AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 25, 2005
REGISTRATION NO. 333-118531
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ISLAND PACIFIC, INC.
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(formerly known as SVI Solutions, Inc.)
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 33-0896617
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7372
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(Primary Standard Industrial Classification Code Number)
19800 MACARTHUR BOULEVARD
IRVINE, CALIFORNIA 92612
(949) 476-2212
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(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
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MICHAEL TOMCZAK
PRESIDENT AND CHIEF OPERATING OFFICER
ISLAND PACIFIC, INC.
19800 MACARTHUR BOULEVARD
IRVINE, CALIFORNIA 92612
(949) 476-2212
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
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Copies to:
Harry J. Proctor, Esq.
Solomon Ward Seidenwurm & Smith, LLP
401 B Street, Suite 1200
San Diego, CA 92101
Phone: (619) 231-0303
Fax: (619) 231-4755
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this registration statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, 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 delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) SHARE (2) PRICE (2) REGISTRATION FEE (2)(3)
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Common Stock, $0.0001
par value 42,075,977 N/A N/A $ 2,649.14
(1) Pursuant to Rule 416 of the Securities Act of 1933, as amended (the
"Securities Act"), such shares shall include an indeterminate number of
shares of common stock that may be issued in connection with a stock split,
stock dividend, recapitalization or similar event.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) promulgated under the Securities
Act based upon the average of the high and low prices of our common stock
on November 23, 2004 as reported on the American Stock Exchange, which was
$0.43 per share.
(3) The Registrant registered 6,846,332 shares of common stock on a Form S-3
filed on August 25, 2004 (File No. 333-118531) and paid a filing fee of
$390.94 in connection with such registration. The Registrant registered
35,646,404 shares of common stock on a Form S-3 filed on September 13, 2004
(File No. 333-118927) and paid a filing fee of $2,258.20 in connection with
such registration. The Registrant is combining the above described Forms
S-3 in this registration statement.
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
EXPLANATORY NOTE
We restated our financial statements for the fiscal year ended March
31, 2004 and our quarterly financial statements for the second and third
quarters of the fiscal year ending March 31, 2003, the first, second and third
quarters of the fiscal year ending March 31, 2004 and the first quarter of the
fiscal year ending March 31, 2005.
The restatements were made for the following:
1. Reversal of revenue recognized on an one-time sale of software
technology rights,
2. Presentation of total revenues and cost of revenues as product and
services revenues and corresponding costs of revenues,
3. Reclassification of amortization expense of software products from
depreciation and amortization expense to cost of product revenue,
4. Reversal of a purchase of software technology ("Software
Technology") and related amortization,
5. Accrual of a royalty liability and related recognition of royalty
fees pursuant to the purchase agreement of Software Technology,
6. Recognition of amortization of debt discount on the March '03,
April '03, May '03 and Toys "R" Us convertible debt as interest
expense,
7. Capitalization and amortization of beneficial conversion interest
charges related to the March '03, April '03, May '03 and March '04
convertible debentures,
8. Capitalization of legal fees related to the acquisitions of Page
Digital Incorporated and Retail Technologies International, Inc.,
9. Reclassification of impairment of prepaid development expense from
other expense to selling, general and administrative expense,
10. Reclassification of a gain on debt forgiveness from extraordinary
item to other income, and
11. Record fair value of RTI's stock options assumed at acquisition.
We did not file an amended Form 10-K/A for the year ended March 31, 2003
due to the immateriality of adjustments.
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED
PURSUANT TO THIS PROSPECTUS UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
ISLAND PACIFIC, INC.
42,075,977 SHARES
COMMON STOCK
We are registering 42,075,977 shares of our common stock for resale by
the selling stockholders identified in this prospectus on pages 14 through and
18. The selling stockholders may sell the shares of common stock described in
this prospectus in public or private transactions, on or off the American Stock
Exchange, at prevailing market prices, or at privately negotiated prices. The
selling stockholders may sell shares directly to purchasers or through brokers
or dealers. Brokers or dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders. We will not
receive any of the proceeds from the sale of the shares by the selling
stockholders. The selling stockholders will receive all of the proceeds from the
sale of the shares and will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the shares. We will pay the
expenses of this registration statement.
Our common stock is listed on the American Stock Exchange under the
symbol "IPI." The closing sale price of our common stock as reported on the
American Stock Exchange on January 14, 2005 was $0.51 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING ON PAGE 3.
NEITHER THE SECURITIES EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is January 25, 2005, subject to completion.
TABLE OF CONTENTS
Page
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PROSPECTUS SUMMARY.......................................................... 1
THE OFFERING................................................................ 2
RISK FACTORS................................................................ 3
FORWARD LOOKING STATEMENTS.................................................. 13
USE OF PROCEEDS............................................................. 14
SELLING STOCKHOLDERS........................................................ 14
PLAN OF DISTRIBUTION........................................................ 18
LEGAL MATTERS............................................................... 19
EXPERTS..................................................................... 19
WHERE YOU CAN FIND MORE INFORMATION......................................... 20
PART II, INFORMATION NOT REQUIRED IN PROSPECTUS.............................II-1
EXHIBIT INDEX...............................................................II-6
YOU SHOULD RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. THE SELLING STOCKHOLDERS ARE OFFERING TO SELL, AND
SEEKING OFFERS TO BUY, COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES
ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS
OF THE DATE ON THE COVER PAGE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF
DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THE COMMON STOCK. IN THIS PROSPECTUS,
"IPI," "WE," "US," AND "OUR" REFER TO ISLAND PACIFIC, INC., UNLESS THE CONTEXT
OTHERWISE REQUIRES.
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION YOU SHOULD
CONSIDER BEFORE BUYING SHARES IN THIS OFFERING. YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING "RISK FACTORS" AND OUR FINANCIAL STATEMENTS
BEFORE MAKING AN INVESTMENT DECISION.
OUR COMPANY
We provide software solutions and services that support virtually all
of the operational activities of a typical retailer. We help traditional and
e-commerce retailers understand, manage and fulfill consumer demand by providing
fully-integrated, retail management and point-of-sale systems. We have installed
our software in over 200 retailers worldwide, which operate approximately 31,000
retail stores and have approximately $250 billion in combined annual sales. Our
current customers include Nike, Disney, the Limited Brands, IBM, Hershey's and
Lands End. We distribute our products through a direct sales force as well as
third party distributors that include IBM and IBM resellers.
Our solutions enable retailers to customize their merchandising and
build customer loyalty through the tracking, reporting and forecasting of
consumer trends. Specifically, our products facilitate data mining, including
identification of consumer preferences and trends, product purchasing
replenishment, pricing, loss prevention, financial management, and e-commerce.
We believe that our products are generally less expensive and faster to
implement than competing products. They are also scaleable, enabling retailers
to leverage their initial investments in our systems as they expand and grow.
OUR INDUSTRY
To operate effectively, retailers need business intelligence systems
that provide reliable data regarding the various factors that shape consumer
response, such as product selection, pricing, and shelf placement. Procurement
and analysis of this information has become more complicated as retailers expand
through the Internet, catalog, kiosk and other distribution channels.
Legacy systems relied upon by retailers to address these information
needs are often self-developed, custom-built systems that are not
Internet-enabled and do not provide the enterprise-wide supply and demand chain
market intelligence, communications, forecasting and planning, and merchandising
functions that are critical to a retailers' ability to operate at maximum
efficiency.
Current offerings of packaged software solutions designed specifically
for the retail industry are primarily positioned for the largest of companies,
which can better afford the expensive licenses and time necessary for managerial
and technical staff to implement these solutions.
Smaller-to -medium sized retailers, generally with $200 to $700 million
in annual sales, have a compelling need for a fully-integrated software
infrastructure that can mine and manage supplier and consumer data; give the
retailer control of its business processes to meet competitive challenges; and
scale up as the retailer grows. In addition, these retailers want systems that
are easy to install, cost-effective and user-friendly.
OUR SOLUTIONS
Our information management solutions are specifically designed to serve
smaller-to-medium sized retailers. Our solutions are easy-to-use, rapidly
deployable, and sufficiently flexible to meet the needs of a broad range of
retail sectors, such as fashion, mass merchandise, and food and drug.
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Key areas that differentiate our software solutions include:
o RAPID IMPLEMENTATION - We believe that our software systems can be
implemented more quickly than competing systems, enabling
retailers to more rapidly leverage the information gathering and
reporting benefits they desire. Moreover, our modular architecture
allows retailers to implement the applications they view as most
critical first, and to add upgrades and enhancements as needed.
o STRONG VALUE PROPOSITION - Our systems are less expensive than
competitive, packaged systems and generally much less expensive
than custom-designed retailing solutions. We believe that the
total cost of ownership of our systems, including installation and
maintenance, is among the lowest in the industry.
o SCALABLE AND FLEXIBLE - Our solutions are scalable; enabling our
customers to leverage their initial investment in our products as
our solutions help them grow. In addition, as their needs become
more complex, we are able to offer them a variety of options and
product extensions through partnerships with other software
vendors. Our solutions work in environments that span from 1 to
5,000 stores.
o PROVEN LEADERSHIP AND INNOVATION - We are a leading provider of
infrastructure software and services for the retail industry, our
target market, with a reputation for innovation and service. We
provide software products and services infrastructure for over 200
retailers. Our constant interaction with this sizeable customer
base provides a key source of ideas for continuous improvement to
our products.
RECENT DEVELOPMENTS
OPERATIONAL IMPROVEMENTS
In recent periods, we have taken a number of steps designed to improve
our balance sheet and operations, including:
o Acquired two complementary companies with substantial revenues and
earnings potential;
o Revamped our management team by adding a new President and COO,
new CTO, and new CFO;
o Improved our IBM-based core products through continuing internal
research and development;
o Obtained the rights to distribute complementary products,
including a new easy-to-install and easy-to-use, open-architecture
software system for very small retailers, which we will introduce
in 2004;
o Established partnerships with several value added resellers to
provide a variety of options and product extensions;
o Improved our distribution capabilities by adding new third party
channels, such as IBM and IBM's resellers, and professional
service firms, such as CGI and LakeWest.
We believe that these actions have positioned us for a return to
sustained revenue growth and profitability.
Our executive offices are located at 19800 MacArthur Boulevard, Irvine,
California, 92612, telephone number (949) 476-2212.
THE OFFERING
Common stock to be offered by 42,075,977 shares
the selling stockholders
Common stock outstanding as of 63,486,885
January 14, 2005
Use of proceeds We will not receive any proceeds
from the sale of shares of common
stock covered by this prospectus.
American Stock Exchange symbol IPI
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RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY CONSIDER THE
RISKS DESCRIBED BELOW BEFORE MAKING A DECISION TO BUY OUR COMMON STOCK. IF ANY
OF THE FOLLOWING RISKS ACTUALLY OCCURS, OUR BUSINESS COULD BE HARMED. IN THAT
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 THE OTHER INFORMATION IN
THIS PROSPECTUS.
EXCEPT FOR HISTORICAL INFORMATION, THE INFORMATION IN THIS PROSPECTUS CONTAINS
"FORWARD-LOOKING" STATEMENTS ABOUT OUR EXPECTED FUTURE BUSINESS AND PERFORMANCE.
OUR ACTUAL OPERATING RESULTS AND FINANCIAL PERFORMANCE MAY PROVE TO BE VERY
DIFFERENT FROM WHAT WE MIGHT HAVE PREDICTED AS OF THE DATE OF THIS PROSPECTUS.
THE RISKS DESCRIBED BELOW ADDRESS SOME OF THE FACTORS THAT MAY AFFECT OUR FUTURE
OPERATING RESULTS AND FINANCIAL PERFORMANCE.
BUSINESS RISKS
WE INCURRED LOSSES FOR FISCAL YEARS 2004, 2003 AND 2002.
We incurred losses of $8.9 million, $2.7 million, and $14.7 million in
the fiscal years ended March 31, 2004, 2003, and 2002 respectively. The losses
in the past three years have generally been due to difficulties completing sales
for new application software licenses, the resulting change in sales mix toward
lower margin services, and debt service expenses. We will need to generate
additional revenue to achieve profitability in future periods. If we are unable
to achieve profitability, or maintain profitability if achieved, our business
and stock price may be adversely effected and we may be unable to continue
operations at current levels, if at all.
WE HAD NEGATIVE WORKING CAPITAL IN THE FISCAL YEAR ENDED MARCH 31, 2003, AND WE
HAVE EXTENDED PAYMENT TERMS WITH A NUMBER OF OUR SUPPLIERS.
At March 31, 2003, we had negative working capital of $4.1 million. We
have had difficulty meeting operating expenses, including interest payments on
debt, lease payments, and supplier obligations. We have at times deferred
payroll for our executive officers, and borrowed from related parties to meet
payroll obligations. We have extended payment terms with our trade creditors
wherever possible.
As a result of extended payment arrangements with suppliers, we may be
unable to secure products and services necessary to continue operations at
current levels from these suppliers. In that event, we will have to obtain these
products and services from other parties, which could result in adverse
consequences to our business, operations, and financial condition. We may be
unable to obtain these products from other parties on terms acceptable to us, if
at all.
OUR NET SALES HAVE DECLINED IN RECENT FISCAL YEARS. WE EXPERIENCED A SUBSTANTIAL
DECREASE IN APPLICATION SOFTWARE LICENSE SALES. OUR GROWTH AND PROFITABILITY IS
DEPENDENT ON THE SALE OF HIGHER MARGIN LICENSES.
Our net sales decreased by 20% in the fiscal year ended March 31, 2004,
compared to the fiscal year ended March 31, 2003. Our net sales decreased by 17%
in the fiscal year ended March 31, 2003 compared to the fiscal year ended March
31, 2002. We experienced a substantial decrease in application license software
sales in fiscal year 2003 and 2002, which typically carry a much higher margin
than other revenue sources. We must improve new application license sales to
become profitable. We have taken steps to refocus our sales strategy on core
historic competencies, but our typically long sales cycles make it difficult to
evaluate whether and when sales will improve. We cannot be sure that the decline
in sales has not been due to factors which might continue to negatively affect
sales.
OUR FINANCIAL CONDITION MAY INTERFERE WITH OUR ABILITY TO SELL NEW APPLICATION
SOFTWARE LICENSES.
Future sales growth may depend on our ability to improve our financial
condition. Our past financial condition has made it difficult for us to complete
sales of new application software licenses. Because our applications typically
require lengthy implementation and extended servicing arrangements, potential
customers require assurance that these services will be available for the
expected life of the application. These potential customers may defer buying
decisions until our financial condition improves, or may choose products of our
competitors whose financial conditions are, or are perceived to be, stronger.
Customer deferrals or lost sales will adversely affect our business, financial
condition, and results of operations.
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OUR SALES CYCLES ARE LONG AND OUR SALES PROSPECTS ARE UNCERTAIN. THIS MAKES IT
DIFFICULT FOR US TO PREDICT REVENUES AND BUDGET EXPENSES.
The length of sales cycles in our business, make it difficult to
evaluate the effectiveness of our sales strategies. Our sales cycles
historically have ranged from three to twelve months, which has caused
significant fluctuations in revenues from period to period. Due to our
difficulties in completing new application software sales in recent periods and
our refocused sales strategy, it is difficult to predict revenues and properly
budget expenses.
Our software applications are complex and perform, or directly affect,
mission-critical functions across many different functional and geographic areas
of a retail enterprise. In many cases, our customers must change established
business practices when they install our software. Our sales staff must dedicate
significant time consulting with a potential customer concerning the substantial
technical and business concerns associated with implementing our products. The
purchase of our products is often discretionary, so lengthy sales efforts may
not result in a sale. Moreover, it is difficult to predict when a license sale
will occur. All of these factors can adversely affect our business, financial
condition, and results of operations.
OUR OPERATING RESULTS AND REVENUES HAVE FLUCTUATED SIGNIFICANTLY IN THE PAST AND
MAY CONTINUE TO DO SO IN THE FUTURE, WHICH COULD ADVERSELY AFFECT OUR STOCK
PRICE.
Our quarterly operating results have fluctuated significantly in the
past and may fluctuate in the future as a result of several factors outside of
our control, including: the size and timing of orders, the general health of the
retail industry, the length of our sales cycles, and technological changes. If
revenue declines in a quarter, our operating results will be adversely affected
because many of our expenses are relatively fixed. In particular, sales and
marketing, application development, and general and administrative expenses do
not change significantly with variations in revenue in a quarter. It is likely
that in some future quarter our net sales or operating results will be below the
expectations of public market analysts or investors, which may cause our stock
price to decline.
Further, due to these fluctuations, we do not believe period to period
comparisons of our financial performance are necessarily meaningful nor should
they be relied on as an indication of our future performance.
WE MAY EXPERIENCE SEASONAL DECLINES IN SALES, WHICH COULD CAUSE OUR OPERATING
RESULTS TO FALL SHORT OF EXPECTATIONS IN SOME QUARTERS.
We may experience slower sales of our applications and services from
October through December of each year as a result of retailers' focus on the
holiday retail-shopping season. This can negatively affect revenues in our third
fiscal quarter and in other quarters, depending on our sales cycles.
OUR DEBT COULD ADVERSELY AFFECT US.
As of October 31, 2004, our debt, including any accrued interest, is as follows:
o $1. 2 million in convertible debenture issued in March 2004 to
Midsummer Investments, Ltd. ("Midsummer") due in full in May 2006,
with monthly redemptions commencing in September 2004.
o $0.5 million in promissory note issued in June 2004 to Intuit Inc.
("Intuit") due in full on June 1, 2006, payable in monthly
installments.
o $1.4 million in promissory notes issued in June 2004 to
noteholders of Retail Technologies International, Inc. ("RTI") due
on May 1, 2005, payable in monthly installments.
o $2.5 million in promissory notes issued in June 2004 to Michael
Tomczak and Jeffrey Boone due on June 1, 2006, payable in monthly
installments.
o $7.0 million in a secured convertible term note issued to Laurus
Master Fund, Ltd. ("Laurus") in July 2004, matures on July 12,
2007 with monthly principal installments of $212,000 together with
any accrued and unpaid interest commencing on March 1, 2005.
The substantial amount of our indebtedness impacts us in a number of ways:
o We have to dedicate a portion of cash flow from operations to
principal and interest payments on the debt, which reduces funds
available for other purposes.
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o We may not have sufficient funds to pay principal and/or interest
when they become due resulting in a default, which could lead to
our debt holders exercising rights under their respective debt
instruments, including, without limitation, declaring debt
immediately due and payable or taking possession or control of the
assets that secure the respective debt instruments.
These are just some factors pertaining to our debt that generally place us at a
disadvantage to our less leveraged competitors. Any or all of these factors
could cause our stock price to decline.
WE HAVE RELIED ON CAPITAL CONTRIBUTED BY RELATED PARTIES, AND SUCH CAPITAL MAY
NOT BE AVAILABLE IN THE FUTURE.
Our cash from operations has not been sufficient to meet our
operational needs and we have relied on capital from related parties. A company
affiliated with Donald S. Radcliffe, our director, made short-term loans to us
in fiscal 2002 and in fiscal 2003 to meet payroll. Softline Limited ("Softline")
loaned us $10 million to make a required principal payment on our Union Bank
term loan in July 2000. A subsidiary of Softline loaned us an additional
$600,000 in November 2000 to meet working capital needs. This loan was repaid in
February 2001, in part with $400,000 we borrowed from Barry M. Schechter, our
former Chairman. We borrowed an additional $164,000 from Mr. Schechter in March
2001, which was repaid in July 2001, for operational needs related to our
Australian subsidiary.
We may not be able to obtain capital from related parties in the
future. No officer, director, stockholder, or related party is under any
obligation to provide cash to meet our future liquidity needs.
WE MAY NEED TO RAISE CAPITAL TO GROW OUR BUSINESS. OBTAINING THIS CAPITAL COULD
IMPAIR THE VALUE OF YOUR INVESTMENT.
We may need to raise capital to:
o Support unanticipated capital requirements;
o Take advantage of acquisition or expansion opportunities;
o Continue our current development efforts;
o Develop new applications or services; or
o Address working capital needs.
Our future capital requirements depend on many factors, including our
application development, sales, and marketing activities. We do not know whether
additional financing will be available when needed, or on terms acceptable to
us. If we cannot raise needed funds for the above purposes on acceptable terms,
we may be forced to curtail some or all of the above activities and we may not
be able to grow our business or respond to competitive pressures or
unanticipated developments.
We may raise capital through public or private equity offerings or debt
financings. To the extent we raise additional capital by issuing equity
securities or convertible debt securities, our stockholders may experience
substantial dilution and the new securities may have greater rights,
preferences, or privileges than our existing common stock.
INTANGIBLE ASSETS MAY BE IMPAIRED MAKING IT MORE DIFFICULT TO OBTAIN FINANCING.
Goodwill, capitalized software, non-compete agreements, and other
intangible assets represent approximately 87% of our total assets as of
September 30, 2004. We may have to impair or write-off these assets, which will
cause a charge to earnings and could cause our stock price to decline.
Any such impairment will also reduce our assets, as well as the ratio
of our assets to our liabilities. These balance sheet effects could make it more
difficult for us to obtain capital, and could make the terms of capital we do
obtain more unfavorable to our existing stockholders.
5
FOREIGN CURRENCY FLUCTUATIONS MAY IMPAIR OUR COMPETITIVE POSITION AND AFFECT OUR
OPERATING RESULTS.
Fluctuations in currency exchange rates affect the prices of our
applications and services and our expenses. Foreign currency losses may
negatively affect profitability or increase losses. Approximately 81%, 17% and
2% of our revenues were in the Americas, Europe and Asia, respectively, in the
six months ended September 30, 2004. Approximately 87%, 13% and 0% of our
revenues were in the Americas, Europe and Asia, respectively, in the six months
ended September 30, 2003. Many of our expenses related to foreign sales, such as
corporate level administrative overhead and development, are denominated in U.S.
dollars. When accounts receivable and accounts payable arising from
international sales and services are converted to U.S. dollars, the resulting
gain or loss contributes to fluctuations in our operating results. We do not
hedge against foreign currency exchange rate risks.
HISTORICALLY WE HAVE BEEN DEPENDENT ON A SMALL NUMBER OF CUSTOMERS FOR A
SIGNIFICANT AMOUNT OF OUR BUSINESS.
Gabriel Brothers, Inc. and Charming Shoppes of Delaware, Inc. each
accounted for 6% of our total revenues in the six months ended September 30,
2004. Toys "R" Us ("Toys") accounted for 9%, 34% and 47% of our total revenues
from continuing operations for the fiscal years ended March 31, 2004, 2003, and
2002, respectively. In November 2003, Toys terminated their software development
and services agreement with us. We cannot provide any assurances that Toys or
any of our current customers will continue at current or historical levels or
that we will be able to obtain orders from new customers.
IF WE LOSE THE SERVICES OF ANY MEMBER OF OUR SENIOR MANAGEMENT OR KEY TECHNICAL
AND SALES PERSONNEL, OR IF WE ARE UNABLE TO RETAIN OR ATTRACT ADDITIONAL
TECHNICAL PERSONNEL, OUR ABILITY TO CONDUCT AND EXPAND OUR BUSINESS WILL BE
IMPAIRED.
We are heavily dependent on our President and Chief Operating Officer,
Michael Tomczak and our Chief Technology Officer, Jeffrey Boone. We are also
heavily dependent on our former Chairman, Barry Schechter, who remains a
consultant to us. We also believe our future success will depend largely upon
our ability to attract and retain highly-skilled software programmers, managers,
and sales and marketing personnel. Competition for personnel is intense,
particularly in international markets. The software industry is characterized by
a high level of employee mobility and aggressive recruiting of skilled
personnel. We compete against numerous companies, including larger, more
established companies, for our personnel. We may not be successful in attracting
or retaining skilled sales, technical, and managerial personnel, which could
negatively affect our financial performance and cause our stock price to
decline.
WE ARE DEPENDENT ON THE RETAIL INDUSTRY. IF ECONOMIC CONDITIONS IN THE RETAIL
INDUSTRY FURTHER DECLINE, OUR REVENUES MAY ALSO DECLINE. RETAIL SALES HAVE BEEN
AND MAY CONTINUE TO BE SLOW.
Our future growth is critically dependent on increased sales to the
retail industry. We derive the substantial majority of our revenues from the
licensing of software applications and the performance of related professional
and consulting services to the retail industry. The retail industry as a whole
is currently experiencing increased competition and weakening economic
conditions that could negatively impact the industry and our customers' ability
to pay for our products and services. In addition, the retail industry may be
consolidating, and it is uncertain how consolidation will affect the industry.
Such consolidation and weakening economic conditions have in the past, and may
in the future, negatively impact our revenues and reduce the demand for our
products and may negatively impact our business, operating results and financial
condition. Specifically, uncertain economic conditions and the specter of
terrorist activities have adversely impacted sales of our software applications,
and we believe mid-tier specialty retailers may be reluctant during the current
economic climate to make the substantial infrastructure investment that
generally accompanies the implementation of our software applications, which may
adversely impact our business.
THERE MAY BE AN INCREASE IN CUSTOMER BANKRUPTCIES DUE TO WEAK ECONOMIC
CONDITIONS.
We have in the past and may in the future be impacted by customer
bankruptcies. During weak economic conditions, such as those currently being
experienced in many geographic regions around the world, there is an increased
risk that certain of our customers will file bankruptcy. When our customers file
bankruptcy, we may be required to forego collection of pre-petition amounts owed
and to repay amounts remitted to us during the 90-day preference period
preceding the filing. Accounts receivable balances related to pre-petition
amounts may in certain of these instances be large due to extended payment terms
for software license fees and significant billings for consulting and
implementation services on large projects. We also face risk from international
customers who may file for bankruptcy protection in foreign jurisdictions - the
application of foreign bankruptcy laws may be less certain or harder to predict.
Although we believe that we have sufficient reserves to cover anticipated
customer bankruptcies, there can be no assurance that such reserves will be
adequate, and if they are not adequate, our business, operating results and
financial condition would be adversely affected.
6
WE MAY NOT BE ABLE TO MAINTAIN OR IMPROVE OUR COMPETITIVE POSITION BECAUSE OF
THE INTENSE COMPETITION IN THE RETAIL SOFTWARE INDUSTRY.
We conduct business in an industry characterized by intense
competition. Most of our competitors are very large companies with an
international presence. We must also compete with smaller companies that have
established strong local or regional customer bases. Many of our competitors and
potential competitors are more established, benefit from greater name
recognition, and have significantly greater resources than us. Our competitors
may also have lower cost structures and better access to the capital markets
than us. As a result, our competitors may be able to respond more quickly than
we can to new or emerging technologies and changes in customer requirements. Our
competitors may:
o Introduce new technologies that render our existing or future
products obsolete, unmarketable, or less competitive;
o Make strategic acquisitions or establish cooperative relationships
among themselves or with other solution providers, which would
increase the ability of their products to address the needs of our
customers; and
o Establish or strengthen cooperative relationships with our current
or future strategic partners, which would limit our ability to
compete through these channels.
We could be forced to reduce prices and suffer reduced margins and
market share due to increased competition from providers of offerings similar
to, or competitive with, our applications, or from service providers that
provide services similar to our services. Competition could also render our
technology obsolete. For a further discussion of competitive factors in our
industry, see "Description of Business - Competition" below.
OUR MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE, SO OUR SUCCESS DEPENDS
HEAVILY ON OUR ABILITY TO DEVELOP AND INTRODUCE NEW APPLICATIONS AND RELATED
SERVICES.
The retail software industry is characterized by rapid technological
change, evolving standards, and wide fluctuations in supply and demand. We must
cost-effectively develop and introduce new applications and related services
that keep pace with technological developments to compete. If we do not gain
market acceptance for our existing or new offerings or if we fail to introduce
progressive new offerings in a timely or cost-effective manner, our financial
performance will suffer.
The success of application enhancements and new applications depends on
a variety of factors, including technology selection and specification, timely
and efficient completion of design, and effective sales and marketing efforts.
In developing new applications and services, we may:
o Fail to respond to technological changes in a timely or
cost-effective manner;
o Encounter applications, capabilities, or technologies developed by
others that render our applications and services obsolete or
non-competitive or that shorten the life cycles of our existing
applications and services;
o Experience difficulties that could delay or prevent the successful
development, introduction, and marketing of these new applications
and services; or
o Fail to achieve market acceptance of our applications and
services.
The life cycles of our applications are difficult to estimate,
particularly in the emerging electronic commerce market. As a result, new
applications and enhancements, even if successful, may become obsolete before we
recoup our investment.
OUR PROPRIETARY RIGHTS OFFER ONLY LIMITED PROTECTION. OUR COMPETITORS MAY
DEVELOP APPLICATIONS SUBSTANTIALLY SIMILAR TO OUR APPLICATIONS AND USE SIMILAR
TECHNOLOGIES, WHICH MAY RESULT IN US LOSING CUSTOMERS. WE MAY HAVE TO INITIATE
COSTLY LITIGATION TO PROTECT OUR PROPRIETARY RIGHTS.
Our success and competitive position is dependent in part upon our
ability to develop and maintain the proprietary aspects of our intellectual
property. Our intellectual property includes our trademarks, trade secrets,
copyrights, and other proprietary information. Our efforts to protect our
intellectual property may not be successful. Effective copyright and trade
secret protection may be unavailable or limited in some foreign countries. We
hold only one patent. Consequently, others may develop, market, and sell
applications substantially equivalent to ours or utilize technologies similar to
those used by us, so long as they do not directly copy our applications or
otherwise infringe our intellectual property rights.
7
We may find it necessary to bring claims or initiate litigation against
third parties for infringement of our proprietary rights or to protect our trade
secrets. These actions would likely be costly and divert management resources.
These actions could also result in counterclaims challenging the validity of our
proprietary rights or alleging infringement on our part. The ultimate outcome of
any litigation will be difficult to predict.
OUR APPLICATIONS MAY BE SUBJECT TO CLAIMS THEY INFRINGE ON THE PROPRIETARY
RIGHTS OF THIRD PARTIES, WHICH MAY EXPOSE US TO LITIGATION.
We may become subject to litigation involving patents or proprietary
rights. Patent and proprietary rights litigation entail substantial legal and
other costs. We do not know if we will have the necessary financial resources to
defend or prosecute our rights in connection with any such litigation.
Responding to and defending claims related to our intellectual property rights,
even ones without merit, can be time consuming and expensive and can divert
management's attention from other business matters. In addition, these actions
could cause application delivery delays or require us to enter into royalty or
license agreements. Royalty or license agreements, if required, may not be
available on terms acceptable to us, if they are available at all. Any or all of
these outcomes could have a material adverse effect on our business, operating
results, and financial condition.
DEVELOPMENT AND MARKETING OF OUR OFFERINGS DEPENDS ON STRATEGIC RELATIONSHIPS
WITH OTHER COMPANIES. OUR EXISTING STRATEGIC RELATIONSHIPS MAY NOT ENDURE AND
MAY NOT DELIVER THE INTENDED BENEFITS, AND WE MAY NOT BE ABLE TO ENTER INTO
FUTURE STRATEGIC RELATIONSHIPS.
Since we do not possess all of the technical and marketing resources
necessary to develop and market our offerings to their target markets, our
business strategy substantially depends on our strategic relationships,
including licensing software and technology that is integrated into our
applications. While some of these relationships are governed by contracts, most
are non-exclusive and all may be terminated on short notice by either party. If
these relationships terminate or fail to deliver the intended benefits, our
development and marketing efforts will be impaired and our revenues may decline.
We may not be able to enter into new strategic relationships, which could put us
at a disadvantage to those of our competitors who do successfully exploit
strategic relationships.
OUR PRIMARY COMPUTER AND TELECOMMUNICATIONS SYSTEMS ARE IN A LIMITED NUMBER OF
GEOGRAPHIC LOCATIONS, WHICH MAKES THEM MORE VULNERABLE TO DAMAGE OR
INTERRUPTION. THIS DAMAGE OR INTERRUPTION COULD HARM OUR BUSINESS.
Substantially all of our primary computer and telecommunications
systems are located in two geographic areas. These systems are vulnerable to
damage or interruption from fire, earthquake, water damage, sabotage, flood,
power loss, technical, or telecommunications failure or break-ins. Our insurance
may not adequately compensate us for our lost business and will not compensate
us for any liability we incur due to our inability to provide services to our
customers. Although we have implemented network security measures, our systems
are vulnerable to computer viruses, physical or electronic break-ins, and
similar disruptions. These disruptions could lead to interruptions, delays, loss
of data, or the inability to service our customers. Any of these occurrences
could impair our ability to serve our customers and harm our business.
IF PRODUCT LIABILITY LAWSUITS ARE SUCCESSFULLY BROUGHT AGAINST US, WE MAY INCUR
SUBSTANTIAL LIABILITIES AND MAY BE REQUIRED TO LIMIT COMMERCIALIZATION OF OUR
APPLICATIONS.
Our business exposes us to product liability risks. Our applications
are highly complex and sophisticated and they may occasionally contain design
defects or software errors that could be difficult to detect and correct. In
addition, implementation of our applications may involve customer-specific
customization by us or third parties or involve integration with systems
developed by third parties. These aspects of our business create additional
opportunities for errors and defects in our applications and services. Problems
in the initial release may be discovered only after the application has been
implemented and used over time with different computer systems and in a variety
of other applications and environments. Our applications have in the past
contained errors that were discovered after they were sold. Our customers have
also occasionally experienced difficulties integrating our applications with
other hardware or software in their enterprise.
We are not currently aware of any material defects in our applications
that might give rise to future lawsuits. However, errors or integration problems
may be discovered in the future. Such defects, errors, or difficulties could
result in loss of sales, delays in or elimination of market acceptance, damage
to our brand or to our reputation, returns, increased costs and diversion of
development resources, redesigns, and increased warranty and servicing costs. In
addition, third-party products, upon which our applications are dependent, may
contain defects which could reduce or undermine entirely the performance of our
applications.
8
Our customers typically use our applications to perform
mission-critical functions. As a result, the defects and problems discussed
above could result in significant financial or other damage to our customers.
Although our sales agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims, we do not
know if these limitations of liability are enforceable or would otherwise
protect us from liability for damages to a customer resulting from a defect in
one of our applications or the performance of our services. Our product
liability insurance may not cover all claims brought against us.
THE SAGE GROUP, PLC (THE "SAGE GROUP") HAS THE RIGHT TO ACQUIRE A SIGNIFICANT
PERCENTAGE OF OUR COMMON STOCK. IF SUCH STOCK IS ACQUIRED BY THE SAGE GROUP, IT
MAY BE ABLE TO EXERCISE EFFECTIVE CONTROL OF US.
On November 14, 2003, the Sage Group acquired substantially all of the
assets of Softline, including Softline's 141,000 shares of our Series A
Convertible Preferred Stock, which are convertible into 19,312,442 shares of our
common stock within 60 days of January 14, 2005, 8,923,915 shares of our common
stock, and options to purchase 71,812 shares of our common stock. The Sage Group
beneficially owns approximately 34.2% of our outstanding common stock, including
shares the Sage Group has the right to acquire upon conversion of its Series A
Convertible Preferred Stock and exercise of its outstanding options. Although
the Series A Convertible Preferred Stock is non-voting as to most matters and is
redeemable by us, if the Sage Group converts its Series A Convertible Preferred
Stock to common stock, it may have effective control over all matters affecting
us, including:
o The election of all of our directors;
o The allocation of business opportunities that may be suitable for
the Sage Group and us;
o Any determinations with respect to mergers or other business
combinations involving us;
o The acquisition or disposition of assets or businesses by us;
o Debt and equity financing, including future issuance of our common
stock or other securities;
o Amendments to our charter documents;
o The payment of dividends on our common stock; and
o Determinations with respect to our tax returns.
THE SAGE GROUP'S POTENTIAL INFLUENCE ON US COULD MAKE IT DIFFICULT FOR ANOTHER
COMPANY TO ACQUIRE US, WHICH COULD DEPRESS OUR STOCK PRICE.
The Sage Group beneficially owns a significant percentage of our common
stock. The Sage Group's potential effective voting control could discourage
others from initiating any potential merger, takeover or other change of control
transaction that may otherwise be beneficial to our business or our
stockholders. As a result, the Sage Group's potential effective control could
reduce the price that investors may be willing to pay for shares of our stock in
the future or could prevent any party from attempting to acquire us at any
price.
OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE.
The market price of our common stock has been, and is likely to
continue to be, volatile. When we or our competitors announce new customer
orders or services, change pricing policies, experience quarterly fluctuations
in operating results, announce strategic relationships or acquisitions, change
earnings estimates, experience government regulatory actions, or suffer from
generally adverse economic conditions, our stock price could be affected. Some
of the volatility in our stock price may be unrelated to our performance.
Recently, companies similar to ours have experienced extreme price fluctuations,
often for reasons unrelated to their performance.
9
ALL OF OUR ASSETS ARE PLEDGED TO SECURE THE SECURED CONVERTIBLE TERM NOTE ISSUED
TO LAURUS.
We issued a security interest in all of our assets to Laurus as
security for the Laurus Note in the principal amount of $7 million. The Laurus
Note is due and payable in full on July 12, 2007.
WE HAVE NEVER PAID A DIVIDEND ON OUR COMMON STOCK AND WE DO NOT INTEND TO PAY
DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE FUTURE.
We have not previously paid any cash or other dividend on our common
stock. We anticipate that we will use our earnings and cash flow for repayment
of indebtedness, to support our operations, and for future growth, and we do not
have any plans to pay dividends on our common stock in the foreseeable future.
Holders of our Series A Convertible Preferred Stock are entitled to dividends in
preference and priority to common stockholders. Future equity financing(s) may
further restrict our ability to pay dividends.
THE TERMS OF OUR PREFERRED STOCK MAY REDUCE THE VALUE OF YOUR COMMON STOCK.
We are authorized to issue up to 5,000,000 shares of preferred stock in
one or more series. We issued 141,000 shares of Series A Convertible Preferred
Stock in May 2002. We also issued 2,517,232 shares of Series B Convertible
Preferred Stock ("Series B Preferred") in June 2004; however, all of Series B
Preferred shares were converted into 7,551,696 shares of common stock in August
2004. Our board of directors may determine the terms of subsequent series of
preferred stock without further action by our stockholders. If we issue
additional preferred stock, it could affect your rights or reduce the value of
your common stock. In particular, specific rights granted to future holders of
preferred stock could be used to restrict our ability to merge with or sell our
assets to a third party. These terms may include voting rights, preferences as
to dividends and liquidation, conversion and redemption rights, and sinking fund
provisions. We are actively seeking capital and some of the arrangements we may
consider may involve the issuance of preferred stock.
FAILURE TO COMPLY WITH THE AMERICAN STOCK EXCHANGE'S LISTING STANDARDS COULD
RESULT IN OUR DELISTING FROM THAT EXCHANGE AND LIMIT YOUR ABILITY TO SELL OUR
COMMON STOCK.
Our stock is currently traded on the American Stock Exchange (the
"Exchange"). The Exchange has published certain guidelines it uses in
determining whether a security warrants continued listing. Pursuant to these
guidelines the Exchange will consider suspending trading in a listed security or
delisting a security when, in the opinion of the Exchange: (i) the financial
condition and/or operating results of the issuer appear to be unsatisfactory;
(ii) the aggregate market value of the security has become so reduced as to make
further dealings on the Exchange inadvisable; (iii) the issuer has sold or
otherwise disposed of its principal operating assets, or has ceased to be an
operating company; (iv) the issuer has failed to comply with its listing
agreements with the Exchange; or (v) any other event shall occur or any
condition shall exist which makes further dealings on the Exchange unwarranted.
As a result of our financial condition or other factors, the Exchange could in
the future determine that our stock does not merit continued listing. If our
stock were delisted from the Exchange, the ability of our stockholders to sell
our common stock could become limited and we would lose the advantage of some
state and federal securities regulations imposing lower regulatory burdens on
exchange-traded issuers.
OUR RESTATED FINANCIAL STATEMENTS COULD ADVERSELY EFFECT OUR STOCK PRICE OR
SUBJECT US TO LAWSUITS BY OUR STOCKHOLDERS.
On October 29, 2004, we filed an 8-K reporting that certain of our
financial statements required restatement and should no longer be relied upon.
On November 16, 2004, we filed an amended Form 10-K and amended Forms 10-Q
restating our financial statements for the fiscal year ended March 31, 2004,
second and third quarters of the fiscal year ending March 31, 2003, the first,
second and third quarters of the fiscal year ending March 31, 2004 and the first
quarter of the fiscal year ending March 31, 2005. The restatement of these
financial statements could cause investors to lose confidence in our financial
reporting, which could adversely effect our stock price. Additionally, we may be
subject to lawsuits by stockholders, who relied on the financial statements that
were subsequently restated.
SHARES ISSUABLE UPON THE EXERCISE OF OPTIONS OR WARRANTS, CONVERSION OF
DEBENTURES, AS DIVIDENDS ON CONVERTIBLE PREFERRED STOCK, AS INTEREST ON
DEBENTURES, OR UNDER ANTI-DILUTION PROVISIONS IN CERTAIN AGREEMENTS COULD DILUTE
YOUR STOCK HOLDINGS AND ADVERSELY AFFECT OUR STOCK PRICE.
We have issued options and warrants to acquire common stock to our
employees and certain other persons at various exercise prices, some of which
are or may in the future be below the market price of our stock. We currently
have outstanding options and warrants for 34,920,110 shares as of January 14,
2005. Of these options and warrants: 22,983,678 have exercise prices above the
recent market price of $0.51 per share (as of January 14, 2005), and 11,936,432
have exercise prices at or below that recent market price.
10
There are 10,000,000 shares reserved for issuance under our new 2004
Equity Incentive Plan ("2004 Plan"), which was approved by our stockholders at
our annual meeting on August 11, 2004. The 2004 Plan currently has 6,325,500
shares available for issuance as of January 14, 2005. Future options issued
under the plan may have further dilutive effects.
We have outstanding a 9% Convertible Debenture, convertible into
2,960,786 shares, and a Secured Convertible Term Note, convertible into
14,333,977 shares of common stock. We are required to adjust the conversion
prices under both the 9% Convertible Debenture and the Secured Convertible Term
Note, if we issue additional shares of common stock at price below the then
effective respective conversion prices.
We have outstanding 141,000 shares of Series A Preferred Stock,
convertible into 19,140,181 shares of common stock as of January 14, 2005.
The issuance of additional shares pursuant to these options, warrants,
convertible debentures, or anti-dilution provisions will cause immediate and
possibly substantial dilution to our stockholders. Further, subsequent sales of
such shares in the public market could depress the market price of our stock by
creating an excess in supply of shares for sale. Issuance of these shares and
sale of these shares in the public market could also impair our ability to raise
capital by selling equity securities.
WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE OUR OPERATIONS WITH PAGE DIGITAL
INCORPORATED ("PAGE DIGITAL") OR RTI OR REALIZE ALL OF THE ANTICIPATED BENEFITS
OF THESE ACQUISITIONS.
On January 30, 2004, we acquired Page Digital and pursuant to an
agreement dated June 1, 2004, we acquired RTI These acquisitions involve
integrating two companies that previously operated independently into Island
Pacific. These integrations may be complex, costly, and time-consuming
processes. The difficulties of combining these companies' operations include,
among other things:
o Coordinating geographically disparate organizations, systems, and
facilities;
o Strain on management resources due to integration demands;
o Integrating personnel with diverse business backgrounds;
o Consolidating corporate and administrative functions;
o Coordinating product development;
o Coordinating sales and marketing functions;
o Retaining key employees; and
o Preserving relationships with key customers.
BUSINESS RISKS FACED BY PAGE DIGITAL COULD DISADVANTAGE OUR BUSINESS.
Page Digital is a developer of multi-channel commerce software and
faces several business risks that could disadvantage our business. These risks
include many of the risks that we face, described above, as well as:
o LONG AND VARIABLE SALES CYCLES MAKE IT DIFFICULT TO PREDICT
OPERATING RESULTS - Historically, the period between initial
contact with a prospective customer and the licensing of Page
Digital's products has ranged from one to twelve months. Page
Digital's average sales cycle is currently three months. The
licensing of Page Digital's products is often an enterprise wide
decision by customers, which involves a significant commitment of
11
resources by Page Digital and its prospective customer. Customers
generally consider a wide range of issues before committing to
purchase Page Digital's products, including product benefits, cost
and time of implementation, ability to operate with existing and
future computer systems, ability to accommodate increased
transaction volume, and product reliability. As a part of the
sales process, Page Digital spends a significant amount of
resources informing prospective customers about the use and
benefits of Page Digital products, which may not result in a sale,
therefore increasing operating expenses. As a result of this sales
cycle, Page Digital's revenues are unpredictable and could vary
significantly from quarter to quarter causing our operating
results to vary significantly from quarter to quarter.
o DEFECTS IN PRODUCTS COULD DIMINISH DEMAND FOR PRODUCTS AND RESULT
IN LOSS OF REVENUES - From time to time errors or defects may be
found in Page Digital's existing, new, or enhanced products,
resulting in delays in shipping, loss of revenues, or injury to
Page Digital's reputation. Page Digital's customers use its
products for business critical applications. Any defects, errors,
or other performance problems could result in damage to Page
Digital's customers' businesses. These customers could seek
significant compensation from Page Digital for any losses.
Further, errors or defects in Page Digital's products may be
caused by defects in third-party software incorporated into Page
Digital products. If so, Page Digital may not be able to fix these
defects without the assistance of the software providers.
o FAILURE TO FORMALIZE AND MAINTAIN RELATIONSHIPS WITH SYSTEMS
INTEGRATORS COULD REDUCE REVENUES AND HARM PAGE DIGITAL'S ABILITY
TO IMPLEMENT PRODUCTS - A significant portion of Page Digital's
sales are influenced by the recommendations of systems
integrators, consulting firms, and other third parties, who assist
with the implementation and maintenance of Page Digital's
products. These third parties are under no obligation to recommend
or support Page Digital's products. Failing to maintain strong
relationships with these third parties could result in a shift by
these third parties toward favoring competing products, which
could negatively affect Page Digital's software license and
service revenues.
o PAGE DIGITAL'S PRODUCT MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL
CHANGE, SO PAGE DIGITAL'S SUCCESS DEPENDS HEAVILY ON ITS ABILITY
TO DEVELOP AND INTRODUCE NEW APPLICATIONS AND RELATED SERVICES -
The retail software industry is characterized by rapid
technological change, evolving standards, and wide fluctuations in
supply and demand. Page Digital must cost-effectively develop and
introduce new applications and related services that keep pace
with technological developments to compete. If Page Digital fails
to gain market acceptance for its existing or new offerings or if
Page Digital fails to introduce progressive new offerings in a
timely or cost-effective manner, our financial performance may
suffer.
o PAGE DIGITAL'S FAILURE TO PROTECT INTELLECTUAL PROPERTY AND
PROPRIETARY RIGHTS AND/OR INTELLECTUAL PROPERTY INFRINGEMENT
CLAIMS AGAINST PAGE DIGITAL, COULD RESULT IN PAGE DIGITAL LOSING
VALUABLE ASSETS OR BECOMING SUBJECT TO COSTLY AND TIME-CONSUMING
LITIGATION - Page Digital's success and ability to compete depend
on its proprietary rights and intellectual property. Page Digital
relies on trademark, trade secret, and copyright laws to protect
its proprietary rights and intellectual property. Page Digital
also has one issued patent. Despite Page Digital's efforts to
protect intellectual property, a third party could obtain access
to Page Digital's software source code or other proprietary
information without authorization, or could independently
duplicate Page Digital's software. Page Digital may need to
litigate to enforce intellectual property rights. If Page Digital
is unable to protect its intellectual property it may lose a
valuable asset. Further, third parties could claim Page Digital
has infringed their intellectual property rights. Any claims,
regardless of merit, could be costly and time-consuming to defend.
o COMPETITION IN THE SOFTWARE MARKET IS INTENSE AND COULD REDUCE
PAGE DIGITAL'S SALES OR PREVENT THEM FROM ACHIEVING PROFITABILITY
- The market for Page Digital's products is intensely competitive
and subject to rapid technological change. Competition is likely
to result in price reductions, reduced gross margins, and loss of
Page Digital's market share, any one of which could reduce future
revenues or earnings. Further, most of Page Digital's competitors
are large companies with greater resources, broader customer
relationships, greater name recognition, and an international
presence. As a result, Page Digital's competitors may be able to
better respond to new and emerging technologies and customer
demands.
BUSINESS RISKS FACED BY RTI COULD DISADVANTAGE OUR BUSINESS.
RTI is a provider of retail management store solutions to small through
mid-tier retailers via an international network of retailers and faces several
business risks that could disadvantage our business. These risks include many of
the risks that we face, described above, as well as:
12
o RTI FACES INTENSE COMPETITION IN THE RETAIL POINT OF SALE INDUSTRY
- RTI operates in an extremely competitive industry, which is
subject to rapid technological and market changes. We anticipate
that the competition will increase as more companies focus on
providing technology solutions to small and mid-tier retailers.
Many of our current and potential competitors, such as Microsoft,
have more resources to devote to product development, marketing,
and distribution. While we believe RTI has competitive strengths
in its market, there can be no assurance that RTI will continue to
compete successfully against larger more established competitors.
o RTI IS DEPENDENT ON ITS VALUE-ADDED RESELLLERS (VARS) - RTI does
not have a direct sales force and relies on VARs to distribute and
sell its products. RTI currently has approximately 67 VARs - 27 in
North America, 7 in South America, 11 in Asia, 19 in Europe and
the Middle East, 1 in Africa, and 1 each in Australia and New
Zealand. Combined, RTI's four largest VARs account for
approximately 35% of its revenues, although no one is over 15%.
RTI's VARs are independently owned businesses and there can be no
assurance that one or more will not go out of business or cease to
sell RTI products. Until a replacement VAR could be recruited, and
trained, or until an existing VAR could expand into the vacated
territory, such a loss could result in a disruption in RTI's
revenue and profitability. Furthermore, there can be no assurance
that an adequate replacement could be located.
o A PROLONGED SLOWDOWN IN THE GLOBAL ECONOMY COULD ADVERSELY IMPACT
RTI'S REVENUES - A slowdown in the global economy might lead to
decreased capital spending, fewer new retail business start ups,
and slower new store expansion at existing retail businesses. Such
conditions, even on a regional basis could severely impact one or
more of RTI's VARs and result to a disruption in RTI's revenues
and profitability.
o RTI'S PRODUCT MARKETS ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE,
SO RTI'S SUCCESS DEPENDS HEAVILY ON ITS ABILITY TO DEVELOP AND
INTRODUCE NEW APPLICATIONS AND RELATED SERVICES - We believe RTI's
ability to succeed in its market is partially dependent on its
ability to identify new product opportunities and rapidly,
cost-effectively bring them to market. However, there is no
guarantee that they will be able to gain market acceptance for any
new products. In addition, there is no guarantee that one of RTI's
competitors will not be able to bring competing applications to
market faster or market them more effectively. Failure to
successfully develop new products, bring them to market and gain
market acceptance could result in decreased market share and
ultimately have a material adverse affect on RTI.
o RTI DOES NOT HOLD ANY PATENTS OR COPYRIGHTS, ANY TERMINATION OF OR
ADVERSE CHANGE TO RTI'S LICENSE RIGHTS COULD HAVE A MATERIAL
ADVERSE EFFECT ON ITS BUSINESS - RTI has a license to develop,
modify, market, sell, and support its core technology from a third
party. Any termination of, or disruption in, this license could
have a material adverse affect on RTI's business. Further, we
believe that most of the technology used in the design and
development of RTI's core products is widely available to others.
Consequently, there can be no assurance that others will not
develop and market applications that are similar to RTI's or
utilize technologies that are equivalent to RTI's. Likewise, while
RTI believes that its products do not infringe on any third
party's intellectual property, there can be no assurance that they
will not become involved in litigation involving intellectual
property rights. If such litigation did occur, it could have a
material adverse affect on RTI's business.
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27a OF THE SECURITIES ACT AND SECTION 21e OF THE EXCHANGE ACT. THESE
STATEMENTS RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. IN SOME
CASES, YOU CAN IDENTIFY FORWARD-LOOKING STATEMENTS BY TERMINOLOGY SUCH AS THE
WORDS MAY, WILL, SHOULD, EXPECT, PLAN, ANTICIPATE, BELIEVE, ESTIMATE, PREDICT,
POTENTIAL, OR CONTINUE, OR THE NEGATIVES OF SUCH WORDS OR OTHER COMPARABLE
TERMINOLOGY. THESE STATEMENTS ARE ONLY PREDICTIONS. ACTUAL EVENTS OR RESULTS MAY
DIFFER MATERIALLY. IMPORTANT FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO
THE ITEMS DISCUSSED UNDER "RISK FACTORS" AND OTHER SECTIONS OF THIS PROSPECTUS.
ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN THE
FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT GUARANTEE FUTURE RESULTS,
LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. WE ARE UNDER NO OBLIGATION TO
UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS AFTER THE FILING OF THIS REPORT TO
CONFORM SUCH STATEMENTS TO ACTUAL RESULTS OR TO CHANGES IN OUR EXPECTATIONS.
13
USE OF PROCEEDS
We will not receive any of the proceeds from the sale by the selling
stockholders of any of the shares of common stock covered by this prospectus.
All proceeds from the resale of the shares of our common stock described in this
prospectus will be for the accounts of the selling stockholders.
SELLING STOCKHOLDERS
We are registering 42,075,977 shares of our common stock for resale by
the selling stockholders named below. The term "selling stockholders" includes
each stockholder named below and such stockholder's transferees, pledgees,
donees, or other successors. The selling stockholders, including their
transferees, pledgees, donees, or their successors, may from time to time offer
and sell pursuant to this prospectus any or all of the shares registered
hereunder.
BACKGROUND
On March 15, 2004, we sold Omicron Master Trust ("Omicron") and
Midsummer (collectively, the "Purchasers") convertible debentures (the "March
2004 Debentures") for an aggregate price of $3.0 million pursuant to a
securities purchase agreement (the "Purchase Agreement"). The March 2004
Debentures bear interest at a rate of 9% per annum, and provided for interest
only payments on a quarterly basis, payable, at our option, in cash or shares of
our common stock. The March 2004 Debentures mature on May 15, 2006. The March
2004 Debentures were convertible into shares of our common stock at a conversion
price of $1.32 per share, subject to adjustment, if we offer or sell any
securities for an effective per share price that is less than 87% of the then
current conversion price, negatively restate any of our financial statements or
make any public disclosure that negatively revises or supplements any prior
disclosure regarding a material transaction consummated prior to March 15, 2004
or trigger other customary anti-dilution protections. We also issued the
Purchasers two warrants each as follows: (i) Series A Warrants to purchase up to
an aggregate of 1,043,479 shares of our common stock at an exercise price of
$1.15 per share with a five-year term, exercisable at anytime after September
16, 2004, subject to adjustment if we offer or sell any securities for an
effective per share price that is less than the then current exercise price,
negatively restate any of our financial statements or make any public disclosure
that negatively revises or supplements any prior disclosure regarding a material
transaction consummated prior to March 15, 2004 or trigger other customary
anti-dilution protections and (ii) Series B Warrants to purchase up to an
aggregate of 8,500,000 shares of our common stock with an exercise price of $5
per share, subject to adjustment upon the issuance or sale of securities in a
public offering for an effective per share price that is less than the
then-current exercise price and upon the trigger of other customary
anti-dilution protections. The Series B Warrants are immediately exercisable and
expire on the earlier of the six-month anniversary of the effective date of the
registration statement covering the shares underlying the warrant or 18 months
from March 15, 2004.
In July 2004, we paid Omicron the $1.75 million due under its March
2004 Debenture in full plus $0.2 million in accrued interest, liquidated damages
and prepayment penalties. We issued 600,000 shares of our common stock, which we
valued at $240,000, to Midsummer as payments for liquidated damages and as
partial consideration for Midsummer consenting to our issuance of the Note to
Laurus. We also amended Midsummer's March 2004 Debenture in exchange for its
consent to the transaction with Laurus. Pursuant to Amendment No. 1 to the 9%
Debenture Due May 15, 2006 Issued to Midsummer Investments, Ltd. And Waiver
("Amendment No. 1 to the March 2004 Debenture"), the terms of Midsummer's March
2004 Debenture were amended as follows: (i) the prepayment penalty was
eliminated, (ii) the conversion price was reduced to $0.56 per share, (iii)
interest payments are due on a monthly, rather than quarterly, basis, and (iv)
the commencement of monthly redemption payments was accelerated to September 1,
2004 and the payments due were revised such that payments of $50,000 are due
monthly from September 1, 2004 and the monthly payments increase to $62,500
starting February 1, 2005. In addition, the exercise price of the Series A
Warrants held by both Purchasers was reduced to $0.56 per share. We have also
issued Midsummer 301,773 shares of our common stock for the monthly redemption
payment and interest payments for October and November 2004.
On November 30, 2004, we entered into Amendment No. 2 to Midsummer's
March 2004 Debenture ("Amendment No. 2"). Pursuant to Amendment No. 2, the terms
of Midsummer's March 2004 Debenture were amended as follows: (i) the conversion
price for the March 2004 Debenture and the exercise price for the Series A
Warrant were reduced to $0.37 per share, (ii) all outstanding accrued and unpaid
liquidated damages and all liquidated damages that may accrue through January
31, 2005 were waived, (iii) until the shares are registered, we may make monthly
redemption and interest payments in shares of restricted stock valued at 80% of
the value weighted average price for the 20 days prior to either the interest
payment date or the date the shares are issued, whichever is lower. In addition,
we issued Midsummer an additional warrant ("Additional Warrant") to purchase
200,000 shares of our common stock with an exercise price of $0.41.
14
We previously issued an aggregate of $3.5 million in convertible
debentures and warrants to purchase an aggregate of 1,572,858 shares of common
stock to Omicron, Midsummer and a third institutional investor in March 2003.
These debentures were converted into an aggregate of 2,930,832 shares in
September 2003. The warrants remain outstanding.
In this registration statement we are registering (i) 600,000 shares of
common stock issued to Midsummer in July 2004 in connection with it consenting
to the transaction with Laurus, (ii) 2,543,104 shares of common stock, which
constitute 130% of the shares issuable to Midsummer upon conversion of its March
2004 Debenture, based on a conversion price of $0.56 per share pursuant to
Amendment No. 1 to the March 2004 Debenture, (iii) 434,783 shares of common
stock issuable to Midsummer upon exercise of its Series A Warrant, (iv)
3,541,667 shares of common stock issuable to Midsummer upon exercise of its
Series B Warrant, (v) 608,696 shares of common stock issuable to Omicron upon
exercise of its Series A Warrant, and (vi) 4,958,333 shares of common stock
issuable to Omicron upon exercise of its Series B Warrant. Midsummer and Omicron
are both accredited investors, as that term is defined in Rule 501(a) of the
Securities Act ("Accredited Investors"), and all of the foregoing securities
were issued pursuant to the exemption from registration provided by Section 4(2)
of the Securities Act and Regulation D thereunder.
Pursuant to the Amended and Restated Agreement of Merger and Plan or
Reorganization dated June 1, 2004 between Island Pacific, IPI Merger Sub, Inc.,
IP Retail Technologies International, Inc. (formerly known as IPI Merger Sub II,
Inc., "Merger Sub II") on the one hand and RTI, Michael Tomczak and Jeffrey
Boone of the other hand (Michael Tomczak and Jeffery Boone are referred to
herein as the "Shareholders") we acquired RTI from the Shareholders and Intuit
Inc. ("Intuit") in a merger transaction. The terms of the merger were as
follows: (i) we assumed RTI's obligations under certain promissory notes issued
by RTI on December 20, 2002 with an aggregate principal balance of $2.3 million;
(ii) the total consideration paid at the closing of the Merger was $11.6 million
paid in shares of our common stock with fair value of $1.2 million, newly
designated Series B convertible preferred stock ("Series B Preferred") with fair
value of $5.7 million, promissory notes totaling $3.6 million, assumption of
RTI's stock option plan valued at $1.0 million and acquisition costs of
$110,000; (iii) the Shareholders and Intuit are entitled to price protection of
up to a maximum of $0.23 per share payable by promissory note, if and to the
extent that the average trading price of our common stock is less than $0.76 at
the time the registration statement covering the shares of our common stock
issued in the merger and issuable upon conversion of the Series B Preferred is
declared effective by the SEC; and (iv) the merger consisted of two steps (the
"Merger"), first, Merger Sub merged with and into RTI, Merger Sub's separate
corporate existence ceased and RTI continued as the surviving corporation (the
"Reverse Merger"), immediately thereafter, RTI merged with and into Merger Sub
II, RTI's separate corporate existence ceased and Merger Sub II continued as the
surviving corporation (the "Second-Step Merger").
In the Merger, each Shareholder received 1,258,616 shares of Series B
Preferred, convertible into 3,775,848 shares of common stock, and a promissory
note payable monthly over two years in the principal amount of $1,295,000,
bearing interest at 6.5% per annum. In the Merger, Intuit, the holder of all of
the outstanding shares of RTI's Series A Preferred Stock, received 1,546,733
shares of our common stock and a promissory note payable monthly over two years
in the principal amount of $530,700, bearing interest at 6.5% per annum. The
Series B Preferred automatically converted to common stock without further
payment, pursuant to its terms, when we increased our authorized shares of
common stock to 250,000,000 on August 27, 2004. Upon the consummation of the
Merger, Michael Tomczak, RTI's former President and Chief Executive Officer, was
appointed our President, Chief Operating Officer and director and Jeffrey Boone,
RTI's former Chief Technology Officer, was appointed our Chief Technology
Officer. We entered into two-year employment agreements and non-competition
agreements with Mr. Tomczak and Mr. Boone. We also granted Mr. Tomczak and Mr.
Boone options to purchase 1,772,354 and 1,572,354 shares of our common stock,
respectively. We are registering all of the shares of common stock issued in the
Merger, including the shares of common stock issued on conversion of the Series
B Preferred and shares of common stock issuable upon exercise of the options
held by the Shareholders in this registration statement. The Shareholders and
Intuit are Accredited Investors and the foregoing securities were issued
pursuant to the exemption from registration provided by Section 4(2) under the
Securities Act and Regulation D thereunder.
Pursuant to a Securities Purchase Agreement dated July 12, 2004, we
sold and issued Laurus a secured convertible term note ("Note") for gross
proceeds of $7.0 million. In addition, we issued Laurus a warrant to purchase up
to 3,750,000 shares of our common stock at a price of $0.71 per share ("Laurus
Warrant"). The Note matures on July 12, 2007 ("Maturity Date"). The Note accrues
interest at a rate per annum (the "Interest Rate") equal to the "prime rate"
published in The Wall Street Journal from time to time, plus two percent.
Interest under the Note is payable monthly in arrears and interest payments
commenced on August 1, 2004. The Interest Rate is calculated on the last day of
15
each month and is subject to adjustment based on the then-current price of our
common stock. The initial conversion price under the Note was $0.56 per share,
subject to adjustment upon our issuance of securities at a price below the fixed
conversion price, a stock split or combination, declaration of a dividend on our
common stock or reclassification of our common stock. We have the option to
redeem the Note by paying the investor 125% of the principal amount due under
the Note together with all accrued and unpaid interest. Our obligations under
the Note are secured by all of our assets. All our wholly owned subsidiaries
guarantied our obligations under the Note. We also pledged all of our interests
in the outstanding stock of our subsidiaries as security for our obligations
under the Note.
The Laurus Warrant is immediately exercisable and has a seven year
term. We have the right to require exercise of the Laurus Warrant in whole or in
part if: (1) all of our obligations under the Note have been irrevocably paid in
full, (2) the common stock underlying the Laurus Warrant has been registered on
a registration statement declared effective by the SEC, and such registration
statement remains effective, and (3) the average closing price of our common
stock for the ten (10) trading days immediately prior to the proposed date of
the mandatory exercise of the Laurus Warrant is greater than three hundred
percent (300%) of the then applicable exercise price.
In October 2004, Laurus agreed to amend the Note and defer the payments
due from September 2004 through February 2005 until the Maturity Date. Pursuant
to the amendment, we are required to make monthly payments in the amount of
$212,121 commencing on March 1, 2005 with a balloon payment of $1.1 million due
in July 2007. In connection with this amendment, (i) the conversion price on $2
million of the $7 million Note was reduced to $0.37 and (ii) we issued Laurus an
additional warrant ("October '04 Warrant") to purchase 250,000 shares of our
common stock at a price of $0.41 per share.
In this registration statement, we are registering (i) 12,500,000
shares of common stock issuable to Laurus upon conversion of the Note, and (ii)
3,750,000 shares of common stock issuable upon exercise of the Laurus Warrant.
Laurus is an Accredited Investor and all of the foregoing shares were issued
pursuant to the exemption from registration provided by Section 4(2) of the
Securities Act and Regulation D thereunder.
We are registering (i) 84,000 shares of common stock issuable on
exercise of options issued to Liolios Group, Inc. ("Liolios") as compensation
for investor relations services rendered. Liolios is an Accredited Investors and
the foregoing securities were issued pursuant to the exemption from registration
provided by Section 4(2) of the Securities Act and Regulation D thereunder.
We are registering 612,257 shares of common stock issuable to the Sage
Group as accrued interest on its Series A Convertible Preferred Stock. The Sage
Group beneficially owns 34.2% of our stock, including shares the Sage Group has
the right to acquire upon conversion of its Series A Convertible Preferred Stock
and exercise of options. Although, the Series A Convertible Preferred Stock is
non-voting as to most matters and redeemable by us, if the Sage Group converts
its Series A Convertible Preferred Stock, it may have effective control of us.
Our former directors, Ivan Epstein and Robert Wilkie, both of whom resigned
effective as of July 1, 2004, are employees of a subsidiary of the Sage Group.
The Sage Group acquired it shares from Softline on November 14, 2003. Both
Softline and the Sage Group are Accredited Investors and the foregoing shares
were initially issued pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act and Regulation D thereunder.
The following table, which reflects stockholdings as of January 14,
2005, is based in part upon information provided by the selling stockholders and
sets forth (i) the names of the selling stockholders; (ii) the number of shares
of our common stock that the selling stockholders owned prior to the resale of
any of the shares of our common stock being registered hereby; (iii) the maximum
number of shares of our common stock that may be offered for resale for the
accounts of the selling stockholders pursuant to this prospectus; (iv) the
number of shares of our common stock owned by the selling stockholders after the
offering (assuming all of the shares registered for each selling stockholder are
sold in the offering); and (v) the percentage of our common stock that will be
held by the selling stockholders after the offering (assuming all of the shares
registered for each selling stockholder are sold in the offering).
NUMBER OF SHARES NUMBER OF SHARES NUMBER OF SHARES OF PERCENTAGE OF
OF IPI OF IPI COMMON IPI COMMON STOCK COMMON STOCK
COMMON STOCK STOCK TO BE BENEFICIALLY OWNED AFTER BENEFICIALLY OWNED
SELLING STOCKHOLDER BENEFICIALLY OWNED (1) RESOLD IN THE OFFERING THE OFFERING AFTER THE OFFERING (2)
------------------- ---------------------- ---------------------- ------------ ----------------------
Laurus Master Fund, Ltd. (3) 18,333,977 16,250,000 2,083,977 2.1%
Michael Tomczak (4) 5,548,202 5,548,202 0 0%
Jeffrey Boone (5) 5,348,202 5,348,202 0 0%
Midsummer Investments, Ltd. (6) 8,806,310 7,119,554 1,686,756 2.3%
Omicron Master Trust (7) 6,389,137 5,567,029 822,108 0.9%
Intuit Inc. 1,546,733 1,546,733 0 0%
Liolios Group, Inc. (8) 86,500 84,000 2,500 <1%
The Sage Group, plc (9) 28,308,169 612,257 27,695,912 24.3%
16
*Includes 130% of the shares of common stock issuable to Midsummer on conversion
of the March 2004 Debenture, under the terms of Amendment No. 1 to the Midsummer
Debenture. The additional 30% of the shares issuable on conversion of the March
2004 Debenture, are being registered to account for additional shares issuable
upon the trigger of certain anti-dilution provisions, as required by the
registration rights agreement executed in connection with the sale of the March
2004 Debenture. These shares are not deemed to be outstanding after offering or
sold in the offering for the purposes of calculating the shares held by
Midsummer after the offering or the percentage of shares held by Midsummer after
the offering.
(1) The number of shares does not include an indeterminate number of additional
shares that may be registered and issued in accordance with Rule 416 under the
Securities Act to prevent dilution of the common stock resulting from stock
splits, stock dividends, or other events.
(2) For the purposes of calculating the percentage of common stock beneficially
owned after the offering, we have assumed 95,277,563 shares of common stock
outstanding after the offering, which includes 63,486,885 shares of our common
stock outstanding as of January 14, 2005, plus 31,790,678 shares of common stock
issuable upon the exercise of options and warrants or upon conversion of notes
or debentures, which shares are being registered in this prospectus and will be
deemed outstanding after the offering as we are assuming all of the shares
registered for each selling stockholder will be sold in the offering with the
exception of the additional 30% of the shares issuable to Midsummer on
conversion of its debenture which are required to be issued to account for
additional shares that may be registered upon the trigger of certain
anti-dilution provisions. In addition, in computing the percentage of the common
stock beneficially owned by each stockholder, all derivative securities held by
that person that are currently exercisable or exercisable within 60 days of
January 14, 2005, will be deemed outstanding in calculating the percentage
ownership of that person. These shares will not be deemed outstanding, however,
for the purpose of computing the percentage ownership of any other person.
(3) Includes 14,333,977 shares of common stock issuable upon conversion of the
Note within 60 days of January 14, 2005, 12,500,000 of which are being
registered in this registration statement, and 4,000,000 shares issuable upon on
exercise of warrants within 60 days of January 14, 2005, 3,750,000 of which are
being registered in this registration statement. Laurus's beneficial ownership
is limited to 4.99% pursuant to limitations in the Note and related warrant.
Laurus Capital Management, LLC is the entity that exercises voting and
investment power on behalf of Laurus Master Fund, Ltd. David Grin and Eugene
Grin are the natural persons who exercise voting and dispositive power over
Laurus Capital Management, LLC.
(4) Includes 1,772,354 shares of common stock issuable upon exercise of options
within 60 days of January 14, 2005, all of which are being registered in this
prospectus.
(5) Includes 1,572,354 shares of common stock issuable upon exercise of options
within 60 days of January 14, 2005, all of which are being registered in this
prospectus.
(6) Includes 2,960,786 shares of common stock issuable upon conversion of the
March 2004 Debenture, 2,543,104 of which are being registered in this
registration statement, and 4,943,751 shares of common stock issuable upon
exercise of warrants, of which 3,976,450 shares are being registered in this
registration statement. Midsummer's beneficial ownership is limited to 4.99%
pursuant to limitations in the March 2004 Debenture and related warrants.
Midsummer Capital, LLC is the investment manager to Midsummer Investment Ltd. By
virtue of such relationship, Midsummer Capital, LLC may be deemed to have
dispositive power over the shares owned by Midsummer Investment Ltd. Midsummer
Capital, LLC disclaims beneficial ownership of such shares. Mr. Michel Amsalem
and Mr. Scott Kaufman have delegated authority from the members of Midsummer
Capital, LLC with respect to the shares of common stock owned by Midsummer
Investment Ltd. Messrs. Amsalem and Kaufman may be deemed to share voting and
dispositive power over the shares of our common stock owned by Midsummer
Investment Ltd. Messrs. Amsalem and Kaufman disclaim beneficial ownership of
such shares of our common stock and neither person has any legal right to
maintain such delegated authority.
(7) Includes 6,389,137 shares of common stock issuable upon exercise of warrants
within 60 days of January 14, 2005, of which 5,567,029 shares are being
registered in this registration statement. Omicron's beneficial ownership is
limited to 4.99% pursuant to limitations in its warrants. Omicron Capital, L.P.,
a Delaware limited partnership ("Omicron Capital"), serves as investment manager
to Omicron Master Trust, a trust formed under the laws of Bermuda ("Omicron"),
Omicron Capital, Inc., a Delaware corporation ("OCI"), serves as general partner
of Omicron Capital, and Winchester Global Trust Company Limited ("Winchester")
serves as the trustee of Omicron. By reason of such relationships, Omicron
Capital and OCI may be deemed to share dispositive power over the shares of our
17
common stock owned by Omicron, and Winchester may be deemed to share voting and
dispositive power over the shares of our common stock owned by Omicron. Omicron
Capital, OCI and Winchester disclaim beneficial ownership of such shares of our
common stock. Omicron Capital has delegated authority from the board of
directors of Winchester regarding the portfolio management decisions with
respect to the shares of common stock owned by Omicron and, as of April 21,
2003, Mr. Olivier H. Morali and Mr. Bruce T. Bernstein, officers of OCI, have
delegated authority from the board of directors of OCI regarding the portfolio
management decisions of Omicron Capital with respect to the shares of common
stock owned by Omicron. By reason of such delegated authority, Messrs. Morali
and Bernstein may be deemed to share voting and dispositive power over the
shares of our common stock owned by Omicron. Messrs. Morali and Bernstein
disclaim beneficial ownership of such shares of our common stock and neither of
such persons has any legal right to maintain such delegated authority. No other
person has sole or shared voting or dispositive power with respect to the shares
of our common stock being offered by Omicron, as those terms are used under
Regulation 13D-G of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Omicron and Winchester are not "affiliates" of one another, as
that term is used under the Exchange Act, or of any other person named in this
prospectus as a selling stockholder. No person or "group" (as that term is used
in Section 13(d) or Regulation 13D-G of the Exchange Act) controls Omicron and
Winchester.
(8) Includes 84,000 shares of common stock issuable upon exercise of options
within 60 days of January 14, 2005. Scott Liolios, President, has sole voting
and dispositive power over all of these shares.
(9) Includes 71,812 shares of common issuable upon exercise of options within 60
days of January 14, 2005 and 19,312,442 shares of common issuable upon
conversion of Series A Convertible Preferred Stock within 60 days of January 14,
2005. The Sage Group, PLC has sole voting and dispositive power over all of
these shares.
PLAN OF DISTRIBUTION
The shares of common stock offered for resale through this prospectus
may be sold from time to time by the selling stockholders in one or more
transactions at fixed prices, at market prices at the time of sale, at varying
prices determined at the time of sale, or at negotiated prices. The selling
stockholders may offer their shares of common stock in one or more of the
following transactions:
o On any national securities exchange or quotation service on which
the common stock may be listed or quoted at the time of sale,
including the American Stock Exchange;
o In the over-the-counter market;
o In private transactions;
o Through options;
o By pledge to secure debts and other obligations;
o Ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchases;
o Block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
o Purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o An exchange distribution in accordance with the rules of the
applicable exchange;
o Settlement of short sales;
o The sale of a specified number of shares at a stipulated price per
share by agreement between broker-dealers and the selling
shareholders; or
o A combination of any of the above methods.
18
If required, we will distribute a supplement to this prospectus to
describe material changes in the terms of the offering.
The shares of common stock described in this prospectus may be sold
from time to time directly by the selling stockholders. Alternatively, the
selling stockholders may from time to time offer shares of common stock to or
through underwriters, broker/dealers, or agents. The selling stockholders and
any underwriters, broker/dealers, or agents that participate in the distribution
of the shares of common stock may be deemed to be "underwriters" within the
meaning of the Securities Act. Any profits on the resale of shares of common
stock and any compensation received by any underwriter, broker/dealer, or agent
may be deemed to be underwriting discounts and commissions under the Securities
Act.
The selling stockholders may from time to time pledge or grant a
security interest in some or all of the shares and, if they default in the
performance of any of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provisions of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.
The selling stockholders may also transfer the shares of common stock
in other circumstances, in which case the transferees, pledgees, or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
Any shares covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus. The selling stockholders may not sell all of the
shares we are registering. The selling stockholders may transfer, devise, or
gift such shares by other means not described in this prospectus.
To comply with the securities laws of certain jurisdictions, the common
stock must be offered or sold only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions, the shares may not be offered or
sold unless they have been registered or qualified for sale or an exemption is
available and the selling stockholder complies with the exemption.
Under the Exchange Act, any person engaged in a distribution of the
common stock may not simultaneously engage in market-making activities with
respect to the common stock for nine business days prior to the start of the
distribution. In addition, each selling stockholder and any other person
participating in a distribution will be subject to the Exchange Act which may
limit the timing of purchases and sales of common stock by the selling
stockholders or any such other person. These factors may affect the
marketability of the common stock and the ability of brokers or dealers to
engage in market-making activities.
We will pay all expenses of this registration. These expenses include the
Securities and Exchange Commission's (the "SEC's") filing fees, fees under state
securities or "blue sky" laws, and accounting and legal fees. We estimate that
our expenses in connection with this registration will be approximately $10,000.
All expenses for the issuance of any supplement to this prospectus will be paid
by us. The selling stockholders may pay selling commissions or brokerage fees
with respect to the sale of the resale shares by them. Some of the selling
stockholders will be indemnified by us against certain civil liabilities under
securities laws or will be entitled to contribution in connection therewith. We
will be indemnified by some of the selling stockholders against certain
liabilities under securities laws or will be entitled to contribution in
connection therewith.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will by
passed on for us by Solomon Ward Seidenwurm & Smith, LLP, 401 B Street, Suite
1200, San Diego, California 92101.
EXPERTS
The consolidated financial statements of Island Pacific, Inc. appearing
in its Annual Report on Form 10-K/A for the year ended March 31, 2004 and Form
10-K for the years ended March 31, 2003, and March 31, 2002 have been audited by
Singer, Lewak, Greenbaum, Goldstein, LLP, independent accountants 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 the report of such firm, given on their authority as experts in
accounting and auditing.
19
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and
other information with the Securities and Exchange Commission. You may read and
copy materials that we have filed with the Securities and Exchange Commission at
the Securities and Exchange Commission's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the public reference
rooms. Our Securities and Exchange Commission filings are also available to the
public on the Securities and Exchange Commission's Internet website at
http://www.sec.gov.
This prospectus provides you with a general description of the common
stock being registered. This prospectus is part of a registration statement that
we have filed with the Securities and Exchange Commission. To see more detail,
you should read the exhibits and schedules filed with, or incorporated by
reference into, our registration statement.
We incorporate by reference into this prospectus the documents listed
below and any future filings we make with the SEC under Sections 13(a), 13(c),
14, or 15(d) of the Exchange Act, including any filings after the date of this
prospectus, until this offering is completed. The information incorporated by
reference is an important part of this prospectus. Any statement in a document
incorporated by reference into this prospectus will be deemed to be modified or
superseded to the extent a statement contained in (1) this prospectus or any
prospectus supplement or (2) any other subsequently filed document that is
incorporated by reference into this prospectus or any prospectus supplement, in
either case, modifies or supersedes such statement.
o Our Annual Report on Form 10-K filed on June 29, 2004;
o Our Amended Annual Report for the fiscal year ended March 31, 2004
filed on Form 10-K/A filed on November 16, 2004;
o Our Quarterly Reports on Form 10-Q filed August 13, 2004 and
November 15, 2004;
o Our Amended Quarterly Reports for the quarters ended September 30,
2002, December 31, 2002, June 30, 2003, September 30, 2003,
December 31, 2003 and June 30, 2004, all filed on November 16,
2004 and our Amended Quarterly Report for the quarter ended
December 31, 2003 filed on June 30, 2004;
o Our Current Reports on Form 8-K filed on June 14, 2004, July 21,
2004, August 16, 2004, August 30, 2004, October 8, 2004, October
29, 2004, November 2, 2004, December 2, 2004 and January 14, 2005
and our Amended Current Reports on Form 8-K/A filed on August 5,
2004 and two of which were filed on November 24, 2004.
o The description of the Registrant's Common Stock par value
$0.0001, which is contained in a registration statement filed
under the Exchange Act on June 30, 1998 including any amendment or
report filed for the purpose of updating such description.
You may request a copy of these filings at no cost by contacting us in
writing or telephonically at following address and/or phone number: 19800
MacArthur Boulevard, Irvine, California 92612, (949) 476-2212.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
any person to make a statement that differs from what is included or
incorporated by reference in this prospectus. If any person does make a
statement that differs from what is included or incorporated by reference in
this prospectus, you should not rely on it. Neither we nor any underwriter or
agent will make an offer to sell these securities in any state in which the
offer or sale is not permitted. The information in this prospectus is complete
and accurate as of its date, but the information may change after that date.
20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the securities
being registered are set forth in the following table (all amounts except the
registration fee are estimated):
SEC Registration Fee................................. $ 2,649
Legal fees and expenses.............................. $ 15,000
Accounting fees and expenses......................... $ 7,000
Printing & Engraving................................. $ 500
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Section 102(b)(7) of the Delaware General
Corporation Law (the "DGCL"), which permits a corporation in its certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director for violations of the director's fiduciary duty, except
(i) for any breach of the director's fiduciary 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)
pursuant to Section 174 of the DGCL (providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions), or
(iv) for any transaction from which the director derived an improper personal
benefit. Our Restated Certificate of Incorporation contains provisions permitted
by Section 102(b)(7) of the DGCL.
Reference is made to Section 145 of the DGCL which provides that a
corporation may indemnify any persons, including directors and officers, who
are, or are threatened to be made, parties to any threatened, pending, or
completed legal action, suit or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person is or was a director,
officer, employee, or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee, or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorney's fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit, or
proceeding, provided such director, officer, employee, or agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal actions or
proceedings, had no reasonable cause to believe that his conduct was unlawful. A
Delaware corporation may indemnify directors and/or officers in an action or
suit by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval, if the director
or officer is adjudged to be liable to the corporation. Where a director or
officer is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such director or officer actually and reasonably incurred.
Our Restated Certificate of Incorporation provides indemnification of
our directors and officers to the fullest extent permitted by the DGCL. Our
Restated Bylaws provide for indemnification by the Company of its directors,
officers, and certain non-officer employees under certain circumstances against
expenses, including attorney's fees, judgments, fines, and amounts paid in
settlement actually and reasonably incurred in connection with any threatened,
pending, or completed action, suit or proceeding, in which such person was or is
a party or is threatened to be made a party by reason of the fact that such
person is or was an employee or agent of the Company.
We have obtained liability insurance for each of our directors and
officers for certain losses arising from claims or charges made against them
while acting in their capacities as our directors or officers.
The above discussion of our Restated Certificate of Incorporation and
Restated Bylaws and Sections 102(b)(7) and 145 of the DGCL is not intended to be
exhaustive and is qualified in its entirety by such Restated Certificate of
Incorporation, Restated Bylaws and statutes.
At present, there is no pending litigation or proceeding involving our
directors or officers as to which indemnification is being sought nor are we
aware of any threatened litigation that may result in claims for indemnification
by any officer or director.
II-1
ITEM 16. EXHIBITS.
EXHIBIT DESCRIPTION
------- -----------
2.1 Amended and Restated Agreement of Merger and Plan of Reorganization
dated June 1, 2004 by and between Island Pacific, Inc., Retail
Technologies International, Inc., IPI Merger Sub, Inc., IPI Merger Sub
II, Inc., Michael Tomczak and Jeffrey Boone, incorporated by reference
to exhibit 2.1 to the Company's Form 8-K filed on June 14, 2004.
2.2 Agreement of Merger dated June 1, 2004 between IPI Merger Sub II, Inc.
and Retail Technologies International, Inc., incorporated by reference
to exhibit 2.2 to the Company's Form 8-K filed on June 14, 2004.
4.1 Securities Purchase Agreement dated March 15, 2004 by and among Island
Pacific, Inc., Omicron Master Trust and Midsummer Investments, Ltd,
incorporated by reference to exhibit 4.1 to the Company's Form 8-K
filed on March 17, 2004.
4.2 Securities Purchase Agreement dated July 12, 2004 by and among Island
Pacific, Inc. and Laurus Master Fund, Ltd., incorporated by reference
to exhibit 4.1 to the Company's Form 8-K filed on July 21, 2004.
4.3 Registration Rights Agreement dated March 15, 2004 by and among the
Company, Omicron Master Trust and Midsummer Investments, Ltd.,
incorporated by reference to exhibit 4.2 to the Company's Form 8-K
filed on March 17, 2004.
4.4 Amendment No. 1 to the 9% Convertible Debenture dated July 30, 2004 by
and between Island Pacific, Inc. and Midsummer Investments, Ltd.,
incorporated by reference to exhibit 4.14 to the Company's Form 10-Q
filed on August 12, 2004.
4.5 Secured Convertible Term Note issued by Island Pacific, Inc. in favor
of Laurus Master Fund. Ltd., incorporated by reference to exhibit 4.2
to the Company's Form 8-K filed on July 21, 2004.
4.5 Common Stock Purchase Warrant dated July 12, 2004 issued to Laurus
Master Fund, Ltd. by Island Pacific, Inc., incorporated by reference to
exhibit 4.3 to the Company's Form 8-K filed on July 21, 2004.
4.7 Registration Rights Agreement dated July 12, 2004 between Island
Pacific, Inc. and Laurus Master Fund, Ltd., incorporated by reference
to exhibit 4.4 to the Company's Form 8-K filed on July 21, 2004.
4.8 Registration Rights Agreement dated June 1, 2004 by and between Island
Pacific, Inc., Michael Tomczak, Jeffrey Boone and Intuit, Inc.,
incorporated by reference to exhibit 4.1 to the Company's Form 8-K
filed on June 14, 2004.
4.9 Form of Voting Agreement, incorporated by reference to exhibit 4.2 to
the Company's Form 8-K filed on June 14, 2004.
4.10 Amended and Restated Secured Term Convertible Note dated October 29,
2004 issued by Island Pacific, Inc. in favor of Laurus Master Fund,
Ltd., incorporated by reference to exhibit 4.1 to the Company's Form
8-K filed on November 2, 2004.
4.11 Common Stock Purchase Warrant dated October 29, 2004 issued by Island
Pacific, Inc. to Laurus Master Fund, Ltd. incorporated by reference to
exhibit 4.2 to the Company's Form 8-K filed on November 2, 2004.
4.12 Amended and Restated Registration Rights Agreement dated October 29,
2004 between Island Pacific, Inc. and Laurus Master Fund, Ltd.,
incorporated be reference to exhibit 4.3 to the Company's Form 8-K
filed on November 2, 2004
4.13 Amendment No. 2 to the 9% Convertible Debenture dated November 30, 2004
by and between Island Pacific, Inc. and Midsummer Investments, Ltd.
II-2
4.14 Common Stock Purchase Warrant dated November 30, 2004 issued by Island
Pacific, Inc. to Midsummer Investments, Ltd.
5.1 Opinion of Solomon Ward Seidenwurm & Smith, LLP
23.1 Consent of Solomon Ward Seidenwurm & Smith, LLP, reference is made to
exhibit 5.1 above.
23.2 Consent of Singer Lewak Greenbaum & Goldstein, LLP, independent
auditors.
24.1 Power of Attorney, reference is made to the signature page hereto.
ITEM 17. UNDERTAKINGS
We hereby undertake:
(1) To file, during any period in which offers or sales are being made
pursuant to this registration statement, a post-effective amendment to this
registration statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most
recent post-effective amendment thereof) which, individually or in
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in this registration statement
as effective; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8, or Form F-3, and the
information required to be included in a post-effective amendment by such
clauses is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) We hereby undertake that, for the purpose of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities and 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.
(c) Insofar as indemnification by us for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the registrant pursuant to the provisions referenced above or otherwise, we
have been advised that in the opinion of the SEC 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 against
such liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered
hereunder, we 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.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Irvine,
State of California, on January 25, 2005.
ISLAND PACIFIC, INC., A DELAWARE CORPORATION
By: /s/ Michael Tomczak
----------------------------------------
Michael Tomczak, President and Chief
Operating Officer
(Principal Executive Officer)
By: /s/ Corinne Bertrand
----------------------------------------
Corinne Bertrand, Chief Financial Officer
(Principal Financial and Accounting
Officer)
POWER OF ATTORNEY
EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS
MICHAEL TOMCZAK AND CORINNE BERTRAND, AND EACH OF THEM, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION AND EACH OF THEM WITH FULL POWER TO ACT WITHOUT
THE OTHER, HIS OR HER ATTORNEY-IN-FACT AND AGENT, FOR HIM OR HER AND IN HIS OR
HER NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL
AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT
AND ANY REGISTRATION STATEMENT RELATING TO THIS REGISTRATION STATEMENT UNDER
RULE 462 UNDER THE SECURITIES ACT OF 1933, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND ALL OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE, GRANTING UNTO SAID
ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN
AND ABOUT THE PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE OR SHE MIGHT
OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID
ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR, HIS, OR HER SUBSTITUTES
OR SUBSTITUTE, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES CAPACITY DATE
---------- -------- ----
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/ Michael Silverman Chairman of the Board January 25, 2005
-----------------------------
Michael Silverman
/s/ Michael Tomczak President, Chief Operating Officer January 25, 2005
----------------------------- and Director
Michael Tomczak
/s/ Donald S. Radcliffe Director January 25, 2005
-----------------------------
Donald S. Radcliffe
/s/ Lawrence Page Director January 25, 2005
-----------------------------
Lawrence Page
/s/ Julia Eakes Director January 25, 2005
-----------------------------
Julia Eakes
/s/ Steven Spector Director January 25, 2005
-----------------------------
Steven Spector
/s/ Ian Bonner Director January 25, 2005
-----------------------------
Ian Bonner
II-4
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
2.1 Amended and Restated Agreement of Merger and Plan of Reorganization
dated June 1, 2004 by and between Island Pacific, Inc., Retail
Technologies International, Inc., IPI Merger Sub, Inc., IPI Merger Sub
II, Inc., Michael Tomczak and Jeffrey Boone, incorporated by reference
to exhibit 2.1 to the Company's Form 8-K filed on June 14, 2004.
2.2 Agreement of Merger dated June 1, 2004 between IPI Merger Sub II, Inc.
and Retail Technologies International, Inc., incorporated by reference
to exhibit 2.2 to the Company's Form 8-K filed on June 14, 2004.
4.1 Securities Purchase Agreement dated March 15, 2004 by and among Island
Pacific, Inc., Omicron Master Trust and Midsummer Investments, Ltd,
incorporated by reference to exhibit 4.1 to the Company's Form 8-K
filed on March 17, 2004.
4.2 Securities Purchase Agreement dated July 12, 2004 by and among Island
Pacific, Inc. and Laurus Master Fund, Ltd., incorporated by reference
to exhibit 4.1 to the Company's Form 8-K filed on July 21, 2004.
4.3 Registration Rights Agreement dated March 15, 2004 by and among the
Company, Omicron Master Trust and Midsummer Investments, Ltd.,
incorporated by reference to exhibit 4.2 to the Company's Form 8-K
filed on March 17, 2004.
4.4 Amendment No. 1 to the 9% Convertible Debenture dated July 30, 2004 by
and between Island Pacific, Inc. and Midsummer Investments, Ltd.,
incorporated by reference to exhibit 4.14 to the Company's Form 10-Q
filed on August 12, 2004.
4.5 Secured Convertible Term Note issued by Island Pacific, Inc. in favor
of Laurus Master Fund. Ltd., incorporated by reference to exhibit 4.2
to the Company's Form 8-K filed on July 21, 2004.
4.5 Common Stock Purchase Warrant dated July 12, 2004 issued to Laurus
Master Fund, Ltd. by Island Pacific, Inc., incorporated by reference to
exhibit 4.3 to the Company's Form 8-K filed on July 21, 2004.
4.7 Registration Rights Agreement dated July 12, 2004 between Island
Pacific, Inc. and Laurus Master Fund, Ltd., incorporated by reference
to exhibit 4.4 to the Company's Form 8-K filed on July 21, 2004.
4.8 Registration Rights Agreement dated June 1, 2004 by and between Island
Pacific, Inc., Michael Tomczak, Jeffrey Boone and Intuit, Inc.,
incorporated by reference to exhibit 4.1 to the Company's Form 8-K
filed on June 14, 2004.
4.9 Form of Voting Agreement, incorporated by reference to exhibit 4.2 to
the Company's Form 8-K filed on June 14, 2004.
4.10 Amended and Restated Secured Term Convertible Note dated October 29,
2004 issued by Island Pacific, Inc. in favor of Laurus Master Fund,
Ltd., incorporated by reference to exhibit 4.1 to the Company's Form
8-K filed on November 2, 2004.
4.11 Common Stock Purchase Warrant dated October 29, 2004 issued by Island
Pacific, Inc. to Laurus Master Fund, Ltd., incorporated by reference to
exhibit 4.2 to the Company's Form 8-K filed on November 2, 2004.
4.12 Amended and Restated Registration Rights Agreement dated October 29,
2004 between Island Pacific, Inc. and Laurus Master Fund, Ltd.,
incorporated be reference to exhibit 4.3 to the Company's Form 8-K
filed on November 2, 2004.
4.13 Amendment No. 2 to the 9% Convertible Debenture dated November 30, 2004
by and between Island Pacific, Inc. and Midsummer Investments, Ltd.
II-5
4.14 Common Stock Purchase Warrant dated November 30, 2004 issued by Island
Pacific, Inc. to Midsummer Investments, Ltd.
5.1 Opinion of Solomon Ward Seidenwurm & Smith, LLP
23.1 Consent of Solomon Ward Seidenwurm & Smith, LLP, reference is made to
exhibit 5.1 above.
23.2 Consent of Singer Lewak Greenbaum & Goldstein, LLP, independent
auditors.
24.1 Power of Attorney, reference is made to the signature page hereto.
II-6