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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| US Dataworks, | AMEX:UDW | AMEX | Ordinary Share |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.00 | - |
| Registration No. 333-148039 |
|
Nevada
(State or Other Jurisdiction of Incorporation or Organization) |
84-1290152
(I.R.S. Employer Identification Number) |
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
| (Do not check if a smaller reporting company) |
The information in this prospectus is not complete and may be changed. The selling securityholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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Consent of Ham, Langston & Brezina, LLP
About This Prospectus
You should rely only on the information provided in or incorporated by reference in this
prospectus, the registration statement, a prospectus supplement or an amendment. We have not
authorized anyone to provide you with information or to represent anything not contained in this
prospectus. You must not rely on any unauthorized information or representations. The selling
stockholders are offering to sell, and seeking offers to buy, only the shares of common stock
covered by this prospectus, and only under circumstances and in jurisdictions where it is lawful to
do so. The information contained in this prospectus is current only as of its date, regardless of
the time of delivery of this prospectus or of any sale of the shares.
You should read carefully the entire prospectus, as well as the documents incorporated by
reference in the prospectus, before making an investment decision. All references to “US
Dataworks,” “we,” “us,” “our,” or the “Company” in this prospectus mean US Dataworks, Inc. and its
subsidiaries, except where it is made clear that the term means only the parent company.
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THE COMPANY
US Dataworks is a developer of payment processing software, serving several of the top 25
banking institutions, top 10 credit card issuers, major retailers and the United States Government.
We generate revenue from the licensing, system integration and maintenance of our core product,
Clearingworks, and its component subsystems, ClearingworksACH, ClearingworksCHECK21,
ClearingworksPAYMENTS and ClearingworksSECURE. Our software is designed to enable organizations to
transition from traditional paper-based payment and billing processes to electronic payment
solutions. Our products include check processing, point-of-purchase transactions and turnkey
Automated Clearing House (ACH) payments. ACH payments are highly reliable and efficient electronic
fund transfers among participating depository financial institutions including the Federal Reserve,
the central bank of the United States. Our products are designed to provide organizations with an
in-house solution that will complement and enhance such organizations’ existing technologies,
systems and operational workflow. Our strategy is to identify, design and develop products that
fill specific niches in the payment processing industry.
MICRworks
tm
, Clearingworks
®
, Returnworks
tm
,
and Remitworks
tm
are trademarks of US Dataworks. Other trademarks referenced
herein are the property of their respective owners.
Our executive offices are located at One Sugar Creek Center Blvd., 5
th
Floor, Sugar
Land, TX 77478 and our telephone number at those offices is (281) 504-8000.
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully
consider the risks and uncertainties and all other information contained or incorporated by
reference in this prospectus before you purchase shares of our common stock, including the risks
and uncertainties discussed below, as well as any modification, replacement or update to these
risks and uncertainties that are reflected in any future filings we make with the SEC as described
under the caption “Documents Incorporated By Reference” below, which will also be incorporated by
reference herein in their entirety.
The risks and uncertainties described below are not the only ones we face. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial may also impair
our business operations. If any of the following risks actually occurs, our business, financial
condition and results of operations could be materially and adversely affected. As a result, the
trading price of our common stock could decline, and you could lose part or all of your investment.
We have a history of losses and may not operate profitably in the future.
We have a history of losses and our net losses and negative cash flow may continue for the
foreseeable future. As of December 31, 2007, our accumulated deficit was ($57,682,571). We believe
that our planned growth and profitability will depend in large part on our ability to promote our
brand name, gain clients and expand our relationships with clients for whom we could provide
licensing agreements and system integration. Accordingly, we intend to invest heavily in marketing,
strategic partnership, development of our client base and development of our marketing technology
and operating infrastructure. If we are not successful in promoting our brand name and expanding
our client base, it will have a material adverse effect on our financial condition and our ability
to continue to operate our business.
Our ability to continue as a going concern may be contingent upon our ability to secure capital
from prospective investors or lenders.
The consolidated financial statements, which are incorporated by reference, have been prepared
assuming we will continue on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. We believe we currently have
adequate cash to fund anticipated cash needs through December 31, 2008. However, we may need to
raise additional capital in the future. Any equity financing may be dilutive to shareholders, and
debt financing, if available, will increase expenses and may involve restrictive covenants. We may
be required to raise additional capital, at times and in amounts that are uncertain, especially
under the current capital market conditions. These factors raise substantial doubt about our
ability to continue as a going concern. Under these circumstances, if we are unable to obtain
additional capital or are required to raise it on undesirable terms, it may have a material adverse
effect on our financial condition, which could require us to:
•
curtail our operations significantly;
•
sell significant assets;
•
seek arrangements with strategic partners or other parties that may require us to
relinquish significant rights to products, technologies or markets; or
•
explore other strategic alternatives including a merger or sale of US Dataworks.
Our financial statements do not include any adjustments relating to the recoverability and
classification of recorded assets or liabilities that might be necessary should we be unable to
continue as a going concern.
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Our operating results are subject to fluctuations caused by many factors that could cause us to
fail to achieve our revenue or profitability expectations, which in turn could cause our stock
price to decline.
Our operating results can vary significantly depending upon a number of factors, many of which
are outside our control. Factors that may affect our quarterly operating results include:
•
market acceptance of and changes in demand for our products and services;
•
gain or loss of clients or strategic relationships;
•
announcement or introduction of new software, services and products by us or by our
competitors;
•
our ability to build brand recognition;
•
timing of sales to customers;
•
price competition;
•
our ability to upgrade and develop systems and infrastructure to accommodate growth;
•
our ability to attract and integrate new personnel in a timely and effective manner;
•
our ability to introduce and market products and services in accordance with market
demand;
•
changes in governmental regulation;
•
reduction in or delay of capital spending by our clients due to the effects of
terrorism, war and political instability; and
•
general economic conditions, including economic conditions specific to the financial
services industry.
In addition, each quarter we derive a significant portion of our revenue from agreements
signed at the end of the quarter. Our operating results could suffer if the timing of these
agreements is delayed. Depending on the type of agreements we enter into, we may not be able to
recognize revenue under these agreements in the quarter in which they are signed. Some of all of
these factors could negatively affect demand for our products and services, and our future
operating results.
Most of our operating expenses are relatively fixed in the short-term. We may be unable to
adjust spending rapidly to compensate for any unexpected sales shortfall, which could harm our
quarterly operating results. Because of the emerging nature of the markets in which we compete, we
do not have the ability to predict future operating results with any certainty. Because of the
above factors, you should not rely on period-to-period comparisons of results of operation as an
indication of future performances.
Because a small number of customers have historically accounted for and, may in future periods
account for, substantial portions of our revenue, our revenue could decline because of delays of
customer orders or the failure to retain customers.
We have a small number of customers that account for a significant portion of our revenue. Our
revenue could decline because of a delay in signing agreements with a single customer or the
failure to retain an existing customer. In addition, we may not obtain additional customers. The
failure to obtain additional customers or the failure to retain existing customers will harm our
operating results.
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If general economic and business conditions do not improve, we may experience decreased revenue or
lower growth rates.
The revenue growth and profitability of our business depends on the overall demand for
computer software and services in the product segments in which we compete. Because our sales are
primarily to major banking and government customers, our business also depends on general economic
and business conditions. A softening of demand caused by a weakening of the economy may result in
decreased revenue or lower growth rates. As a result, we may not be able to effectively promote
future license revenue growth in our application business.
We may not be able to attract, retain or integrate key personnel, which may prevent us from
successfully operating our business.
We may not be able to retain our key personnel or attract other qualified personnel in the
future. Our success will depend upon the continued service of key management personnel. The loss of
services of any of the key members of our management team or our failure to attract and retain
other key personnel could disrupt operations and have a negative effect on employee productivity
and morale and harm our financial results.
We operate in a market that is intensely and increasingly competitive, and if we are unable to
compete successfully, our revenue could decline and we may be unable to gain market share.
The market for financial services software is relatively new and highly competitive. Our
future success will depend on our ability to adapt to rapidly changing technologies, evolving
industry standards, product offerings and evolving demands of the marketplace.
Some of our competitors have:
•
longer operating histories;
•
larger installed customer bases;
•
greater name recognition and longer relationships with clients; and
•
significantly greater financial, technical, marketing and public relations resources
than US Dataworks.
Our competitors may also be better positioned to address technological and market developments
or may react more favorably to technological changes. We compete on the basis of a number of
factors, including:
•
the breadth and quality of services;
•
creative design and systems engineering expertise;
•
pricing;
•
technological innovation; and
•
understanding clients’ strategies and needs.
Competitors may develop or offer strategic services that provide significant technological,
creative, performance, price or other advantages over the services we offer. If we fail to gain
market share or lose existing market share, our financial condition, operating results and business
could be adversely affected and the value of the investment in us could be reduced significantly.
We may not have the financial resources, technical expertise or marketing, distribution or support
capabilities to compete successfully.
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We may be responsible for maintaining the confidentiality of our client’s sensitive information,
and any unauthorized use or disclosure could result in substantial damages and harm our reputation.
The services we provide for our clients may grant us access to confidential or proprietary
client information. Any unauthorized disclosure or use could result in a claim against us for
substantial damages and could harm our reputation. Our contractual provisions attempting to limit
these damages may not be enforceable in all instances or may otherwise fail to adequately protect
us from liability for damages.
If we do not adequately protect our intellectual property, our business may suffer, we may lose
revenue or we may be required to spend significant time and resources to defend our intellectual
property rights.
We rely on a combination of patent, trademark, trade secrets, confidentiality procedures and
contractual procedures to protect our intellectual property rights. If we are unable to adequately
protect our intellectual property, our business may suffer from the piracy of our technology and
the associated loss in revenue. Any patents that we may hold may not sufficiently protect our
intellectual property and may be challenged by third parties. Our efforts to protect our
intellectual property rights may not prevent the misappropriation of our intellectual property. Any
future infringement claims could cause us to spend significant time and money to defend our
intellectual property rights, redesign our products or develop or license a substitute technology.
We may be unsuccessful in acquiring or developing substitute technology and any required license
may be unavailable on commercially reasonable terms, if at all. In the event of litigation to
determine the validity of any third party claims or claims by us against such third party, such
litigation, whether or not determined in our favor, could result in significant expense and divert
the efforts of our technical and management personnel, regardless of the outcome of such
litigation. Furthermore, other parties may also independently develop similar or competing products
that do not infringe upon our intellectual property rights.
We may be unable to consummate future potential acquisitions or investments or successfully
integrate acquired businesses or investments or foreign operations with our business, which may
disrupt our business, divert management’s attention and slow our ability to expand the range of our
technologies and products.
We intend to continue to expand the range of our technologies and products, and we may acquire
or make investments in additional complementary businesses, technologies or products, if
appropriate opportunities arise. We may be unable to identify suitable acquisition or investment
candidates at reasonable prices or on reasonable terms, or consummate future acquisitions or
investments, each of which could slow our growth strategy. We have no prior history or experience
in investing in or acquiring and integrating complementary businesses and therefore may have
difficulties completing such transactions or realizing the benefits of such transactions, or they
may have a negative effect on our business. Such investments or acquisitions could require us to
devote a substantial amount of time and resources and could place a significant strain on our
management and personnel. To finance any acquisitions, we may choose to issue shares of our common
stock, which would dilute your interest in us. Any future acquisitions by us also could result in
significant write-offs or the incurrence of debt and contingent liabilities, any of which could
harm our operating results.
The actual or anticipated resale by the selling stockholders of shares of our common stock may
cause the market price of our common stock to decline.
The resale of our common stock by the selling stockholders through open market transactions or
other means may, depending upon the timing of the resales, depress the market price of our common
stock. Moreover, actual or anticipated downward pressure on the market price of our common stock
due to actual or anticipated resales of our common stock could cause some institutions or
individuals to engage in short sales of our common stock, which may itself cause the market price
of our common stock to decline.
Conversion of the convertible notes and exercise of the warrants will dilute the ownership interest
of existing stockholders, including holders who had previously converted their convertible notes.
The conversion of some or all of the convertible notes and the exercise of some or all of the
warrants will dilute the ownership interests of existing stockholders. Any sales in the public
market of the common stock issuable
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upon such conversion could adversely affect prevailing market prices of our common stock. In
addition, the existence of the convertible notes may encourage short selling by market participants
because the conversion of the convertible notes could depress the price of our common stock.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
When used in this prospectus, the words “believe,” “expect,” “anticipate,” “intend,” “seek,”
“will,” “may” and similar expressions are intended to identify forward-looking statements. These
forward-looking statements speak only as of the date hereof. These are statements that relate to
future periods and include, but are not limited to, statements as to customer concentration, our
efforts to develop and maintain strategic relationships, our ability to compete, growth of
competition, adequacy of cash, expectations regarding net losses and cash flow, statements
regarding our growth and profitability, investments in marketing and promotion, our need for future
financing, our dependence on personnel, our ability to respond to rapid technological change, our
ability to increase volume sales of our products and our strategic relationships. These statements
are based on certain assumptions that we have made in light of our experience in the industry as
well as our perceptions of historical trends, current conditions, expected future developments and
other factors we believe are appropriate in these circumstances. As you read and consider this
prospectus, you should understand that these statements are not guarantees of performance or
results. They involve risks, uncertainties and assumptions. Many factors could affect our actual
financial results or results of operations and could cause actual results to differ materially from
those in the forward-looking statements. These risks and uncertainties include, but are not limited
to, risks related to development of new products and services and their use by our potential
customers, our ability to attract and maintain strategic relationships, our ability to work with
our strategic partners, our ability to retain and obtain customers, our ability to protect our
proprietary rights, our ability to successfully gain market share, our dependence on a small number
of customers, our ability to obtain future financing, our ability to achieve long term viability,
and the risks set forth in this prospectus under the caption “Risk Factors” and any risk factors
discussed in future filings which are incorporated by reference. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this prospectus might not
occur and you should not place undue reliance upon them. We undertake no obligation to update
beyond that required by law any forward-looking statements, whether as a result of new information,
future events or otherwise.
All forward-looking statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by the cautionary statements included in this prospectus.
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PROCEEDS FROM THE OFFERING
We will not receive any proceeds from the sale of the shares by the selling stockholders. All
proceeds from the sale of the shares will be for the account of the selling stockholders, as
described below. We may receive proceeds upon the exercise of warrants, up to $2,000,000 at an
exercise price of $0.43 per share, held by the selling stockholders to the extent the warrant
exercise prices are paid in cash. We intend to use any such proceeds for general corporate
purposes, including working capital. See “Selling Stockholders” and “Plan of Distribution.”
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SELLING STOCKHOLDERS
We have prepared this prospectus to allow the selling stockholders or their pledges, donees,
transferors or other successors in interest, to sell, from time to time, up to an aggregate of
13,953,489 shares of our common stock, $0.0001 per value per share, issuable upon conversation of
senior secured convertible notes and up to an aggregate of 4,651,163 shares of our common stock
issuable upon exercise of warrants. All of the common stock offered by this prospectus may be
offered by the selling stockholders for their own account. We will not receive any proceeds from
the sale of these shares of common stock by the selling stockholders.
2007 Private Placement of Senior Secured Convertible Notes
On November 13, 2007, we entered into a Securities Purchase Agreement (Purchase Agreement)
with the selling stockholders pursuant to which we issued an aggregate of $4,000,000 senior secured
convertible notes (Notes) and warrants (Warrants) to purchase an aggregate of 4,651,163 shares of
our common stock (Private Placement). The Notes currently bear an interest rate of 9.81% per
annum, which is equal to LIBOR plus 5% re-calculated as of the first day of each calendar quarter.
At any time, at the option of the selling stockholder, any outstanding principal amounts and
accrued interest may be converted into shares of our common stock at a conversion price of $0.43
per share, which is equal to 110% of the dollar volume-weighted average price for our common stock
on November 12, 2007, subject to anti-dilution provisions. However, in no event will the
conversion price be less than $0.43 per share[, the market price of our common stock on November
13, 2007]. As of the date hereof, a selling stockholder may not beneficially own more than 4.99%
(Maximum Percentage) of outstanding shares of our common stock following any such conversion.
However, at any time, the selling stockholder may increase this Maximum Percentage up to 9.99% upon
sixty-one (61) days prior written notice to us. The Notes have a maturity date of November 13,
2010.
The Warrants may be exercised for an aggregate of 4,651,163 shares of our common stock at
exercise price of $0.43 per share, which is equal to 110% of the dollar volume-weighted average
price for our common stock on November 12, 2007, subject to anti-dilution provisions. However, in
no event will the exercise price be less than $0.43 per share, the market price of our common stock
on November 13, 2007. However, the selling stockholders, following any exercise, may not
beneficially own more than the Maximum Percentage in effect at the time of any such exercise. The
Warrants may be exercised at any time until 11:59 p.m., New York time on November 13, 2012.
We may also be obligated to pay fees if we fail to timely convert any portion of the Notes
upon request, in the event of a change in control or in the event of a default under the Notes. If
we fail to timely issue shares of our common stock as requested, we may be obligated to pay a
penalty equal to 1.5% of the value of the unissued share on the conversion date. If we should
enter in certain transacting where greater than 50% of our assets or equity are transferred, the
selling stockholders may redeem the Notes for either 125% of (1) the then outstanding principal
balance or (2) the value of our common stock as converted at the time of the change in control. If
such an event occurs and the entire $4 million in principal is still outstanding, the maximum
aggregate amount selling stockholders would be entitled to receive would be $5 million. If
however, the selling stockholders have converted all $4 million principal amounts into shares of
our common stock, which would equal 9,302,326, they would then be entitled to a maximum aggregate
amount equal to 9,302,326 shares multiplied by the closing price of our common stock on the
redemption date. If there should be an event of default (as defined in the Notes), we may be
obligated to pay a fee equal to 100% or 125% of the then outstanding principal amount of the Notes.
As the foregoing penalties are calculated using the closing price of our common stock on a future
date, we are unable to more accurately estimate the magnitude of these penalties.
In connection with the Private Placement, we paid approximately $76,994 in attorney’s fees for
the selling stockholders and collateral agent, approximately $20,000 in collateral agent and
consultant fees and $280,000 in placement agent fees, which represented approximately 10.4% of our
net proceeds. Following these payments we received net proceeds of approximately $3,623,000 from
the sale of the Notes. In addition, in exchange for entering into a Put Agreement with the selling
stockholders, we have agreed to pay Charles E. Ramey, our Chief Executive Officer, and John L.
Nicholson, M.D., a member of our Board of Directors (Guarantors), a fee equal to (1) two percent
(2%) of the Note principal balance for the first six months of the Note’s term, (2) two percent
(2%) of the Note principal balance for the next twelve months of the Note’s term, and (3) two
percent (2%) of the Note principal balance of the remaining eighteen months of the Note’s term.
The actual amounts we will be obligated to pay will
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be based on the amount of principal outstanding over the term of the Notes and when the Note
is paid in full or converted. The maximum amount we may be obligated to pay the Guarantors over
the next three years is an aggregate of $240,000, which would represent approximately 6.6% of our
net proceeds.
The estimated total possible payments to all selling stockholders and any of their affiliates,
in addition to the those payments set forth above, in the first year following the sale of the
Notes is approximately $342,110. We are required to pay quarterly interest payments in cash to the
selling stockholders, at the rate of 500 basis points over the then current LIBOR rate. If the
selling stockholders convert their Notes prior to the quarterly interest payment, we shall pay the
quarterly interest accrued through the date of sale. The estimated total of $342,110 is based on
the interest due for the period from November 13, 2007 to December 31, 2007 of $51,933 (using a 6
month LIBOR rate of 4.7375% on November 13, 2007), the interest due for the period from January 1,
2008 to March 31, 2008 of $96,725 (using a 6 month LIBOR rate of 4.56625% on January 2, 2008) and
estimating the interest due for the remainder of the year based on the interest payment due from
the period from January 1, 2008 to March 31, 2008 of $193,452. We intend to make all interest
payments in cash.
Except for the ownership of the Notes and the Warrants issued pursuant to the Purchase
Agreement, to our knowledge, neither the selling stockholders nor any of their affiliates has held
any position or office with, been employed by or otherwise has had any material relationship with
us within the past three years. To our knowledge, none of the selling stockholders are registered
broker-dealers or are affiliated with a registered broker-dealer. To our knowledge, none of the
selling stockholder holds a “short position” in our common stock.
In April 2004, we issued to Highbridge International LLC (formerly Smithfield Fiduciary LLC)
155,280 shares of our common stock for $1.61 per share and warrants to purchase an additional
194,100 shares at an exercise price of $1.61 per share. At the time of this transaction, this
represented 0.65% and 0.82%, respectively, of the outstanding shares
of our common stock and 0.74% and
0.93%, respectively, of the outstanding shares of our common stock excluding shares held by the
selling stockholder, its affiliates or our affiliates. Highbridge still holds the 155,280 shares
of our common stock and the warrants to purchase 155,280 shares. On March 24, 2008, the market
value of these shares of our common stock and the shares issuable upon exercise of these warrants
was $23,292 and $23,292, respectively.
The table below lists the selling stockholders and other information regarding the beneficial
ownership of the shares of our common stock by each of the selling stockholders. The second column
lists the number of shares of our common stock beneficially owned by each selling stockholder,
which includes its ownership of the convertible notes and warrants, as of December 10, 2007,
assuming conversion of all convertible notes and exercise of the warrants held by the selling
stockholders on that date, without regard to any limitations (including the Maximum Percentage
limitation) on conversion or exercise.
The third column lists the shares of our common stock being offered by this prospectus by each
selling stockholder. Based on 32,062,962 shares outstanding on November 13, 2007, of which 28,387,820
were held by persons other than the selling stockholders, affiliates of the selling stockholders or
our affiliates, the selling stockholders will hold less than one percent of our common stock
following the offering.
In accordance with the terms of a registration rights agreement among us and the selling
stockholders, this prospectus covers the resale of at least 130% of the sum of the aggregate number
of shares of our common stock issued or issuable upon conversion of the Notes and exercise of the
Warrants as of the trading day immediately preceding the date the registration statement is
initially filed with the SEC. Because the conversion price of the Notes may be adjusted, the
number of shares that will actually be issued may be more or less than the number of shares being
offered by this prospectus. Based on the conversion and exercise price of $0.43 per share, the
dollar value of the 13,953,489 shares issuable upon conversion of the Notes and 4,651,162 shares
issuable upon exercise of the Warrants is $5,200,000 and $2,600,000, respectively. The fourth
column assumes the sale of all of the shares offered by the selling stockholders pursuant to this
prospectus. The selling stockholders may sell all, some or none of their shares in this offering.
See “Plan of Distribution.”
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Shares Beneficially
Number of Shares
Shares Beneficially
Name of Selling Stockholder
Owned Prior to Offering
Being Offered
Owned After Offering
Highbridge International LLC(1)
6,259,931
7,936,047
155,280
Castlerigg Master Investments Ltd.(2)
6,976,744
9,069,767
—
Cranshire Capital, L.P.(3)
872,093
1,133,721
—
(1)
Highbridge Capital Management, LLC is the trading manager of Highbridge International LLC and
has voting control and investment discretion over securities held by Highbridge International
LLC. Glenn Dubin and Henry Swieca control Highbridge Capital Management, LLC and have voting
and dispositive power over these securities. Each of Highbridge Capital Management, LLC,
Glenn Dubin and Henry Swieca disclaim beneficial ownership of the securities held by
Highbridge International LLC.
(2)
Sandell Asset Management Corp. is the investment manager of Castlerigg Master Investments
Ltd. Thomas Sandell, Cem Hacioglu and Matthew Pliskin of Sandell Asset Management Corp. have
voting and dispositive power over these shares and may be deemed to share beneficial ownership
of the shares beneficially owned by Castlerigg Master Investments Ltd. Castlerigg
International Ltd. is the controlling shareholder of Castlerigg International Holdings Limited
which is the controlling shareholder of Castlerigg Master Investments Ltd. Each of Castlerigg
International Holdings Limited and Castlerigg International Ltd. may be deemed to share
beneficial ownership of the shares beneficially owned by Castlerigg Master Investments Ltd.
Messrs. Sandell, Hacioglu and Pliskin and Sandell Asset Management Corp., Castelrigg
International Holdings Limited, and Castlerigg International Ltd. each disclaims beneficial
ownership of the securities with respect to which indirect beneficial ownership is described.
(3)
Downsview Capital, Inc. is the general partner of Cranshire Capital, L.P. Mitchell P. Kopin of
Downsview Capital, Inc. has voting and dispositive power over these Shares. Mr. Kopin and
Downsview Capital, Inc. disclaim beneficial ownership of the shares held by Cranshire Capital, L.P.
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PLAN OF DISTRIBUTION
We are registering the shares of our common stock issuable upon conversion of the principal
and interest on the convertible notes and exercise of the warrants to permit the resale of these
shares of our common stock by the holders of the convertible notes and warrants from time to time
after the date of this prospectus. We will not receive any of the proceeds from the sale by the
selling stockholders of the shares of our common stock. We will bear all fees and expenses
incident to our obligation to register the shares of our common stock.
The selling stockholders may sell all or a portion of the shares of our common stock
beneficially owned by them and offered hereby from time to time directly or through one or more
underwriters, broker-dealers or agents. If the shares of our common stock are sold through
underwriters or broker-dealers, the selling stockholders will be responsible for underwriting
discounts or commissions or agent’s commissions. The shares of our common stock may be sold in one
or more transactions at fixed prices, at prevailing market prices at the time of the sale, at
varying prices determined at the time of sale, or at negotiated prices. These sales may be
effected in the following ways, which may involve crosses or block transactions:
•
on any national securities exchange or quotation service on which the securities may
be listed or quoted at the time of sale;
•
in the over-the-counter market;
•
in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
•
through the writing of options, whether such options are listed on an options
exchange or otherwise;
•
ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
•
block trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;
•
purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;
•
an exchange distribution in accordance with the rules of the applicable exchange;
•
privately negotiated transactions;
•
short sales;
•
sales pursuant to Rule 144;
•
broker-dealers may agree with the selling stockholders to sell a specified number of
such shares at a stipulated price per share;
•
a combination of any such methods of sale; and
•
any other method permitted pursuant to applicable law.
If the selling stockholders effect such transactions by selling shares of our common stock to
or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may
receive commissions in the form of discounts, concessions or commissions from the selling
stockholders or commissions from purchasers of the shares of our common stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those customary in the types
of transactions involved). In connection with sales of the shares of our common stock or
otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which
may in turn
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engage in short sales of the shares of our common stock in the course of hedging in positions
they assume. The selling stockholders may also sell shares of our common stock short and deliver
shares of our common stock covered by this prospectus to close out short positions and to return
borrowed shares in connection with such short sales. The selling stockholders may also loan or
pledge shares of our common stock to broker-dealers that in turn may sell such shares.
The selling stockholders may pledge or grant a security interest in some or all of the
convertible notes or shares of our common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may offer and sell the
shares of our common stock from time to time pursuant to this prospectus or any amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as
amended, amending, if necessary, the list of selling stockholders to include the pledgee,
transferee or other successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer and donate the shares of our common stock in other
circumstances in which case the transferees, donees, pledgees or other successors in interest will
be the selling stockholders for purposes of this prospectus.
The selling stockholders and any broker-dealer participating in the distribution of the shares
of our common stock may be deemed to be “underwriters” within the meaning of the Securities Act,
and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be
deemed to be underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of our common stock is made, a prospectus supplement, if
required, will be distributed which will set forth the aggregate amount of shares of our common
stock being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms constituting compensation from
the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid
to broker-dealers.
Under the securities laws of some states, the shares of our common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in some states the
shares of our common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied
with.
There can be no assurance that any selling stockholder will sell any or all of the shares of
our common stock registered pursuant to the registration statement, of which this prospectus forms
a part.
The selling stockholders and any other person participating in such distribution will be
subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which
may limit the timing of purchases and sales of any of the shares of our common stock by the selling
stockholders and any other participating person. Regulation M may also restrict the ability of any
person engaged in the distribution of the shares of our common stock to engage in market-making
activities with respect to the shares of our common stock. All of the foregoing may affect the
marketability of the shares of our common stock and the ability of any person or entity to engage
in market-making activities with respect to the shares of our common stock.
We will pay all expenses of the registration of the shares of our common stock pursuant to the
registration rights agreement, estimated to be $15,000 in total, including, without limitation,
Securities and Exchange Commission filing fees and expenses of compliance with state securities or
“blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts
and selling commissions, if any. We will indemnify the selling stockholders against liabilities,
including some liabilities under the Securities Act, in accordance with the registration rights
agreements, or the selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under the Securities Act,
that may arise from any written information furnished to us by a selling stockholder specifically
for use in this prospectus, in accordance with the related registration rights agreement, or we may
be entitled to contribution.
Once sold under the registration statement, of which this prospectus forms a part, the shares
of our common stock will be freely tradable in the hands of persons other than our affiliates.
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16
17
DOCUMENTS INCORPORATED BY REFERENCE
The SEC permits us to “incorporate by reference” the information contained in documents we
file with the SEC, which means that we can disclose important information to you by referring you
to those documents rather than by including them in this prospectus. Information that is
incorporated by reference is considered to be part of this prospectus and you should read it with
the same care that you read this prospectus. Later information that we file with the SEC will
automatically update and supersede the information that is either contained, or incorporated by
reference, in this prospectus, and will be considered to be a part of this prospectus from the date
those documents are filed. We have filed with the SEC, and incorporate by reference in this
prospectus
•
our annual report on Form 10-KSB for the fiscal year ended March 31, 2007;
•
our quarterly reports on Form 10-QSB for the fiscal quarters ended June 30, 2007,
September 30, 2007 and December 31, 2007;
•
our current reports on Form 8-K filed with the SEC on August 23, 2007, September 5,
2007, November 14, 2007, December 19, 2007, February 21, 2008 and March 5, 2008;
•
the description of our common stock set forth in our registration statement on Form
8-A filed under the Exchange Act on April 17, 2000, including any amendment or report
filed for the purpose of updating such description.
•
the description of our Series X Participating Preferred Stock Purchase Rights
contained in the registration statement on Form 8-A filed under the Exchange Act on
July 25, 2003, including any amendment or report filed for the purpose of updating such
description;
•
All documents filed by us with the SEC pursuant to the Exchange Act after the date
of the initial registration statement and prior to the effectiveness of the
registration statement; and
We also incorporate by reference all additional documents that we file with the SEC under the
terms of Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act that are made after the initial
filing date of the registration statement of which this prospectus is a part and the effectiveness
of the registration statement, as well as between the date of this prospectus and the termination
of any offering of securities offered by this prospectus. We are not, however, incorporating, in
each case, any documents or information that we are deemed to furnish and not file in accordance
with SEC rules.
You may request a copy of any or all of the documents incorporated by reference but not
delivered with this prospectus, at no cost, by writing or telephoning us at the following address
and number: US Dataworks, Inc., One Sugar Creek Center Blvd., 5
th
Floor, Sugar Land, TX
77478, Attn: Investor Relations, telephone: (281) 504-8000. We will not, however, send exhibits to
those documents, unless the exhibits are specifically incorporated by reference in those documents.
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II-1
II-2
II-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses payable by the registrant in connection
with the sale and distribution of the securities being registered hereby. Normal commission
expenses and brokerage fees are payable individually by the selling securityholders. All amounts
are estimated except the SEC registration fee.
Amount
SEC registration fee
$
151
Accounting fees and expenses
$
3,000
Legal fees and expenses
$
10,000
Miscellaneous
$
1,849
Total
$
15,000
Item 15. Indemnification of Directors and Officers
Sections 78.7502 and 78.751 of the General Corporation Law of Nevada provides for the
indemnification of officers, directors, and other corporate agents in terms sufficiently broad to
indemnify such persons under certain circumstances for liabilities (including reimbursement for
expenses incurred) arising under the Securities Act. Nevada Law provides, among other things, that
a corporation may indemnify a person who was or is a party to or is threatened to be made a party
to, any threatened pending or completed action by reason of their service to the corporation.
Expenses include attorney’s fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with the action suit or proceeding. In order to be
entitled to indemnification such person must have reasonably relied on information provided by the
corporation or acted in good faith. Further, discretionary indemnification may be authorized by the
Board of Directors, the stockholders, a majority vote of a quorum of disinterested directors, of if
no quorum can be obtained, by legal opinion of counsel. Article VI of the Registrant’s Amended and
Restated Bylaws (Exhibit 3(ii) to the Quarterly Report on Form 10-QSB for the quarter ended
December 31, 2002) provides for indemnification of the Registrant’s directors, officers, employees
and other agents to the extent and under the circumstances permitted by the General Corporation Law
of Nevada.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted
to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions,
the Registrant has been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable.
Item 16. Exhibits
Exhibit
Number
Description of Document
4.1
Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to
the Registrant’s Annual Report on Form 10-KSB for the year ended March
31, 2002).
4.2
Rights Agreement, dated July 24, 2003, by and between the Registrant
and Corporate Stock Transfer (incorporated by reference to Exhibit 4.1
to the Registrant’s Current Report on Form 8-K, filed with the SEC on
July 25, 2003).
4.3
Amendment No. 2 to Rights Agreement, dated November 13, 2007, by and
between the Registrant and American Stock Transfer & Trust
(incorporated by reference to Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K, filed with the SEC on November 14, 2007).
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Exhibit
Number
Description of Document
5.1*
Opinion of Hale Lane Peek Dennison and Howard, Professional Corporation.
23.1
Consent of Ham, Langston & Brezina, LLP, independent auditors.
23.3*
Consent of Hale Lane Peek Dennison & Howard (see Exhibit 5.1).
24.1*
Power of Attorney (see page II-4 of this Registration Statement).
99.1*
Securities Purchase Agreement dated as of November 13, 2007, by and
among the Registrant and the signatories thereto.
99.2*
Form of Senior Secured Convertible Promissory Note.
99.3*
Form of Common Stock Purchase Warrant.
*
Previously filed.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a
post-effective amendment to the registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii)
To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement; and
(iii)
To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement;
provided, however, that paragraphs (i), (ii) and (iii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference
in this registration statement, or is contained in a form of prospectus filed
pursuant to Rule 424(b) that is part of the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(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.
(4)
That, for purposes of determining any liability under the Securities Act, (A)
each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to
be part of the registration statement
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as of the date the filed prospectus was deemed part of and included in the
registration statement; and (B) each prospectus required to be filed pursuant to
Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x)
for the purpose of providing the information required by section 10(a) of the
Securities Act of 1933 shall be deemed to be part of and included in the
registration statement as of the earlier of the date such form of prospectus is
first used after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As provided in Rule 430B,
for liability purposes of the issuer and any person that is at that date an
underwriter, such date shall be deemed to be a new effective date of the
registration statement relating to the securities in the registration statement to
which that prospectus relates, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof. Provided, however,
that no statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale prior
to such effective date, supersede or modify any statement that was made in the
registration statement or prospectus that was part of the registration statement or
made in any such document immediately prior to such effective date.
(5)
That, for purposes of determining any liability under the Securities Act, each
filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Sugar Land, State of Texas, on March 24, 2008.
US DATAWORKS, INC.
By
/s/ Charles E. Ramey
Charles E. Ramey
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the dates indicated.
/s/ Charles E. Ramey
Charles E. Ramey
Chief Executive Officer
(Principal Executive Officer)
and Director
March 24, 2008
/s/ John T. McLaughlin
John T. McLaughlin
Chief Accounting Officer
(Principal Financial and
Accounting Officer)
March 24, 2008
/s/ Joe Abrell*
Joe Abrell
Director
March 24, 2008
/s/ J. Patrick Millinor*
J. Patrick Millinor
Director
March 24, 2008
/s/ John L. Nicholson*
John L. Nicholson, M.D.
Director
March 24, 2008
/s/ Terry Stepanik*
Terry Stepanik
Director
March 24, 2008
/s/ Hayden D. Watson*
Hayden D. Watson
Director
March 24, 2008
/s/ Thomas L. West, Jr.*
Thomas L. West, Jr.
Director
March 24, 2008
* /s/ John T. McLaughlin
John T. McLaughlin
Attorney-in-fact
March 24, 2008
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EXHIBIT INDEX
Exhibit
Number
Description of Document
4.1
Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to
the Registrant’s Annual Report on Form 10-KSB for the year ended March
31, 2002).
4.2
Rights Agreement, dated July 24, 2003, by and between the Registrant
and Corporate Stock Transfer (incorporated by reference to Exhibit 4.1
to the Registrant’s Current Report on Form 8-K, filed with the SEC on
July 25, 2003).
4.3
Amendment No. 2 to Rights Agreement, dated November 13, 2007, by and
between the Registrant and American Stock Transfer & Trust
(incorporated by reference to Exhibit 4.2 to the Registrant’s Current
Report on Form 8-K, filed with the SEC on November 14, 2007).
5.1*
Opinion of Hale Lane Peek Dennison and Howard, Professional Corporation.
23.1
Consent of Ham, Langston & Brezina, LLP, independent auditors.
23.3*
Consent of Hale Lane Peek Dennison & Howard (see Exhibit 5.1).
24.1*
Power of Attorney (see page II-4 of this Registration Statement).
99.1*
Securities Purchase Agreement dated as of November 13, 2007, by and
among the Registrant and the signatories thereto.
99.2*
Form of Senior Secured Convertible Promissory Note.
99.3*
Form of Common Stock Purchase Warrant.
*
Previously filed.
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