check,
Inc. effective November 15, 2000 (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 29, 2001)
10.12 2001 Stock Option Plan (Incorporated by reference to Registrant's Proxy
Statement on Schedule 14A filed May 31, 2001)
10.13 Employment Agreement between Edwin Winiarz and the Company, dated as of
September 7, 2001 (Incorporated by reference to Registrant's Annual
Report on Form 10-K filed March 31, 2003)
10.14 Employment Agreement between Frank Mandelbaum and the Company, dated as
of February 1, 2002 (Incorporated by reference to Registrant's Annual
Report on Form 10-K filed March 29, 2002)
10.15 Memorandum of Understanding between AAMVAnet, Inc. and Intelli-Check,
Inc. effective January 29, 2002 (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 29, 2002)
10.16 Securities Purchase Agreement between Intelli-Check, Inc. and Gryphon
Master Fund, L.P. dated March 27, 2003 (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 31, 2003)
10.17 Registration Rights Agreement between Intelli-Check, Inc. and Gryphon
Master Fund, L.P. dated March 27, 2003 (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 31, 2003)
10.18 Intellectual Property License Agreement between Intelli-Check, Inc. and
Cardcom, Inc. effective March 12, 2003*
23.1 Consent of Grant Thornton LLP
23.2 Consent of Arthur Andersen, LLP**
24 Power of Attorney*
----------
* Filed previously
** Pursuant to Rule 437(a) promulgated under the Securities Act of 1933, as
amended, no consent is filed herewith.
Item 17. Undertakings.
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, as amended (the "Act"), each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended, may be permitted to directors, officers, and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, and is therefore unenforceable. In
the event that a claim for indemnification by the registrant against such
liabilities (other than the payment by the registrant of expenses incurred or
29
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933, as amended, and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, as amended, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933, as amended,
shall be deemed to be part of this registration statement as of the time it
was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, as of September 29, 2003.
INTELLI-CHECK, INC.
/s/ FRANK MANDELBAUM
By: Frank Mandelbaum
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
Name and Signature Title Date
------------------ ----- ----
/s/ FRANK MANDELBAUM Chairman of the Board and September 29, 2003
Chief Executive Officer
Frank Mandelbaum
--------------------------------------------------------------------------------
* Senior Executive Vice President, September 29, 2003
Treasurer, Chief Financial
Officer
Edwin Winiarz
--------------------------------------------------------------------------------
* Director September 29, 2003
Evelyn Berezin
--------------------------------------------------------------------------------
* Director September 29, 2003
Howard Davis
--------------------------------------------------------------------------------
* Director September 29, 2003
Jeffrey Levy
--------------------------------------------------------------------------------
* Director September 29, 2003
Charles McQuinn
--------------------------------------------------------------------------------
* Director September 29, 2003
Arthur L. Money
--------------------------------------------------------------------------------
* Director September 29, 2003
Jim Moody
--------------------------------------------------------------------------------
*/s/ Frank Mandelbaum
------------------------
By: Frank Mandelbaum
Attorney-in-Fact
31
INDEX TO EXHIBITS
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation, as amended (Incorporated by reference to
Registrant's Registration Statement on Form SB-2, File No. 333-87797)
3.2 Certificate of Designation of Preferred Stock of Intelli-Check, Inc.
(Incorporated by reference to Registrant's Annual Report on Form 10-K
filed March 31, 2003)
4.1 Specimen Common Stock Certificate (Incorporated by reference to the
Registrant's Registration Statement on Form SB-2, File No. 333-87797)
4.2 Warrant to Gryphon Master Fund, L.P. (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 31, 2003)
4.3 Form of Underwriter's Warrant Agreement including form of Warrant
Certificate
5.1 Opinion of Loeb & Loeb
10.1 1998 Stock Option Plan (Incorporated by reference to Registration
Statement on Form SB-2 (File No. 333-87797) filed September 24, 1999)
10.5 Agreement of Lease between the Company and Industrial and Research
Associates, dated as of October 15, 2000 (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 29, 2001)
10.6 1999 Stock Option Plan (Incorporated by reference to Registration
Statement on Form SB-2 (File No. 333-87797) filed September 24, 1999)
10.7 Development and Supply Agreement between the Company and Welch Allyn
Data Collection Inc., dated July 9, 1999 (Incorporated by reference to
Registration Statement on Form SB-2 (File No. 333-87797) filed September
24, 1999)
10.8 Agreement between the Company and Northern Leasing Systems Inc., dated
as of August 13, 1999 (Incorporated by reference to Registration
Statement on Form SB-2 (File No. 333-87797) filed September 24, 1999)
10.10 Agreement between the Company and Kevin Messina, individually and d/b/a
K.M. Software Development, dated as of May 3, 1999 (Incorporated by
reference to Registration Statement on Form SB-2 (File No. 333-87797)
filed September 24, 1999)
10.11 Memorandum of Understanding between AAMVAnet, Inc. and Intelli-Check,
Inc. effective November 15, 2000 (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 29, 2001)
10.12 2001 Stock Option Plan (Incorporated by reference to Registrant's Proxy
Statement on Schedule 14A filed May 31, 2001)
10.13 Employment Agreement between Edwin Winiarz and the Company, dated as of
September 7, 2001 (Incorporated by reference to Registrant's Annual
Report on Form 10-K filed March 31, 2003)
10.14 Employment Agreement between Frank Mandelbaum and the Company, dated as
of February 1, 2002 (Incorporated by reference to Registrant's Annual
Report on Form 10-K filed March 29, 2002)
10.15 Memorandum of Understanding between AAMVAnet, Inc. and Intelli-Check,
Inc. effective January 29, 2002 (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 29, 2002)
10.16 Securities Purchase Agreement between Intelli-Check, Inc. and Gryphon
Master Fund, L.P. dated March 27, 2003 (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 31, 2003)
10.17 Registration Rights Agreement between Intelli-Check, Inc. and Gryphon
Master Fund, L.P. dated March 27, 2003 (Incorporated by reference to
Registrant's Annual Report on Form 10-K filed March 31, 2003)
10.18 Intellectual Property License Agreement between Intelli-Check, Inc. and
Cardcom, Inc. effective March 12, 2003*
23.1 Consent of Grant Thornton LLP
23.2 Consent of Arthur Andersen, LLP **
24 Power of Attorney*
----------
* Filed previously.
** Pursuant to Rule 437(a) promulgated under the Securities Act of 1933, as
amended, no consent is filed herewith.
32