As filed with the Securities and Exchange Commission on December 13, 2007
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
US DATAWORKS, INC.
(Exact Name of registrant as Specified in Its Charter)
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Nevada
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84-1290152
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(State or Other Jurisdiction of
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(I.R.S. Employer
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Incorporation or Organization)
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Identification Number)
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One Sugar Creek Center Blvd., 5
th
Floor
Sugar Land, TX 77478
(281) 504-8000
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrants Principal Executive Offices)
Charles E. Ramey
One Sugar Creek Center Blvd., 5
th
Floor
Sugar Land, TX 77478
(281) 504-8000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
With copy to:
Richard S. Bebb, Esq.
Noelle Matteson, Esq.
Pillsbury Winthrop Shaw Pittman LLP
2475 Hanover Street
Palo Alto, CA 94304
Telephone: (650) 233-4500
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, check the following box.
o
If any of the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment plans, check the following box.
þ
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.
o
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.
o
If this form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with the Commission
pursuant to Rule 462(e) under the Securities Act, check the following box.
o
If this form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities Act, check the following box.
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CALCULATION OF REGISTRATION FEE
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Proposed
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Proposed
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maximum
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maximum
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Title of each class of securities to be
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Amount to be
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offering price per
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aggregate
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Amount of
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registered
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registered(1)
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share(2)
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offering price
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registration fee
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Common Stock, $0.0001 par value(2)(3)
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18,139,535 shares
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$0.27
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$4,897,675
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$151
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(1)
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The shares being registered for resale by selling stockholders are issuable upon exercise of
certain outstanding convertible notes and warrants of the Registrant. Pursuant to Rule 416
under the Securities Act of 1933, the number of shares registered hereby shall also be deemed
to include such indeterminate number of additional shares of common stock that may be issued
or have been issued upon conversion of the convertible notes and exercise of the warrants
solely as a result of provisions to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
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(2)
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Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c)
based upon the average of the high and low prices of the Companys Common Stock on the
American Stock Exchange on December 12, 2007.
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(3)
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Associated with the Common Stock are Series X Participating Preferred Stock Purchase Rights
that will not be exercisable or be evidenced separately from the Common Stock prior to the
occurrence of certain events.
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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 that
specifically states that this registration statement shall thereafter become effective in
accordance with
Section 8(a)
of the Securities Act of 1933 or until this registration statement
shall become effective on such date as the Securities and Exchange Commission, acting pursuant to
said Section
8(a)
, may determine.
The information in this prospectus is not complete and may be changed. The selling
securityholders may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
Subject to Completion, Dated December 13, 2007
PROSPECTUS
18,139,535 Shares
Common Stock
We have prepared this prospectus to allow the persons named in this prospectus under the
caption Selling Stockholders to sell shares of our common stock issuable upon conversion of their
convertible notes and upon exercise of their warrants. This prospectus will be used by selling
stockholders to resell their shares of common stock. The conversion and exercise prices are set
forth in the convertible notes and warrants, which are subject to anti-dilution adjustments. We
will not receive any proceeds from the sale of the shares by the selling stockholders other than
cash received upon the exercise of the warrants.
For a more detailed description of the convertible notes and warrants, see Selling
Stockholders beginning on page 10.
Our common stock is traded on the American Stock Exchange under the symbol UDW. The last
reported sale price of our common stock on the American Stock Exchange on December 12, 2007, was
$0.28 per share.
Investing in our common stock involves a high degree of risk. You should carefully read and
consider the Risk Factors beginning on page 4.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is _________, 2007
TABLE OF CONTENTS
About This Prospectus
You should rely only on the information provided in or incorporated by reference in this
prospectus, the registration statement, a prospectus supplement or an amendment. We have not
authorized anyone to provide you with information or to represent anything not contained in this
prospectus. You must not rely on any unauthorized information or representations. The selling
stockholders are offering to sell, and seeking offers to buy, only the shares of common stock
covered by this prospectus, and only under circumstances and in jurisdictions where it is lawful to
do so. The information contained in this prospectus is current only as of its date, regardless of
the time of delivery of this prospectus or of any sale of the shares.
You should read carefully the entire prospectus, as well as the documents incorporated by
reference in the prospectus, before making an investment decision. All references to US
Dataworks, we, us, our, or the Company in this prospectus mean US Dataworks, Inc. and its
subsidiaries, except where it is made clear that the term means only the parent company.
2
THE COMPANY
US Dataworks is a developer of payment processing software, serving several of the top 25
banking institutions, top 10 credit card issuers, major retailers and the United States Government.
We generate revenue from the licensing, system integration and maintenance of our core product,
Clearingworks, and its component subsystems, ClearingworksACH, ClearingworksCHECK21,
ClearingworksPAYMENTS and ClearingworksSECURE. Our software is designed to enable organizations to
transition from traditional paper-based payment and billing processes to electronic payment
solutions. Our products include check processing, point-of-purchase transactions and turnkey
Automated Clearing House (ACH) payments. ACH payments are highly reliable and efficient electronic
fund transfers among participating depository financial institutions including the Federal Reserve,
the central bank of the United States. Our products are designed to provide organizations with an
in-house solution that will complement and enhance such organizations existing technologies,
systems and operational workflow. Our strategy is to identify, design and develop products that
fill specific niches in the payment processing industry.
MICRworks
tm
, Clearingworks
®
, Returnworks
tm
,
and Remitworks
tm
are trademarks of US Dataworks. Other trademarks referenced
herein are the property of their respective owners.
Our executive offices are located at One Sugar Creek Center Blvd., 5
th
Floor, Sugar
Land, TX 77478 and our telephone number at those offices is (281) 504-8000.
3
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully
consider the risks and uncertainties and all other information contained or incorporated by
reference in this prospectus before you purchase shares of our common stock, including the risks
and uncertainties discussed below, as well as any modification, replacement or update to these
risks and uncertainties that are reflected in any future filings we make with the SEC as described
under the caption Documents Incorporated By Reference below, which will also be incorporated by
reference herein in their entirety.
The risks and uncertainties described below are not the only ones we face. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial may also impair
our business operations. If any of the following risks actually occurs, our business, financial
condition and results of operations could be materially and adversely affected. As a result, the
trading price of our common stock could decline, and you could lose part or all of your investment.
We have a history of losses and may not operate profitably in the future.
We have a history of losses and our net losses and negative cash flow may continue for the
foreseeable future. As of September 30, 2007, our accumulated deficit was ($52,131,368). We believe
that our planned growth and profitability will depend in large part on our ability to promote our
brand name, gain clients and expand our relationships with clients for whom we could provide
licensing agreements and system integration. Accordingly, we intend to invest heavily in marketing,
strategic partnership, development of our client base and development of our marketing technology
and operating infrastructure. If we are not successful in promoting our brand name and expanding
our client base, it will have a material adverse effect on our financial condition and our ability
to continue to operate our business.
Our ability to continue as a going concern may be contingent upon our ability to secure capital
from prospective investors or lenders.
The consolidated financial statements, which are incorporated by reference, have been prepared
assuming we will continue on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. We believe we currently have
adequate cash to fund anticipated cash needs through March 31, 2008. However, we may need to raise
additional capital in the future. Any equity financing may be dilutive to shareholders, and debt
financing, if available, will increase expenses and may involve restrictive covenants. We may be
required to raise additional capital, at times and in amounts that are uncertain, especially under
the current capital market conditions. These factors raise substantial doubt about our ability to
continue as a going concern. Under these circumstances, if we are unable to obtain additional
capital or are required to raise it on undesirable terms, it may have a material adverse effect on
our financial condition, which could require us to:
curtail our operations significantly;
sell significant assets;
seek arrangements with strategic partners or other parties that may require us to
relinquish significant rights to products, technologies or markets; or
explore other strategic alternatives including a merger or sale of US Dataworks.
Our financial statements do not include any adjustments relating to the recoverability and
classification of recorded assets or liabilities that might be necessary should we be unable to
continue as a going concern.
4
Our operating results are subject to fluctuations caused by many factors that could cause us to
fail to achieve our revenue or profitability expectations, which in turn could cause our stock
price to decline.
Our operating results can vary significantly depending upon a number of factors, many of which
are outside our control. Factors that may affect our quarterly operating results include:
market acceptance of and changes in demand for our products and services;
gain or loss of clients or strategic relationships;
announcement or introduction of new software, services and products by us or by our
competitors;
our ability to build brand recognition;
timing of sales to customers;
price competition;
our ability to upgrade and develop systems and infrastructure to accommodate growth;
our ability to attract and integrate new personnel in a timely and effective manner;
our ability to introduce and market products and services in accordance with market
demand;
changes in governmental regulation;
reduction in or delay of capital spending by our clients due to the effects of terrorism,
war and political instability; and
general economic conditions, including economic conditions specific to the financial
services industry.
In addition, each quarter we derive a significant portion of our revenue from agreements
signed at the end of the quarter. Our operating results could suffer if the timing of these
agreements is delayed. Depending on the type of agreements we enter into, we may not be able to
recognize revenue under these agreements in the quarter in which they are signed. Some of all of
these factors could negatively affect demand for our products and services, and our future
operating results.
Most of our operating expenses are relatively fixed in the short-term. We may be unable to
adjust spending rapidly to compensate for any unexpected sales shortfall, which could harm our
quarterly operating results. Because of the emerging nature of the markets in which we compete, we
do not have the ability to predict future operating results with any certainty. Because of the
above factors, you should not rely on period-to-period comparisons of results of operation as an
indication of future performances.
We may not be able to maintain our relationships with strategic partners, which may cause our cash
flow to decline.
We may not be able to maintain our relationships with strategic partners, such as BancTec and
Computer Sciences Corporation. These strategic relationships are a core component of our sales and
distribution strategy. The loss of a strategic partner could harm our financial results.
Because a small number of customers have historically accounted for and, may in future periods
account for, substantial portions of our revenue, our revenue could decline because of delays of
customer orders or the failure to retain customers.
We have a small number of customers that account for a significant portion of our revenue. Our
revenue could decline because of a delay in signing agreements with a single customer or the
failure to retain an existing customer. In addition, we may not obtain additional customers. The
failure to obtain additional customers or the failure to retain existing customers will harm our
operating results.
5
If general economic and business conditions do not improve, we may experience decreased revenue or
lower growth rates.
The revenue growth and profitability of our business depends on the overall demand for
computer software and services in the product segments in which we compete. Because our sales are
primarily to major banking and government customers, our business also depends on general economic
and business conditions. A softening of demand caused by a weakening of the economy may result in
decreased revenue or lower growth rates. As a result, we may not be able to effectively promote
future license revenue growth in our application business.
We may not be able to attract, retain or integrate key personnel, which may prevent us from
successfully operating our business.
We may not be able to retain our key personnel or attract other qualified personnel in the
future. Our success will depend upon the continued service of key management personnel. The loss of
services of any of the key members of our management team or our failure to attract and retain
other key personnel could disrupt operations and have a negative effect on employee productivity
and morale and harm our financial results.
We operate in a market that is intensely and increasingly competitive, and if we are unable to
compete successfully, our revenue could decline and we may be unable to gain market share.
The market for financial services software is relatively new and highly competitive. Our
future success will depend on our ability to adapt to rapidly changing technologies, evolving
industry standards, product offerings and evolving demands of the marketplace.
Some of our competitors have:
longer operating histories;
larger installed customer bases;
greater name recognition and longer relationships with clients; and
significantly greater financial, technical, marketing and public relations resources than
US Dataworks.
Our competitors may also be better positioned to address technological and market developments
or may react more favorably to technological changes. We compete on the basis of a number of
factors, including:
the breadth and quality of services;
creative design and systems engineering expertise;
pricing;
technological innovation; and
understanding clients strategies and needs.
Competitors may develop or offer strategic services that provide significant technological,
creative, performance, price or other advantages over the services we offer. If we fail to gain
market share or lose existing market share, our financial condition, operating results and business
could be adversely affected and the value of the investment in us could be reduced significantly.
We may not have the financial resources, technical expertise or marketing, distribution or support
capabilities to compete successfully.
6
We may be responsible for maintaining the confidentiality of our clients sensitive information,
and any unauthorized use or disclosure could result in substantial damages and harm our reputation.
The services we provide for our clients may grant us access to confidential or proprietary
client information. Any unauthorized disclosure or use could result in a claim against us for
substantial damages and could harm our reputation. Our contractual provisions attempting to limit
these damages may not be enforceable in all instances or may otherwise fail to adequately protect
us from liability for damages.
If we do not adequately protect our intellectual property, our business may suffer, we may lose
revenue or we may be required to spend significant time and resources to defend our intellectual
property rights.
We rely on a combination of patent, trademark, trade secrets, confidentiality procedures and
contractual procedures to protect our intellectual property rights. If we are unable to adequately
protect our intellectual property, our business may suffer from the piracy of our technology and
the associated loss in revenue. Any patents that we may hold may not sufficiently protect our
intellectual property and may be challenged by third parties. Our efforts to protect our
intellectual property rights may not prevent the misappropriation of our intellectual property. Any
future infringement claims could cause us to spend significant time and money to defend our
intellectual property rights, redesign our products or develop or license a substitute technology.
We may be unsuccessful in acquiring or developing substitute technology and any required license
may be unavailable on commercially reasonable terms, if at all. In the event of litigation to
determine the validity of any third party claims or claims by us against such third party, such
litigation, whether or not determined in our favor, could result in significant expense and divert
the efforts of our technical and management personnel, regardless of the outcome of such
litigation. Furthermore, other parties may also independently develop similar or competing products
that do not infringe upon our intellectual property rights.
We may be unable to consummate future potential acquisitions or investments or successfully
integrate acquired businesses or investments or foreign operations with our business, which may
disrupt our business, divert managements attention and slow our ability to expand the range of our
technologies and products.
We intend to continue to expand the range of our technologies and products, and we may acquire
or make investments in additional complementary businesses, technologies or products, if
appropriate opportunities arise. We may be unable to identify suitable acquisition or investment
candidates at reasonable prices or on reasonable terms, or consummate future acquisitions or
investments, each of which could slow our growth strategy. We have no prior history or experience
in investing in or acquiring and integrating complementary businesses and therefore may have
difficulties completing such transactions or realizing the benefits of such transactions, or they
may have a negative effect on our business. Such investments or acquisitions could require us to
devote a substantial amount of time and resources and could place a significant strain on our
management and personnel. To finance any acquisitions, we may choose to issue shares of our common
stock, which would dilute your interest in us. Any future acquisitions by us also could result in
significant write-offs or the incurrence of debt and contingent liabilities, any of which could
harm our operating results.
The actual or anticipated resale by the selling stockholders of shares of our common stock may
cause the market price of our common stock to decline.
The resale of our common stock by the selling stockholders through open market transactions or
other means may, depending upon the timing of the resales, depress the market price of our common
stock. Moreover, actual or anticipated downward pressure on the market price of our common stock
due to actual or anticipated resales of our common stock could cause some institutions or
individuals to engage in short sales of our common stock, which may itself cause the market price
of our common stock to decline.
Conversion of the convertible notes and exercise of the warrants will dilute the ownership interest
of existing stockholders, including holders who had previously converted their convertible notes.
The conversion of some or all of the convertible notes and the exercise of some or all of the
warrants will dilute the ownership interests of existing stockholders. Any sales in the public
market of the common stock issuable upon such conversion could adversely affect prevailing market
prices of our common stock. In addition, the existence of the convertible notes may encourage short
selling by market participants because the conversion of the convertible notes could depress the
price of our common stock.
7
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
When used in this prospectus, the words believe, expect, anticipate, intend, seek,
will, may and similar expressions are intended to identify forward-looking statements. These
forward-looking statements speak only as of the date hereof. These are statements that relate to
future periods and include, but are not limited to, statements as to customer concentration, our
efforts to develop and maintain strategic relationships, our ability to compete, growth of
competition, adequacy of cash, expectations regarding net losses and cash flow, statements
regarding our growth and profitability, investments in marketing and promotion, our need for future
financing, our dependence on personnel, our ability to respond to rapid technological change, our
ability to increase volume sales of our products and our strategic relationships. These statements
are based on certain assumptions that we have made in light of our experience in the industry as
well as our perceptions of historical trends, current conditions, expected future developments and
other factors we believe are appropriate in these circumstances. As you read and consider this
prospectus, you should understand that these statements are not guarantees of performance or
results. They involve risks, uncertainties and assumptions. Many factors could affect our actual
financial results or results of operations and could cause actual results to differ materially from
those in the forward-looking statements. These risks and uncertainties include, but are not limited
to, risks related to development of new products and services and their use by our potential
customers, our ability to attract and maintain strategic relationships, our ability to work with
our strategic partners, our ability to retain and obtain customers, our ability to protect our
proprietary rights, our ability to successfully gain market share, our dependence on a small number
of customers, our ability to obtain future financing, our ability to achieve long term viability,
and the risks set forth in this prospectus under the caption Risk Factors and any risk factors
discussed in future filings which are incorporated by reference. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this prospectus might not
occur and you should not place undue reliance upon them. We undertake no obligation to update
beyond that required by law any forward-looking statements, whether as a result of new information,
future events or otherwise.
All forward-looking statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by the cautionary statements included in this prospectus.
8
PROCEEDS FROM THE OFFERING
We will not receive any proceeds from the sale of the shares by the selling stockholders. All
proceeds from the sale of the shares will be for the account of the selling stockholders, as
described below. We may receive proceeds upon the exercise of warrants, up to $2,000,000 at an
exercise price of $0.43 per share, held by the selling stockholders to the extent the warrant
exercise prices are paid in cash. We intend to use any such proceeds for general corporate
purposes, including working capital. See Selling Stockholders and Plan of Distribution.
9
SELLING STOCKHOLDERS
The selling stockholders are offering for resale an aggregate of 13,953,489 shares of our
common stock. On November 13, 2007, we entered into a Securities Purchase Agreement (the
Purchase Agreement) with the selling stockholders pursuant to which we issued an aggregate of
$4,000,000 senior secured convertible notes and warrants to purchase an aggregate of 4,651,163
shares of our common stock, $0.0001 par value per share. The convertible notes currently bear an
interest rate of 9.81% per annum, which is equal to LIBOR plus 5% re-calculated as of the first day
of each calendar quarter. At any time, at the option of the selling stockholder, any outstanding
principal amounts and accrued interest may be converted into shares of our common stock at a
conversion price of $0.43 per share, which is equal to 110% of the dollar volume-weighted average
price for our common stock on November 12, 2007, subject to anti-dilution provisions. As of the
date hereof, a selling stockholder may not beneficially own more than 4.99% (the Maximum
Percentage) of outstanding shares of our common stock following any such conversion. However, at
any time, the selling stockholder may increase this Maximum Percentage up to 9.99% upon sixty-one
(61) days prior written notice to us. The convertible notes have a maturity date of November 13,
2010.
The warrants may be exercised for an aggregate of 4,651,163 shares of our common stock at
exercise price of $0.43 per share, which is equal to 110% of the dollar volume-weighted average
price for our common stock on November 12, 2007, subject to anti-dilution provisions. However, the
selling stockholders, following any exercise, may not beneficially own more than the Maximum
Percentage in effect at the time of any such exercise. The warrants may be exercised at any time
until 11:59 p.m., New York time on November 13, 2012.
The shares of our common stock being offered by the selling stockholders are issuable upon
conversion of the principal and interest on the convertible notes and upon exercise of the
warrants. We are registering the shares of our common stock in order to permit the selling
stockholders to offer the shares for resale from time to time. Except for the ownership of the
convertible notes and the warrants issued pursuant to the Purchase Agreement, to our knowledge,
neither the selling stockholders nor any of their affiliates has held any position or office with,
been employed by or otherwise has had any material relationship with us within the past three
years. To our knowledge, none of the selling stockholders are registered broker-dealers.
The table below lists the selling stockholders and other information regarding the beneficial
ownership of the shares of our common stock by each of the selling stockholders. The second column
lists the number of shares of our common stock beneficially owned by each selling stockholder,
which includes its ownership of the convertible notes and warrants, as of December 10, 2007,
assuming conversion of all convertible notes and exercise of the warrants held by the selling
stockholders on that date, without regard to any limitations (including the Maximum Percentage
limitation) on conversions or exercise.
The third column lists the shares of our common stock being offered by this prospectus by each
selling stockholder.
In accordance with the terms of a registration rights agreement among us and the selling
stockholders, this prospectus covers the resale of at least 130% of the sum of the aggregate number
of shares of our common stock issued or issuable upon conversion of the convertible notes and
exercise of the warrants as of the trading day immediately preceding the date the registration
statement is initially filed with the SEC. Because the conversion price of the convertible notes
may be adjusted, the number of shares that will actually be issued may be more or less than the
number of shares being offered by this prospectus. The fourth column assumes the sale of all of
the shares offered by the selling stockholders pursuant to this prospectus. The selling
stockholders may sell all, some or none of their shares in this offering. See Plan of
Distribution.
10
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Shares Beneficially
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Shares Beneficially
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Owned Prior to
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Number of Shares
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Owned After
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Name of Selling Stockholder
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Offering
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Being Offered
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Offering
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Highbridge International LLC(1)
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6,259,931
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7,936,047
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155,280
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Castlerigg Master Investments
Ltd.(2)
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6,976,744
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9,069,767
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Cranshire Capital, L.P.(3)
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872,093
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1,133,721
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(1)
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Highbridge Capital Management, LLC is the trading manager of Highbridge International LLC
and has voting control and investment discretion over securities held by Highbridge International
LLC. Glenn Dubin and Henry Swieca control Highbridge Capital Management, LLC. Each of Highbridge
Capital Management, LLC, Glenn Dubin and Henry Swieca disclaim beneficial ownership of the
securities held by Highbridge International LLC.
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(2)
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Sandell Asset Management Corp. is the investment manager of Castlerigg Master Investments
Ltd. Thomas Sandell is the controlling person of Sandell Asset Management Corp. and may be deemed
to share beneficial ownership of the shares beneficially owned by Castlerigg Master Investments
Ltd. Castlerigg International Ltd. is the controlling shareholder of Castlerigg International
Holdings Limited which is the controlling shareholder of Castlerigg Master Investments Ltd. Each
of Castlerigg International Holdings Limited and Castlerigg International Ltd. may be deemed to
share beneficial ownership of the shares beneficially owned by Castlerigg Master Investments Ltd.
Sandell Asset Management Corp., Castelrigg International Holdings Limited, and Castlerigg
International Ltd. each disclaims beneficial ownership of the securities with respect to which
indirect beneficial ownership is described.
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(3)
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Downsview Capital, Inc. is the general partner of Cranshire Capital, L.P. Mitchell P.
Kopin and Downsview Capital disclaim beneficial ownership of the shares held by Cranshire Capital,
L.P.
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11
PLAN OF DISTRIBUTION
We are registering the shares of our common stock issuable upon conversion of the principal
and interest on the convertible notes and exercise of the warrants to permit the resale of these
shares of our common stock by the holders of the convertible notes and warrants from time to time
after the date of this prospectus. We will not receive any of the proceeds from the sale by the
selling stockholders of the shares of our common stock. We will bear all fees and expenses
incident to our obligation to register the shares of our common stock.
The selling stockholders may sell all or a portion of the shares of our common stock
beneficially owned by them and offered hereby from time to time directly or through one or more
underwriters, broker-dealers or agents. If the shares of our common stock are sold through
underwriters or broker-dealers, the selling stockholders will be responsible for underwriting
discounts or commissions or agents commissions. The shares of our common stock may be sold in one
or more transactions at fixed prices, at prevailing market prices at the time of the sale, at
varying prices determined at the time of sale, or at negotiated prices. These sales may be
effected in the following ways, which may involve crosses or block transactions:
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on any national securities exchange or quotation service on which the securities may
be listed or quoted at the time of sale;
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in the over-the-counter market;
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in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
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through the writing of options, whether such options are listed on an options
exchange or otherwise;
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ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
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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;
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purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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short sales;
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sales pursuant to Rule 144;
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broker-dealers may agree with the selling stockholders to sell a specified number of
such shares at a stipulated price per share;
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a combination of any such methods of sale; and
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any other method permitted pursuant to applicable law.
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If the selling stockholders effect such transactions by selling shares of our common stock to
or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from the selling
stockholders or commissions from purchasers of the shares of our common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those customary in the types
of transactions involved). In connection with sales of the shares of our common stock or
otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which
may in turn
12
engage in short sales of the shares of our common stock in the course of hedging in positions
they assume. The selling stockholders may also sell shares of our common stock short and deliver
shares of our common stock covered by this prospectus to close out short positions and to return
borrowed shares in connection with such short sales. The selling stockholders may also loan or
pledge shares of our common stock to broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in some or all of the
convertible notes or shares of our common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may offer and sell the
shares of our common stock from time to time pursuant to this prospectus or any amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer and donate the shares of our common stock in other
circumstances in which case the transferees, donees, pledgees or other successors in interest will
be the selling stockholders for purposes of this prospectus.
The selling stockholders and any broker-dealer participating in the distribution of the shares
of our common stock may be deemed to be underwriters within the meaning of the Securities Act,
and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be
deemed to be underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of our common stock is made, a prospectus supplement, if
required, will be distributed which will set forth the aggregate amount of shares of our common
stock being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms constituting compensation from
the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid
to broker-dealers.
Under the securities laws of some states, the shares of our common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in some states the
shares of our common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied
with.
There can be no assurance that any selling stockholder will sell any or all of the shares of
our common stock registered pursuant to the registration statement, of which this prospectus forms
a part.
The selling stockholders and any other person participating in such distribution will be
subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of our common stock by the selling
stockholders and any other participating person. Regulation M may also restrict the ability of any
person engaged in the distribution of the shares of our common stock to engage in market-making
activities with respect to the shares of our common stock. All of the foregoing may affect the
marketability of the shares of our common stock and the ability of any person or entity to engage
in market-making activities with respect to the shares of our common stock.
We will pay all expenses of the registration of the shares of our common stock pursuant to the
registration rights agreement, estimated to be $15,000 in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with state securities or
blue sky laws; provided, however, that a selling stockholder will pay all underwriting discounts
and selling commissions, if any. We will indemnify the selling stockholders against liabilities,
including some liabilities under the Securities Act, in accordance with the registration rights
agreements, or the selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under the Securities Act,
that may arise from any written information furnished to us by a selling stockholder specifically
for use in this prospectus, in accordance with the related registration rights agreement, or we may
be entitled to contribution.
Once sold under the registration statement, of which this prospectus forms a part, the shares
of our common stock will be freely tradable in the hands of persons other than our affiliates.
13
LEGAL MATTERS
The validity of the shares of our common stock will be passed upon for us by Hale Lane Peek
Dennison and Howard, Professional Corporation, Reno, Nevada.
EXPERTS
Ham, Langston & Brezina, LLP, independent accountants, have audited our financial statements
for fiscal years 2006 and 2005 included in our Annual Report on Form 10-KSB for the fiscal year
ended March 31, 2007.
Our financial statements are incorporated by reference in this prospectus in reliance upon the
report of Ham, Langston & Brezina, LLP given upon its authority as an expert in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other information with
the Securities and Exchange Commission. You may read and copy any materials we file with the SEC
at the SECs public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the
SEC at 1-800-SEC-0330 for more information on its public reference room. The SEC also maintains an
Internet website at http://www.sec.gov that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC. In addition,
information may be found on our website at
www.usdataworks.com
. The information on our website is
not incorporated by reference in and is not otherwise intended to be part of this prospectus. We
have included our website address as an inactive textual reference only.
We have filed with the SEC a registration statement that contains this prospectus on Form S-3
under the Securities Act. The registration statement relates to the convertible notes and warrants
and the common stock issuable on conversion of the convertible notes and exercise of the warrants
offered by the selling securityholders. This prospectus does not contain all of the information
set forth in the registration statement and the exhibits and schedules to the registration
statement. Please refer to the registration statement and its exhibits and schedules for further
information with respect to the Company, the convertible notes, the warrants and the common stock.
Statements contained in this prospectus as to the contents of any contract or other document are
not necessarily complete and, in each instance, we refer you to the copy of that contract or
document filed as an exhibit to the registration statement. You may read and obtain a copy of the
registration statement and its exhibits and schedules from the SEC, as described in the preceding
paragraph.
14
DOCUMENTS INCORPORATED BY REFERENCE
The SEC permits us to incorporate by reference the information contained in documents we
file with the SEC, which means that we can disclose important information to you by referring you
to those documents rather than by including them in this prospectus. Information that is
incorporated by reference is considered to be part of this prospectus and you should read it with
the same care that you read this prospectus. Later information that we file with the SEC will
automatically update and supersede the information that is either contained, or incorporated by
reference, in this prospectus, and will be considered to be a part of this prospectus from the date
those documents are filed. We have filed with the SEC, and incorporate by reference in this
prospectus
our annual report on Form 10-KSB for the fiscal year ended March 31, 2007;
our quarterly reports on Form 10-QSB for the fiscal quarters ended June 30, 2007 and
September 30, 2007;
our current reports on Form 8-K filed with the SEC on August 23, 2007, September 5, 2007
and November 14, 2007;
the description of our common stock set forth in our registration statement on Form 8-A
filed under the Exchange Act on April 17, 2000, including any amendment or report filed for the
purpose of updating such description.
the description of our Series X Participating Preferred Stock Purchase Rights contained in
the registration statement on Form 8-A filed under the Exchange Act on July 25, 2003, including any
amendment or report filed for the purpose of updating such description;
All documents filed by us with the SEC pursuant to the Exchange Act after the date of the
initial registration statement and prior to the effectiveness of the registration statement; and
We also incorporate by reference all additional documents that we file with the SEC under the
terms of Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act that are made after the initial
filing date of the registration statement of which this prospectus is a part and the effectiveness
of the registration statement, as well as between the date of this prospectus and the termination
of any offering of securities offered by this prospectus. We are not, however, incorporating, in
each case, any documents or information that we are deemed to furnish and not file in accordance
with SEC rules.
You may request a copy of any or all of the documents incorporated by reference but not
delivered with this prospectus, at no cost, by writing or telephoning us at the following address
and number: US Dataworks, Inc., One Sugar Creek Center Blvd., 5
th
Floor, Sugar Land, TX
77478, Attn: Investor Relations, telephone: (281) 504-8000. We will not, however, send exhibits to
those documents, unless the exhibits are specifically incorporated by reference in those documents.
15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses payable by the registrant in connection
with the sale and distribution of the securities being registered hereby. Normal commission
expenses and brokerage fees are payable individually by the selling securityholders. All amounts
are estimated except the SEC registration fee.
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Amount
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SEC registration fee
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$
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151
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Accounting fees and expenses
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$
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3,000
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Legal fees and expenses
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$
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10,000
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Miscellaneous
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$
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1,849
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Total
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$
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15,000
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Item 15. Indemnification of Directors and Officers
Sections 78.7502 and 78.751 of the General Corporation Law of Nevada provides for the
indemnification of officers, directors, and other corporate agents in terms sufficiently broad to
indemnify such persons under certain circumstances for liabilities (including reimbursement for
expenses incurred) arising under the Securities Act. Nevada Law provides, among other things, that
a corporation may indemnify a person who was or is a party to or is threatened to be made a party
to, any threatened pending or completed action by reason of their service to the corporation.
Expenses include attorneys fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with the action suit or proceeding. In order to be
entitled to indemnification such person must have reasonably relied on information provided by the
corporation or acted in good faith. Further, discretionary indemnification may be authorized by the
Board of Directors, the stockholders, a majority vote of a quorum of disinterested directors, of if
no quorum can be obtained, by legal opinion of counsel. Article VI of the Registrants Amended and
Restated Bylaws (Exhibit 3(ii) to the Quarterly Report on Form 10-QSB for the quarter ended
December 31, 2002) provides for indemnification of the Registrants directors, officers, employees
and other agents to the extent and under the circumstances permitted by the General Corporation Law
of Nevada.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted
to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions,
the Registrant has been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable.
Item 16. Exhibits
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Exhibit
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Number
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Description of Document
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4.1
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Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to
the Registrants Annual Report on Form 10-KSB for the year ended March
31, 2002).
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4.2
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Rights Agreement, dated July 24, 2003, by and between the Registrant
and Corporate Stock Transfer (incorporated by reference to Exhibit 4.1
to the Registrants Current Report on Form 8-K, filed with the SEC on
July 25, 2003).
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4.3
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Amendment No. 2 to Rights Agreement, dated November 13, 2007, by and
between the Registrant and American Stock Transfer & Trust
(incorporated by reference to Exhibit 4.2 to the Registrants Current
Report on Form 8-K, filed with the SEC on November 14, 2007).
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II-1
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Exhibit
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Number
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Description of Document
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5.1
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Opinion of Hale Lane Peek Dennison and Howard, Professional Corporation.
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23.1
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Consent of Ham, Langston & Brezina, LLP, independent auditors.
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23.3
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Consent of Hale Lane Peek Dennison & Howard (see Exhibit 5.1).
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24.1
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Power of Attorney (see page II-4 of this Registration Statement).
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99.1
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Securities Purchase Agreement dated as of November 13, 2007, by and
among the Registrant and the signatories thereto.
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99.2
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Form of Senior Secured Convertible Promissory Note.
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99.3
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Form of Common Stock Purchase Warrant.
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Item 17. Undertakings
The undersigned registrant hereby undertakes:
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(1)
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To file, during any period in which offers or sales are being made, a
post-effective amendment to the registration statement:
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(i)
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To include any prospectus required by Section 10(a)(3) of the
Securities Act;
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(ii)
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To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement; and
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(iii)
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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;
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provided, however, that paragraphs (i), (ii) and (iii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference
in this registration statement, or is contained in a form of prospectus filed
pursuant to Rule 424(b) that is part of the registration statement.
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(2)
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That, for the purpose of determining any liability under the Securities Act,
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.
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(3)
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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.
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(4)
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That, for purposes of determining any liability under the Securities Act, (A)
each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to
be part of the registration statement as of the date the filed prospectus was deemed
part of and included in the registration statement; and (B) each prospectus required to
be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of
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II-2
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a registration statement in reliance on Rule 430B relating to an offering made
pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the
information required by section 10(a) of the Securities Act of 1933 shall be deemed
to be part of and included in the registration statement as of the earlier of the
date such form of prospectus is first used after effectiveness or the date of the
first contract of sale of securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and any person that is
at that date an underwriter, such date shall be deemed to be a new effective date of
the registration statement relating to the securities in the registration statement
to which that prospectus relates, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof. Provided, however,
that no statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale prior
to such effective date, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration statement or
made in any such document immediately prior to such effective date.
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(5)
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That, for purposes of determining any liability under the Securities Act, each
filing of the registrants annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Sugar Land, State of Texas, on December 13, 2007.
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US DATAWORKS, INC.
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By
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/s/ Charles E. Ramey
Charles E. Ramey
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Chief Executive Officer
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Charles E. Ramey and John McLaughlin, and each of them, his or her true and lawful
attorneys in fact and agents, each with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Registration Statement, and to file the
same, with exhibits thereto and other documents in connection therewith, with the Securities and
Exchange Commission, 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, as
fully to all intents and purposes as he or she might or could do in person, hereby ratifying and
confirming all that each of said attorneys in fact and agents or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the dates indicated.
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/s/ Charles E. Ramey
Charles E. Ramey
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Chief Executive Officer
(Principal Executive Officer)
and Director
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December 13, 2007
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/s/ John T. McLaughlin
John T. McLaughlin
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Chief Accounting Officer
(Principal Accounting Officer)
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December 13, 2007
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/s/ Joe Abrell
Joe Abrell
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Director
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December 13, 2007
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/s/ J. Patrick Millinor
J. Patrick Millinor
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Director
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December 13, 2007
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/s/ John L. Nicholson
John L. Nicholson, M.D.
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Director
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December 13, 2007
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/s/ Terry Stepanik
Terry Stepanik
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Director
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December 13, 2007
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II-4
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/s/ Hayden D. Watson
Hayden D. Watson
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Director
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December 13, 2007
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/s/ Thomas L. West, Jr
Thomas L. West, Jr.
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Director
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December 13, 2007
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II-5
EXHIBIT INDEX
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Exhibit
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Number
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Description of Document
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4.1
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Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to
the Registrants Annual Report on Form 10-KSB for the year ended March
31, 2002).
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4.2
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Rights Agreement, dated July 24, 2003, by and between the Registrant
and Corporate Stock Transfer (incorporated by reference to Exhibit 4.1
to the Registrants Current Report on Form 8-K, filed with the SEC on
July 25, 2003).
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4.3
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Amendment No. 2 to Rights Agreement, dated November 13, 2007, by and
between the Registrant and American Stock Transfer & Trust
(incorporated by reference to Exhibit 4.2 to the Registrants Current
Report on Form 8-K, filed with the SEC on November 14, 2007).
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5.1
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Opinion of Hale Lane Peek Dennison and Howard, Professional Corporation.
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23.1
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Consent of Ham, Langston & Brezina, LLP, independent auditors.
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23.3
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Consent of Hale Lane Peek Dennison & Howard (see Exhibit 5.1).
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24.1
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Power of Attorney (see page II-4 of this Registration Statement).
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99.1
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|
Securities Purchase Agreement dated as of November 13, 2007, by and
among the Registrant and the signatories thereto.
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99.2
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Form of Senior Secured Convertible Promissory Note.
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99.3
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Form of Common Stock Purchase Warrant.
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