As filed with the Securities and Exchange
Commission on October 9, 2003. Registration No. 333-106494
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO.3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TAG-IT PACIFIC, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 95-4654481
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
21900 BURBANK BOULEVARD, SUITE 270
WOODLAND HILLS, CALIFORNIA 91367
(818) 444-4100
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
COLIN DYNE, CHIEF EXECUTIVE OFFICER
21900 BURBANK BOULEVARD, SUITE 270
WOODLAND HILLS, CALIFORNIA 91367
(818) 444-4100
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)
COPIES TO:
John J. McIlvery, Esq.
Stubbs Alderton & Markiles, LLP
15821 Ventura Boulevard, Suite 525
Encino, California 91436
(818) 444-4500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
If the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class Offering Aggregate Amount Of
of Securities Amount To Be Price Offering Registration
To Be Registered Registered(1) Per Unit Price Fee
================================================================================
Common Stock, par
value $.001 per share . 2,641,665 $5.41 (2) $14,291,407 $ 1,157
--------------------------------------------------------------------------------
Common Stock, par
value $.001 per share,
issuable upon
conversion of Series
C Convertible
Redeemable Preferred
Stock ................. 607,288 $5.41 (2) $ 3,285,428 $ 266
--------------------------------------------------------------------------------
Common Stock, par
value $.001 per share,
issuable upon exercise
of warrants ........... 458,332 $5.41 (3) $ 2,479,576 $ 201
--------------------------------------------------------------------------------
TOTAL ................. 3,707,285 $20,056,411 $ 1,624 (4)
================================================================================
(1) In the event of a stock split, stock dividend, or similar transaction
involving the Registrant's Common Stock, in order to prevent dilution, the
number of shares registered shall automatically be increased to cover the
additional shares in accordance with Rule 416(a) under the Securities Act.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c), on the basis of the average high and low prices of
the Registrant's Common Stock reported on the American Stock Exchange on
June 20, 2003.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(g), on the basis of the average high and low prices of
the Registrant's Common Stock reported on the American Stock Exchange on
June 20, 2003.
(4) A registration fee of $1,695 was paid with respect to 3,879,785 shares of
Common Stock included with the prior filing of the Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME 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.
================================================================================
SUBJECT TO COMPLETION - OCTOBER 9, 2003
PROSPECTUS
TAG-IT PACIFIC, INC.
3,707,285 SHARES OF COMMON STOCK
($0.001 par value)
----------
This prospectus relates to the offer and sale from time to time of up
to 3,707,285 shares of our common stock that are held by the stockholders named
in the "Selling Stockholders" section of this prospectus. The shares of our
common stock offered pursuant to this prospectus were originally issued to the
selling stockholders in connection with private placements of our shares,
pursuant to the exercise of warrants to purchase common stock, or pursuant to
the conversion of convertible redeemable preferred stock.
The prices at which the stockholders may sell the shares in this
offering will be determined by the prevailing market price for the shares or in
negotiated transactions. We will not receive any of the proceeds from the sale
of the shares. We will bear all expenses of registration incurred in connection
with this offering. The stockholders whose shares are being registered will bear
all selling and other expenses.
Our common stock is traded on the American Stock Exchange under the
symbol "TAG." On October 8, 2003 the last reported sale price of the common
stock on the American Stock Exchange was $5.05 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT THE RISKS YOU
SHOULD CONSIDER CAREFULLY BEFORE BUYING SHARES OF OUR COMMON STOCK.
----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
----------
The date of this prospectus is ______________
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY.............................................................3
RISK FACTORS...................................................................4
FORWARD-LOOKING STATEMENTS.....................................................9
USE OF PROCEEDS................................................................9
SELLING STOCKHOLDERS...........................................................9
PLAN OF DISTRIBUTION..........................................................14
WHERE YOU CAN FIND MORE INFORMATION...........................................16
LEGAL MATTERS.................................................................17
EXPERTS.......................................................................17
2
PROSPECTUS SUMMARY
ABOUT TAG-IT PACIFIC
Tag-It Pacific, Inc. is an apparel company that specializes in the
distribution of trim items to manufacturers of fashion apparel and licensed
consumer products, and specialty retailers and mass merchandisers. We act as a
full service outsourced trim management department for manufacturers of fashion
apparel such as Tarrant Apparel Group and Azteca Production International. We
also serve as a specified supplier of trim items to owners of specific brands,
brand licensees and retailers, including Abercrombie & Fitch, The Limited,
Express, Lerner and Miller's Outpost, among others. We also distribute zippers
under our TALON brand name to owners of apparel brands and apparel manufacturers
such as Levi Strauss & Co., VF Corporation and Tropical Sportswear, among
others. In 2002, we created a new division under the TEKFIT brand name. This
division develops and sells apparel components that utilize the patented Pro-Fit
technology, including a stretch waistband. We market these products to the same
customers targeted by our MANAGED TRIM SOLUTION and TALON zipper divisions.
ABOUT THE OFFERING
This prospectus may be used only in connection with the resale by the
selling stockholders of up to 3,707,285 shares of our common stock.
We will not receive any proceeds from the sale of the shares of common
stock offered by the selling stockholders using this prospectus. On October 8,
2003 we had 11,454,909 shares of common stock outstanding.
CORPORATE INFORMATION
We were incorporated in Delaware in September 1997. We were formed to
serve as the parent holding company of Tag-It, Inc., a California corporation,
Tag-It Printing & Packaging Ltd., which changed its name in 1999 to Tag-It
Pacific (HK) LTD, a BVI corporation, Tag-It de Mexico, S.A. de C.V., A.G.S.
Stationery, Inc., a California corporation, and Pacific Trim & Belt, Inc., a
California corporation. All of these companies were consolidated under a parent
limited liability company in October 1997. These companies became our wholly
owned subsidiaries immediately prior to the effective date of our initial public
offering in January 1998. In 2000, we formed two wholly owned subsidiaries,
Tag-It Pacific Limited, a Hong Kong corporation, and Talon International, Inc.,
a Delaware corporation.
Our executive offices are located at 21900 Burbank Boulevard, Suite
270, Woodland Hills, California 91367, and our telephone number is (818)
444-4100. Information on our website, www.tagitpacific.com, does not constitute
part of this prospectus.
3
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE YOU DECIDE TO
BUY OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE THE
MATERIAL ONES FACING OUR COMPANY. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR,
OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER.
IF THIS OCCURS, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY
LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK.
RISKS ASSOCIATED WITH THIS OFFERING
WE OPERATE IN AN INDUSTRY THAT IS SUBJECT TO SIGNIFICANT FLUCTUATIONS
IN OPERATING RESULTS FROM QUARTER TO QUARTER, THAT MAY RESULT IN UNEXPECTED
REDUCTIONS IN REVENUE AND STOCK PRICE VOLATILITY. Factors that may influence our
quarterly operating results include:
o The volume and timing of customer orders received during the
quarter;
o The timing and magnitude of customers' marketing campaigns;
o The loss or addition of a major customer;
o The availability and pricing of materials for our products;
o The increased expenses incurred in connection with the
introduction of new products;
o Currency fluctuations;
o Delays caused by third parties; and
o Changes in our product mix or in the relative contribution to
sales of our subsidiaries.
Due to these factors, it is possible that in some quarters our
operating results may be below our stockholders' expectations and those of
public market analysts. If this occurs, the price of our common stock would
likely be adversely affected.
OUR STOCK PRICE MAY DECREASE, WHICH COULD ADVERSELY AFFECT OUR BUSINESS
AND CAUSE OUR STOCKHOLDERS TO SUFFER SIGNIFICANT LOSSES. The following factors
could cause the market price of our common stock to decrease, perhaps
substantially:
o The failure of our quarterly operating results to meet
expectations of investors or securities analysts;
o Adverse developments in the financial markets, the apparel
industry and the worldwide or regional economies;
o Interest rates;
o Changes in accounting principles;
o Sales of common stock by existing shareholders or holders of
options;
o Announcements of key developments by our competitors; and
o The reaction of markets and securities analysts to
announcements and developments involving our company.
IF WE NEED TO SELL OR ISSUE ADDITIONAL SHARES OF COMMON STOCK OR ASSUME
ADDITIONAL DEBT TO FINANCE FUTURE GROWTH, OUR STOCKHOLDERS' OWNERSHIP COULD BE
DILUTED OR OUR EARNINGS COULD BE ADVERSELY IMPACTED. Our business strategy may
include expansion through internal growth, by acquiring complementary businesses
or by establishing strategic relationships with targeted customers and
suppliers. In order to do so or to fund our other activities, we may issue
additional equity securities that
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could dilute our stockholders' stock ownership. We may also assume additional
debt and incur impairment losses related to goodwill and other tangible assets
if we acquire another company and this could negatively impact our results of
operations.
WE HAVE ADOPTED A NUMBER OF ANTI-TAKEOVER MEASURES THAT MAY DEPRESS THE
PRICE OF OUR COMMON STOCK. Our stockholders' rights plan, our ability to issue
additional shares of preferred stock and some provisions of our certificate of
incorporation and bylaws and of Delaware law could make it more difficult for a
third party to make an unsolicited takeover attempt of us. These anti-takeover
measures may depress the price of our common stock by making it more difficult
for third parties to acquire us by offering to purchase shares of our stock at a
premium to its market price.
INSIDERS OWN A SIGNIFICANT PORTION OF OUR COMMON STOCK, WHICH COULD
LIMIT OUR STOCKHOLDERS' ABILITY TO INFLUENCE THE OUTCOME OF KEY TRANSACTIONS. As
of June 15, 2003, our officers and directors and their affiliates owned
approximately 31.7% of the outstanding shares of our common stock. The Dyne
family, which includes Mark Dyne, Colin Dyne, Larry Dyne, Jonathan Burstein and
the estate of Harold Dyne, beneficially owned approximately 35.3% of the
outstanding shares of our common stock. The number of shares beneficially owned
by the Dyne family includes the shares of common stock held by Azteca Production
International, which are voted by Colin Dyne pursuant to a voting agreement. The
Azteca Production International shares constitute approximately 8.8% of the
outstanding shares of common stock at June 15, 2003. Gerard Guez and Todd Kay,
significant stockholders of Tarrant Apparel Group, each own approximately 10.5%
of the outstanding shares of our common stock at June 15, 2003. As a result, our
officers and directors, the Dyne family and Messrs. Kay and Guez are able to
exert considerable influence over the outcome of any matters submitted to a vote
of the holders of our common stock, including the election of our Board of
Directors. The voting power of these stockholders could also discourage others
from seeking to acquire control of us through the purchase of our common stock,
which might depress the price of our common stock.
RISKS RELATED TO OUR BUSINESS
IF WE LOSE OUR LARGEST CUSTOMERS OR THEY FAIL TO PURCHASE AT
ANTICIPATED LEVELS, OUR SALES AND OPERATING RESULTS WILL BE ADVERSELY AFFECTED.
Our largest customer, Tarrant Apparel Group, accounted for approximately 41.5%
and 42.3% of our net sales, on a consolidated basis, for the years ended
December 31, 2002 and 2001, respectively, and 24.1% of our total sales for the
six months ended June 30, 2003. In December 2000, we entered into an exclusive
supply agreement with Azteca Production International, AZT International SA D
RL, and Commerce Investment Group, LLC that provides for a minimum of
$10,000,000 in total annual purchases by Azteca Production International and its
affiliates during each year of the three-year term of the agreement. Azteca
Production International is required to purchase from us only if we are able to
provide trim products on a competitive basis in terms of price and quality.
Our results of operations will depend to a significant extent upon the
commercial success of Azteca Production International and Tarrant Apparel Group.
If Azteca and Tarrant fail to purchase our trim products at anticipated levels,
or our relationship with Azteca or Tarrant terminates, it may have an adverse
affect on our results because:
o We will lose a primary source of revenue if either of Tarrant
or Azteca choose not to purchase our products or services;
o We may not be able to reduce fixed costs incurred in
developing the relationship with Azteca and Tarrant in a
timely manner;
o We may not be able to recoup setup and inventory costs;
o We may be left holding inventory that cannot be sold to other
customers; and
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o We may not be able to collect our receivables from them.
CONCENTRATION OF RECEIVABLES FROM OUR LARGEST CUSTOMERS MAKES
RECEIVABLE BASED FINANCING DIFFICULT AND INCREASES THE RISK THAT IF OUR LARGEST
CUSTOMERS FAIL TO PAY US, OUR CASH FLOW WOULD BE SEVERELY AFFECTED. Our business
relies heavily on a relatively small number of customers, including Tarrant
Apparel Group and Azteca Production International. This concentration of our
business reduces the amount we can borrow from our lenders under receivables
based financing agreements. Under our credit agreement with UPS Capital, for
instance, if accounts receivable due us from a particular customer exceed a
specified percentage of the total eligible accounts receivable against which we
can borrower, UPS Capital will not lend against the receivables that exceed the
specified percentage. In addition, Gerard Guez, the founder, Chairman and Chief
Executive Officer, and a significant stockholder of Tarrant Apparel Group and
Hubert Guez, the founder, Chief Executive Officer and President, and a
significant stockholder of Azteca Production International, are brothers. This
relationship between our two largest customers further concentrates our
receivables risk significantly among this family group. Further, if we are
unable to collect any large receivables due us, our cash flow would be severely
impacted.
BECAUSE WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS, WE MAY NOT BE ABLE
TO ALWAYS OBTAIN MATERIALS WHEN WE NEED THEM AND WE MAY LOSE SALES AND
CUSTOMERS. Lead times for materials we order can vary significantly and depend
on many factors, including the specific supplier, the contract terms and the
demand for particular materials at a given time. From time to time, we may
experience fluctuations in the prices, and disruptions in the supply, of
materials. Shortages or disruptions in the supply of materials, or our inability
to procure materials from alternate sources at acceptable prices in a timely
manner, could lead us to miss deadlines for orders and lose sales and customers.
OUR REVENUES MAY BE HARMED IF GENERAL ECONOMIC CONDITIONS WORSEN. Our
revenues depend on the health of the economy and the growth of our customers and
potential future customers. When economic conditions weaken, certain apparel
manufacturers and retailers, including some of our customers, have experienced
in the past, and may experience in the future, financial difficulties which
increase the risk of extending credit to such customers. Customers adversely
affected by economic conditions have also attempted to improve their own
operating efficiencies by concentrating their purchasing power among a narrowing
group of vendors. There can be no assurance that we will remain a preferred
vendor to our existing customers. A decrease in business from or loss of a major
customer could have a material adverse effect on our results of operations.
Further, if the economic conditions in the United States worsen or if a wider or
global economic slowdown occurs, we may experience a material adverse impact on
our business, operating results, and financial condition.
IF WE ARE NOT ABLE TO MANAGE OUR RAPID EXPANSION AND GROWTH, WE COULD
INCUR UNFORESEEN COSTS OR DELAYS AND OUR REPUTATION AND RELIABILITY IN THE
MARKETPLACE AND OUR REVENUES WILL BE ADVERSELY AFFECTED. The growth of our
operations and activities has placed and will continue to place a significant
strain on our management, operational, financial and accounting resources. If we
cannot implement and improve our financial and management information and
reporting systems, we may not be able to implement our growth strategies
successfully and our revenues will be adversely affected. In addition, if we
cannot hire, train, motivate and manage new employees, including management and
operating personnel in sufficient numbers, and integrate them into our overall
operations and culture, our ability to manage future growth, increase production
levels and effectively market and distribute our products may be significantly
impaired.
OUR CUSTOMERS HAVE CYCLICAL BUYING PATTERNS WHICH MAY CAUSE US TO HAVE
PERIODS OF LOW SALES VOLUME. Most of our customers are in the apparel industry.
The apparel industry historically has been subject to substantial cyclical
variations. Our business has experienced, and we expect our business to
6
continue to experience, significant cyclical fluctuations due, in part, to
customer buying patterns, which may result in periods of low sales usually in
the first and fourth quarters of our financial year.
OUR BUSINESS MODEL IS DEPENDENT ON INTEGRATION OF INFORMATION SYSTEMS
ON A GLOBAL BASIS AND, TO THE EXTENT THAT WE FAIL TO MAINTAIN AND SUPPORT OUR
INFORMATION SYSTEMS, IT CAN RESULT IN LOST REVENUES. We must consolidate and
centralize the management of our subsidiaries and significantly expand and
improve our financial and operating controls. Additionally, we must effectively
integrate the information systems of our Mexican and Caribbean facilities with
the information systems of our principal offices in California and Florida. Our
failure to do so could result in lost revenues, delay financial reporting or
adversely affect availability of funds under our credit facilities.
THE LOSS OF KEY MANAGEMENT AND SALES PERSONNEL COULD ADVERSELY AFFECT
OUR BUSINESS, INCLUDING OUR ABILITY TO OBTAIN AND SECURE ACCOUNTS AND GENERATE
SALES. Our success has and will continue to depend to a significant extent upon
key management and sales personnel, many of whom would be difficult to replace,
particularly Colin Dyne, our Chief Executive Officer. Colin Dyne is not bound by
an employment agreement. The loss of the services of Colin Dyne or the services
of other key employees could have a material adverse effect on our business,
including our ability to establish and maintain client relationships. Our future
success will depend in large part upon our ability to attract and retain
personnel with a variety of sales, operating and managerial skills.
IF WE EXPERIENCE DISRUPTIONS AT ANY OF OUR FOREIGN FACILITIES, WE WILL
NOT BE ABLE TO MEET OUR OBLIGATIONS AND MAY LOSE SALES AND CUSTOMERS. Currently,
we do not operate duplicate facilities in different geographic areas. Therefore,
in the event of a regional disruption where we maintain one or more of our
facilities, it is unlikely that we could shift our operations to a different
geographic region and we may have to cease or curtail our operations. This may
cause us to lose sales and customers. The types of disruptions that may occur
include:
o Foreign trade disruptions;
o Import restrictions;
o Labor disruptions;
o Embargoes;
o Government intervention; and
o Natural disasters.
INTERNET-BASED SYSTEMS THAT HOST OUR MANAGED TRIM SOLUTION MAY
EXPERIENCE DISRUPTIONS AND AS A RESULT WE MAY LOSE REVENUES AND CUSTOMERS. Our
MANAGED TRIM SOLUTION is an Internet-based business-to-business e-commerce
system. To the extent that we fail to adequately continue to update and maintain
the hardware and software implementing the MANAGED TRIM SOLUTION, our customers
may experience interruptions in service due to defects in our hardware or our
source code. In addition, since our MANAGED TRIM SOLUTION is Internet-based,
interruptions in Internet service generally can negatively impact our customers'
ability to use the MANAGED TRIM SOLUTION to monitor and manage various aspects
of their trim needs. Such defects or interruptions could result in lost revenues
and lost customers.
THERE ARE MANY COMPANIES THAT OFFER SOME OR ALL OF THE PRODUCTS AND
SERVICES WE SELL AND IF WE ARE UNABLE TO SUCCESSFULLY COMPETE OUR BUSINESS WILL
BE ADVERSELY AFFECTED. We compete in highly competitive and fragmented
industries with numerous local and regional companies that provide some or all
of the products and services we offer. We compete with national and
international design companies, distributors and manufacturers of tags,
packaging products, zippers and other trim items. Some of our competitors,
including Paxar Corporation, YKK, Universal Button, Inc., Avery Dennison
Corporation and
7
Scovill Fasteners, Inc., have greater name recognition, longer operating
histories and, in many cases, substantially greater financial and other
resources than we do.
IF CUSTOMERS DEFAULT ON BUYBACK AGREEMENTS WITH US, WE WILL BE LEFT
HOLDING UNSALABLE INVENTORY. Inventories include goods that are subject to
buyback agreements with our customers. Under these buyback agreements the
customer must purchase the inventories from us, under normal invoice and selling
terms, if any inventory which we purchase on their behalf remains in our hands
longer than agreed by the customer from the time we received the goods from our
vendors. If any customer defaults on these buyback provisions, we may incur a
charge in connection with our holding significant amounts of unsalable
inventory.
UNAUTHORIZED USE OF OUR PROPRIETARY TECHNOLOGY MAY INCREASE OUR
LITIGATION COSTS AND ADVERSELY AFFECT OUR SALES. We rely on trademark, trade
secret and copyright laws to protect our designs and other proprietary property
worldwide. We cannot be certain that these laws will be sufficient to protect
our property. In particular, the laws of some countries in which our products
are distributed or may be distributed in the future may not protect our products
and intellectual rights to the same extent as the laws of the United States. If
litigation is necessary in the future to enforce our intellectual property
rights, to protect our trade secrets or to determine the validity and scope of
the proprietary rights of others, such litigation could result in substantial
costs and diversion of resources. This could have a material adverse effect on
our operating results and financial condition. Ultimately, we may be unable, for
financial or other reasons, to enforce our rights under intellectual property
laws, which could result in lost sales.
IF OUR PRODUCTS INFRINGE ANY OTHER PERSON'S PROPRIETARY RIGHTS, WE MAY
BE SUED AND HAVE TO PAY LARGE LEGAL EXPENSES AND JUDGMENTS AND REDESIGN OR
DISCONTINUE SELLING OUR PRODUCTS. From time to time in our industry, third
parties allege infringement of their proprietary rights. Any infringement
claims, whether or not meritorious, could result in costly litigation or require
us to enter into royalty or licensing agreements as a means of settlement. If we
are found to have infringed the proprietary rights of others, we could be
required to pay damages, cease sales of the infringing products and redesign the
products or discontinue their sale. Any of these outcomes, individually or
collectively, could have a material adverse effect on our operating results and
financial condition.
WE MAY NOT BE ABLE TO REALIZE THE ANTICIPATED BENEFITS OF ACQUISITIONS.
We may consider strategic acquisitions as opportunities arise, subject to the
obtaining of any necessary financing. Acquisitions involve numerous risks,
including diversion of our management's attention away from our operating
activities. We cannot assure our stockholders that we will not encounter
unanticipated problems or liabilities relating to the integration of an acquired
company's operations, nor can we assure our stockholders that we will realize
the anticipated benefits of any future acquisitions.
WE MAY FACE INTERRUPTION OF PRODUCTION AND SERVICES DUE TO INCREASED
SECURITY MEASURES IN RESPONSE TO TERRORISM. Our business depends on the free
flow of products and services through the channels of commerce. Recently, in
response to terrorists' activities and threats aimed at the United States,
transportation, mail, financial and other services have been slowed or stopped
altogether. Further delays or stoppages in transportation, mail, financial or
other services could have a material adverse effect on our business, results of
operations and financial condition. Furthermore, we may experience an increase
in operating costs, such as costs for transportation, insurance and security as
a result of the activities and potential activities. We may also experience
delays in receiving payments from payers that have been affected by the
terrorist activities and potential activities. The United States economy in
general is being adversely affected by the terrorist activities and potential
activities and any economic downturn could adversely impact our results of
operations, impair our ability to raise capital or otherwise adversely affect
our ability to grow our business.
8
FORWARD-LOOKING STATEMENTS
This prospectus contains statements that constitute forward-looking
statements within the meaning of Section 21E of the Exchange Act of 1934 and
Section 27A of the Securities Act of 1933. The words "expect," "estimate,"
"anticipate," "predict," "believe" and similar expressions and variations
thereof are intended to identify forward-looking statements. Such statements
appear in a number of places in this prospectus and include statements regarding
our intent, belief or current expectations regarding our strategies, future
sales, other plans and objectives, our ability to design, develop, source and
market products, and the ability of our products to achieve or maintain
commercial acceptance. Any forward-looking statements are not guarantees of
future performance and involve risks and uncertainties. Actual results may
differ materially from those projected in this prospectus, for the reasons,
among others, described in the Risk Factors section beginning on page 4. You
should read the Risk Factors section carefully, and should not place undue
reliance on any forward-looking statements, which speak only as of the date of
this prospectus. We undertake no obligation to release publicly any updated
information about forward-looking statements to reflect events or circumstances
occurring after the date of this prospectus or to reflect the occurrence of
unanticipated events.
USE OF PROCEEDS
The proceeds from the sale of each selling stockholder's common stock
will belong to that selling stockholder. We will not receive any proceeds from
such sales.
In a May 2003 private placement, we sold 1,725,000 shares of our common
stock at a price per share of $3.50 for net proceeds to us of approximately
$5,529,000. Of these proceeds, we used approximately $4,000,000 for general
working capital purposes, and we presently intend to use approximately
$1,500,000 to purchase capital equipment primarily for our Talon zipper
business.
SELLING STOCKHOLDERS
COMMON STOCK FINANCING
In May 2003, we entered into a securities purchase agreement, pursuant
to which we sold shares of our common stock, with the following investors: Neal
I. Goldman, Prism Offshore Fund, Ltd, Prism Partners, LP, SF Capital Partners,
Ltd., MicroCapital Fund Limited Partner, MicroCapital LLC, Lagunitas Partners
LP, Gruber & McBaine International, Jon D. Gruber and Linda W. Gruber, and J.
Patterson McBaine. Pursuant to this securities purchase agreement, we sold
1,725,000 shares of our common stock at a price per share of $3.50 for aggregate
proceeds to us of $6,037,500. Roth Capital Partners LLC acted as placement agent
in connection with this private placement financing transaction. For their
services as placement agent, we paid Roth Capital Partners LLC a fee equal to 8%
of our gross proceeds from the financing ($483,000) and a $25,000
non-accountable expense allowance. In addition, we issued to Roth Capital
Partners LLC a warrant to purchase up to 172,500 shares of our common stock at
an exercise price of $5.06 per share. The warrants have a term of 5 years. These
warrants vest and become exercisable on August 30, 2003.
9
COMMON STOCK AND WARRANT FINANCINGS
HARRIS TOIBB
On December 28, 2001, we entered into stock and warrant purchase
agreement with Harris Toibb, pursuant to which we sold an aggregate 666,666
shares of our common stock at a price per share of $3.00 for aggregate proceeds
to us of $2,000,000. Of these shares, 266,666 shares were sold at the initial
closing under this agreement, and 100,000 and 300,000 shares were sold at
subsequent closings in March 2002 and February 2003, respectively. Additionally,
we issued to Mr. Toibb warrants to purchase 333,333 shares our common stock. All
of the warrants were immediately exercisable upon their issuance. The initial
exercise price for one half of the warrants is $4.34 per share and the exercise
price of the remaining warrants is $4.73 per share, representing 110% and 120%,
respectively, of the market value of our common stock on the date of the first
closing. With respect to 150,000 of these warrants, the exercise price was
reduced to $3.50 per share upon the closing of the May 2003 common stock
financing, in accordance with certain adjustment provisions contained in the
warrants. The exercise price for the warrants will be adjusted upward by 25% of
the amount, if any, that the market price of our common stock on the exercise
date exceeds the initial exercise price (as adjusted) up to a maximum exercise
price of $5.25. The warrants have a term of four years from the date of
issuance.
MARK DYNE
On January 7, 2002, we entered into stock and warrant purchase
agreement with Mark Dyne, the chairman of our board of directors, pursuant to
which we sold 166,666 shares of our common stock at a price per share of $3.00
for aggregate proceeds to us of $500,000. Additionally, we issued to Mr. Dyne
warrants to purchase 83,333 shares our common stock. All of the warrants were
immediately exercisable upon their issuance. The exercise price for one half of
the warrants is $4.34 per share and the exercise price of the remaining warrants
is $4.73 per share, representing 110% and 120%, respectively, of the market
value of our common stock on the date of closing. The exercise price for the
warrants will be adjusted upward by 25% of the amount, if any, that the market
price of our common stock on the exercise date exceeds the initial exercise
price (as adjusted) up to a maximum exercise price of $5.25. The warrants have a
term of four years from the date of issuance.
CRAGLENNON INVESTMENTS LIMITED
On January 8, 2002, we entered into stock and warrant purchase
agreement with Craglennon Investments Limited, pursuant to which we sold 83,333
shares of our common stock at a price per share of $3.00 for aggregate proceeds
to us of $250,000. Additionally, we issued to Craglennon Investments Limited
warrants to purchase 41,666 shares our common stock. All of the warrants were
immediately exercisable upon their issuance. The exercise price for one half of
the warrants is $4.34 per share and the exercise price of the remaining warrants
is $4.73 per share, representing 110% and 120%, respectively, of the market
value of our common stock on the date of closing. The exercise price for the
warrants will be adjusted upward by 25% of the amount, if any, that the market
price of our common stock on the exercise date exceeds the initial exercise
price (as adjusted) up to a maximum exercise price of $5.25. The warrants have a
term of four years from the date of issuance.
10
CONVERTIBLE REDEEMABLE PREFERRED STOCK FOR SUPPLY AGREEMENT
In September 2001, we entered into a Series C Preferred Stock purchase
agreement with Coats North America Consolidated, Inc., pursuant to which we
issued 759,494 shares of Series C Convertible Redeemable Preferred Stock to
Coats in exchange for a cash investment from Coats of $3,000,001. The Series C
Preferred Stock accrues cumulative dividends at the rate 6% per annum. Each
share of Series C Preferred Stock is convertible at the option of the holder
into the number of shares of common stock as is determined by dividing (x) the
Series C Liquidation amount (which is $3.95 plus all accrued and unpaid
dividends, as adjusted from time to time) by (y) the conversion price applicable
to such share. The conversion price is $4.94. The Series C Preferred Stock is
redeemable at the option of the holder after four years. If the holders elect to
redeem the Series C Preferred Stock, we have the option to redeem for cash at
the stated value of $3,000,001 or in the form of our common stock at 85% of the
market price of our common stock on the date of redemption. If the market price
of our common stock on the date of redemption is less than $2.75 per share, we
must redeem for cash at the stated value of the Series C Preferred Stock. We can
elect to redeem the Series C Preferred Stock at any time for cash at the stated
value. Each holder of the Series C Preferred Stock has the right to vote with
the common stock based on the number of common shares that the Series C
Preferred Stock could then be converted into on the record date.
In connection with the Series C Preferred Stock purchase agreement, we
also entered into a 10-year co-marketing and supply agreement with Coats. The
co-marketing and supply agreement provides for selected introductions into
Coats' customer base and that our trim packages will exclusively offer thread
manufactured by Coats. Total purchases from Coats for the years ended December
31, 2002 and 2001 amounted to approximately $12,276,000 and $18,247,000,
respectively.
REGISTRATION RIGHTS
Each of the investors in the private placement transactions received
"piggyback" registration rights with respect to the common stock they purchased
and with respect to the common stock issuable upon exercise of the warrants they
received, whereby they are entitled to include for registration all or any part
of the common stock they purchased and/or which underlie their warrants, in
certain eligible registration statements. The registration statement of which
this prospectus is a part qualifies as an eligible registration statement.
In connection with the May 2003 private placement financing, we also
entered into a registration rights agreement with the investors. Pursuant to the
registrant rights agreement, we agreed to file a registration statement on Form
S-3 registering the resale by the investors of the shares of common stock we
issued in the transaction and to keep the registration statement effective until
the sooner of two years or until all the registered shares are sold. This
registration rights agreement also provides that if we do not register for
resale the shares of our common stock we issued to the investors by October 27,
2003, then we must pay each of the investors 1% of aggregate purchase price paid
by such investor upon such failure to register the shares and 1% of the
aggregate purchase price paid by such investor for each month after October 27,
2003 that we do not register the shares. Pursuant to this agreement, and the
subsequent election by the other selling stockholders identified in this section
to exercise their "piggyback" registration
11
rights, we filed the registration statement of which this prospectus is a part
with the Securities and Exchange Commission to register for resale the shares of
common stock, the shares of common stock issuable upon conversion of the Series
C Preferred Stock, and the shares of common stock underlying warrants,
identified in this prospectus and owned by the selling stockholders.
OTHER MATERIAL RELATIONSHIPS WITH TAG-IT PACIFIC
Mark Dyne, a selling stockholder and the chairman of our board of
directors, loaned us $160,000 in August 1999 and $15,000 in January 1999. This
indebtedness is evidenced by unsecured promissory notes, dated August 17, 1999
and January 31, 1999, which are due and payable on demand and bear interest at a
rate of 7.0% and 7.5% per annum. During the year ended December 31, 2000, we
repaid $95,205 to Mr. Dyne. In October 2000, Mark Dyne loaned us a further
$500,000. This indebtedness is evidenced by a convertible secured subordinated
promissory note, dated October 4, 2000, which is due and payable on demand,
bears interest at a rate of 11.0% per annum and is convertible at the election
of the holder into our common stock at a price of $4.50 per share. At June 30,
2003, we were indebted to Mr. Dyne in the aggregate amount of $762,398.
At June 30, 2003, we were indebted to Monto Holdings Pty. Ltd. in the
aggregate amount of $145,087. Mark Dyne holds a significant equity interest in
Monto Holdings Pty. Ltd. The loans from Monto Holdings Pty. Ltd. are all
evidenced by promissory notes which bear interest at a rate of 10% per annum and
are due and payable on the fifteenth day following the date on which the holder
of the promissory note makes written demand for payment.
On October 4, 2002, we entered into a note payable agreement with
Harris Toibb, a selling stockholder, in the amount of $500,000 to fund
additional working capital requirements. The note payable was unsecured, due on
demand, accrued interest at 4% and was subordinated to UPS Capital. This note
was re-paid on February 28, 2003.
SELLING STOCKHOLDERS TABLE
The following table sets forth: (1) the name of each of the
stockholders for whom we are registering shares under this registration
statement; (2) the number of shares of our common stock beneficially owned by
each such stockholder prior to this offering (including all shares of common
stock issuable upon the exercise or conversion of the preferred stock, notes and
warrants as described above, whether or not exercisable within 60 days of the
date hereof); (3) the number of shares of our common stock offered by such
stockholder pursuant to this prospectus; and (4) the number of shares, and (if
one percent or more) the percentage of the total of the outstanding shares, of
our common stock to be beneficially owned by each such stockholder after this
offering, assuming that all of the shares of our common stock beneficially owned
by each such stockholder and offered pursuant to this prospectus are sold and
that each such stockholder acquires no additional shares of our common stock
prior to the completion of this offering. Such data is based upon information
provided by each selling stockholder.
12
PERCENTAGE OF
COMMON STOCK COMMON STOCK COMMON STOCK
COMMON STOCK BEING OFFERED OWNED UPON OWNED UPON
OWNED PRIOR TO PURSUANT TO THIS COMPLETION OF COMPLETION OF
NAME THE OFFERING PROSPECTUS THIS OFFERING THIS OFFERING
---- ------------ ---------- ------------- -------------
Lagunitas Partners LP (1) 461,500 380,000 81,500 *
50 Osgood Place, Penthouse
San Francisco, CA 94133
Gruber & McBaine International (1) 155,500 120,000 35,500 *
50 Osgood Place, Penthouse
San Francisco, CA 94133
Jon D. Gruber & Linda W. Gruber 55,500 50,000 5,500 *
50 Osgood Place, Penthouse
San Francisco, CA 94133
J. Patterson McBaine 70,000 50,000 20,000 *
50 Osgood Place, Penthouse
San Francisco, CA 94133
Prism Offshore Fund, Ltd. (2) 400,000 400,000 0 --
One International Place, Suite 2401
Boston, MA 02110
Prism Partners, L.P. (2) 300,000 300,000 0 --
One International Place, Suite 2401
Boston, MA 02110
MicroCapital Fund Limited Partner (3) 235,100 180,000 55,100 *
415 Jessie Street, Suite 1002
San Francisco, CA 94103
MicroCapital LLC (4) 435,000 20,000 415,000 3.7%
415 Jessie Street, Suite 1002
San Francisco, CA 94103
Neal I. Goldman 100,000 100,000 0 --
220 East 42nd Street, 29th Floor
New York, NY 10017
SF Capital Partners, Ltd (5) 125,000 125,000 0 --
3600 South Lake Drive
St. Francis, Wisconsin 53235
Harris Toibb (6) 1,290,498 999,998 290,500 2.6%
307 21st Street
Santa Monica, CA 90402
Mark Dyne (7) 1,090,512 250,000 840,512 7.2%
15821 Ventura Blvd., Suite 525
Encino, CA 91436
Craglennon Investments Limited (8) 124,999 124,999 0 --
P.O. Box 212
Hadsley House, Lefebore Street
St. Peter Port, Guernsey, GY1 4JE
Channel Islands
13
PERCENTAGE OF
COMMON STOCK COMMON STOCK COMMON STOCK
COMMON STOCK BEING OFFERED OWNED UPON OWNED UPON
OWNED PRIOR TO PURSUANT TO THIS COMPLETION OF COMPLETION OF
NAME THE OFFERING PROSPECTUS THIS OFFERING THIS OFFERING
---- ------------ ---------- ------------- -------------
Coats North America (9) 607,288 607,288 0 --
Two Lakepointe Plaza
4135 South Stream Blvd.
Charlotte, NC 28217
---------------------------
* Less than one percent (1%).
(1) Gruber McBaine Capital Management exercises voting and investment
authority over the shares held by this selling stockholder.
(2) Chris Argyrople and Charles Jobson, as a result of their relationship with
the investment management company of this selling stockholder, exercise
voting and investment authority over the shares held by this selling
stockholder.
(3) Ian P. Ellis, as a result of his relationship with the general partner of
this selling stockholder, exercises voting and investment authority over
the shares held by this selling stockholder.
(4) Includes shares held by other entities over which the selling stockholder
has voting and dispositive control. Ian P. Ellis exercises voting and
investment authority over the shares held by this selling stockholder.
(5) Brian J. Stark and Michael A. Roth, as a result of their relationship with
the Investment Manager of this selling stockholder, exercise voting and
investment authority over the shares held by this selling stockholder.
(6) Includes 333,332 shares of common stock that may be acquired upon exercise
of warrants.
(7) Includes 268,000 shares of common stock that may be acquired upon exercise
of stock options which currently are exercisable, 83,334 shares of common
stock that may be acquired upon exercise of warrants, and 111,111 shares
of common stock that may be acquired upon conversion of debt.
(8) Includes 41,666 shares of common stock that may be acquired upon exercise
of warrants.
(9) Consists of shares of common stock that may be acquired upon conversion of
759,494 shares of Series C Convertible Redeemable Preferred Stock. Donna
Armstrong exercises voting and investment authority over the shares held
by this selling stockholder.
Other than the transactions described above or as described in the
table below, we had no material relationship with any selling stockholder during
the three years preceding the date of this prospectus.
PLAN OF DISTRIBUTION
The shares of our common stock offered pursuant to this prospectus may
be offered and sold from time to time by the selling stockholders listed in the
preceding section, or their donees, transferees, pledgees or other successors in
interest that receive such shares as a gift or other non-sale related transfer.
These selling stockholders will act independently of us in making decisions with
respect to the timing, manner and size of each sale.
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales
14
may be at fixed or negotiated prices. The selling stockholders may use any one
or more of the following methods when selling shares:
o Ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o Block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o Purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o An exchange distribution in accordance with the rules of the
applicable exchange;
o Privately negotiated transactions;
o Settlement of short sales;
o Broker-dealers may agree with the selling stockholders to sell
a specified number of such shares at a stipulated price per
share;
o A combination of any such methods of sale; and
o Any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders may from time to time pledge or grant a
security interest in some or all of the shares of 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 common stock from
time to time under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may also be deemed to be "underwriters" within
the meaning of the Securities Act in connection with such sales. In such event,
any commissions received by such broker-dealers or agents 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. The selling stockholders have
15
informed us that they do not have any agreement or understanding, directly or
indirectly, with any person to distribute the common stock. Additionally, each
of SF Capital Partners Ltd. and Neal I. Goldman, both of which are an affiliate
of a broker-dealer, have informed us that they purchased the shares to be resold
for their own account in the ordinary course of business.
We are required to pay all fees and expenses incident to the
registration of the shares. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the SEC with
respect to the common stock offered by this prospectus. This prospectus, which
constitutes a part of the registration statement, does not contain all of the
information set forth in the registration statement or the exhibits and
schedules that are part of the registration statement. You may read and copy any
document we file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. We refer you to the registration statement and the
exhibits and schedules thereto for further information with respect to us and
our common stock. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference room. Our SEC filings are also available to the public
from the SEC's website at www.sec.gov.
We are subject to the information and periodic reporting requirements
of the Securities Exchange Act of 1934 and, in accordance with those
requirements, will continue to file periodic reports, proxy statements and other
information with the SEC. These periodic reports, proxy statements and other
information will be available for inspection and copying at the SEC's public
reference rooms and the SEC's website referred to above.
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means that we can disclose important information to you by
referring to those documents. We incorporate by reference the documents listed
below and any additional documents filed by us with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering of
securities is terminated. The information we incorporate by reference is an
important part of this prospectus, and any information that we file later with
the SEC will automatically update and supersede this information.
The documents we incorporate by reference are:
1. Our Annual Report on Form 10-K for the year ended December 31,
2002 (File No. 001-13669);
2. Our Amendment No. 1 to Annual Report on Form 10-K/A for the
year ended December 31, 2002 (File No. 001-13669);
3. Our Quarterly Report on Form 10-Q for the quarter ended March
31, 2003 (File No. 001-13669);
4. Our Quarterly Report on Form 10-Q for the quarter ended June
30, 2003 (File No. 001-13669);
16
5. Our Current Report on Form 8-K as filed on May 15, 2003 (File
No. 001-13669);
6. Our Current Report on Form 8-K as filed on June 4, 2003 (File
No. 001-13669);
7. Our Current Report on Form 8-K as filed on August 18, 2003
(File No. 001-13669);
8. The description of our capital stock contained in our
Registration Statement on Form 8-A (File No. 001-13669); and
9. All other reports filed by us pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 since December
31, 2002, including all such reports filed after the date of
the initial registration statement and prior to effectiveness
of the registration statement.
You may request a copy of these filings, at no cost, by writing or
calling us at Tag-It Pacific, Inc., 21900 Burbank Boulevard, Suite 270, Woodland
Hills, California 91367, telephone number (818) 444-4100, Attention: Ronda
Sallmen.
You should rely only on the information contained in this prospectus or
any supplement and in the documents incorporated by reference above. We have not
authorized anyone else to provide you with different information. You should not
assume that the information in this prospectus or any supplement or in the
documents incorporated by reference is accurate on any date other than the date
on the front of those documents.
LEGAL MATTERS
Stubbs Alderton & Markiles, LLP, Encino, California, has rendered to
Tag-It Pacific, Inc. a legal opinion as to the validity of the common stock
covered by this prospectus.
EXPERTS
The consolidated financial statements and schedules incorporated by
reference in this Prospectus have been audited by BDO Seidman, LLP, independent
certified public accountants, to the extent and for the periods set forth in
their report incorporated herein by reference, and are incorporated herein in
reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
17
--------------------------------------------------------------------------------
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement to this prospectus. We have not
authorized anyone else to provide you with different information. The selling
stockholders should not make an offer of these shares in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any supplement to this prospectus is accurate as of any date other
than the date on the cover page of this prospectus or any supplement.
--------------------------------------------------------------------------------
--------------------
TAG-IT PACIFIC, INC.
PROSPECTUS
--------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table itemizes the expenses incurred by the Registrant in
connection with the offering. All the amounts shown are estimates except the
Securities and Exchange Commission registration fee.
Registration fee - Securities and Exchange Commission ............ $ 1,695
Legal Fees and Expenses .......................................... 15,000
Accounting Fees and Expenses ..................................... 7,500
Miscellaneous Expenses ........................................... 2,500
-------
Total ....................................................... $26,695
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Certificate of Incorporation and its Bylaws provide
for the indemnification by the Registrant of each director, officer and employee
of the Registrant to the fullest extent permitted by the Delaware General
Corporation Law, as the same exists or may hereafter be amended. Section 145 of
the Delaware General Corporation Law provides in relevant part that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe such person's conduct was
unlawful.
In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
II-1
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper. Delaware law further provides that nothing
in the above described provisions shall be deemed exclusive of any other rights
to indemnification or advancement of expenses to which any person may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
The Registrant's Certificate of Incorporation provides that a director
of the Registrant shall not be liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director. Section 102(o)(7)
of the Delaware General Corporation Law provides that a provision so limiting
the personal liability of a director shall not eliminate or limit the liability
of a director for, among other things: breach of the duty of loyalty; acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law; unlawful payment of dividends; and transactions from which
the director derived an improper personal benefit.
The Registrant has entered into separate but identical indemnity
agreements (the "Indemnity Agreements") with each director of the Registrant and
certain officers of the Registrant (the "Indemnitees"). Pursuant to the terms
and conditions of the Indemnity Agreements, the Registrant indemnified each
Indemnitee against any amounts which he or she becomes legally obligated to pay
in connection with any claim against him or her based upon any action or
inaction which he or she may commit, omit or suffer while acting in his or her
capacity as a director and/or officer of the Registrant or its subsidiaries,
provided, however, that Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Registrant and, with respect to any criminal action, had no reasonable cause
to believe Indemnitee's Conduct was unlawful.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
4.1 Specimen Stock Certificate of Common Stock of Registrant.
Incorporated by reference to Exhibit 4.1to Form SB-2 filed on
October 21, 1997, and the amendments thereto.
4.2 Rights Agreement, dated as of November 4, 1998, between
Registrant and American Stock Transfer and Trust Company as
Rights Agent. Incorporated by reference to Exhibit 4.1 to Current
Report on Form 8-K filed as of November 4, 1998.
4.3 Form of Rights Certificate. Incorporated by reference to Exhibit
B to the Rights Agreement filed as Exhibit 4.1 to Current Report
on Form 8-K filed as of November 4, 1998.
4.4 Certificate of Designation of Series C Convertible Redeemable
Preferred Stock. Incorporated by reference to Exhibit 99.5 to
Form 8-K filed on October 15, 2001.
5.1 Opinion and Consent of Stubbs Alderton & Markiles, LLP.
10.1 Supply Agreement entered into on December 22, 2000, by and
between the Company, Hubert Guez, Paul Guez and Azteca Production
International, Inc., AZT International SA D RL, and Commerce
Investment Group, LLC. Incorporated by reference to Exhibit
10.53 to Form 10-K filed on April 4, 2001.
10.2 Investor Rights Agreement entered into on December 22, 2000, by
and between the Company and Commerce Investment Group, LLC.
Incorporated by reference to Exhibit 10.54 to Form 10-K filed on
April 4, 2001.
II-2
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
10.3 Voting Agreement entered into on December 22, 2000, by and
between the Company, Hubert Guez, Paul Guez and Azteca Production
International, Inc., AZT International SA D RL, Commerce
Investment Group, LLC, and Colin Dyne. Incorporated by reference
to Exhibit 10.55 to Form 10-K filed on April 4, 2001.
10.4 Right of First Refusal and Sale Agreement entered into on
December 22, 2000, by and between the Registrant, Hubert Guez,
Paul Guez and Azteca Production International, Inc., AZT
International SA D RL, Commerce Investment Group, LLC, and Colin
Dyne. Incorporated by reference to Exhibit 10.56 to Form 10-K
filed on April 4, 2001.
10.5 Series C Preferred Stock Purchase Agreement, dated as of
September 20, 2001, between the Registrant and Coats North
America Consolidated, Inc. Incorporated by reference to Exhibit
99.1 to Form 8-K filed on October 15, 2001.
10.6 Investor Rights Agreement, dated as of September 20, 2001,
between the Registrant and Coats North America Consolidated, Inc.
Incorporated by reference to Exhibit 99.2 to Form 8-K filed on
October 15, 2001.
10.7 Co-Marketing and Supply Agreement, dated as of September 20,
2001, between the Registrant and Coats America, Inc. Incorporated
by reference to Exhibit 99.3 to Form 8-K filed on October 15,
2001.
10.8 Purchase Money Security Agreement, dated as of September 20,
2001, between the Registrant and Coats America, Inc. Incorporated
by reference to Exhibit 99.4 to Form 8-K filed on October 15,
2001.
10.9 Form of Stock and Warrant Purchase Agreement dated December 28,
2001. Incorporated by reference to Exhibit 99.1 to Form 8-K filed
on January 23, 2002.
10.10 Form of Warrant to Purchase Common Stock Agreements dated
December 28, 2001. Incorporated by reference to Exhibit 99.2 to
Form 8-K filed on January 23, 2002.
10.11 Form of Stockholders Agreements dated December 28, 2001.
Incorporated by reference to Exhibit 99.3 to Form 8-K filed on
January 23, 2002.
10.12 Form of Investor Rights Agreements dated December 28, 2001.
Incorporated by reference to Exhibit 99.4 to Form 8-K filed on
January 23, 2002.
10.13 Securities Purchase Agreement dated May 23, 2003, by and among
the Registrant and the Purchasers identified on the signature
pages thereto. Incorporated by reference to Exhibit 99.2 to Form
8-K filed on June 4, 2003.
10.14 Registration Rights Agreement dated May 23, 2003, by and among
the Registrant and the Purchasers identified on the signature
pages thereto. Incorporated by reference to Exhibit 99.3 to Form
8-K filed on June 4, 2003.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Stubbs Alderton & Markiles, LLP (included in Exhibit
5.1).
24.1 Power of Attorney (included on signature page).*
-----------------
* 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 this registration statement 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 liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the
II-3
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes 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 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to 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
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of the appropriate jurisdiction the question 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.
The undersigned hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
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.
II-4
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 authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Los
Angeles, State of California, on October 9, 2003.
TAG-IT PACIFIC, INC.
By: /s/ Ronda Sallmen
--------------------------------------
Ronda Sallmen, Chief Financial Officer
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 stated.
Signature Title Date
--------- ----- ----
* Chairman of the Board of October 9, 2003
--------------------------- Directors
Mark Dyne
* Chief Executive Officer October 9, 2003
--------------------------- and Director
Colin Dyne
/s/ Ronda Sallmen Chief Financial Officer October 9, 2003
---------------------------
Ronda Sallmen
* Director October 9, 2003
---------------------------
Kevin Bermeister
* Director October 9, 2003
---------------------------
Michael Katz
* Director and Vice October 9, 2003
--------------------------- President of Operations
Jonathan Burstein
Director
---------------------------
Brent Cohen
* Director October 9, 2003
---------------------------
Donna Armstrong
* By: /s/ Ronda Sallmen
-----------------------
Ronda Sallmen
As Attorney-In-Fact
S-1
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
4.1 Specimen Stock Certificate of Common Stock of Registrant.
Incorporated by reference to Exhibit 4.1to Form SB-2 filed on
October 21, 1997, and the amendments thereto.
4.2 Rights Agreement, dated as of November 4, 1998, between
Registrant and American Stock Transfer and Trust Company as
Rights Agent. Incorporated by reference to Exhibit 4.1 to Current
Report on Form 8-K filed as of November 4, 1998.
4.3 Form of Rights Certificate. Incorporated by reference to Exhibit
B to the Rights Agreement filed as Exhibit 4.1 to Current Report
on Form 8-K filed as of November 4, 1998.
4.4 Certificate of Designation of Series C Convertible Redeemable
Preferred Stock. Incorporated by reference to Exhibit 99.5 to
Form 8-K filed on October 15, 2001.
5.1 Opinion and Consent of Stubbs Alderton & Markiles, LLP.*
10.1 Supply Agreement entered into on December 22, 2000, by and
between the Company, Hubert Guez, Paul Guez and Azteca Production
International, Inc., AZT International SA D RL, and Commerce
Investment Group, LLC. Incorporated by reference to Exhibit
10.53 to Form 10-K filed on April 4, 2001.
10.2 Investor Rights Agreement entered into on December 22, 2000, by
and between the Company and Commerce Investment Group, LLC.
Incorporated by reference to Exhibit 10.54 to Form 10-K filed on
April 4, 2001.
10.3 Voting Agreement entered into on December 22, 2000, by and
between the Company, Hubert Guez, Paul Guez and Azteca Production
International, Inc., AZT International SA D RL, Commerce
Investment Group, LLC, and Colin Dyne. Incorporated by reference
to Exhibit 10.55 to Form 10-K filed on April 4, 2001.
10.4 Right of First Refusal and Sale Agreement entered into on
December 22, 2000, by and between the Registrant, Hubert Guez,
Paul Guez and Azteca Production International, Inc., AZT
International SA D RL, Commerce Investment Group, LLC, and Colin
Dyne. Incorporated by reference to Exhibit 10.56 to Form 10-K
filed on April 4, 2001.
10.5 Series C Preferred Stock Purchase Agreement, dated as of
September 20, 2001, between the Registrant and Coats North
America Consolidated, Inc. Incorporated by reference to Exhibit
99.1 to Form 8-K filed on October 15, 2001.
10.6 Investor Rights Agreement, dated as of September 20, 2001,
between the Registrant and Coats North America Consolidated, Inc.
Incorporated by reference to Exhibit 99.2 to Form 8-K filed on
October 15, 2001.
10.7 Co-Marketing and Supply Agreement, dated as of September 20,
2001, between the Registrant and Coats America, Inc. Incorporated
by reference to Exhibit 99.3 to Form 8-K filed on October 15,
2001.
10.8 Purchase Money Security Agreement, dated as of September 20,
2001, between the Registrant and Coats America, Inc. Incorporated
by reference to Exhibit 99.4 to Form 8-K filed on October 15,
2001.
10.9 Form of Stock and Warrant Purchase Agreement dated December 28,
2001. Incorporated by reference to Exhibit 99.1 to Form 8-K filed
on January 23, 2002.
10.10 Form of Warrant to Purchase Common Stock Agreements dated
December 28, 2001. Incorporated by reference to Exhibit 99.2 to
Form 8-K filed on January 23, 2002.
10.11 Form of Stockholders Agreements dated December 28, 2001.
Incorporated by reference to Exhibit 99.3 to Form 8-K filed on
January 23, 2002.
10.12 Form of Investor Rights Agreements dated December 28, 2001.
Incorporated by reference to Exhibit 99.4 to Form 8-K filed on
January 23, 2002.
10.13 Securities Purchase Agreement dated May 23, 2003, by and among
the Registrant and the Purchasers identified on the signature
pages thereto. Incorporated by reference to Exhibit 99.2 to Form
8-K filed on June 4, 2003.
10.14 Registration Rights Agreement dated May 23, 2003, by and among
the Registrant and the Purchasers identified on the signature
pages thereto. Incorporated by reference to Exhibit 99.3 to Form
8-K filed on June 4, 2003.
23.1 Consent of BDO Seidman, LLP.
23.2 Consent of Stubbs Alderton & Markiles, LLP (included in Exhibit
5.1).
EX-1
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
24.1 Power of Attorney (included on signature page).*
-----------------
* Previously filed.
EX-2