-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GnvOSfzTrBTU6tWVIL5ILDx4BPTDVC6L8txy3gfXD5MfgNoKFX+zgnzRpZSPt5Ca zoCGQx6k4GzDVNAX2ovCYw== 0000950144-99-013651.txt : 19991129 0000950144-99-013651.hdr.sgml : 19991129 ACCESSION NUMBER: 0000950144-99-013651 CONFORMED SUBMISSION TYPE: S-3MEF PUBLIC DOCUMENT COUNT: 3 333-78907 FILED AS OF DATE: 19991124 EFFECTIVENESS DATE: 19991124 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SI DIAMOND TECHNOLOGY INC CENTRAL INDEX KEY: 0000891417 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 760273345 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3MEF SEC ACT: SEC FILE NUMBER: 333-91697 FILM NUMBER: 99764640 BUSINESS ADDRESS: STREET 1: 3006 LONGHORN BOULEVARD STREET 2: SUITE 107 CITY: AUSTIN STATE: TX ZIP: 78758 BUSINESS PHONE: 5123315020 MAIL ADDRESS: STREET 1: 12100 TECHNOLOGY BOULEVARD CITY: AUSTIN STATE: TX ZIP: 78727 S-3MEF 1 SI DIAMOND TECHNOLOGY, INC. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 24, 1999 REGISTRATION STATEMENT NO. 333-78907 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- POST-EFFECTIVE AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 SI DIAMOND TECHNOLOGY, INC. (Exact Name of small business issuer as specified in its charter) STATE OF TEXAS 76-0273345 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification Number) SI DIAMOND TECHNOLOGY, INC. DOUGLAS P. BAKER 3006 LONGHORN BOULEVARD, SUITE 107 VICE PRESIDENT AND CHIEF AUSTIN, TEXAS 78758 FINANCIAL OFFICER (512) 339-5020 SI DIAMOND TECHNOLOGY, INC. (Address, including zip code, and 3006 LONGHORN BOULEVARD telephone number, including area AUSTIN, TEXAS 78758 code, of small business issuer's (512) 339-5020 principal executive offices) (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------- Copies To: MICHAEL W. MURRAY DONALD T. LOCKE VICE PRESIDENT AND GENERAL COUNSEL KILPATRICK STOCKTON, LLP SI DIAMOND TECHNOLOGY, INC. 3737 GLENWOOD AVENUE 3006 LONGHORN BOULEVARD, SUITE 107 SUITE 400 AUSTIN, TEXAS 78758 RALEIGH, NORTH CAROLINA 27612 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after this Registration Statement has been declared effective. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, 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, check the following box and list the Securities Act registration statement number of earlier effective registration statement for the same offering. [X] : No. 333-78907 If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]: If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE ================================================================================================================== TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF TO BE REGISTERED REGISTERED PER SHARE (2) PRICE (2) REGISTRATION FEE ------------------------------------------------------------------------------------------------------------------ Common stock, par value $.001 per share... 5,573,460 ------------------------------------------------------------------------------------------------------------------ Common stock underlying warrants.......... 10,599,792 ================================================================================================================== Total 16,173,252 $1.7734 $28,681,646 $257.91(1) ==================================================================================================================
(1) Amount represents an increase in the amount offered of 523,132 shares for which the registration fee is calculated. All other shares subject to this registration statement have previously been registered and the registration fees paid for. (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 sales prices per share of common stock as reported by the OTC Bulletin Board on November 19, 1999. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. 2 EXPLANATORY NOTE SI Diamond has previously filed Registration Statement Nos. 333-24801, 333-38941, 333-40711 and 333-78907 to register shares of its common stock, as well as shares of its common stock underlying warrants held by certain selling shareholders. This Post-Effective Amendment No. 1 to Registration Statement No. 333-78907 eliminates those selling shareholders who have previously sold such shares pursuant to the previous registration statements and also eliminates those selling shareholders to whom the Company no longer has registration obligations. This Post-Effective Amendment No. 1 to Registration Statement No. 333-78907 also registers an additional 523,132 shares of common stock or shares of common stock underlying warrants which have not previously been registered. 3 PROSPECTUS SI DIAMOND TECHNOLOGY, INC. 5,573,460 SHARES OF COMMON STOCK (PAR VALUE $.001 PER SHARE) 10,599,792 SHARES OF COMMON STOCK UNDERLYING WARRANTS The shareholders of SI Diamond Technology, Inc. identified on pages 20-21 may offer and sell the shares covered by this Prospectus from time to time. The shares offered for sale: - are presently outstanding, or will be issued as a result of existing agreements, or - underlie certain existing warrants to purchase common stock. This offering is not being underwritten. The selling shareholders will pay all underwriting discounts and selling commissions, if any, applicable to the sale of the shares. SI Diamond will receive the proceeds from the exercise of the warrants but will not receive any proceeds from the sale of the shares of common stock by the selling shareholders. SI Diamond will pay substantially all of the expenses of the registration of the sale of the shares. SI Diamond has agreed to indemnify certain of the selling shareholders against certain civil liabilities, including liabilities under the Securities Act of 1933. See "Plan of Distribution and Selling Shareholders." SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH YOU SHOULD CONSIDER. YOU SHOULD READ THE ENTIRE PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION. SI Diamond's common stock is traded and quoted on the OTC Bulletin Board under the symbol "SIDT". On November 19, 1999, the closing price of the common stock as reported on the OTC Bulletin Board was $1.84375 per share. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------- The date of this Prospectus is November ___, 1999. 4 PROSPECTUS SUMMARY The following summary highlights selected information from this document and may not contain all the information important to you. You should read carefully this entire document and the documents to which we have referred you. Unless the context otherwise requires, the term "SI Diamond" or the "Company" refers to SI Diamond Technology, Inc. and its subsidiaries. THE COMPANY The executive offices of SI Diamond are located at 3006 Longhorn Boulevard, Suite 107, Austin, Texas 78758, and its telephone number is (512) 339-5020. THE OFFERING This prospectus relates to 16,173,252 shares of common stock, par value $.001 per share, of SI Diamond Technology, Inc., a Texas corporation, which may be offered for sale by certain shareholders of the Company from time to time. The shares offered for sale: - are presently outstanding, or will be issued as a result of existing agreements, or - underlie certain existing warrants to purchase common stock. As of November 19, 1999, the Company had the following securities outstanding covered by this Prospectus.
SECURITY DESIGNATION AMOUNT OUTSTANDING (1) -------------------- ---------------------- Common stock 5,573,460 Common stock underlying warrants 10,599,792
- ------------------- (1) This number represents either shares of common stock or the number of shares of common stock into which the warrants are convertible as of the date of this Prospectus. See "Plan of Distribution and Selling Shareholders." PLAN OF DISTRIBUTION This offering is not being underwritten. The selling shareholders directly, through agents designated by them from time to time or through dealers or underwriters also to be designated, may sell the shares from time to time, in or through privately negotiated transactions, or in one or more transactions, including block transactions, on the OTC Bulletin Board or on any stock exchange on which the shares may be listed in the future pursuant to and in accordance with the applicable rules of such exchange or otherwise. The selling price of the shares may be at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. To the extent required, the specific shares to be sold, the names of the selling shareholders, the respective purchase prices and public offering prices, the names of any such agent, dealer or underwriter and any applicable commission or discounts with respect to a 2 5 particular offer will be described in an accompanying prospectus. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this prospectus. See "Plan of Distribution and Selling Shareholders." The Company will receive the proceeds from the exercise of the warrants, but will not receive any proceeds from the sale of the shares by the selling shareholders. The Company has agreed to pay all of the expenses of the registration of the shares. The selling shareholders must pay any commissions and discounts of underwriters, dealers or agents. The Company has agreed to indemnify certain of the selling shareholders against certain civil liabilities under the Securities Act. See "Plan of Distribution and Selling Shareholders." SELLING SHAREHOLDERS AS UNDERWRITERS The selling shareholders and any broker-dealers, agents or underwriters that participate with the selling shareholders in the distribution of any of the shares may be deemed to be "Underwriters" within the meaning of the Securities Act, and any commissions received by them and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. See "Plan of Distribution and Selling Shareholders." RISK FACTORS See "Risk Factors" beginning on page 4 of this prospectus for a discussion of certain factors related to the Company and the common stock offered in this prospectus. 3 6 RISK FACTORS The common stock being offered hereby involves a high degree of risk. You should carefully consider the following risk factors in addition to other information contained in this prospectus in deciding whether to invest in our shares of common stock. OUR DFE PRODUCT DEVELOPMENT IS IN ITS EARLY STAGES AND THE OUTCOME IS UNCERTAIN Our Diamond Field Emission ("DFE") technology, and any products that use this technology, will require significant additional development, engineering, testing and investment prior to commercialization. Our leading potential DFE product is a cathode, or light source, intended for use in a display. If the cathode is successful, a display using this cathode is also a possibility. The cathode or display may not be successfully developed. If either of these products is developed, it may not be possible to produce these products in significant quantities at a price that is competitive with other similar products. THERE ARE NO CURRENT DFE PRODUCT REVENUES We currently do not receive revenue from any products which we produce that use our DFE technology. However, we have received revenue for continued research on our DFE technology and licensing others to use our patented technology. We may never receive revenue from the sale of products which we produce that use our DFE technology. OUR SUCCESS IS DEPENDENT ON OUR PRINCIPAL PRODUCTS Our DFE technology is an emerging technology. Our financial condition and prospects are dependent upon market acceptance and sales of our DFE products and our electronic billboard and related electronic display products. Additional research and development needs to be conducted on the DFE products before marketing and sales efforts can be commenced. Market acceptance of our products will be dependent upon the perception within the electronics and instrumentation industries of the quality, reliability, performance, efficiency, breadth of application and cost effectiveness of the products. There can be no assurance that we will be able to gain commercial market acceptance for our products or develop other products for commercial use. WE HAVE A HISTORY OF OPERATING LOSSES We have a history of operating losses and have never had a profitable year until 1999. We have incurred operating losses as shown below:
YEAR ENDED DECEMBER 31 NET INCOME (LOSS) ---------------------- ----------------- 1992 $ (1,630,978) 1993 $ (7,527,677) 1994 $ (7,255,420) 1995 $ (14,389,856) 1996 $ (13,709,006) 1997 $ (6,320,901) 1998 $ (3,557,548) 1999 (through September 30) $ 1,749,368
4 7 We may continue to incur additional operating losses for an extended period of time as we continue to develop products. We do, however, expect to be profitable in 1999. We may not be profitable beyond 1999. Wallace Sanders & Company, independent auditors of the Company, have expressed substantial doubt as to our ability to continue as a going concern based on these accumulated losses from operations. See "Independent Auditors' Report." We have funded our operations to date primarily through the proceeds from the sale of our debt and equity securities. In order to continue our transition from a contract research and development organization to an organization with ongoing operations, we anticipate that substantial product development expenditures will continue to be incurred. WE HAVE FUTURE CAPITAL NEEDS AND THE SOURCE OF THAT FUNDING IS UNCERTAIN We expect to continue to incur substantial expenses for research and development, product testing, production, manufacturing, product marketing, and administrative overhead. The majority of research and development expenditures are for the development of our DFE technology and our electronic billboard product. Products that use our DFE technology may not be available for commercial sale or routine use for a period of one to two years. Our electronic billboard product is available for sale at the present time. Commercialization of our existing and proposed products will require additional capital in excess of our current sources of funding. A shortage of capital may prevent us from achieving profitability for an extended period of time. Because the timing and receipt of revenues from the sale of products will be tied to the achievement of certain product development, testing, manufacturing and marketing objectives, which cannot be predicted with certainty, there may be substantial fluctuations in our results of operations. If revenues do not increase as rapidly as anticipated, or if product development and testing and marketing require more funding than anticipated, we may be required to curtail our expansion and/or seek additional financing from other sources. We may seek additional financing through the offer of debt or equity or any combination of the two at any time. We have developed a plan to allow us to maintain operations until we are able to sustain ourselves on our own revenue. At the present time, we have existing resources to sustain ourselves for a period of approximately six months from the date of this Prospectus at current spending levels. We believe that we have the ability to continue to raise short term funding, if necessary, to enable us to continue operations until our plan can be completed. These strategic partners could take the form of joint venture participants, licensors of technology, investors, or any other form acceptable to the Company. We are also concentrating on raising revenue by seeking customers for our electronic billboard product, which has been developed. Our plan is based on current development plans, current operating plans, the current regulatory environment, historical experience in the development of electronic products and general economic conditions. Changes could occur which would cause certain assumptions on which this plan is based to be no longer valid. If adequate funds are not available from operations or additional sources of financing, we may have to eliminate, or reduce substantially, expenditures for research and development, testing and production of our products. We may have to obtain funds through arrangements with other entities that may require us to relinquish rights to certain of our technologies or products. These actions could materially and adversely affect the Company. RAPID TECHNOLOGICAL CHANGE COULD RENDER OUR PRODUCTS OBSOLETE AND WE MAY NOT REMAIN COMPETITIVE The display industry is highly competitive and is characterized by rapid technological change. Our existing and proposed products will compete with other existing products and may compete against other developing technologies. Development by others of new or improved products, processes or technologies may reduce the size of potential markets for our products. There is no assurance that other products, processes or technologies will not render our proposed products obsolete or less competitive. Most of our 5 8 competitors have greater financial, managerial, distribution, production and technical resources than us. We will be required to devote substantial financial resources and effort to further research and development. There can be no assurance that we will successfully differentiate our products from our competitors' products, or that we will adapt to evolving markets and technologies, develop new products, or achieve and maintain technological advantages. WE HAVE TECHNOLOGIES SUBJECT TO LICENSES As a licensee of certain research technologies through various license and assignment agreements with Microelectronics and Computer Technology Corporation and DiaGasCrown, Inc., we have acquired rights to develop and commercialize certain research technologies. In certain cases, agreements require us to pay royalties on the sale of products developed from the licensed technologies and fees on revenues from sublicensees. We also have to pay for the costs of filing and prosecuting patent applications. Each agreement is subject to termination by either party, upon notice, in the event of certain defaults by the other party. The payment of such royalties may adversely affect our future profitability. OUR PRODUCTS MAY NOT BE ACCEPTED BY THE MARKET Since our inception, we have focused our product development and research and development efforts on technologies that we believe will be a significant advance over currently available technologies. With any new technology, there is a risk that the market may not appreciate the benefits or recognize the potential applications of the technology. Market acceptance of our products will depend, in part, on our ability to convince potential customers of the advantages of such products as compared to competitive products. It will also depend upon our ability to train manufacturers to produce our product and customers and others to use them. We currently have a limited marketing organization and there is no assurance that we will be able to successfully market our proposed products even if such products perform as anticipated. WE HAVE LIMITED MANUFACTURING CAPACITY AND EXPERIENCE We have recently acquired the assets and management of a company which has experience in manufacturing electronic billboards and related products in the areas in which we conduct our principal research. Members of the management team of SI Diamond have commercial manufacturing and marketing experience in other industries and with other products in the display industry; however, we have only limited experience in manufacturing our proposed products. We are focusing our efforts on licensing our technology to others for use in their manufacturing processes. We intend to contract with qualified manufacturers for assembly services related to our electronic billboard product, which is currently under development. To the extent that any of our other products require manufacturing facilities, we intend to contract with strategic partners or other qualified manufacturers. WE FACE CHALLENGES RELATING TO EXPANSION OF OUR PRODUCTION AND MANUFACTURING FACILITIES With the recent acquisition of the assets and management of a company with experience in manufacturing electronic billboards and related products, we must complete the remaining phases of integrating those assets and management into SI Diamond. We are in the process of completing this integration and may add additional facilities in the future. Expansion activities such as these are subject to a number of risks, including the following: - unforeseen environmental or engineering problems relating to existing new facilities; 6 9 - unavailable or late delivery of the advanced, and often customized, equipment used in the production of our products; - unavailability of funds necessary for expansion; - work stoppages and delays; and - delays in bringing production equipment on-line. These and other risks may affect the ultimate cost and timing of this integration of facilities and management, which could adversely affect our business, results of operations and financial condition. WE MAY NOT BE ABLE TO MARKET AND SELL OUR PRODUCTS We intend to establish and develop a sales organization to promote, market, and sell our products. This may require significant additional expenditures, management resources, and training time. There can be no assurance that we will be able to establish a successful sales organization. WE ARE DEPENDENT ON THE AVAILABILITY OF MATERIALS AND SUPPLIERS We anticipate that the materials to be used in producing our future products will be purchased from outside vendors. In certain circumstances, we may be required to bear the risk of material price fluctuations. We anticipate that the majority of raw materials used in products to be manufactured by the Company or its strategic partners will be readily available. However, there is no assurance that these materials will be available in the future, or if available, will be procurable at prices favorable to the Company or its strategic partners. LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS Our future success will depend on our ability to attract and retain highly qualified scientific, technical and managerial personnel. Competition for such personnel is intense. We may not be able to attract and retain all personnel necessary for the development of our business. In addition, much of the know-how and processes developed by the Company reside in our key scientific and technical personnel. This know-how and these processes are not readily transferable to other scientific and technical personnel. The loss of the services of key scientific, technical and managerial personnel could have a material adverse effect on us. WE MAY NOT BE ABLE TO PROVIDE SYSTEM INTEGRATION In order to prove that our technologies work and will produce a complete product, we must ordinarily integrate a number of highly technical and complicated subsystems into a fully-integrated prototype. There is no assurance that we will be able to successfully complete the development work on any of our proposed products or ultimately develop any marketable products. WE MAY BE UNABLE TO ENFORCE OR DEFEND OUR OWNERSHIP AND USE OF OUR PROPRIETARY TECHNOLOGY Our ability to compete effectively with other companies will depend on our ability to maintain the proprietary nature of our technology. Although we have been awarded, have filed applications for, or have been licensed technology under numerous patents, the degree of protection offered by these patents or the likelihood that pending patents will be issued is uncertain. Competitors in both the United States and foreign countries, many of which have substantially greater resources and have made substantial investment in competing technologies, may already have, or may apply for and obtain patents that will prevent, limit or 7 10 interfere with our ability to make and sell our products. Competitors may also intentionally infringe on our patents. The defense and prosecution of patent suits is both costly and time-consuming, even if the outcome is favorable to the Company. In foreign countries, the expenses associated with such proceedings can be prohibitive. In addition, there is an inherent unpredictability in obtaining and enforcing patents in foreign countries. An adverse outcome in the defense of a patent suit could subject us to significant liabilities to third parties, require disputed rights to be licensed from third parties or require us to cease selling our products. Although third parties have not asserted infringement claims against us, there is no assurance that third parties will not assert such claims in the future. Claims that our products infringe on the proprietary rights of others are more likely to be asserted after commencement of commercial sales incorporating our technology. We also rely on unpatented proprietary technology, and there is no assurance that others will not independently develop the same or similar technology, or otherwise obtain access to our proprietary technology. To protect our rights in these areas, we require all employees and most consultants, advisors and collaborators to enter into confidentiality agreements. These agreements may not provide meaningful protection for the our trade secrets, know-how, or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how, or other proprietary information. While we have attempted to protect proprietary technology that we develop or acquire and will continue to attempt to protect future proprietary technology through patents, copyrights and trade secrets, we believe that our success will depend upon further innovation and technological expertise. OUR REVENUES HAVE BEEN DEPENDENT ON GOVERNMENT CONTRACTS IN THE PAST In previous years, a significant part of our revenues were derived from contracts with agencies of the United States government. Following is a summary of those revenues in recent years:
REVENUES FROM PERCENTAGE OF YEAR ENDED DECEMBER 31 GOVERNMENT CONTRACTS TOTAL REVENUE ---------------------- -------------------- ------------- 1992 $ 930,000 99% 1993 $ 1,147,000 89% 1994 $ 820,000 41% 1995 $ 1,009,000 33% 1996 $ 2,869,000 50% 1997 $ 854,000 24% 1998 $ 0 0% 1999 $ 0 0%
We currently have no significant commitment for any future government funding and do not intend to seek any government funding unless it directly relates to achievement of our strategic objectives. To the extent that we are unable to obtain funding from alternate sources, this could adversely affect our ability to continue to perform research and development on our proposed products. Contracts involving the United States government are, or may be, subject to various risks including, but not limited to, the following: 8 11 - Unilateral termination for the convenience of the government - Reduction or modification in the event of changes in the government's requirements or budgetary constraints - Increased or unexpected costs causing losses or reduced profits under fixed-price contracts or unallowable costs under cost reimbursement contracts - Potential disclosure of our confidential information to third parties - The failure or inability of the prime contractor to perform its prime contract in circumstances where we are a subcontractor - The failure of the government to exercise options provided for in the contracts - The right of the government to obtain a non-exclusive, royalty free, irrevocable world-wide license to technology developed under contracts funded by the government if we fail to continue to develop the technology YEAR 2000 ISSUES MAY EXPOSE US TO LIABILITY Some computers, software and other equipment include programming code in which calendar year data is abbreviated to only two digits. As a result of this design decision, some of the systems could fail to operate or fail to produce correct results if "00" is interpreted to mean 1900 rather than 2000. These problems are widely expected to increase in frequency and severity as the year 2000 approaches and are commonly referred to as the "Year 2000 Problem." The Year 2000 Problem presents us potential risks including, but not limited to, the following: - Products sold to customers - We have had very limited product sales to customers and believe that all products sold to customers are Year 2000 compliant. We believe our risk in this area is extremely limited. - Internal Infrastructure - We have completed an internal evaluation and have determined that all of our internal systems will be Year 2000 compliant well prior to the end of 1999. We believe our risk in this area is extremely limited. - Suppliers/third party relationships - There is no assurance that our suppliers or other third parties that we rely on will resolve any or all Year 2000 problems with their systems on a timely basis. Since we have no significant suppliers of product, we believe our risk is limited in this area. - External Infrastructure - We are dependent on other entities such as governmental units, utilities, banks, etc., that maintain an external infrastructure necessary for us to operate. Although we expect that such entities are addressing and solving their Year 2000 problems, there no assurances that these problems will be addressed and solved on a timely basis. 9 12 WE ARE EXPOSED TO MATERIAL LITIGATION We have been sued by a former customer of Plasmatron, one of our subsidiaries, for damages that the former customer claims that it incurred as a result of the alleged failure of the machine provided by Plasmatron to perform as intended. Various trade creditors, as well as a former landlord, have also filed suit to collect unpaid trade amounts due. We expect these items to be resolved with no material impact on our financial statements. If we were to become subject to a judgment that exceeds our ability to pay, that judgment would have a material impact on our financial condition and could affect our ability to continue in existence. OUR OFFICERS, DIRECTORS AND PRINCIPAL SHAREHOLDERS OWN OR CONTROL A LARGE NUMBER OF SHARES Officers, directors and principal shareholders of SI Diamond own, or have the power to vote, in the aggregate, approximately 10.99% of the voting stock of SI Diamond on an "as converted" basis. Due to the relatively large number of shares owned by these shareholders and certain provisions of SI Diamond's Amended and Restated Articles of Incorporation (the "Restated Articles") and Bylaws, it may be difficult for other shareholders to cause a change in control of SI Diamond or effect other fundamental corporate transactions if officers, directors and principal shareholders were to act as a group. THE MARKET FOR OUR COMMON STOCK IS VOLATILE The market price of the shares of SI Diamond common stock, like that of the common stock of many emerging technology companies, has fluctuated significantly in recent years and will likely continue to fluctuate in the future. The prices of such securities currently rise and are expected to continue to rise rapidly in response to certain events, such as announcements concerning product developments, licenses and patents, although the outcome of such events may not be fully determined. Similarly, prices of such securities may fall rapidly if unfavorable results are encountered in product development or market acceptance. In the event that SI Diamond achieves earnings from the sale of products, securities analysts may begin predicting quarterly earnings. The failure of our earnings to meet analysts' expectations could result in a significant rapid decline in the market price of our common stock. In addition, the stock market has experienced and continues to experience extreme price and volume fluctuations which have affected the market price of the equity securities of many technology companies and which have often been unrelated to the operating performance of those companies. Such broad market fluctuations, as well as general economic and political conditions, may adversely affect the market price of the common stock. SHARES OF OUR COMMON STOCK ARE ELIGIBLE FOR FUTURE SALE As of November 19, 1999, there were 53,685,524 shares of SI Diamond common stock outstanding, of which 45,429,047 shares of such common stock were freely tradable without restriction or further registration under the Securities Act by persons other than "affiliates" of SI Diamond. As of that date, the remaining shares of SI Diamond common stock were deemed "restricted securities," as defined in Rule 144 under the Securities Act, and may not be resold in the absence of registration under the Securities Act or pursuant to an exemption from such registration, including exemptions provided by Rule 144 under the Securities Act. Under Rule 144, persons who have held securities for a period of at least one year may sell a limited amount of such securities without registration under the Securities Act. Rule 144 also permits, under certain circumstances, persons who are not affiliates of SI Diamond, to sell their restricted securities without quantity limitations once they have completed a two-year holding period. The Registration Statement, of which this Prospectus is a part, pertains to 5,573,460 shares of common stock which are currently "restricted securities"; and 10,599,792 shares of common stock which 10 13 underlie existing warrants. SI Diamond is obligated to maintain the effectiveness of the Registration Statement for varying periods of time, pursuant to separate agreements with certain groups of the selling shareholders. In addition to the shares of common stock which are outstanding as of November 19, 1999, 5,702,008 shares of common stock have been reserved for issuance pursuant to our stock option plans. Approximately 10,599,792 shares of common stock have also been reserved for issuance upon the exercise of warrants that have been issued by SI Diamond and 1,421,479 shares of common stock have been reserved for issuance upon conversion of the Company's Series G preferred stock. No prediction can be made as to the effect, if any, that future sales, or the availability of shares of SI Diamond common stock for future sales, will have on the market price prevailing from time to time. Sales of substantial amounts of SI Diamond common stock by SI Diamond or by shareholders who hold "restricted securities," or the perception that such sales may occur, could adversely affect prevailing market prices for the common stock. OTHER CLASSES OF CAPITAL STOCK HAVE PRIOR AND SUPERIOR RIGHTS The rights of holders of the common stock to receive dividends or other payments with respect thereto are subject to any prior and superior rights of holders of SI Diamond's preferred stock. As of November 19, 1999, SI Diamond had issued and outstanding 1,150 shares of its Series G preferred stock, its only series outstanding. Additionally, the holders of the Series G preferred stock are entitled to a liquidation preference over the holders of the common stock. The Board of Directors, however, has the authority to provide for the issuance of additional shares of preferred stock in one or more additional series and such shares may, in the Board's discretion, have prior and superior rights to receive dividends or other payments with respect thereto. In light of its future capital requirements, SI Diamond could issue shares of preferred stock at any time having such prior and superior rights. See "Description of Capital Stock". A POSSIBLE ADVERSE EFFECT ON THE PRICE OF OUR COMMON STOCK COULD RESULT FROM SALES BY SELLING SHAREHOLDERS IN THE MARKET Sales of or offers to sell substantial blocks of common stock currently held by certain shareholders, or the perception by investors, investment professionals or securities analysts of the possibility that such sales may occur could adversely affect the price of and market for the common stock. Upon registration in accordance with its obligations, the selling shareholders will be permitted to sell up to 16,173,252 shares of common stock, of which 10,599,792 are shares of common stock subject to issuance upon the exercise of certain warrants. The shares (assuming the exercise of all warrants subject to the Registration Statement) represent approximately 25.1% of the shares of common stock outstanding on the date hereof. We will not receive any proceeds from sales of shares held by such selling shareholders. SI Diamond will receive the proceeds from the exercise of any warrants to purchase shares of common stock. SI Diamond is unable to predict how much it will receive from the exercise of the warrants held by the Vision Mark Selling Shareholder since the price of such warrants shall be established, if at all, upon the achievement of certain milestones by C&A Services, L.L.C. See "Plan of Distribution and Selling Shareholder-Vision Mark Selling Shareholder." The exercise prices of all other warrants range from $1.00 to $7.89 per share of SI Diamond's common stock. It is unlikely that significant amounts of the warrants will be exercised until the trading price of the common stock exceeds the exercise price of the warrants, if at all. 11 14 WE HAVE NEVER PAID DIVIDENDS SI Diamond has never paid cash dividends on its equity securities and does not intend to pay cash dividends in the foreseeable future. To the extent the Company has earnings in the future, the Company intends to reinvest such earnings in the business operations of the Company. OUR RESTATED ARTICLES OF INCORPORATION AND BYLAWS MAY INHIBIT A TAKEOVER SI Diamond's Restated Articles and Bylaws contain a number of provisions which could make its acquisition by means of an unsolicited tender offer, a proxy contest or otherwise, more difficult, including the following: - the Board is authorized to issue series of preferred stock that could, depending on the terms of such series, impede the completion of a merger, tender offer or other takeover attempt; - the Board of Directors is divided into three classes of directors, with the result that approximately one-third of the Board of Directors are elected each year; and - except in limited circumstances, no shares of our preferred stock may be issued or sold to any officer or director of SI Diamond or any shareholder owning more than five percent (5%) of SI Diamond's common stock without the affirmative vote of a majority of its disinterested shareholders. See "Description of Capital Stock - Certain Provisions of the Articles of Incorporation, Bylaws and Texas Law." OUR RESTATED ARTICLES AND BYLAWS LIMIT OUR DIRECTORS' LIABILITY AND PROVIDE FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS SI Diamond's Restated Articles provide that a director will only be liable to SI Diamond for the following: - breaches of his duty of loyalty to SI Diamond and its shareholders, - acts or omissions not in good faith or which constitute a breach of duty of a director of SI Diamond or involves intentional misconduct or a knowing violation of law, - transactions from which a director receives an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office, - acts or omissions for which liability is specifically provided by statute, and - acts relating to unlawful stock purchases or payments of dividends. Thus, SI Diamond may be prevented from recovering damages for certain alleged errors or omissions by its directors. The Bylaws also provide that, under certain circumstances, SI Diamond will indemnify its officers and directors for liabilities incurred in connection with their good faith acts. Such an indemnification 12 15 payment might deplete our assets. While Texas law permits a shareholder to bring a derivative action on behalf of a corporation, the law relating to the remedies available to corporate shareholders is constantly changing. Shareholders who have questions concerning the fiduciary obligations of the officers and directors of SI Diamond should consult with independent legal counsel. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of SI Diamond pursuant to the foregoing provisions, or otherwise, SI Diamond has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. THERE ARE RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS This prospectus contains some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate", "believe", "expect", "estimate", "project", "intend", "plan", and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results. From time to time, we also may provide oral or written forward-looking statements in other materials we release to the public. Any or all of our forward-looking statements in this report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Many factors mentioned in the following discussion - for example, product development, competition, and the availability of funding - will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially. We undertake no obligation to publicly update any forward-looking statements, whether as the result of new information, future events, or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our 10-QSB, 8-K, and 10-KSB reports to the SEC. Also note that we have provided the above cautionary discussion of risks, uncertainties, and possibly inaccurate assumptions relevant to our business. These are factors that we think could cause our actual results to differ materially from expected and historical results. Other factors besides those listed above could also adversely affect the Company. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995. WHERE YOU CAN FIND MORE INFORMATION This prospectus is part of a Registration Statement on Form S-3 that we filed with the Commission. This prospectus does not contain all of the information in the Registration Statement. The Registration Statement contains more information than this prospectus regarding SI Diamond and its common stock, including exhibits and schedules. You can get a copy of the Registration Statement from the SEC at the address below or from its internet site. We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy the documents we file with the SEC at the SEC's public reference room at 450 Fifth Street, N.A., Judiciary Plaza, Washington, D.C. 20549 and at the Regional Offices of the Commission at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60606-2511 and 13 16 Seven World Trade Center, New York, New York 10048. You should call 1-800-SEC-0330 for more information on the public reference room. You can request copies of these documents upon payment of a duplicating fee by writing to the SEC at the public reference section at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a Web site that contains information regarding registrants at http:\\www.sec.gov. SI Diamond's common stock is included in the OTC Bulletin Board under the symbol "SIDT". Reports, proxy and information statements and other information concerning the Company can be inspected at the National Association of Securities Dealers, Inc., 1735 K Street, 3rd Floor, Washington, D.C. 20006 or obtained by calling the Nasdaq Public Reference Room Disclosure Group at 1-800-638-8241. DOCUMENTS INCORPORATED BY REFERENCE The Commission allows us to "incorporate" into this prospectus information we file with the Commission in other documents. This means we can disclose important information to you by referring to other documents which we have filed and contain that information. The following documents, which have been filed by SI Diamond with the Commission pursuant to the Exchange Act (File No. 1-11602), are incorporated by reference in this prospectus and shall be deemed to be a part hereof: (1) SI Diamond's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998; (2) SI Diamond's Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 1999; (3) SI Diamond's Current Report on Form 10-QSB for the quarterly period ended June 30, 1999; (4) SI Diamond Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 1999; (5) SI Diamond's Current Report on Form 8-K dated as of February 3, 1999; (6) SI Diamond's Current Report on Form 8-K dated as of April 16, 1999; (7) SI Diamond's Current Report on Form 8-K/A dated as of April 16, 1999 (filed on September 27, 1999); (8) SI Diamond's Current Report on Form 8-K dated as of September 3, 1999; (9) SI Diamond's Current Report on Form 8-K/A dated as of September 3, 1999 (filed on November 18, 1999); (10) SI Diamond's Current Report on Form 8-K dated as of September 3, 1999 (filed on November 23, 1999) (11) SI Diamond's Current Report on Form 8-K dated as of September 30, 1999; (12) SI Diamond's Current Report on Form 8-K dated as of October 21, 1999; and 14 17 (13) The description of SI Diamond's common stock which is contained in its Registration Statement on Form 8-A filed on November 19, 1992, pursuant to Section 12 of the Securities Exchange Act of 1934, including any amendment or report filed for the purpose of updating such description. We incorporate by reference all future documents we may file with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we terminate the offering of these shares. The information that we incorporate by reference may include documents filed after the date of this Prospectus which update and supersede the information you read in this Prospectus. You may request a copy of the documents incorporated by reference at no cost. Requests for copies should be directed in writing or by telephone to: SI Diamond Technology, Inc. 3006 Longhorn Boulevard, Suite 107 Austin, Texas 78758 Attention: Corporate Secretary (Telephone: (512) 339-5020) USE OF PROCEEDS The selling shareholders will receive all of the net proceeds from the sale of the shares of SI Diamond common stock sold. Pursuant to this prospectus, SI Diamond will not receive any of the proceeds from the sale of the shares by the selling shareholders. SI Diamond will receive the proceeds from the exercise of the warrants, which proceeds will be used for working capital. SI Diamond is unable to predict how much it will receive from its exercise of the warrants held by the Vision Mark Selling Shareholder since the price of such warrants shall be established, if at all, upon the achievement of certain milestones by C&A Services, L.L.C. See "Plan of Distribution and Selling Shareholder - Vision Mark Selling Shareholder." The exercise prices of all other warrants range from $1.00 to $7.89 per share of SI Diamond's common stock. It is unlikely that significant amounts of the warrants will be exercised until the trading price of the common stock exceeds the exercise price of the warrants, if at all. PLAN OF DISTRIBUTION AND SELLING SHAREHOLDERS GENERAL The Company is registering the shares on behalf of the Selling Shareholders. As used herein, "Selling Shareholders" includes donees and pledgees selling shares received from a named Selling Shareholder after the date of this Prospectus. The Selling Shareholders hold shares of SI Diamond's common stock which are (1) currently "restricted securities", or (2) issuable upon exercise of certain outstanding warrants to purchase shares of the Company's common stock. All costs, expenses and fees in connection with the registration of the shares offered hereby will be borne by the Company. Brokerage commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by the Selling Shareholders. Sales of shares may be effected by Selling Shareholders from time to time in one or more types of transactions (which may include block transactions) on the OTC Bulletin Board or any stock exchange on which the shares may be listed in the future pursuant to and in accordance with the applicable rules of such exchange, in negotiated transactions, through put or call options transactions relating to the shares, through 15 18 short sales of shares, or a combination of such methods of sale, at market prices prevailing at the time of sale, or at negotiated prices. Such transactions may or may not involve brokers or dealers or underwriters. The Selling Shareholders have advised the Company that they have not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their securities, nor is there an underwriter or coordinating broker acting in connection with the proposed sale of shares by the Selling Shareholders. The Selling Shareholders may effect such transactions by selling shares directly to purchasers or to or through broker-dealers, which may act as agents or principals. Such broker-dealers may receive compensation in the form of discounts, concessions, or commissions from the Selling Shareholders and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions). The Selling Shareholders and any broker-dealers that act in connection with the sale of shares might be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, and any commissions received by such broker-dealers and any profit on the resale of the shares sold by them while acting as principals might be deemed to be underwriting discounts or commissions under the Securities Act. The Company has agreed to indemnify each Selling Shareholder against certain liabilities, including liabilities arising under the Securities Act. The Selling Shareholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares against certain liabilities, including liabilities arising under the Securities Act. Because Selling Shareholders may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act, the Selling Shareholders will be subject to the prospectus delivery requirements of the Securities Act. Resales and reoffers of the shares by the Selling Shareholders must also be accompanied by the delivery of a copy of the prospectus. Copies of the prospectus shall be delivered to each Selling Shareholder after the Registration Statement, of which this prospectus is a part, is declared effective. To the extent required by applicable law, the specific shares to be sold, the names of the Selling Shareholders, the respective purchase prices and public offering prices, the names of any agent, dealer or underwriter, and any applicable commissions or discounts with respect to a particular offer will be set forth in the accompanying prospectus. Each Selling Shareholder shall also be informed of the anti-manipulative rules under Regulation M promulgated pursuant to the Exchange Act. Selling Shareholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided they meet the criteria and conform to the requirements of such Rule. They may also pledge shares as collateral for margin accounts, which shares can be resold pursuant to the terms of such accounts. There can be no assurance that the Selling Shareholders will sell any or all of the shares offered by them in this prospectus. SI Diamond has filed the Registration Statement, of which this prospectus forms a part, to comply with the exercise by certain Selling Shareholders of demand registration rights granted to such Selling Shareholders, and to comply with certain "piggyback" registration rights granted to other Selling Shareholders. Upon the Company being notified by a Selling Shareholder that any material arrangement has been entered into with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Act, disclosing (i) the name of each such Selling Shareholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such shares were sold, (iv) the commissions paid or discounts or concessions allowed to such broker- 16 19 dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus and (vi) other facts material to the transaction. In addition, upon SI Diamond being notified by a Selling Shareholder that a donee or pledgee intends to sell more than 500 shares, a supplement to this Prospectus will be filed. SWARTZ SELLING SHAREHOLDERS Effective in January 1996, the persons listed in the Selling Shareholders Table as the Swartz Selling Shareholders received warrants to purchase shares of the Company's common stock at $7.89 per share. These warrants expire on January 7, 2000. Swartz allocated their warrants among certain of its principals and employees. Swartz assisted SI Diamond as placement agent for its Series E preferred stock, of which there are no shares currently outstanding. SERIES G SELLING SHAREHOLDERS In June 1997, the Series G Selling Shareholders received warrants to purchase an aggregate of 850,000 shares of the Company's common stock at $1.00 per share. These warrants expire in August 2002. Of the warrants issued, 350,000 have been exercised and 500,000 remain outstanding. The Company agreed at the time of sale of the Series G preferred stock to register pursuant to the Registration Statement the shares of common stock issuable upon conversion of the Series G preferred stock and the associated warrants and to keep such Registration Statement effective for one (1) year. Additionally, SI Diamond agreed to pay all of the expenses incident to the preparation and filing of the Registration Statement (other than commissions and discounts of any underwriters, dealers or agents). SI Diamond also agreed to indemnify the Series G selling shareholders and any underwriters they may utilize against certain civil liabilities, including liabilities arising under the Securities Act. In addition, each Series G selling shareholder agreed to indemnify SI Diamond against civil liabilities, including liabilities under the Securities Act, with respect to written information furnished by the Series G selling shareholders to SI Diamond. NOTE SELLING SHAREHOLDERS During 1998, SI Diamond issued a total of $1,005,000 of notes payable to investors that were convertible into shares of the Company's common stock at the option of the lenders, primarily at a rate of $0.25 per share, which approximated the market price at the time the loans were made. All of these notes have been converted into SI Diamond's common stock. In January and February 1999, SI Diamond borrowed a total of $200,000 from a shareholder for working capital purposes. These short-term loans bore interest at a rate of 15%, were secured by all assets of SI Diamond, and were convertible into its common stock at rates ranging from $0.30 to $0.40 per share. These conversion rates approximated the market price of SI Diamond's common stock at the times the loans were arranged. These notes were converted into shares of SI Diamond's common stock in February 1999. OCTOBER 1998 WARRANT SELLING SHAREHOLDER In 1998, SI Diamond issued $100,000 of 90-day notes which were payable at a rate of 15% and secured by all assets of SI Diamond. These notes were accompanied by warrants enabling the holders of these 90-day notes to purchase a total of 400,000 shares of SI Diamond's common stock at $0.25 per share, which approximated the market price of the common stock at the time of the loans. 17 20 VISION MARK SELLING SHAREHOLDER On November 11, 1998, Electronic Billboard Technology, Inc. ("EBT"), a wholly-owned subsidiary of SI Diamond entered into a Marketing Agent Agreement with Vision Mark, L.L.C., a Texas limited liability company. Pursuant to the marketing agreement, EBT appointed Vision Mark as a nonexclusive marketing representative. In connection with the marketing agreement, SI Diamond entered into a Consulting and Advisory Services Compensation Agreement with C&A Services, L.L.C. ("C&A"). SI Diamond also agreed that at such time as EBT shall enter into a letter of intent for the installation of certain of its operating systems resulting from Vision Mark's representation of EBT, SI Diamond shall issue C&A 300,000 shares of its common stock. SI Diamond also issued warrants to purchase SI Diamond common stock to C&A, which are exercisable upon the achievement of certain goals as described below: (1) Once EBT has received revenue from arrangements pursuant to the Marketing Agent Agreement in the aggregate of $10,000,000, and for each successive and cumulative $10,000,000 increment of revenue achieved pursuant to the Marketing Agent Agreement, C&A may exercise warrants to purchase up to 250,000 shares of SI Diamond common stock at a purchase price equal to 50% of the average closing price of SI Diamond common stock on the five business days next preceding the date of the achievement of each $10,000,000 increment in revenue from the Marketing Agent Agreement. (2) Within 60 days following each annual anniversary of the Marketing Agent Agreement, if the aggregate revenue from such agreement is at least equal to $10,000,000 for each such annual period, C&A shall have the additional right thereafter to exercise warrants to purchase shares of SI Diamond common stock with respect to each such annual determination. If the amount of revenue received pursuant to the Marketing Agent Agreement is equal to, but not less than 25% of, the aggregate revenue of SI Diamond for each such annual period, C&A may exercise warrants to purchase up to 100,000 shares of SI Diamond common stock at a purchase price equal to 75% of the average closing price of SI Diamond common stock on the five business days next preceding the last business day of each such annual period. For each additional 1% above 25% that the revenue received pursuant to the Marketing Agent Agreement contributed to the aggregate SI Diamond annual revenue for such annual period, C&A may exercise warrants to purchase up to 100,000 such additional shares of SI Diamond common stock, in incremental amounts of 4,000 shares of SI Diamond common stock each for each such additional 1% of revenue that the Marketing Agent Agreement contributed to the aggregate revenue of SI Diamond for such annual period. These warrants may be exercised at a purchase price equal to the average closing price of SI Diamond common stock on the five business days next preceding the last business day of such annual period, less a percentage equal to the sum of 25% plus an additional 1% for each additional 1% over and above 25% (not to exceed, in the aggregate, 50%) that the revenue achieved pursuant to the Marketing Agent Agreement contributed to the aggregate SI Diamond revenue for such annual period. (3) SI Diamond also issued warrants to C&A to purchase an additional 2,300,000 shares of SI Diamond's common stock upon the receipt by EBT of each of $100,000,000 and $200,000,000, respectively, of cumulative revenue from the Marketing Agent Agreement (for a maximum of 4,600,000 shares). The purchase price for the shares subject to these warrants shall be equal to 50% of the average closing price on the five business days next preceding the date on the achievement of each of $100,000,000 and $200,000,000 of such cumulative revenue by EBT. Notwithstanding anything contained in the Consulting and Advisory Services Compensation Agreement, the number of shares of SI Diamond common stock received by C&A shall not exceed 10,000,000 shares, subject to adjustment in certain circumstances. 18 21 SIGN BUILDERS SELLING SHAREHOLDERS On September 3, 1999, SI Diamond entered into an Asset Purchase Agreement by and among itself; SIDT, Inc., one of its indirect wholly-owned subsidiaries; Sign Builders of America, Inc. ("SBOA"); and Sign Builders, Inc., a subsidiary of SBOA. In the Asset Purchase Agreement, SIDT, Inc., purchased the assets subject to such agreement. In return SIDT, Inc., paid $150,000 in cash to Sign Builders and $300,000 in cash to Lance Adams, the sole shareholder of SBOA. SIDT, Inc. also executed a promissory note, guaranteed by SI Diamond, for $450,000 payable to SBOA. $225,000 in principal of this note, plus accrued and unpaid interest, is payable on March 3, 2000, and the remaining $225,000 in principal of this note, plus accrued and unpaid interest, is due and payable on September 3, 2000. At SBOA's election, on each loan payment date it may convert, in whole or in part, principal and accrued interest of the note at $2.127 per share. However, if the combined gross sales of SBOA and SIDT, Inc. for the 1999 calendar year does not exceed $3,000,000, then the note will be reduced $1.00 in principal amount for each $2.00 that the actual gross sales of SBOA and SIDT, Inc. fall below $3,000,000.00. SI Diamond also issued a total of 423,132 shares of its common stock to SBOA and Mr. Adams in its transaction. As part of the Asset Purchase Agreement, SI Diamond agreed to register these shares on its current registration statement. If SI Diamond is unable to accomplish this registration by March 3, 2000, SI Diamond will issue SBOA and Mr. Adams an additional number of shares of SI Diamond common stock equal to 20 percent of the number of shares issued to SBOA and Mr. Adams at closing. SI Diamond agreed to keep the registration statement effective until September 3, 2000 OTHER SELLING SHAREHOLDERS SI Diamond has agreed to give the shareholders listed herein as the Other Selling Shareholders "piggyback" registration rights regarding shares underlying certain warrants and shares held by these holders. Pursuant to these "piggyback" rights, SI Diamond agreed to use its best efforts to have the common stock and the common stock issuable upon the exercise of these warrants included in the Registration Statement, of which this prospectus is a part. SELLING SHAREHOLDERS This prospectus covers offers of the shares of common stock owned by the Selling Shareholders. The following table lists the names of the selling shareholders as well as (1) the number of shares of common stock, and (2) the number of shares of common stock underlying existing warrants held as of November 19, 1999. Because SI Diamond does not know how many shares may be sold by the selling shareholders pursuant to this prospectus, no estimate can be given as to the number of the shares that will be held by the selling shareholders upon termination of this offering. 19 22 SELLING SHAREHOLDERS TABLE
NUMBER OF SHARES NUMBER OF SHARES OF COMMON OF COMMON STOCK HELD AND STOCK UNDERLYING PERCENTAGE OF INTERESTS OFFERED PURSUANT WARRANTS OFFERED PRIOR TO ANY SALES TO THIS PURSUANT TO THIS MADE PURSUANT TO THIS SHAREHOLDER PROSPECTUS PROSPECTUS PROSPECTUS(1) ----------- ---------- ---------- ------------- SWARTZ SELLING SHAREHOLDERS Eric S. Swartz.......................... 55,702 * Michael C. Kendrick..................... 55,702 * P. Bradford Hathorn..................... 5,000 * Lance T. Bury........................... 5,000 * Dwight B. Bronnum....................... 1,500 * Robert L. Hopkins....................... 1,500 * Charles Krusen.......................... 4,867 * Enigma Investments Limited.............. 1,521 * David K. Peteler........................ 3,000 * S. Edward Bradford...................... 11,000 * SERIES G SELLING SHAREHOLDERS Joseph Shaffer and Cynthia Shaffer...... 25,000 * James G. Petroff........................ 25,000 * Mark S. Wagner.......................... 25,000 * Chris S. Lawson......................... 25,000 * Pinnacle Fund, L.P...................... 100,000 (2) * Dan Cafolla............................. 12,500 * Dan Cafolla Profit Sharing Plan......... 12,500 * Klaich Animal Hospital, Ltd. Amended Profit Sharing Plan......... 50,000 * George Valassis......................... 100,000 * Peerless Distributing Company........... 25,000 * ARA ................................. 25,000 * Nicholas Martin Living Trust............ 100,000 * NOTE SELLING SHAREHOLDERS Pinnacle Fund, L.P. .................... 1,221,021 (2) 2.27% R.J. Berman............................. 202,792 * Bill Clement............................ 202,507 * Michael Denton, Jr...................... 305,014 * Michael Scott Blechman Family Trust..... 830,904 1.55% Gilbert Kitt............................ 210,000 * Nick Martin Co.......................... 207,808 * Nicholas Martin Living Trust............ 207,808 Dan Cafolla Profit Sharing Plan......... 105,301 * Tom Hickey.............................. 389,795 *
20 23
NUMBER OF SHARES NUMBER OF SHARES OF COMMON OF COMMON STOCK HELD AND STOCK UNDERLYING PERCENTAGE OF INTERESTS OFFERED PURSUANT WARRANTS OFFERED PRIOR TO ANY SALES TO THIS PURSUANT TO THIS MADE PURSUANT TO THIS SHAREHOLDER PROSPECTUS PROSPECTUS PROSPECTUS(1) ----------- ---------- ---------- ------------- OCTOBER 1998 WARRANT SELLING SHAREHOLDER Johnathon Drake......................... 99,900 * VISION MARK SELLING SHAREHOLDER C&A Services, LLC....................... 300,000 (3) 9,700,000 (4) 15.70% SIGN BUILDERS SELLING SHAREHOLDERS Sign Builders of America, Inc........... 329,101 Lance Adams............................. 94,030 OTHER SELLING SHAREHOLDERS Katherine D. Banks...................... 5,000 80,000 * James N. Perkins........................ 50,000 * H. Scott Phillips....................... 50,000 Market Pathways......................... 40,000 * John E. Palmer.......................... 7,500 * H. Marcia Smolens....................... 7,500 Barry Kitt.............................. 125,000 * Gilbert Kitt............................ 125,000 * Pinnacle Fund, L.P...................... 538,979 (2) 1.00% Sam Chawkin............................. 48,500 * SFT Consulting.......................... 20,000 * TOTAL............................... 5,573,460 10,599,792 25.1% ========== =========== ==========
- -------------------- * Less than 1% (1) This percentage was calculated including shares issuable upon the exercise of warrants into shares of the Company's Common Stock. (2) All combined, Pinnacle Fund, L.P. owns 1,860,000 shares (including 100,000 warrants), which represents 3.46% of the Company's outstanding common stock. (3) These 300,000 shares of SI Diamond Common Stock shall not be issued, if at all, until the Company enters into a letter of intent for the installation of certain of its operating systems resulting from Vision Mark's representation of a subsidiary of SI Diamond. (4) These warrants shall only be exercisable, if at all, upon the achievement of certain milestones resulting from the representation of SI Diamond by Vision Mark. 21 24 DESCRIPTION OF CAPITAL STOCK The authorized capital stock of SI Diamond consists of 120,000,000 shares of common stock, par value $.001 per share, and 2,000,000 shares of preferred stock, par value $1 per share. The preferred stock may be issued in series and currently consists of the Series G preferred stock, of which 1,150 shares are issued and outstanding. After giving effect to the conversion of all 10,599,792 warrants which are subject to the prospectus, there would be 64,285,316 shares of common stock issued and outstanding. Shares of common stock are reserved for issuance upon exercise of warrants including all shares of common stock underlying certain warrants included in this Prospectus. 5,702,008 additional shares are reserved for issuance under SI Diamond's stock option plans and 1,421,479 additional shares are reserved for issuance upon the conversion of the Series G preferred stock. COMMON STOCK The holders of common stock are entitled to one vote per share, voting with the holders of any other class of stock entitled to vote, without regard to class, on all matters to be voted on by the shareholders, including the election of directors. All issued and outstanding shares of common stock are fully paid and nonassessable. The common stock is currently listed on the OTC Bulletin Board. Subject to any prior and superior rights of the preferred stock, the holders of common stock are entitled to receive dividends when, and if, declared by the Board of Directors from funds legally available. Currently, no series of preferred stock has rights that are prior and superior to the common stock with respect to dividends. In the event of any liquidation, dissolution or winding up of the affairs of SI Diamond, the holders of the common stock are entitled to receive, pro rata, any assets of the company remaining after payment has been made in full to the holders of any series of preferred stock with a liquidation preference. Currently, only the holders of the Series G preferred stock are entitled to a liquidation preference. PREFERRED STOCK The preferred stock may be issued from time to time in one or more series as may be established and designated from time to time by the Board of Directors by resolution. The voting powers, preferences and relative, participating, optional and other special rights and the qualifications, limitations or restrictions of any series of preferred stock shall be as stated in the resolution or resolutions of the Board of Directors that provides for the designation of such series. With the exception of shares issued pursuant to any duly adopted stock option plan of the Company, no shares of preferred stock may be issued to any officer or director of SI Diamond or any shareholder who directly or indirectly owns greater than five percent (5%) of the issued and outstanding voting stock of SI Diamond or any affiliate of such persons, without the affirmative vote of a majority in interest of the disinterested shareholders. Under the Texas Business Corporation Act, each series of preferred stock is entitled to vote as a class with respect to a proposed 22 25 amendment to SI Diamond's Restated Articles of Incorporation in certain circumstances. As of November 19, 1999, the only preferred stock of SI Diamond outstanding was its Series G preferred stock. Series G preferred stock There are 3,000 shares of Series G preferred stock currently authorized for issuance, of which 1,150 shares are issued and outstanding. Subject to adjustment in certain circumstances, each share of Series G preferred stock is convertible into that number of shares of common stock determined by dividing the original issue price of the Series G preferred stock, plus an amount equal to ten percent (10%) of the issue price per annum, by $1.00. Except as provided by law, the holders of Series G preferred stock shall be entitled to a number of votes equal to the number of shares of common stock into which their respective shares of Series G preferred stock are then convertible on the record date for the taking of such vote of shareholders. Holders of Series G preferred stock shall be entitled to notice of all shareholders meetings or written consents with respect to which they would be entitled to vote. In the event of any liquidation, dissolution or winding-up of SI Diamond, either voluntary or involuntary, the holders of shares of the Series G preferred stock then issued and outstanding shall be entitled to be paid out of the assets of SI Diamond available for distribution to its shareholders, whether from capital, surplus or earnings, before any payment shall be made to the holders of shares of the common stock, an amount per share equal to the sum of (i) the stated value and (ii) an amount equal to ten percent (10%) of the stated value multiplied by the fraction N/365, where N equals the number of days elapsed since the issue date of the Series G preferred stock. If, upon any liquidation of SI Diamond, the assets available for distribution shall be insufficient to pay the holders of shares of the Series G preferred stock and the holders of any other series of preferred stock with a liquidation preference equal to the liquidation preference of the Series G preferred stock the full amounts to which they shall respectively be entitled, the holders of shares of the Series G preferred stock and the holders of any other series of preferred stock with liquidation preference equal to the liquidation preference of the Series G preferred stock shall receive all of the assets of the Company available for distribution and each such holder of shares of the Series G preferred stock and the holders of any other series of preferred stock with a liquidation preference equal to the liquidation preference of the Series G preferred stock shall share ratably in any distribution in accordance with the amounts due such shareholders. After payment shall have been made to the holders of shares of the Series G preferred stock of the full amount to which they shall be entitled, as aforesaid, the holders of shares of the Series G preferred stock shall be entitled to no further distributions thereon and the holders of shares of the common stock and of shares of any other series of stock of the Company shall be entitled to share, according to their respective rights and preferences, in all remaining assets of SI Diamond available for distribution to its shareholders. SHARES ELIGIBLE FOR FUTURE SALE As of November 19, 1999, there were 53,685,524 shares of common stock outstanding, of which 45,429,047 shares of common stock were freely tradable without restriction or further registration under the Securities Act by persons other than "affiliates" of the Company. As of that date, the remaining shares of 23 26 common stock were deemed "restricted securities," as defined in Rule 144 under the Securities Act, and may not be resold in the absence of registration under the Securities Act or pursuant to an exemption from such registration, including exemptions provided by Rule 144 under the Securities Act. Under Rule 144, persons who have held securities for a period of at least one year may sell a limited amount of such securities without registration under the Securities Act. Rule 144 also permits, under certain circumstances, persons who are not affiliates of SI Diamond, to sell their restricted securities without quantity limitations once they have completed a two-year holding period. The Registration Statement, of which this prospectus is a part, pertains to - 5,573,460 shares of common stock which are currently "restricted securities"; and - 10,599,792 shares of common stock which underlie existing warrants. The Company is obligated to maintain the effectiveness of the Registration Statement for varying periods of time, pursuant to separate agreements with certain groups of the selling shareholders. In addition to the shares of common stock which are outstanding as of November 19, 1999, 5,702,008 shares of common stock have been reserved for issuance pursuant to SI Diamond's stock option plans and 1,421,479 shares have been reserved for issuance upon the conversion of the Series G preferred stock. 10,599,792 shares of common stock have also been reserved for issuance upon exercise of warrants that have been issued by SI Diamond (all of which are subject to this prospectus). No prediction can be made as to the effect, if any, that future sales, or the availability of shares of common stock for future sales, will have on the market price prevailing from time to time. Sales of substantial amounts of common stock by SI Diamond or by shareholders who hold "restricted securities," or the perception that such sales may occur, could adversely affect prevailing market prices for the common stock. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the common stock is American Securities Transfer, Incorporated, 12039 West Alameda Parkway, Lakewood, Colorado 80228. CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND TEXAS LAW SI Diamond's Restated Articles currently contain provisions which could be considered to have anti-takeover effects. First, the authorized and unissued shares of SI Diamond's preferred stock and common stock could be used by incumbent management to make more difficult and thereby discourage an attempt to acquire control of SI Diamond, even though some shareholders may deem such an acquisition desirable. For example, the shares of unissued preferred stock and unissued common stock could be privately placed with purchasers who might support the Board of Directors in opposing a hostile takeover bid. The issuance of the unissued preferred stock with voting rights and/or the unissued common stock could also be used to dilute the stock ownership and voting power of a third party seeking to remove 24 27 directors, replace incumbent directors, accomplish certain business combinations, or alter, amend, or replace provisions in SI Diamond's Restated Articles. To the extent that it impedes any such attempt, the unissued preferred stock and unissued common stock may serve to perpetuate current management. From time to time, SI Diamond evaluates potential transactions and acquisitions, which if consummated, may require the issuance of the unissued preferred stock or unissued common stock. SI Diamond's Restated Articles require a classified Board of Directors pursuant to which only one-third (1/3) of the Board of Directors is elected each year for a term of three years. Therefore, even when a shareholder, or a group of shareholders, has sufficient voting power to elect all of the directors to be elected every year, SI Diamond's classified Board could have the effect of requiring two successive annual meetings to replace a majority of the Board of Directors and three annual meetings to replace the entire Board of Directors. There is no cumulative voting with respect to the election of directors. SI Diamond's Restated Articles also contain a provision which states that with the sole exception of shares issued pursuant to the duly adopted stock option plans, no shares of SI Diamond's preferred stock shall be issued or sold to any officer or director of SI Diamond, or any shareholder who directly or indirectly owns more than five percent (5%) of the issued and outstanding voting stock of SI Diamond, or any affiliate of such a person, without the affirmative vote of a majority in interest of the disinterested shareholders of SI Diamond. SI Diamond shall not be obligated to deliver notices or offer voting stock for sale pursuant to these provisions in respect of the following issuances of voting stock: (a) pursuant to employee, director or consultant stock option, purchase, bonus, exchange or other such plans or upon the exercise of options or other rights granted thereunder, and (b) in connection with transactions in which shares of voting stock are issued to security holders of a company being acquired by SI Diamond or to a company some or all of whose assets are being acquired by SI Diamond. The Restated Articles limit the liability of directors of SI Diamond in their capacity as directors. Specifically, the directors of SI Diamond will not be liable to SI Diamond or its shareholders for monetary damages for an act or omission in a director's capacity as a director, except for liability for the following: - for any breach of the director's duty of loyalty to SI Diamond or its shareholders, - for any act or omission not in good faith which constitutes a breach of duty of the director to SI Diamond or acts or omissions which involve intentional misconduct or a knowing violation of the law, - for transactions from which a director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office, - for an act or omission for which the liability of a director is expressly provided for by an applicable statute, or 25 28 - for acts related to an unlawful stock repurchase or payment of a dividend. The overall effect of the provisions in SI Diamond's current Restated Articles described above would be to make more difficult or discourage a merger, tender, offer or proxy contest, even if such transaction or occurrence generally is favorable to the interests of the shareholders, or they may delay or frustrate the assumption of control by a holder of a large block of SI Diamond's securities and the removal of incumbent management, even if such removal may be beneficial to the shareholders. EXPERTS The consolidated balance sheets as of December 31, 1998 and 1997 and the consolidated statements of operations, stockholders' equity and cash flows for the years then ended, incorporated by reference in this prospectus, have been incorporated herein in reliance on the report, which includes an explanatory paragraph regarding SI Diamond's ability to continue as a going concern, of Wallace Sanders & Company, independent accountants, given on the authority of that firm as experts in accounting and auditing. LEGAL OPINIONS Certain legal matters in connection with the common stock offered hereby have been passed upon for the Company by Kilpatrick Stockton LLP. 26 29 ================================================================================ YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THE SELLING SHAREHOLDERS ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF SI DIAMOND COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF THE SHARES. ------------------- TABLE OF CONTENTS
Page ---- Risk factors.......................................4 Where you can find more information...............13 Documents incorporated by reference...............14 Use of proceeds...................................15 Plan of distribution and selling shareholders.....15 Selling Shareholders table........................20 Description of capital stock......................22 Experts...........................................26 Legal Opinions....................................26
SI DIAMOND TECHNOLOGY, INC. [LOGO APPEARS HERE] 5,573,460 SHARES OF COMMON STOCK (PAR VALUE $.001 PER SHARE) 10,599,792 SHARES OF COMMON STOCK UNDERLYING WARRANTS ---------- PROSPECTUS ---------- NOVEMBER _____, 1999 ================================================================================ 30 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The estimated fees and expenses payable in connection with this offering, all of which are payable by SI Diamond, are as follows: Securities and Exchange Commission registration fee....... $ 257.91 Printing and engraving expenses........................... 4,000.00 Legal fees and expenses................................... 5,000.00 Accounting fees and expenses.............................. 4,000.00 Miscellaneous ............................................ 2,000.00 ----------- Total............................................... 15,257.91 ===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Article 2.02A(16) and Article 2.01-1 of the Texas Business Corporation Act and Article VIII of SI Diamond's Bylaws provide it with broad powers and authority to indemnify its directors and officers and to purchase and maintain insurance for such purposes. Pursuant to such statutory and Bylaw provisions, SI Diamond has purchased insurance against certain costs of indemnification that may be incurred by it and its officers and directors. See "Item 17. Undertakings" for a description of the Securities and Exchange Commission's position regarding such indemnification provisions. Additionally, Article Seven(C) of the Restated Articles, provides that a director of SI Diamond is not liable to the company or its shareholders for monetary damages for any act or omission in the director's capacity as director, except that Article Seven(C) does not eliminate or limit the liability of a director for: - breaches of his duty of loyalty to SI Diamond and its shareholders; - acts or omissions not in good faith or which constitute a breach of duty of a director or involve intentional misconduct or a knowing violation of law; - transactions from which a director receives an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director's office; - acts or omissions for which liability is specifically provided by statute; and - acts relating to unlawful stock purchases or payments of dividends. Article Seven(C) also provides that any subsequent amendments to Texas statutes that further limit the liability of directors will inure to the benefit of the directors, without any further action by shareholders. Any repeal or modification of Article Seven(C) shall not adversely affect any right of protection of a director existing at the time of the repeal or modification. II-2 31 The foregoing discussion is not intended to be exhaustive and is qualified in its entirety by each of such documents and such statutes. ITEM 16. EXHIBITS See Index to Exhibits on page II - 6 for a descriptive response to this item. 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 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. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) 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 of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 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 of 1933 and will be governed by the final adjudication of such issue. II-3 32 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON BEHALF OF THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF AUSTIN, STATE OF TEXAS, ON NOVEMBER 24, 1999. SI DIAMOND TECHNOLOGY, INC. By /s/ Marc W. Eller ------------------------------------ Marc W. Eller Chairman and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Marc W. Eller and Douglas P. Baker, and each or either of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, 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 any subsequent registration statements relating to the offering to which this Registration Statement relates, and to file the same, with all 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 in and about the premises, as fully and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
Signature Title Date --------- ----- ---- /s/ Marc W. Eller Chairman of the Board of November 24, 1999 - -------------------------------------------- Directors and Marc W. Eller Chief Executive Officer (Principal Executive Officer) /s/ Dr. Zvi Yaniv President and November 24, 1999 - -------------------------------------------- Chief Operating Officer Dr. Zvi Yaniv and Director /s/ Douglas P. Baker Vice President, November 24, 1999 - -------------------------------------------- Chief Financial Officer Douglas P. Baker (Principal Financial and Accounting Officer)
II-4 33 /s/ Ronald J. Berman Director November 24, 1999 - -------------------------------------------- Ronald J. Berman /s/ Philip C. Shaffer Director November 24, 1999 - -------------------------------------------- Philip C. Shaffer /s/ David R. Sincox Director November 24, 1999 - -------------------------------------------- David R. Sincox /s/ Nicholas Martin, Jr. Director November 24, 1999 - -------------------------------------------- Nicholas Martin, Jr. /s/ Charles C. Bailey Director November 24, 1999 - -------------------------------------------- Charles C. Bailey
II-5 34 INDEX TO EXHIBITS The exhibits indicated by an asterisk (*) are incorporated by reference from previous filings with the Commission.
EXHIBIT DESCRIPTION OF EXHIBIT SEQUENTIALLY NUMBER NUMBERED PAGES 4.1* Amended and Restated Articles of Incorporation of the Company as filed on February 14, 1997, with the Secretary of State of the State of Texas (Exhibit 3.1 to the Company's Current Report on Form 8-K dated as of February 14, 1997). 4.2* Statement of Resolutions Establishing and Designating the Series F Preferred Stock of the Company as filed with the Secretary of State of the State of Texas on March 10, 1997 (Exhibit 3.1 to the Company's Current Report on Form 8-K dated as of March 7, 1997). 4.3* Amendment to Amended and Restated Articles of Incorporation of the Company amending the Company's Series E Preferred Stock, as filed with the Secretary of State of the State of Texas on May 1, 1997 (Exhibit 3(I).1 to the Company's Current Report on Form 8-K dated as of August 4, 1997). 4.4* Amendment to Amended and Restated Articles of Incorporation of the Company amending the Company's Series F Preferred Stock, as filed with the Secretary of State of the State of Texas on August 4, 1997 (Exhibit 3(I).2 to the Company's Current Report on Form 8-K dated as of August 4, 1997.) 4.5* Amendment to Amended and Restated Articles of Incorporation of the Company amending the Company's Series F Preferred Stock, as filed with the Secretary of State of the State of Texas on March 25, 1998 (Exhibit 4.38 to the Company's Registration Statement on Form S-3 [No. 333-40711] dated as of June 17, 1998.)
II-6 35
EXHIBIT DESCRIPTION OF EXHIBIT SEQUENTIALLY NUMBER NUMBERED PAGES 4.6* Form of Certificate for shares of the Company's common stock (Exhibit 4.1 to the Company's Registration Statement on Form SB-2 (No. 33-51466-FW) dated January 7, 1993). 4.7* Form of warrant Issued to Swartz Investments, Inc. (Exhibit 4.5 to the Company's Current Report on Form 8-K dated as of January 19, 1996 (File No. 1-11602)). 4.8* Statement of Resolutions Establishing and Designating the Company's Series G preferred stock, as filed with the Secretary of State of the State of Texas on June 11, 1997 (Exhibit 3.1 to the Company's Current Report on Form 8-K, dated as of July 25, 1997 (File No. 1-11602)). 4.9* Regulation D Subscription Agreement dated as of November 11, 1998, by and between the Company and C&A Services, L.L.C., for the issuance of warrants to purchase shares of Common Stock of the Company (Exhibit 4.1 to the Company's Current Report on Form 8-K dated as of December 7, 1998). 4.10* Consulting and Advisory Services Agreement by and between the Company and C&A Services, L.L.C. dated as of November 11, 1998 (Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of December 7, 1998.) 4.11* Marketing Agent Agreement by and between Electronic Billboard Technology, Inc. And Vision Mark, L.L.C. dated as of November 11, 1998. (Exhibit 10.2 to the Company's Current Report on Form 8-K dated as of December 7, 1998.)
II-7 36
EXHIBIT DESCRIPTION OF EXHIBIT SEQUENTIALLY NUMBER NUMBERED PAGES 4.12* Form of Rights Agreement dated as of June 18, 1998, between the Company and American Securities Transfer, Incorporated, as Rights Agent, which includes as Exhibit A the form of Statement of Resolution establishing and designating series of preferred stock as "Series H Junior Participating Preferred Stock" and fixing and determining the relative rights and preferences thereof, as Exhibit B the form of Rights Certificate, and as Exhibit C the Summary of Rights to Purchase Preferred Shares (Exhibit 4.1 to the Company's Current Report on Form 8-K dated as of June 18, 1998). 4.13* Asset Purchase Agreement by and among SI Diamond Technology, Inc., SIDT, Inc., Sign Builders of America, Inc. and Lance Adams dated as of August 31, 1999. (Exhibit 2.1 to the Company's Current Report on Form 8-K dated as of September 3, 1999.) 4.14* Secured Promissory Note dated as of September 3, 1999 by SIDT, Inc. as Maker and Sign Builders of America, Inc. and Sign Builders, Inc., collectively as Payee. (Exhibit 4.1 to the Company's Current Report on Form 8-K dated as of September 3, 1999.) 5.1 Opinion of Kilpatrick Stockton LLP, as to certain legal aspects of the offering. 23.1 Consent of Kilpatrick Stockton LLP (included in Exhibit 5.1). 23.2 Consent of Wallace Sanders & Company. 24 Powers of Attorney (set forth on the signature page of this Registration Statement).
II-8 EX-5.1 2 OPINION OF KILPATRICK STOCKTON LLP 1 EXHIBIT 5.1 [LETTERHEAD OF KILPATRICK STOCKTON LLP APPEARS HERE] Board of Directors SI Diamond Technology, Inc. 3006 Longhorn Boulevard Austin, Texas 78758 Gentlemen: We are acting as counsel to SI Diamond Technology, Inc., a Texas corporation (the "Company"), in connection with the proposed offer and sale by certain selling shareholders of up to 16,173,252 shares of common stock. In our capacity as counsel to the Company, we have participated in the preparation of Post-Effective Amendment No. 1 to Registration Statement No. 333-78907 on Form S-3 of the Company with respect to the offer and sale of the common stock which was filed with the Securities and Exchange Commission under the Securities Act of 1933, and the General Rules and Regulations thereunder. Capitalized terms used herein shall have the meanings ascribed to them in the Registration Statement. In connection with the opinions expressed below, we have examined a signed copy of the Registration Statement, corporate records of the Company (on which we have relied with respect to the accuracy of the material factual matters covered thereby), and such other documents as we have deemed necessary or appropriate for purposes of the opinions expressed below. Based on the foregoing and subject to the qualifications and limitations set forth below, we are of the opinion that (i) the shares of common stock held by the selling shareholders are validly issued, fully paid and nonassessable; and (ii) the shares of common stock to be issued pursuant to the warrants are validly authorized and, when such shares have been duly delivered against payment as provided in the warrants, such shares shall be validly issued, fully paid and nonassessable. Our opinion is limited in all respects to the substantive law of the State of Texas and the federal law of the United States, and we assume no responsibility as to the applicability thereto, or the effect thereon, of the laws of any other jurisdiction. The opinion expressed in this letter is rendered as of the date hereof, and we undertake no, and hereby disclaim any, obligation to advise you of any changes in or new developments which might affect matters or opinions set forth herein. We hereby consent to the use of this opinion as an exhibit to the Registration Statement and to the statement made regarding me under the caption "Legal Opinions" in the prospectus included in the Registration Statement. Very truly yours, KILPATRICK STOCKTON LLP By /s/ DONALD T. LOCKE --------------------------------- Donald T. Locke EX-23.2 3 CONSENT OF WALLACE SANDERS & COMPANY 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated February 15, 1999 (except as to Note 15, which is as of March 15, 1999), which appears on page 18 of the annual report on Form 10-KSB of SI Diamond Technology, Inc. and subsidiaries for the year ended December 31, 1998, and to the reference to our Firm under the caption "Experts" in the Prospectus. /s/ Wallace Sanders & Company ----------------------------------------- WALLACE SANDERS & COMPANY Dallas, Texas November 24, 1999 -----END PRIVACY-ENHANCED MESSAGE-----