As filed with the Securities and Exchange Commission on December 18, 2002
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SUREBEAM CORPORATION
(Exact Name Of Registrant As Specified In Its Charter)
DELAWARE 3556 33-0921003
(State Or Other Jurisdiction Of (Primary Standard Industrial (IRS Employer
Incorporation Or Organization) Classification Code Number) Identification No.)
9276 SCRANTON ROAD, SUITE 600, SAN DIEGO, CA 92121
(Address Of Principal Executive Offices) (Zip Code)
(858) 795-6300
(Registrant's Telephone Number, Including Area Code)
LAWRENCE A. OBERKFELL
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
SUREBEAM CORPORATION
9276 SCRANTON ROAD, SUITE 600
SAN DIEGO, CALIFORNIA 92121
(858) 795-6300
(Name, Address, Including Zip Code, And Telephone Number,
Including Area Code, Of Agent For Service)
Copies Of Communications To:
G. EDWARD ARLEDGE, ESQ.
P. BLAKE ALLEN, ESQ.
LUCE FORWARD HAMILTON & SCRIPPS LLP
600 WEST BROADWAY, SUITE 2600
SAN DIEGO, CALIFORNIA 92101
(619) 236-1414
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
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, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
--------------------------- ---------- -------- -------------- ----------------
Class A Common Stock 6,595,389(1) $4.285(2) $28,261,242 $2,600.03
(1) Includes 1,319,075 shares of Class A Common Stock issuable upon
exercise of warrants at an exercise price of $6.00 per share. Also
registered hereunder pursuant to Rule 416 under the Securities Act of
1933, as amended, are an indeterminate number of additional shares of
Class A Common Stock which may become issuable by virtue of
anti-dilution provisions of such warrants to prevent dilution resulting
from stock splits, stock dividends or similar events as specified in
the terms of the warrants.
(2) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(c), based on the average of the high and low
prices of the Registrant's common stock as reported on the Nasdaq
National Market for December 13, 2002, which date is within 5 business
days prior to the initial filing date of 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.
THIS INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE SELLING STOCKHOLDERS MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT 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.
DATED DECEMBER 18, 2002, SUBJECT TO COMPLETION
SUREBEAM CORPORATION
6,595,389 SHARES OF CLASS A COMMON STOCK
This prospectus is part of a registration statement of SureBeam
Corporation ("SureBeam," "we," "us" or "our") filed with the Securities and
Exchange Commission (the "SEC") in connection with a private placement completed
by SureBeam in December 2002. As part of the private placement, we agreed to
register for resale the shares of common stock sold thereunder. We also agreed
to register shares of common stock issuable upon exercise of warrants issued to
the purchasers of the common stock in the private placement. This prospectus
will be used by the selling stockholders to sell up to 6,595,389 shares of our
common stock. This means:
- The selling stockholders may sell their shares of common stock from
time to time.
- For information on the methods of sale of the common stock, you
should refer to the section entitled "Plan of Distribution" on page
15. SureBeam will not receive any portion of the proceeds from the
sale of this common stock.
- You should read this prospectus and any prospectus supplement
carefully and in its entirety before you invest in shares of our
common stock.
SureBeam's common stock is traded on the Nasdaq National Market under the
symbol SURE. On December 13, 2002, the last reported sale price of a share of
our common stock on the Nasdaq National Market was $4.25.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
YOU SHOULD CAREFULLY READ AND CONSIDER THE " RISK FACTORS" BEGINNING ON PAGE 2.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is December ___, 2002
TABLE OF CONTENTS
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS................................ 1
THE COMPANY..................................................................... 1
RISK FACTORS.................................................................... 2
USE OF PROCEEDS................................................................. 13
ISSUANCE OF COMMON STOCK TO THE SELLING STOCKHOLDERS............................ 14
INCOME TAX CONSIDERATIONS....................................................... 14
SELLING STOCKHOLDERS............................................................ 14
PLAN OF DISTRIBUTION............................................................ 15
LEGAL MATTERS................................................................... 16
EXPERTS ........................................................................ 17
WHERE YOU CAN FIND MORE INFORMATION............................................. 17
INFORMATION INCORPORATED BY REFERENCE........................................... 17
(i)
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU SHOULD
NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL
OR BUY ANY SHARES IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL. THE INFORMATION
IN THIS PROSPECTUS IS CURRENT AS OF THE DATE ON THE COVER.
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
To the extent that the information presented in this prospectus, and in
other documents which are incorporated by reference in this prospectus under the
section of this prospectus entitled "Where You Can Find More Information,"
discusses financial projections, information or expectations about our business
plans, results of operations, products or markets, or otherwise makes statements
about future events, such statements are forward-looking. Such forward-looking
statements can be identified by the use of words such as "intends,"
"anticipates," "believes," "estimates," "projects," "forecasts," "expects,"
"plans," and "proposes." Although we believe that the expectations reflected in
these forward-looking statements are based on reasonable assumptions, there are
a number of risks and uncertainties that could cause actual results to differ
materially from such forward-looking statements. These include, among others,
the cautionary statements in the "Risk Factors" section of this prospectus.
These cautionary statements identify important factors that could cause actual
results to differ materially from those described in the forward-looking
statements. When considering forward-looking statements in this prospectus, you
should keep in mind the cautionary statements in the "Risk Factors" section and
other sections of this prospectus, and other cautionary statements in documents
which are incorporated by reference in this prospectus under the section of this
prospectus entitled "Where You Can Find More Information."
THE COMPANY
We are a leading provider of electronic irradiation systems and services
for the food industry. We were formed in August 2000 in connection with the
contribution by The Titan Corporation ("Titan") of the assets, liabilities and
operations related to its electronic food irradiation business. Titan's
electronic food irradiation business had previously been operated as part of a
division of Titan, together with Titan's medical equipment sterilization
business and its government linear electron beam accelerator business.
References to SureBeam, the Company or us in this discussion and analysis
section and in the historical financial statements refer to this division of
Titan prior to the date of the contribution of the electronic food irradiation
business to us by Titan. Our spin-off from Titan was completed on August 5, 2002
when Titan distributed all of its shares of the common stock of SureBeam to the
stockholders of Titan.
Our SureBeam electronic food irradiation process significantly improves
food safety, prolongs shelf life and provides disinfestation, without
compromising food taste, texture or nutritional value. Our SureBeam process is
based on proven electron beam technology that destroys harmful food-borne
bacteria such as E-coli, salmonella and listeria, eliminates or renders harmless
fruit flies and other pests and reduces bacteria driven food spoilage.
Heightened awareness of food safety issues has prompted food growers, packers,
processors and retailers to find new, safe and efficient ways to eliminate
bacteria and insects from their products and to reduce food spoilage. Unlike
older irradiation technologies, our SureBeam process does not use radioactive
isotopes as a means of irradiation. Instead, our SureBeam system uses ordinary
electricity and operates in an efficient and environmentally responsible manner.
As a result, we believe we have an opportunity to establish electronic
irradiation as a new standard for food safety and SureBeam as the leading brand
for food safety solutions.
Our electronic food irradiation system combines our patented conveyor and
shielding systems and proprietary software with publicly available electron
beam, x-ray and linear accelerator technology. Under our business model, we
intend to generate revenue using our electronic food irradiation system in
primarily three types of installations:
- Service centers owned by us, which will charge customers for
processing services;
- Service centers owned by third parties, using equipment they have
purchased from us, which will be charged a continuing royalty fee
for using our technology on an ongoing basis; and
1
- Systems owned by us and installed as part of a customer's production
line, which customers will be charged for processing services.
RISK FACTORS
RISKS RELATED TO OUR BUSINESS
AN INVESTMENT IN SHARES OF OUR COMMON STOCK IS VERY RISKY. YOU SHOULD CAREFULLY
CONSIDER THE FOLLOWING FACTORS AS WELL AS THE OTHER INFORMATION CONTAINED AND
INCORPORATED BY REFERENCE IN THIS PROSPECTUS BEFORE DECIDING TO INVEST.
WE WILL REQUIRE SIGNIFICANT ADDITIONAL CAPITAL TO FUND OPERATIONS, WHICH MAY NOT
BE AVAILABLE ON ACCEPTABLE TERMS OR AT ALL.
We will require additional funds to execute our current business plan
which includes building new SureBeam(R) in-line systems and service centers,
funding working capital, including in relation to our international and domestic
strategic alliances, and funding our ongoing operations, including our corporate
infrastructure, as a stand-alone entity. However, our future capital
requirements will depend on many factors, including:
- Fluctuations in our working capital requirements, including the
continued or increased demand to build our systems in advance of
payment;
- Unexpected delays in collecting accounts receivable from sales of
our systems;
- The volume of food processed at our service centers and the fixed
costs of operating these facilities at substantially less than
current capacity;
- The costs of components for our systems, and the production cost of
assembling our systems;
- The adequacy of our manufacturing and other facilities to meet
demand for our products and services;
- The size and complexity of, and the progress in, our research and
development programs;
- The costs of filing and prosecuting patent applications, and
maintaining, defending and enforcing our patents; and
- The timing, scope and results of market testing by food processors.
IF OUR REVENUES FROM OPERATIONS DO NOT MEET OUR EXPECTATIONS, WE MAY HAVE A
HEIGHTENED NEED FOR ADDITIONAL CAPITAL FROM A SOURCE OTHER THAN OUR CURRENT
CREDIT FACILITY.
Titan has extended to us a $50.0 million senior secured credit facility
secured by substantially all of our assets. It allows us to borrow up to a
maximum of $12.5 million per quarter beginning in the fourth quarter of 2002
through the fourth quarter of 2003, subject to the $50.0 million aggregate
limitation on borrowing. The amount available for borrowing in each of the
second, third and fourth quarters of 2003 is based upon our earnings before
interest, taxes, depreciation and amortization (EBITDA) for the prior quarter as
a percentage of the EBITDA target in our annual operating plan. If our operating
revenues do not meet our expectations, it is likely that (i) our EBITDA will not
meet our EBITDA target, which will limit the amount which we can borrow under
the Titan credit facility; and (ii) because of the shortfall in revenues, we
will have a greater need to borrow funds to fulfill our current business plan.
Therefore, failure to meet our expected operating revenues could have a
compounded effect, which could require us to obtain additional financing sooner
than currently anticipated in order to fulfill our current business plan. In
such circumstance, no assurance can be made that we would be able to obtain
additional financing on terms reasonable to us, or at all, which could have a
material adverse effect upon our results of operations and financial condition.
2
OUR CURRENT CREDIT FACILITY MAY NOT BE SUFFICIENT FOR OUR CAPITAL REQUIREMENTS.
In the past, Titan financed a significant portion of our working capital
and other capital requirements and Titan has extended to us a $50.0 million
senior secured credit facility secured by substantially all of our assets. This
facility is subject to limits in the amounts that can be drawn each quarter, and
subject to certain financial covenants and affirmative and negative covenants.
As of December 13, 2002, we have borrowed $25.0 million under this senior
secured credit facility. We cannot give assurance that the $50.0 million senior
secured credit facility will be adequate for our liquidity needs or that we will
be able to obtain any additional credit on as favorable terms or at all. We
believe our current liquidity, including the senior secured credit facility with
Titan, will allow us to continue our operations through 2003; however, if our
capital requirements vary from our current plans, we may require additional
financing sooner than we anticipate. We expect we will need to obtain additional
debt or equity financing in order to execute our business strategy. Future
equity financings would be dilutive to the existing holders of our common stock.
Future debt financings would most likely involve restrictive covenants and would
need to be approved by Titan. Additional financing from Titan or from third
parties may be unavailable to us when needed. If we are unable to obtain future
equity financing or debt financing or obtain additional funding from Titan or
other financing sources on terms acceptable to us or at all or if we are unable
to generate sufficient cash flow from operations, we believe we would have
sufficient funds to continue our operations through 2003, but we would have to
significantly reduce our current business plan and delay, curtail or eliminate
some of our operations or capital expenditures in 2004 and beyond, which could
have a material adverse effect on our results of operations and financial
condition.
WE MAY NOT ACHIEVE OUR FINANCIAL GOALS IN A TIMELY MANNER, OR AT ALL, DUE TO
VARIABILITY OF TIMING AND AMOUNTS OF REVENUES OBTAINED FROM SALES OF OUR
SYSTEMS.
Historically, a majority of our revenues have been obtained through sales
of our SureBeam electronic food irradiation systems. We recognize the revenues
from these sales using the percentage-of-completion method of accounting, which
allows us to recognize revenue as our fulfillment of the contract progresses.
Under this method, delays in finalizing anticipated sales contracts or even in
construction of systems we have sold can significantly reduce the amount of
revenues which we recognize during any given quarter. Because many of our
expenses are relatively fixed, it is unlikely that a reduction in revenues
recognized in a particular quarter would result in a corresponding reduction in
our expenditure levels for the quarter. Therefore, delays may have a material
adverse effect on our operating results for the quarter in which the delay
occurs, causing us to be unable to achieve our financial goals for the quarter.
If we do not meet our financial goals for a quarter, or if our operating results
for a quarter are below the expectations of public market analysts and
investors, the price of our common stock may decrease significantly.
OUR BUSINESS IS AT AN EARLY STAGE OF DEVELOPMENT. WE ARE SUBJECT TO THE RISKS OF
NEW ENTERPRISES AND THE COMMERCIALIZATION OF A TECHNOLOGY THAT REQUIRES CONSUMER
ACCEPTANCE.
Our early stage of development makes it difficult to assess our prospects
or predict our future operating results. We are subject to risks and
uncertainties frequently encountered by early stage companies that involve the
new application of an existing technology. These risks include our inability to:
- Build consumer confidence in the benefits of food irradiation and
establish the acceptance of our SureBeam electronic irradiation
technology;
- Establish and maintain a sufficient number of food industry
customers and strategic relationships; and
- Obtain substantial capital to support the further development of our
technology and the commercialization of our systems and services.
If we do not successfully address these risks, we may not be able to
increase revenues or commercialize our SureBeam system.
3
IF WE ARE UNABLE TO SUCCESSFULLY ACHIEVE BROAD MARKET ACCEPTANCE OF OUR SUREBEAM
SYSTEM, WE MAY NOT BE ABLE TO GENERATE ENOUGH REVENUES IN THE FUTURE TO ACHIEVE
OR SUSTAIN PROFITABILITY.
We are dependent on the successful commercialization of our SureBeam
system. The market for electronically irradiated food is at an early stage of
development and has developed slower than we had originally expected. As of
September 30, 2002, eleven food processors were selling food electronically
irradiated by us and the volume of food being processed is still a very small
percentage of the market of ground beef. To date, no market has developed for
chicken. The FDA still has not approved the irradiation of processed food, which
represents a substantial potential market. We processed 11.1 million pounds of
food products in 2001, up from 5.9 million pounds processed in 2000. Through
September 30, 2002, we have processed approximately 10.3 million pounds of food
products. Other food processors are testing our technology and it is uncertain
whether or when they will begin commercial production, which in some cases
depends on obtaining regulatory approval. We also do not know whether or when
more fast food or other national chain restaurants or food retailers will decide
to offer irradiated meat and create demand for our electronic irradiation
systems. We expect that some food processors will not irradiate food unless
industry leaders first commit to distribute irradiated food.
The markets for our SureBeam system are unproven. Our SureBeam technology
may not gain adequate commercial acceptance or success. A variety of the risk
factors discussed in this section will determine the success of our market
development and commercialization efforts and the rate and extent of market
acceptance of our SureBeam system.
PUBLIC CONCERNS OVER THE IRRADIATION OF FOOD COULD NEGATIVELY IMPACT MARKET
ACCEPTANCE OF OUR SUREBEAM PROCESS AND SUREBEAM(R) BRANDED FOOD PRODUCTS.
Irradiation of food by any technology, whether using an electron beam or
radioactive isotopes, is opposed by several organized and vocal consumer groups
who claim that irradiated food products are unsafe for consumption or pose a
danger to the environment. These groups attempt to influence public policy and
promote consumer opposition to irradiated food through activities such as
picketing stores that offer irradiated food and by lobbying politicians. Because
irradiation of foods by electron beam technology is a new process, consumers
need to be informed about the benefits and safety of food irradiation. Since
irradiation of food by any method, whether using electron beam or radioactive
isotopes, must be disclosed under the same label "Treated with Radiation" or
"Treated by Irradiation," consumers may fear that our process makes food unsafe
for consumption, has unknown future health effects or poses a danger to the
environment. We risk not being able to overcome these fears through our
educational efforts or to distinguish our process from gamma irradiation. If the
public or our potential customers perceive our systems and services as unsafe or
undesirable, our systems and services may not gain market acceptance, which
would severely limit our ability to market and sell our products. In addition,
negative public attitudes may prompt state legislatures to prohibit the sale of
irradiated food. Further, consumers may be unwilling to pay for the higher cost
of food products processed by our SureBeam system, which could negatively impact
the market acceptance of our process.
WE HAVE A HISTORY OF SIGNIFICANT LOSSES AND WE MAY NOT ACHIEVE OR SUSTAIN
PROFITABILITY.
We have incurred operating losses in each quarter since we commenced
operations. As of September 30, 2002, we had an accumulated deficit of
approximately $117.5 million, and our net loss for the first three quarters of
2002 was $25.1 million. Our net loss for the year ended December 31, 2000 was
approximately $1.8 million, and our net loss for the year ended December 31,
2001 was approximately $74.4 million, including approximately $54.3 million of
non-cash stock-based compensation expense. At the time of our initial public
offering, we recorded stock-based compensation of approximately $78.6 million,
of which $53.5 million was recognized as an expense during the year ended
December 31, 2001. We will recognize this charge in accordance with the vesting
provisions of the related options through 2004. This charge will have a
significant adverse impact on our earnings from 2002 through 2004. We expect to
derive our future revenues from sales of our SureBeam systems and related food
processing services. However, these revenues are highly uncertain. We expect to
devote substantial resources to continue our sales and marketing activities,
including our consumer branding efforts, further develop our administrative
infrastructure and expand our research and development activities. As a result,
we expect that our operating losses will increase and that we will incur
operating losses through at least 2003.
4
REVENUES FROM SYSTEM SALES MAY DECLINE IN THE FUTURE IF WE FAIL TO MAKE NEW
SYSTEM SALES OR THE TIMING OF EXPECTED CONTRACT EXECUTION IS DELAYED.
Our system sales revenues are dependent on a few large contracts and the
recognition of revenues under these long-term contracts is based upon work
performed. Consequently, the timing of the execution of these contracts and the
timing of work performed under them, which is partially outside of our control,
could cause us to generate lower than expected revenues. To date, our revenues
have been primarily attributable to the design and construction of systems for a
limited number of customers, for which revenues are recognized under the
percentage-of-completion method. For example, for the year ended December 31,
1999 revenue from three customers represented approximately 40% of our total
revenues, for the year ended December 31, 2000 revenue from three customers
represented approximately 79% of our total revenues, and for the year ended
December 31, 2001 revenue from three customers represented approximately 89% of
our total revenues. During the first three quarters of 2002, approximately 81%
of our revenues were from two customers. Most of these systems are not yet fully
constructed, installed or integrated and we expect to continue to derive system
sales revenue as we complete construction, installation and integration of these
systems. A reduction or delay of system sales to one or more significant
customers could significantly reduce our revenues. Once the food irradiation
systems become operational, we will no longer derive revenue from these system
sales, but expect to derive income from food processing revenues commensurate
with our existing or potential equity ownership in the entities that own and
operate the third party service centers. In addition, we expect to derive
revenue from processing by company-owned service centers and in-line systems.
There are no assurances that we will continue to derive revenues from these
customers, that revenues from these customers will continue at current or
historical levels, that we will be able to derive revenue from new customers or
that we will be able to derive income from significant food processing revenues
in the future at anticipated levels.
WE MAY BE REQUIRED TO TAKE IMPAIRMENT CHARGES FOR RECEIVABLES IF A CUSTOMER
DEFAULTS ON ITS PAYMENT OBLIGATIONS.
We account for our revenues derived from sales of electronic food
irradiation systems under fixed-price contracts using the
percentage-of-completion method. These systems currently take a total of
approximately 12 to 18 months to design, construct, install, integrate and
deliver. Our unbilled receivables from our contracts for systems have increased
substantially over the past twelve months. If a customer defaults on its payment
obligations under a contract accounted for using the percentage-of-completion
method or if we determine that the contract is otherwise impaired, we would take
an impairment charge to earnings for the receivable arising from previously
recorded revenues in respect of such contract at that time. We cannot assure you
that one or more of our customers will not default on its payment obligations.
For example, in December 1999, we agreed to sell a SureBeam system to a new
entity, Zero Mountain SureBeam, to be formed by Zero Mountain Cold Storage.
Under the agreement, a facility was to be constructed and the entity would
operate an electronic food irradiation service center in Arkansas. Management of
Zero Mountain Cold Storage had not moved forward with its obligation under the
contract. Accordingly, in December 2001, we recorded an allowance for doubtful
accounts of $1.2 million against our receivable from Zero Mountain Cold Storage.
WE HAVE NOT GENERATED POSITIVE CASH FLOW FROM OPERATIONS AND OUR CASH FLOW FROM
OPERATIONS MAY BE INSUFFICIENT TO MEET OPERATING REQUIREMENTS FOR THE
FORESEEABLE FUTURE.
We used net cash from operations of $17.8 million in 2000 and $49.0
million in 2001. Through September 30, 2002, we used net cash from operations of
$10.8 million. Also, in connection with our agreements with our customers, we
have advanced funds aggregating $5.5 million to a strategic alliance entity in
Hawaii Pride to be used primarily for land acquisition, building construction,
and for working capital purposes. We do not expect significant repayments of
these advances until 2003. We received a progress payment of $1.5 million on the
RESAL contract in the third quarter of 2002 and will continue to receive
payments based on the payment schedule in the contract. In addition, we have
entered into a number of commitments to lease land and facilities in connection
with construction of our four company-owned service centers of which three are
operational with the fourth to be operational in the first quarter of 2003.
Based on our customer requirements, we may expend funds to construct and install
in-line systems that we will own and operate. We have limited sources of
committed liquidity including our cash resources. Titan has extended to us a new
$50.0 million senior credit facility secured by all of our assets. As of
December 13, 2002, we have obtained $25.0 million under this credit facility.
This facility will be subject to limits in the amounts
5
that can be drawn each quarter, subject to financial covenants and affirmative
and negative covenants. No assurance can be given that we will be able to
generate sufficient positive cash flow from operations to meet operating
requirements for the foreseeable future.
OUR CUSTOMER CONTRACTS FOR PROCESSING CAN BE CANCELLED ON SHORT NOTICE WITH
LITTLE PENALTY AND THESE CONTRACTS ALLOW THE CUSTOMERS TO USE OTHER ELECTRONIC
IRRADIATION PROVIDERS IN LIMITED CIRCUMSTANCES.
While our customer contracts for processing generally provide for a term
of more than one year, the customers may terminate such contracts with a nominal
termination fee and upon short notice, typically one month. If one or more
customers that are processing a significant volume of products decide to
terminate their contracts, our results of operations would be adversely
affected. While a termination of a contract by a customer would not generally
release a customer from the exclusive provider arrangement in the customer's
contract, we generally must release a customer from the exclusive provider
arrangement if they can find an alternative food irradiation source that can
provide a comparable service at a lower price, or if we cannot fully meet the
customer's demand.
OUR CUSTOMER CONTRACTS FOR PROCESSING DO NOT OBLIGATE OUR CUSTOMERS TO USE A
MINIMUM AMOUNT OF IRRADIATION SERVICES, ONLY TO USE US FOR THEIR IRRADIATION
NEEDS, IF ANY.
Our customer contracts for processing generally provide that the customer
is obligated to use our irradiation services for their food irradiation need, if
any. No assurance can be made, however, that our customers will require a
significant amount, or any food irradiation services during the term of their
respective contracts.
IF WE CANNOT ESTABLISH AND MAINTAIN RELATIONSHIPS WITH FOOD PROCESSORS,
DISTRIBUTORS, RETAILERS AND FOOD SERVICE OPERATORS, WE MAY NOT BE ABLE TO
INCREASE REVENUES OR COMMERCIALIZE OUR SUREBEAM SYSTEM.
In order to increase our revenues and successfully commercialize our
SureBeam system, we must establish and maintain relationships with our existing
and potential customers and strategic partners. A reduction, delay or
cancellation of orders from one or more significant customers or the loss of one
or more key customers could significantly reduce our revenues and could damage
our reputation among our current and potential customers as well as with
consumers. We cannot assure you that our current customers will continue to
place orders with us, that our current customers evaluating the technology will
elect to enter into commercial production, that orders by existing commercial
customers will increase, or that we will be able to obtain orders from new
customers or continue to secure additional strategic relationships.
IF WE EXPERIENCE QUALITY CONTROL PROBLEMS OR SUPPLY SHORTAGES FROM COMPONENT
SUPPLIERS, OUR REVENUES AND PROFIT MARGINS MAY SUFFER.
Our dependence on third party suppliers for components of our systems
involves several risks, including limited control over pricing, availability of
materials, quality and delivery schedules. These components include the
microwave cavities of our linear accelerators, which we currently obtain from a
single source. We may experience quality control problems or supply shortages
with respect to these components in the future. Any quality control problems or
interruptions in supply with respect to one or more components or increases in
component costs could materially adversely affect our customer relationships,
revenues and profit margins.
THE USE OF OUR SYSTEMS TO IRRADIATE FOOD IS SUBJECT TO SIGNIFICANT GOVERNMENT
REGULATION THAT COULD PROHIBIT THE SALE OF IRRADIATED FOOD IN VARIOUS
JURISDICTIONS, INCREASE THE COST OF USING OUR PRODUCTS AND DELAY OR PREVENT THE
USE OF OUR SYSTEMS AND SERVICES BY OUR CUSTOMERS.
Food irradiation is subject to significant regulation as a food additive
by the FDA. Use of our SureBeam system, including product labeling, is also
subject to regulation by the U.S. Department of Agriculture's Food Safety and
Inspection Service and by health and environmental safety departments within
various states. The FDA has approved the use of irradiation for beef, poultry,
pork, fruits and vegetables. The FDA has not yet approved the use of irradiation
for two of the primary food markets we expect to target: processed foods and
seafood. The failure of the FDA to approve irradiation of processed foods and
seafood would prevent us from generating revenues from the application of our
technology in these significant markets. Furthermore, the FDA could remove or
restrict its
6
approval of the use of irradiation for currently approved food products, which
would severely limit our ability to provide services and systems.
In addition, FDA regulations require that all food that has been
irradiated must carry the Radura symbol, an international symbol for
irradiation, and state that the product has been "Treated with Radiation" or
"Treated by Irradiation" on the label or packaging. States such as Vermont have
similar labeling requirements. These labeling regulations may increase the risk
that consumers will not purchase goods that have been treated by our products or
services, which could negatively impact our revenues.
FDA regulations also require approval for packaging materials used by our
customers. While the FDA has approved a number of packaging materials, many
other materials commonly used for packaging food have not been approved. Failure
or delay in receiving such approvals could have a material adverse effect on our
customer relationships and revenues.
We also are required to obtain regulatory approval from foreign regulatory
authorities before we can offer our systems and services in those jurisdictions.
These jurisdictions may apply different criteria than the U.S. regulatory
agencies in connection with their approval processes. Monitoring changes in, and
our compliance with, diverse and numerous foreign regulatory requirements may
increase our costs. Regulatory approvals in foreign countries that regulate
irradiation are subject to similar risks and uncertainties as are regulatory
approvals in the United States. If we are unable to obtain approval to sell our
products and services in these markets, our ability to generate revenues from
these markets would be adversely affected.
Our service centers also are subject to various other federal, state and
municipal regulations regarding health, safety and environmental issues. Our
service centers are subject to continuous supervision, in the case of the USDA,
or periodic inspection by other regulators.
EFFORTS TO CHANGE THE LABELING REQUIREMENTS WITH RESPECT TO ELECTRONIC FOOD
IRRADIATION MAY NOT BE SUCCESSFUL AND MAY RESULT IN CONSUMER CONFUSION.
Along with food industry groups and others, we are seeking to change the
labeling requirements for foods treated with electronic irradiation to allow the
use of words like "cold pasteurization" or "electronic pasteurization" instead
of "irradiation" or "radiation." Although we believe that the proposed changes
may improve the overall acceptance of our SureBeam process, we cannot assure you
that the proposed changes will be accepted, or if accepted, that we will
recognize any benefit from such changes. Additionally, a continued reference to
our SureBeam process as "irradiation" or "radiation" could adversely affect the
consumer acceptance of our process.
INTERNATIONAL EXPANSION WILL SUBJECT US TO RISKS ASSOCIATED WITH INTERNATIONAL
OPERATIONS THAT COULD INCREASE OUR COSTS AND DECREASE OUR PROFIT MARGINS IN BOTH
OUR DOMESTIC AND OUR INTERNATIONAL OPERATIONS.
Our success will depend in part on our ability to expand internationally
as we obtain regulatory approvals to market and sell our SureBeam(R) systems in
other countries. We have received orders to install systems in Saudi Arabia and
in Southeast Asia and we are building a service center in Brazil for extending
the shelf life of fruits and vegetables. Expansion of our international
operations could impose substantial burdens on our resources, divert
management's attention from domestic operations and otherwise adversely affect
our business. Furthermore, international operations are subject to several
inherent risks that could increase our costs and decrease our profit margins
including:
- Reduced protection of intellectual property rights;
- Changes in foreign currency exchange rates
- Changes in a specific country's or region's political or economic
conditions, including military action or war in or near countries
containing our international operations;
7
- Trade protective measures and import or export licensing
requirements or other restrictive actions by foreign governments;
- Laws affecting the enforceability of our contracts and our ability
to collect accounts receivable; and
- Changes in tax laws.
IF WE CANNOT EFFECTIVELY MANAGE OUR INTERNAL GROWTH, OUR BUSINESS PROSPECTS,
REVENUES AND PROFIT MARGINS MAY SUFFER.
If we fail to effectively manage our internal growth in a manner that
minimizes strains on our resources, we could experience disruptions in our
operations and ultimately be unable to generate revenues or profits. We expect
that we will need to significantly expand our operations to successfully
implement our business strategy. As we add manufacturing, marketing, sales, and
other personnel, both domestically and internationally, and expand our
manufacturing, irradiation processing and research and development capabilities,
we expect that our operating expenses and capital requirements will increase. To
effectively manage our growth, we must continue to expend funds to improve our
operational, financial and management controls, and our reporting systems and
procedures. In addition, we must effectively expand, train and manage our
employee base. If we fail in our efforts to manage our internal growth, our
business prospects, revenues and profit margins may suffer.
WE INTEND TO CONTINUE TO PURSUE STRATEGIC TRANSACTIONS, WHICH COULD DISRUPT OUR
OPERATIONS, INCREASE OUR COSTS AND NEGATIVELY IMPACT OUR EARNINGS.
We intend to continue to pursue strategic transactions that provide access
to new technologies, products or markets. These transactions could include
acquisitions, partnerships, joint ventures, business combinations and
investments. Any transaction may require us to incur non-recurring or ongoing
charges and may pose significant integration challenges and/or management and
business disruptions, any of which could increase our costs and negatively
impact our earnings. In addition, we may not succeed in retaining key employees
of any business that we acquire. We may not consummate these transactions on
favorable terms or obtain the benefits we anticipate from a transaction.
OUR TECHNOLOGY COMPETES AGAINST OTHER FOOD IRRADIATION TECHNOLOGIES. COMPETITION
IN OUR MARKET MAY RESULT IN PRICING PRESSURES, REDUCED MARGINS OR THE INABILITY
OF OUR PRODUCTS AND SERVICES TO ACHIEVE MARKET ACCEPTANCE.
We compete against several companies seeking to address the food safety
market. Our electronic food irradiation technology competes against gamma ray
technology and alternatives to irradiation, such as thermal sterilization,
fumigation, lactoferrin and chemical washes. We may be unable to compete
successfully against our current and potential competitors, which may result in
price reductions, reduced margins and the inability to achieve market acceptance
for our products.
The current level of market penetration for food irradiation products is
relatively low when compared to the overall size of the food markets to which we
are targeting our food irradiation services and products. If food irradiation
gains consumer acceptance and the market increases, we expect competition to
grow significantly. Our competitors include Flow International Corporation, Ion
Beam Applications, S.A., MDS/Nordion Food Technologies Service, Inc. and STERIS
Corporation. These organizations may have significantly more capital, research
and development, regulatory, manufacturing, marketing, human and other resources
than we do. As a result, they may be able to devote greater resources to the
manufacture, promotion and sale of their products, initiate or withstand
substantial price competition, or take advantage of acquisition or other
opportunities more readily.
8
OUR INABILITY TO PROTECT OUR PATENTS AND PROPRIETARY RIGHTS IN THE UNITED STATES
AND FOREIGN COUNTRIES COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS PROSPECTS
AND COMPETITIVE POSITION.
Our success depends on our ability to obtain and maintain patent and other
proprietary-right protection for our technology and systems and services in the
United States and other countries. The laws of some foreign countries do not
protect proprietary rights to the same extent as the laws of the United States,
and many companies have encountered significant problems and costs in protecting
their proprietary rights in these foreign countries. If we are unable to obtain
or maintain these protections, we may not be able to prevent third parties from
using our proprietary rights. In addition, we may incur significant expense in
protecting our intellectual property and defending or assessing claims with
respect to intellectual property owned by others.
We periodically assess the strength of our patent and intellectual
property protection for our technologies and products. Our electronic food
irradiation system combines our patented conveyor and shielding systems and
proprietary software with publicly available electron beam, x-ray and linear
accelerator technology. Despite our assessments and our belief in the strength
of our patent protection for particular technologies or products, our patents
may not provide effective barriers to entry against competitors because our
competitors may develop competing technologies and products that do not infringe
upon our patents. Further, our patents do not cover electron beam, x-ray or
linear accelerator technology, which are publicly available. We also could
choose to modify or abandon one or more planned or current products because of
these assessments or actual or threatened claims by other companies. Our patents
or pending patent applications may be challenged, narrowed or invalidated. In
addition, we are not certain that our pending patent applications will be
issued.
We also rely on trade secrets, proprietary know-how and continuing
technological innovation to remain competitive. We have taken measures to
protect our trade secrets and know-how, including the use of confidentiality
agreements with our employees, consultants and advisors. It is possible that
these agreements may be breached and that any remedies for a breach will not be
sufficient to compensate us for damages incurred. We generally control and limit
access to, and the distribution of, our product documentation and other
proprietary information. Despite our efforts to protect these proprietary
rights, unauthorized parties may copy aspects of our products and obtain and use
information that we regard as proprietary. We also cannot guarantee that other
parties will not independently develop our know-how or otherwise obtain access
to our technology.
COMPANIES MAY CLAIM THAT WE INFRINGE THEIR INTELLECTUAL PROPERTY OR PROPRIETARY
RIGHTS, WHICH COULD CAUSE US TO INCUR SIGNIFICANT EXPENSES OR PREVENT US FROM
SELLING OUR PRODUCTS.
Our success depends on our ability to operate without infringing the
patents and proprietary rights of third parties. Product development is
inherently uncertain in a rapidly evolving technological environment in which
there may be numerous patent applications pending, many of which are
confidential when filed, with regard to similar technologies. Future patents
issued to third parties may contain claims that conflict with our patents.
Although we believe that our current product does not infringe the proprietary
rights of any third parties, third parties could assert infringement claims
against us in the future. Any litigation or interference proceedings, regardless
of their outcome, would probably be costly and require significant time and
attention of our key management and technical personnel. Litigation or
interference proceedings could also force us to:
- Stop or delay selling, manufacturing or using products that
incorporate the challenged intellectual property;
- Pay damages; or
- Enter into licensing or royalty agreements that may be unavailable
on acceptable terms.
PRODUCT LIABILITY CLAIMS COULD MATERIALLY ADVERSELY AFFECT OUR CUSTOMER
RELATIONSHIPS AND COSTS.
Our involvement in the processing of food results in a significant risk
that we will be subject to product liability claims resulting from the
consumption of contaminated food. We may be held liable or incur costs to settle
or defend liability claims if any of our systems cause, or are claimed to cause,
injury or are found unsuitable during
9
product testing, manufacturing, marketing, sale or use. These risks exist even
with respect to products that have received, or may in the future receive,
regulatory approval, registration or clearance for commercial use. Also, we may
be liable to our customers for the costs they incur from product recalls. We
cannot guarantee that we will be able to avoid product liability exposure.
While we currently maintain product liability insurance at levels that we
believe are sufficient and consistent with industry standards for companies at
our stage of development, we cannot guarantee that our product liability
insurance is adequate. It is also possible that at any time our insurance
coverage may become unavailable on commercially reasonable terms or at all. A
product liability claim or product recall could result in liability to us
greater than our assets and/or insurance coverage. Moreover, product liability
claims, recalls and expenses associated with defending against claims or recalls
could have an adverse impact on us even if we have adequate insurance coverage.
Further, a product liability claim against us, whether merited or not, or a
product recall claim against us would damage our reputation and severely
undermine our branding campaign and our efforts to gain consumer acceptance.
IF WE CANNOT RETAIN KEY PERSONNEL OR ATTRACT QUALIFIED PERSONNEL, OUR CUSTOMER
RELATIONSHIPS, COMPETITIVE POSITION AND REVENUES COULD SUFFER.
Our success depends to a significant extent upon the efforts of our key
management, sales and marketing, technical support and research and development
personnel, none of whom have entered into agreements not to compete with us. The
loss of any key personnel could adversely affect us. We believe that our future
success will depend in large part upon our continuing ability to attract and
retain highly skilled managerial, sales and marketing, technical support and
research and development personnel. Like other emerging growth companies, we
face intense competition for our personnel needs, and we have at times
experienced and continue to experience difficulty in recruiting qualified
personnel. We face the additional challenge of carefully balancing the growth of
our employees commensurate with our anticipated revenue growth. If our revenue
growth or attrition levels vary significantly, our results of operations or
financial condition could be adversely affected. Further, our common stock price
has been, and may continue to be extremely volatile. When our common stock price
is less than the exercise price of stock options granted to employees, turnover
is likely to increase, which could adversely affect our results of operations or
financial condition. Additionally, there are several proposals in the United
States Congress and in the accounting industry to require corporations to
include a compensation expense in their statement of operations relating to the
issuance of employee stock options. If such a measure is approved, we may decide
to issue fewer stock options. As a result, we may be impaired in our efforts to
attract and retain necessary personnel. We cannot assure you that we will be
successful in attracting, assimilating and retaining additional qualified
personnel in the future. If we were to lose the services of one or more of our
key personnel, or if we failed to attract and retain additional qualified
personnel, it could materially and adversely affect our customer relationships,
competitive position and revenues.
DELAYS IN THE CONSTRUCTION AND INSTALLATION OF OUR SYSTEMS COULD NEGATIVELY
AFFECT OUR REVENUES.
Our business model depends on the successful deployment of our systems,
whether the systems are constructed and installed in our company-owned service
centers or in a customer's production line. A number of factors beyond our
control can slow or delay the deployment of our systems such as site
preparation, zoning and permitting requirements, the availability of skilled
construction personnel and construction equipment, and adverse weather
conditions.
IF OUR STOCK PRICE BECOMES LESS THAN $1.00 PER SHARE FOR AN EXTENDED PERIOD, WE
COULD BE DELISTED FROM THE NASDAQ.
Maintaining the listing of our common stock on the Nasdaq National Market
is important to us. The delisting of our common stock from the Nasdaq would have
a material adverse effect upon the marketability of our common stock and could,
among other things, materially and adversely affect our ability to raise
additional equity capital or to obtain financing through other sources. The
Nasdaq has numerous requirements which must be complied with for a company to
maintain its security's listing on the Nasdaq, one of which is that the minimum
bid price of the security must be $1.00 or greater per share. If the price of
our common stock were below $1.00 per share for a period of 30 or more
consecutive business days, the Nasdaq could take action to delist our common
stock from the Nasdaq. While the price of our common stock on the Nasdaq has not
traded below $1.00 since our initial
10
public offering, we cannot assure you that the price of our common stock will
not fall below $1.00 in the future. On December 13, 2002, the closing price per
share of our common stock was $4.25.
If our common stock were delisted from the Nasdaq, trading would
thereafter be reported in the National Association of Securities Dealers Over
the Counter Bulletin Board or in the "pink sheets." The investing in securities
traded in the Bulletin Board or in the pink sheets is generally considered to be
subject to more risk than comparable investing in securities, which are traded
on one of the major national securities exchanges such as the Nasdaq or the New
York Stock Exchange. In the event of delisting from the Nasdaq, our common stock
may be classified as a "penny stock" by the SEC and would become subject to
rules adopted by the SEC regulating broker-dealer practices in connection with
transactions in "penny stocks." Broker-dealers recommending a penny stock must,
among other things, document the suitability of the investment for the specific
customer, obtain a written agreement of the customer to purchase the penny
stock, identify such broker-dealer's role, if any, as a market maker in the
particular stock, and provide information with respect to market prices of the
common stock and the amount of compensation that the broker-dealer will earn in
the proposed transaction. These disclosure requirements may have the effect of
reducing the level of trading activity in the market for our common stock. If
our common stock became subject to the penny stock rules, many broker-dealers
may be unwilling to engage in transactions in our securities because of the
added disclosure requirements, thereby making it more difficult for purchasers
of our common stock to dispose of their shares of our common stock. The
ownership of penny stock is generally considered to subject the owner to greater
risks than the ownership of common stock as a whole due, among other things, to
the smaller trading volume in such stocks and to the substantial impact upon the
stock's overall value which results from small stock price variations.
RISKS RELATED TO OUR RELATIONSHIP WITH TITAN
OUR INDEPENDENT STATUS FROM TITAN INVOLVES A VARIETY OF RISKS FOR SUREBEAM,
INCLUDING RISKS RELATED TO ACCESS TO FINANCING SOURCES AND CORPORATE SERVICES
AND FACILITIES PREVIOUSLY PROVIDED BY TITAN. OUR INABILITY TO SUCCESSFULLY
ADDRESS THESE RISKS COULD NEGATIVELY IMPACT THE OPERATION OF OUR BUSINESS AND
FINANCIAL RESULTS.
Titan has distributed its shares of our common stock to Titan stockholders
following its receipt of a favorable ruling from the Internal Revenue Service.
We now have substantially complete separation from Titan, other than our various
contracts with Titan. While the continued control of our company by Titan
involved a variety of risks, our separation from Titan also involves numerous
risks.
If we require additional financing other than that provided by our credit
facility with Titan, we would be required to develop our own credit and other
liquidity sources. Titan had historically provided for our general corporate and
administrative support, which was principally comprised of administrative and
clerical functions necessary to implement our management decisions and
operations, including benefits administration and information technology
support, through a corporate services agreement. In connection with the
spin-off, various agreements with Titan have terminated and we have developed
our own systems and services. However, we may not be able to retain these
services successfully or at a comparable cost to that as provided by Titan.
OUR BUSINESS MAY SUFFER BECAUSE WE HAVE ENTERED INTO AFFILIATE AGREEMENTS WITH
TITAN THAT MAY NOT HAVE BEEN BASED ON ARMS' LENGTH NEGOTIATIONS.
We have entered into various agreements with Titan including a tax
allocation agreement, tax sharing and disaffiliation agreement, license
agreement, and credit agreement. Because we were a majority-owned subsidiary of
Titan at the time these agreements were entered into, these agreements were
negotiated between related parties, and the results may differ from results
obtained from arms-length third parties. Under the license agreement, Titan
purchased a perpetual and exclusive, non-royalty bearing license to use our
intellectual property on all applications other than the food (excluding water),
animal hide and flower markets in return for the following: 1) to make available
to us a $50.0 million line of credit, 2) to convert the then current $75.0
million debt owed Titan to equity via an exchange for our stock, and 3) a cash
payment of $8.0 million.
Under the tax allocation agreement, Titan will determine the amount of
separate taxable income and tax liability that we would realize if we filed a
separate tax return. In addition, because we have filed a consolidated tax
return with Titan, we may be obligated to pay taxes for the entire group of
Titan companies if those companies
11
defaulted in the payment of their taxes. If Titan offsets taxable gains with our
losses, Titan will have to compensate us in cash for the benefit it receives for
its use of our losses when we demonstrate we are able to utilize those losses or
they would have otherwise expired. In addition, any benefit from our losses used
to offset Titan profits resulting in a tax savings, is subject to Titan's
position at that time.
WE HAVE ENTERED INTO A LICENSE AGREEMENT WITH TITAN THAT PREVENTS US FROM
CAPITALIZING ON NEWLY DISCOVERED USES OF OUR TECHNOLOGY IN APPLICATIONS THAT ARE
NOT RELATED TO FOOD (EXCLUDING WATER), ANIMAL HIDES AND FLOWERS EXCEPT THROUGH A
MANUFACTURING CONTRACT.
Titan purchased from us a perpetual and exclusive non-royalty bearing
license to use our intellectual property in all applications and fields other
than in the fields of food (excluding water), animal hides and flowers. Because
Titan's license is an exclusive license, we cannot use our intellectual property
in applications other than food (excluding water), animal hides and flowers.
Applications which we believe are reserved for Titan's use include medical
equipment sterilization and sterilization of mail to eliminate the threat of
anthrax contamination.
Under the terms of the license agreement with Titan, future sales of
electronic irradiation equipment to Titan, if any, will be sold on a cost plus
20% markup basis, unless otherwise negotiated. Titan is obligated to purchase
electronic irradiation equipment it requires, if any, from SureBeam until
December 31, 2003, after which it may purchase equipment from any source.
Therefore, after December 31, 2003, we anticipate we will receive no revenue
from any commercialization of our licensed technology by Titan or any new
applications for our licensed technology developed by Titan unless Titan chooses
to purchase equipment from us or enter into other arrangements with us under
which we would receive revenue. Titan is not obligated to purchase any
electronic irradiation equipment from us in the future, and should Titan not
purchase any electronic irradiation equipment from us, it could have a material
adverse effect upon our financial condition and results of operations.
ONE OF OUR DIRECTORS IS ALSO A DIRECTOR OF TITAN, WHICH COULD CAUSE TITAN'S
INTERESTS TO RECEIVE PRIORITY OVER OUR INTERESTS.
One of our directors, Susan Golding, also is a director of Titan. During
2001, Ms. Golding was a consultant to Titan. Titan is currently our primary
creditor because it has extended to us a $50.0 million secured credit facility,
under which we have obtained $25.0 million as of December 13, 2002. Therefore,
Ms. Golding may consider not only the short-term and long-term impact of
financial and operating decisions on us, but also the impact of these decisions
on Titan's consolidated financial results and its stockholders. In some
instances, the impact of these decisions could be disadvantageous to us while
advantageous to Titan. We cannot guarantee that all conflicts will be resolved
in a manner that is favorable to us or that such conflicts will not result in
harmful consequences to our business or prospects.
MAINTAINING THE TAX-FREE STATUS OF THE DISTRIBUTION OF OUR COMMON STOCK BY TITAN
TO ITS STOCKHOLDERS RESTRICTS CERTAIN OF OUR ACTIVITIES.
For the distribution of our stock by Titan to qualify as tax-free to
Titan, there must not be a change in ownership of 50% or more in either the
voting power or value of either our stock or Titan's stock that is considered to
be part of a plan or a series of related transactions related to Titan's
intended distribution of our stock to its stockholders. Accordingly, we may be
significantly limited in our ability to raise additional equity financing, use
our stock for acquisitions and other similar strategic transactions or for
compensation of employees and others. Further, in connection with the spin-off,
we have entered into a tax sharing and disaffiliation agreement that provides
for, among other things, an agreement with Titan that if we take any action that
causes Titan's representations with respect to the letter ruling to be untrue or
engage in transactions after the distribution that cause the spin-off to be
taxable to Titan, we would be required to indemnify Titan for any and all taxes
resulting from the failure of the spin-off to qualify as a tax-free transaction.
In addition, we may be required to indemnify Titan for half of any taxes
incurred as a result of the spin-off if the spin-off is taxable for reasons that
were not caused by actions taken by either Titan or us and to share
proportionately with Titan such taxes if they are caused by actions by both us
and Titan, in proportion to our relative contribution to the imposition of these
taxes. Any indemnification payments by us would most likely be material.
12
OUR SALES THROUGH TITAN GENERALLY PRODUCE LOWER PROFIT MARGINS THAN OUR SALES TO
OTHER PARTIES. A HIGHER PERCENTAGE OF SALES THROUGH TITAN COULD REDUCE OUR
OVERALL PROFIT MARGINS.
Historically, Titan has purchased a substantial amount of equipment from
us as a subcontractor, in order to allow Titan to fulfill various contracts.
These sales have typically been structured on a fixed price basis or cost plus
basis. Therefore, sales to or through Titan have historically, and likely will
in the future, carry a lower profit margin than comparable sales to other
parties. A higher percentage of sales through Titan could reduce our overall
profit margins.
RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR COMMON STOCK
OUR SECURITIES HAVE NOT BEEN PUBLICLY TRADED VERY LONG AND OUR STOCK PRICE MAY
BE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND VOLATILITY.
The market price of our common stock has been subject to significant
fluctuations since the date of our initial public offering on March 16, 2001.
Our common stock market price has ranged from a high of approximately $19.45 to
a low of approximately $1.46 since such time. These fluctuations could continue.
Among the factors that could affect our stock price are:
- Quarterly variations in our operating results;
- Changes in revenue or earnings estimates or publication of research
reports by analysts;
- Speculation in the press or investment community;
- Strategic actions by us such as new joint ventures, acquisitions or
restructuring;
- Actions by institutional stockholders;
- General market conditions; and
- Domestic and international economic factors unrelated to our
performance.
The stock markets in general have experienced extreme volatility that has
often been unrelated to the operating performance of particular companies. These
broad market fluctuations may adversely affect the trading price of our common
stock.
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT
ACQUISITION OF US, WHICH COULD DECREASE THE VALUE OF YOUR SHARES.
Our certificate of incorporation and bylaws and Delaware law contain
provisions that could make it harder for a third party to acquire us without the
consent of our board of directors. These provisions include a classified board
of directors and limitations on actions by our stockholders by written consent.
In addition, our board of directors has the right to issue preferred stock
without stockholder approval, which could be used to dilute the stock ownership
of a potential hostile acquirer. Delaware law also imposes some restrictions on
mergers and other business combinations between us and any holder of 15% or more
of our outstanding common stock. Although we believe these provisions provide
for an opportunity to receive a higher bid by requiring potential acquirers to
negotiate with our board of directors, these provisions apply even if the offer
may be considered beneficial by some stockholders.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the
selling stockholders. Assuming the full exercise of the warrants by the selling
stockholders on a cash basis, we will receive approximately $7,914,450 in gross
proceeds. Although we have not yet formulated a specific plan, we intend to use
a significant portion of the
13
proceeds from the exercise of the warrants for working capital, and other
general corporate purposes as our Board of Directors may determine. All proceeds
from the sale of the common stock under this prospectus will be for the account
of the selling stockholders, as described below. See "Selling Stockholders" and
"Plan of Distribution" below.
ISSUANCE OF COMMON STOCK TO THE SELLING STOCKHOLDERS
On December 2, 2002, we entered into agreements with investors to sell an
aggregate of 5,276,314 shares of our common stock for $4.75 per share, or an
aggregate purchase price of approximately $25,062,492. In addition, we issued
warrants to purchase 1,319,075 shares of our common stock at an exercise price
of $6.00 per share. We issued these shares and warrants to the investors on
December 3, 2002. The warrants are exercisable from the date of issuance until
December 2, 2007. The shares issued under the agreements were offered through a
placement agent, for which services we paid to the placement agent a fee of
approximately $1,754,374. After the placement agent fee and before deducting
related legal and accounting expenses, we realized net proceeds of approximately
$23,300,000. We intend to use the proceeds for working capital needs and general
corporate purposes.
This prospectus covers the resale by the selling stockholders of up to
6,595,389 shares, which includes 5,276,314 shares of our common stock which are
issued and outstanding and 1,319,075 shares of our common stock underlying the
warrants.
We issued all of the securities under an exemption from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act")
pursuant to Section 4(2) of the Securities Act and/or Rule 506 of Regulation D
under the Securities Act. All of the shares of common stock issued to the
investors or to be issued upon exercise of the warrants issued to the investors
are restricted until we register them under this prospectus. We agreed to file a
registration statement with the SEC covering the resale of the shares issued or
issuable to each selling stockholder. Our agreement requires us to cause this
registration statement to remain effective until the earlier of (a) two years
after it is declared effective by the SEC, (b) the date on which each selling
stockholder's shares could be sold in a single three-month period under Rule 144
of the Securities Act, or (c) such time as all the common stock offered by this
prospectus have been sold. We also agreed to indemnify each selling stockholder
for claims made against them arising out of, among other things, statements made
in this registration statement.
INCOME TAX CONSIDERATIONS
You should consult your own tax advisor about the income tax issues and
the consequences of holding and disposing of our common stock.
SELLING STOCKHOLDERS
The following table sets forth information as of December 13, 2002, with
respect to the number of shares of common stock owned by each of our
stockholders selling under this prospectus. None of the selling stockholders has
had a material relationship with us within the past three years, other than as a
result of the ownership of shares or other securities.
SHARES OF COMMON PERCENTAGE
SHARES OF STOCK OF COMMON
COMMON STOCK NUMBER OF BENEFICIALLY STOCK HELD
BENEFICIALLY SHARES OWNED AFTER THE AFTER SALE
OWNED AS OF REGISTERED FOR SALE OF THE OF COMMON
SELLING STOCKHOLDER THE DATE HEREOF SALE HEREBY COMMON STOCK(1) STOCK
------------------- --------------- ----------- --------------- -----
Mainfield Enterprises, Inc. (2) 1,319,085 1,315,788 3,297 *
Riverview Group, LLC (2) 1,315,788 1,315,788 0 0
SF Capital Partners Ltd (3) 937,500 937,500 0 0
14
Cranshire Capital, L.P. (4) 983,752 921,052 62,700 *
Smithfield Fiduciary LLC (5) 789,473 789,473 0 0
Deephaven Small Cap Growth Fund, LLC (5) 789,473 789,473 0 0
Omicron Master Trust (6) 526,315 526,315 0 0
------------
* Represents less than one percent.
(1) Assumes no additional shares of common stock are acquired.
(2) Includes 263,157 shares of common stock that may be obtained upon
exercise of a warrant at $6.00 per share.
(3) Includes 187,500 shares of common stock that may be obtained upon
exercise of a warrant at $6.00 per share.
(4) Includes 184,210 shares of common stock that may be obtained upon
exercise of a warrant at $6.00 per share.
(5) Includes 157,894 shares of common stock that may be obtained upon
exercise of a warrant at $6.00 per share.
(6) Includes 105,263 shares of common stock that may be obtained upon
exercise of a warrant at $6.00 per share.
PLAN OF DISTRIBUTION
The common stock covered by this prospectus may be offered and sold at
various times by the selling stockholders. As used herein, "selling
stockholders" includes the selling stockholders named in the table above and
pledgees, donees, transferees or other successors-in-interest selling shares
received from a named selling stockholder as a gift, partnership distribution or
other non-sale-related transfer after the date of this prospectus. The selling
stockholders will act independently of us in making decisions with respect to
the timing, manner and size of each sale. The common stock may be sold by or for
the account of the selling stockholders in transactions on the Nasdaq National
Market, the over-the-counter market, or otherwise. The sales may be made at
fixed prices, at market prices prevailing at the time, or at privately
negotiated prices. The selling stockholders may sell the common stock by means
of one or more of the following methods:
- a block trade in which the broker-dealer so engaged will attempt to
sell the common stock as agent, but may position and resell a
portion of the block as a principal to facilitate the transaction;
- purchases by brokers, dealers or underwriters as principal and
resale by those purchasers for their own accounts under this
prospectus;
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- in connection with the loan or pledge of the common stock registered
hereunder to a broker-dealer, and the sale of the common stock so
loaned or the sale of the shares so pledged upon a default;
- an exchange distribution in accordance with the rules of the
applicable exchange;
15
- in connection with the writing of non-traded and exchanged-traded
call options, in hedge transactions and in settlement of other
transactions in standardized or over-the-counter option;
- short sales;
- in privately negotiated transactions; or
- in a combination of any of the above methods.
In effecting sales, brokers or dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate in the resales. Brokers,
dealers or agents may receive compensation in the form of discounts, concessions
or commissions from the selling stockholders or from the purchasers, or from
both. The selling stockholders do not expect these discounts, concessions or
commissions to exceed what is customary in the applicable types of transactions.
The selling stockholders and any participating brokers or dealers may be
deemed to be "underwriters" within the meaning of the Securities Act in
connection with such sales. In such event, any commission, discount or
concession these "underwriters" receive may be deemed to be underwriting
compensation. In addition, because selling stockholders may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, the
selling stockholders will be subject to the prospectus delivery requirements of
the Securities Act. In addition, any shares of a selling stockholder covered by
this prospectus which qualify for sale pursuant to Rule 144 promulgated under
the Securities Act may be sold under Rule 144 rather than pursuant to this
prospectus. The selling stockholders informed us that they do not have any
agreement or understanding, directly or indirectly, with any person to
distribute the common stock.
The selling stockholders have been advised that while they are engaged in
a distribution of the common stock included in this prospectus, they may be
required to comply with the anti-manipulative provisions of Regulation M as
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). With certain exceptions, Regulation M precludes the selling stockholders,
any affiliated purchasers, and any broker-dealer or other person who
participates in such distribution from bidding for or purchasing, or attempting
to induce any person to bid for or purchase any security which is the subject of
the distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. Regulation M's
prohibition on purchases may include purchases to cover short positions by the
selling stockholders, and a selling stockholder's failure to cover a short
position at a lender's request and subsequent purchases of shares by the lender
in the open market to cover such short positions, may constitute an inducement
to buy shares which is prohibited by Regulation M.
We have agreed to bear all expenses of registration of the common stock
(other than fees and expenses, if any, of legal counsel or other advisors to the
selling stockholders). Any commissions, discounts, concessions or other fees, if
any, are payable to brokers or dealers in connection with any sale of the common
stock will be borne by the selling stockholders selling those shares. We have
agreed to indemnify the selling stockholders against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In addition, we
will file a supplement to this prospectus upon being notified by a selling
stockholder that a donee or pledgee intends to sell more than 500 shares. We
will bear all costs, expenses and fees in connection with the registration of
the shares.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the securities
offered hereby will be passed upon for SureBeam by Luce, Forward, Hamilton &
Scripps LLP, attorneys at law, San Diego, California.
16
EXPERTS
The financial statements of SureBeam appearing in SureBeam's Annual Report
on Form 10-K as of and for the year ended December 31, 2001, have been included
in reliance upon the report of Arthur Andersen LLP, independent public
accountants, given on the authority of said firm as experts in auditing and
accounting. Arthur Andersen LLP has not consented to the inclusion of its report
in this prospectus, and SureBeam has dispensed with the requirement to file its
consent in reliance upon Rule 437a, as promulgated under the Securities Act.
Because Arthur Andersen LLP has not consented to the inclusion of its report in
this prospectus, investors may not be able to recover against Arthur Andersen
LLP under Section 11 of the Securities Act for any untrue statement of a
material fact contained in the financial statements audited by Arthur Andersen
LLP or any omission to state a material fact required to be stated in those
financial statements.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy and information
statements and other information with the SEC. Our SEC filings are available to
the public through the Internet at the SEC's web site at http://www.sec.gov. You
may also read and copy any document we file at the SEC's public reference rooms
located at Room 1024, Judiciary Plaza, 450 5th Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the SEC's public reference
rooms by calling the SEC at 1-800-SEC-0330.
This prospectus is part of a registration statement we filed with the SEC.
This registration statement relates to the common stock offered by the selling
stockholders. This prospectus does not contain all of the information set forth
in the registration statement. For more information about our common stock, and
us you should read the registration statement and its exhibits and schedules.
Copies of the registration statement, including its exhibits may be obtained
from the SEC's principal office in Washington, D.C. upon payment of the fees
prescribed by the SEC, may be examined without charge at the offices of the SEC,
or may be accessed via a web site maintained by the SEC at http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. This prospectus incorporates important
business and financial information about SureBeam which is not included in or
delivered with this prospectus. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
SEC will automatically update and supersede this information.
We incorporate by reference the following documents:
- our Annual Report on Form 10-K for the year ended December 31, 2001,
as filed on April 1, 2002;
- our Quarterly Report on Form 10-Q for the quarter ended March 31,
2002, as filed on May 15, 2002, as amended by the Quarterly Report
on Form 10-Q/A filed on July 10, 2002;
- our Quarterly Report on Form 10-Q for the quarter ended June 30,
2002, as filed on August 14, 2002;
- our Quarterly Report on Form 10-Q for the quarter ended September
30, 2002, as filed on November 14, 2002;
- our Current Reports on Form 8-K filed on April 15, 2002, August 8,
2002, and December 5, 2002;
- our definitive Proxy Statement filed on April 16, 2002 in connection
with our Annual Meeting of Stockholders held on May 23, 2002;
17
- the description of our common stock to be registered hereunder is
contained in the section entitled "Description of Capital Stock,"
commencing at page 59 of the Prospectus included in the Registrant's
Registration Statement on Form S-1, No 333-43672, as amended, filed
with the SEC on August 14, 2000 and is incorporated herein by
reference; and
- future filings we make with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act until all of the shares offered by the
selling stockholders have been sold.
Each person to whom a copy of this prospectus is delivered may obtain a
copy of these filings, without charge, by writing or calling us at:
SureBeam Corporation
9276 Scranton Road, Suite 600
San Diego, CA 92121
(858) 795-6300
Attention: Krista Mallory
If you would like to request these filings from us, please do so at least
five business days before you have to make an investment decision.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. We are not making an offer of these securities in
any state where the offer is not permitted. You should not assume that the
information in this prospectus or the documents incorporated by reference is
accurate as of any date other than on the front of those documents.
--------------
18
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6,595,389
CLASS A COMMON STOCK
SUREBEAM CORPORATION
--------------
PROSPECTUS
--------------
, 2002
--------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that costs and expenses in connection with the
sale and distribution described in this registration statement will be as shown
below. Selling commissions, brokerage fees, applicable transfer taxes and fees,
and fees of counsel for the selling stockholders are payable by the selling
stockholders.
SEC registration fee ................................ $ 2,600.00
Printing expenses ................................... 3,000.00
Nasdaq listing fee .................................. 17,500.00
Accounting fees and expenses ........................ 15,000.00
Legal fees and expenses ............................. 15,000.00
-------------
Total ......................... $ 53,100.00
=============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act.
The Registrant's Certificate of Incorporation and Bylaws include
provisions to (i) eliminate the personal liability of its directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by Section 102(b)(7) of the General Corporation Law of Delaware (the "Delaware
Law") and (ii) require the Registrant to indemnify its directors and executive
officers to the fullest extent permitted by Section 145 of the Delaware Law,
including circumstances in which indemnification is otherwise discretionary.
Pursuant to Section 145 of the Delaware Law, a corporation generally has the
power to indemnify its present and former directors, officers, employees and
agents against expenses incurred by them in connection with any suit to which
they are or are threatened to be made, a party by reason of their serving in
such positions so long as they acted in good faith and in a manner they
reasonably believed to be in or not opposed to, the best interests of the
corporation and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Registrant believes that these
provisions are necessary to attract and retain qualified persons as directors
and officers. These provisions do not eliminate the directors' duty of care,
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware Law. In
addition, each director will continue to be subject to liability for breach of
the director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for acts or omissions that the director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the director's duty to the Registrant or its
stockholders when the director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the Registrant or its stockholders, for improper
transactions between the director and the Registrant and for improper
distributions to stockholders and loans to directors and officers. The provision
also does not affect a director's responsibilities under any other law, such as
the federal securities law or state or federal environmental laws.
The Registrant has entered into indemnity agreements with certain of its
directors and executive officers that require the Registrant to indemnify such
persons against any and all expenses (including attorneys' fees), witness fees,
damages, judgments, fines, settlements and other amounts incurred (including
expenses of a derivative action) in connection with any action, suit or
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a director, an officer or
an employee of the Registrant or any of its affiliated enterprises, provided
that such person acted in good faith and in a manner such
II-1
person reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to any criminal proceeding, had no reasonable cause
to believe his conduct was unlawful. The indemnification agreements also set
forth certain procedures that will apply in the event of a claim for
indemnification thereunder.
At present, there is no pending litigation or proceeding involving a
Director, officer or key employee of the Registrant as to which indemnification
is being sought nor is the Registrant aware of any threatened litigation that
may result in claims for indemnification by any officer or Director.
The Registrant has an insurance policy covering the officers and Directors
of the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the forgoing 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.
Exhibit No. Description
----------- -----------
* 4.1 Form of Securities Purchase Agreement, dated December 2,
2002, between the Company and various Purchasers
* 4.2 Form of Registration Rights Agreement, dated December 2,
2002, between the Company and various Purchasers
* 4.3 Form of Common Stock Purchase Warrant dated December 3,
2002
5.1 Opinion of Luce, Forward, Hamilton & Scripps LLP as to
legality of securities being registered
23.1 Consent of Luce, Forward, Hamilton & Scripps LLP is
contained in Exhibit 5.1 to this Registration Statement
----------
* Incorporated by reference to the Company's Current Report on Form 8-K
filed on December 5, 2002
Arthur Andersen LLP has not consented to the inclusion of its report contained
in the Registrant's Annual Report on Form 10-K for the year ended December 31,
2001, filed on April 1, 2002 with this prospectus, and the Registrant has
dispensed with the requirement to file the consent of Arthur Andersen LLP in
reliance upon Rule 437a, as promulgated under the Securities Act.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
II-2
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
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 SEC 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
the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the registrant pursuant to section 13 or section 15(d) of the Exchange Act
that are incorporated by reference in the registration statement;
(2) 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; and
(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; and
(b) For purposes of determining any liability under the Securities Act, each
filing of the registrant's 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act 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 SEC such
indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities, other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding, is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
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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 San Diego, State of California, on December 18, 2002.
SUREBEAM CORPORATION
By: /s/ LAWRENCE A. OBERKFELL
-----------------------------------------
Lawrence A. Oberkfell
Chairman of the Board,
Chief Executive Officer and President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Lawrence A. Oberkfell and David A. Rane and each
of them, his true and lawful attorneys-in-fact and agents, each with full power
of substitution and re-substitution, for him and in his 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 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 Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
President, Chief
Executive Officer and
/s/ LAWRENCE A. OBERKFELL Chairman of the Board
------------------------------ (Principal Executive
Lawrence A. Oberkfell Officer) December 18, 2002
Senior Vice President,
Chief Financial Officer
/s/ DAVID A. RANE and Secretary
------------------------------ (Principal Financial
David A. Rane Officer) December 18, 2002
/s/ JOHN C. ARME Director
------------------------------
John C. Arme December 18, 2002
/s/ SUSAN GOLDING Director
------------------------------
Susan Golding December 18, 2002
/s/ MICHAEL J LICATA Director
------------------------------
Michael J Licata December 18, 2002
/s/ WILLIAM C. HALE Director
------------------------------
William C. Hale December 18, 2002
/s/ ROBERT O. ADERS Director
------------------------------
Robert O. Aders December 18, 2002
II-4