Document/ExhibitDescriptionPagesSize 1: S-2MEF Registration Statemenet HTML 249K
2: EX-5.1 Opinion re: Legality HTML 11K
3: EX-23.2 Consent of Experts or Counsel HTML 8K
4: EX-24.1 Power of Attorney HTML 8K
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Approximate
date of commencement of proposed sale to the public:
From
time to time after this Registration Statement has been
declared effective.
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, check
the following box. x
If
the
registrant elects to deliver its latest annual report to security holder, or
a
complete and legible facsimile thereof, pursuant to Item 11(a) (i) of this
Form,
check the following box.
x
If
this
form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of earlier effective registration statement
for the same offering.
x:
333-124419
If
this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o:
If
this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o:
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. o
CALCULATION
OF REGISTRATION FEE
Title
of Each
Class
of Securities
to
be Registered
Amount
to be
Registered
(1)
Proposed
Maximum
Offering
Price
Per
Share (2)
Proposed
Maximum
Aggregate
Offering
Price
(2)
Amount
of
Registration
Fee
Common
stock, par value $.001 per share
1,802,393
Common
stock underlying warrants
95,000
Total
1,897,393
$2.125
$4,031,960
$120.65
(1)
(1)
Amount
represents an increase in the amount offered of 482,393 shares
for which
the registration fee is calculated. All other shares subject to
this
registration statement have previously been registered and the
registration fees related to those shares
paid.
(2)
Estimated
solely for the purpose of calculating the registration fee pursuant
to
Rule 457(c), based on the average of the high and low sales prices
per
share of common stock as reported by the OTC Bulletin Board on October27,2005.
The
Registrant hereby amends this Registration Statement on such date or dates
as
may be necessary to delay
its effective date
until the Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
Nano-Proprietary,
Inc. has previously filed Registration Statement No. 333-124419 to register
shares of its common stock, as well as shares of its common stock underlying
warrants held by certain selling shareholders. Pursuant to Rule 429 of the
Securities Act of 1933, this registration statement also serves as a
post-effective amendment to this prior registration statement. This Registration
Statement eliminates those selling shareholders who have previously sold such
shares pursuant to the previous registration statement and also eliminates
those
selling shareholders to whom the Company no longer has registration obligations.
This Registration Statement also registers an additional 482,393 shares
of
common stock, or shares of common stock underlying warrants, which have not
previously been registered.
The
shareholders of Nano-Proprietary, Inc. identified on page 18 may offer and
sell
the shares covered by this prospectus from time to time. All shares that are
sold pursuant to this prospectus will be sold by the selling shareholders.
The
Company will not sell any shares pursuant to this prospectus. The shares offered
for sale:
· are
presently issued and outstanding, or
· underlie
certain existing warrants to purchase shares of our common stock.
This
offering is not being underwritten. The selling shareholders will pay all
underwriting discounts and selling commissions, if any, applicable to the sale
of the shares.
Nano-Proprietary,
Inc. will receive the proceeds from the exercise of the warrants but will not
receive any proceeds from the sale of the shares of common stock by the selling
shareholders. The warrants covered by this prospectus have fixed exercise prices
ranging from $1.00 to $2.00 and would provide proceeds of $130,000 to us, if
exercised.
Nano-Proprietary,
Inc. will pay substantially all of the expenses of the registration of the
sale
of the shares. Nano-Proprietary, Inc. has agreed to indemnify certain of the
selling shareholders against certain civil liabilities, including liabilities
under the Securities Act of 1933. See “Plan of Distribution and Selling
Shareholders.”
See
“Risk Factors” beginning on page 5 for a discussion of certain risk factors that
you should consider. You should read the entire prospectus before making an
investment decision.
Nano-Proprietary,
Inc.’s common stock is traded and quoted on the OTC Bulletin Board under the
symbol “NNPP”. On October 27, 2005, the closing price of the common stock as
reported on the OTC Bulletin Board was $2.07 per share.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
following summary highlights all of the material information from this document.
You should read carefully this entire document and the documents to which we
have referred you. Unless the context otherwise requires, the term
“Nano-Proprietary, Inc.” refers to Nano-Proprietary, Inc. and its
subsidiaries.
Nano-Proprietary,
Inc.
The
executive offices of Nano-Proprietary, Inc. are located at 3006 Longhorn
Boulevard, Suite 107, Austin, Texas78758, and its telephone number is (512)
339-5020.
The
Offering
This
prospectus relates to 1,897,393 shares of common stock, par value $.001 per
share, of Nano-Proprietary, Inc., a Texas corporation, which may be offered
for
sale by certain shareholders of the Company from time to time. The shares
offered for sale:
· are
presently issued and outstanding, or
· underlie
certain existing warrants to purchase shares of our common stock.
As
of
October 27, 2005, the Company had a total of 99,746,440 common shares
outstanding. The following securities are covered by this
Prospectus:
Security
Designation
Shares
covered
by
Propectus
Common
Stock
1,802,393
Common
stock underlying warrants
95,000
These
warrants have fixed exercise prices ranging from $1.00 to $2.00 per share.
The
warrants expire at various dates through 2006.
Plan
of Distribution
This
offering is not being underwritten. The selling shareholders directly, through
agents designated by them from time to time or through dealers or underwriters
also to be designated, may sell the shares from time to time, in or through
privately negotiated transactions, or in one or more transactions, including
block transactions, on the OTC Bulletin Board or on any stock exchange on which
the shares may be listed in the future pursuant to and in accordance with the
applicable rules of such exchange or otherwise. The selling price of the shares
may be at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. To the extent required,
the specific shares to be sold, the names of the selling shareholders, the
respective purchase prices and public offering prices, the names of any such
agent, dealer or underwriter and any applicable commission or discounts with
respect to a particular offer will be described in an accompanying prospectus.
In addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
prospectus. See “Plan of Distribution and Selling Shareholders.” We will keep
this prospectus current until the expiration dates of the warrants, even if
the
warrants which underlie certain shares of our common stock subject to this
prospectus are out of the money.
We
will
receive the proceeds from the exercise of the warrants, but will not receive
any
proceeds from the sale of the shares by the selling shareholders. The total
number of warrants outstanding is 95,000. These warrants have fixed exercise
ranging from $1.00 to $2.00 per share. The maximum amount of money that we
will
receive from the proceeds of the exercise of these warrants is $130,000. We
have
agreed to pay all of the expenses of the registration of the shares. The selling
shareholders must pay any commissions and discounts of underwriters, dealers
or
agents. We have agreed to indemnify certain of the selling shareholders against
certain civil liabilities under the Securities Act. See “Plan of Distribution
and Selling Shareholders.”
Accompanying
Documents
This
prospectus is accompanied by a copy of Nano-Proprietary, Inc.’s latest form
10-K/A. A copy of Nano-Proprietary, Inc.’s latest form or 10-Q shall be provided
without charge to each person to whom a prospectus is delivered.
Selling
Shareholders as Underwriters
The
selling shareholders and any broker-dealers, agents or underwriters that
participate with the selling shareholders in the distribution of any of the
shares may be deemed to be “Underwriters” within the meaning of the Securities
Act, and any commissions received by them and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. See “Plan of Distribution and Selling
Shareholders.” No selling shareholders are broker-dealers or affiliates of
broker-dealers.
Recent
Developments
We
completed a private placement of shares of our common stock in October 2005.
As
a result of this private placement we issued 482,393 shares of our common stock
in exchange for gross proceeds of $1,000,000. There were no significant expenses
associated with the sale of these shares. We expect the proceeds of this
transaction, when combined with our existing cash and expected revenues will
enable us to operate until at least the end of the 1st
quarter
of 2006.
In
April
2005, we filed suit against Canon, Inc. and Canon USA, Inc. in
the
U.S. District Court for the Western District of Texas, Austin Division. We
are
seeking a declaratory judgment that new SED color
television products, scheduled to be manufactured by Canon and/or Toshiba
beginning in 2005, are not covered under a 1999 patent license agreement
that we have with Canon. We assert that Canon is improperly
using our
patented technology to produce surface conductor electron emitter display
screens (SED) for a new generation of flat screen color televisions. We also
assert that a joint venture formed by Canon and Toshiba Corporation
to
produce the SED display screens, SED, Inc., is not a licensed subsidiary
under the 1999 agreement and that Canon is improperly transferring its
license rights under Nano-Proprietary's patents to the joint venture and
Toshiba. The suit also contained three additional claims related to a Lanham
Act
violation by Canon, tortuous interference by Canon, and a breach of covenant
of
good faith and fair sealings against Canon. Canon filed its response in July
2005 denying liability in the matter. In September 2005, Canon filed a motion
to
dismiss Canon USA, Inc. from the case and dismiss the Lanham Act claim, the
tortuous interference claim, and the breach of covenant of good faith and fair
dealings. In October 2005, the Judge in the case denied Canon’s motion to
dismiss Canon, USA, Inc. and the breach of covenant of good faith and fair
dealings claim. The Judge granted Canon’s motion, without prejudice, to dismiss
the Lanham Act claim and the tortuous interference claim. Dismissal without
prejudice allows us to re-file these claims at any time if additional evidence
supporting these claims becomes available to us in the discovery process. The
first two claims described above were not at issue in the dismissal motion
by
Canon. The case is currently in the discovery phase and a trial date has been
set for March 2007.
See
“Risk
Factors” beginning on page 5 of this prospectus for a discussion of certain
factors related to the Company and the common stock offered in this
prospectus.
The
common stock being offered hereby involves a high degree of risk. You should
carefully consider the following risk factors in addition to other information
contained in this prospectus in deciding whether to invest in our shares of
common stock.
Our
success is dependent on our principal technologies
Our
field
emission technology, sensors, and nanomaterials which include composites, are
emerging technologies. Our financial condition and prospects are dependent
upon
our licensing these technologies to others. Additional R&D needs to be
conducted on the carbon nanotube technology before others can produce products
using this technology. Market acceptance of products using our technology will
be dependent upon the acceptance within the industries of those products of
the
quality, reliability, performance, efficiency, and breadth of application and
cost-effectiveness of the products. There can be no assurances that these
products will be able to gain commercial market acceptance.
Our
technology development is in its early stages and the outcome is
uncertain
Our
many
applications of nanotechnologies, and certain products that use these
technologies, will require significant additional development, engineering,
testing and investment prior to commercialization. We are exploring the use
of
our technology in several different types of products, in addition to the
cathodes that we have developed that currently use this technology. We have
developed proof of concepts of potential products based on carbon nanotube
technologies. We are developing products jointly with others based on our
technology. Upon successful completion of the development process, our
development partners will be required to license our technology to produce
and
sell the products. Our development partners retain all rights to any
intellectual property that they develop in the process.
If
any of
the products that are being developed using our technologies are developed,
it
may not be possible for potential licensees to produce these products in
significant quantities at a price that is competitive with other similar
products. At the present time, the only revenue that we receive related to
our
technology is related to reimbursed research expenditures, development fees,
and
the license agreement with Oxford Instruments. These revenues are identified
in
our quarterly filings on Form 10-Q and our annual filings on Form 10-K as
revenues of our Applied Nanotech, Inc. subsidiary in the related “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
sections. We also anticipate receiving up-front license fees in
2005.
Products
using our technology may not be accepted by the market
Since
our
inception, we have focused our product development and R&D efforts on
technologies that we believe will be a significant advancement over currently
available technologies. With any new technology, there is a risk that the market
may not appreciate the benefits or recognize the potential applications of
the
technology. Market acceptance of products using our technology will depend,
in
part, on our ability to convince potential customers of the advantages of such
products as compared to competitive products. It will also depend upon our
ability to train manufacturers and others to use our products.
Our
development partners have certain rights to jointly developed property and
to
license our technology
We
have
committed to license our technology to our development partners upon completion
of certain development projects that are in process. The terms of any such
license have not yet been determined. One of our development partners, a large
Japanese display company, has paid us $2.0 million for research services and
has
the right to offset this payment against any future license fee payments due
as
a result of an existing license agreement that we have with this company. Our
development partners in the HYFED™ project also have rights to any jointly
developed property; however, any such jointly developed property would be based,
at least in part, on our underlying technology and would require our partners
to
enter into an agreement with us. See also “Our technology development is in
its early stages and the outcome is uncertain” above for further
discussion.
In
order
to prove that our technologies work and will produce a complete product, we
must
ordinarily integrate a number of highly technical and complicated subsystems
into a fully integrated prototype. There is no assurance that we will be able
to
successfully complete the development work on some of our proposed products
or
ultimately develop any market for those products.
Many
products that may be developed using our technology will have to be integrated
into end-user products by manufacturers of those products. Although we intend
to
develop products to be integrated into existing manufacturing capabilities,
manufacturers may be required to make modifications to, or expand their
manufacturing capabilities. Manufactures may not elect to integrate products
using our technology into their end-user products, or they may not devote
adequate resources to modifying their manufacturing capabilities so that our
technologies can be successfully incorporated into their end-user products.
The
complexity of integration may delay the introduction of products using our
technology.
Rapid
technological changes could render our technology obsolete and we may not remain
competitive
The
display industry and other industries in which we compete are highly competitive
and are characterized by rapid technological change. Our existing and proposed
products will compete with other existing products and may compete against
other
developing technologies. Development by others of new or improved products,
processes or technologies may reduce the size of potential markets for our
products. There is no assurance that other products, processes or technologies
will not render our proposed products obsolete or less competitive. Many of
our
competitors have greater financial, managerial, distribution, and technical
resources than we do. We will be required to devote substantial financial
resources and effort to further R&D. There can be no assurances that we will
successfully differentiate our technology from our competitors' technology,
or
that we will adapt to evolving markets and technologies, develop new
technologies, or achieve and maintain technological advantages.
We
have limited resources and our focus on particular products may result in our
failure to capitalize on other opportunities
We
have
limited resources available to successfully develop and commercialize our
technology. As of October 27, 2005, we had 25 full-time employees, 2 part-time
employees, and 1 substantially full time consultant. There is a wide array
of
potential applications for our technology and our limited resources require
us
to focus on specific product areas, while ignoring others.
We
have limited manufacturing capacity and experience
We
have
no established commercial manufacturing facilities in the area of the
carbon nanotube field emission technology in which we are conducting our
principal research. At the present time, we have no intention of establishing
a
manufacturing facility related to our field emission technology, sensors,
nanomaterials which include using composites, or any other aspects of our
technology. We are focusing our efforts on licensing our technology to others
for use in their manufacturing processes. To the extent that any of our other
products require manufacturing facilities, we intend to contract with a
qualified manufacturer.
We
are dependent on the availability of materials and
suppliers
The
materials used in producing current and future products using our technology
are
purchased from other vendors. We anticipate that the majority of raw materials
used in products to be developed by us will be readily available to
manufacturers. However, there is no assurance that the current availability
of
these materials will continue in the future, or if available, will be procurable
at favorable prices.
We
have a history of net losses
We
have a
history of net losses. From our inception through December 31, 2004, we incurred
net losses of approximately $80 million. Our only profitable year was 1999,
based on the strength of a license agreement of approximately $5.6 million
signed in March 1999. We have incurred net income and losses
as
shown below:
Year
Ended December 31
Net
Income
(Loss)
1995
($14,389,856)
1996
($13,709,006)
1997
($6,320,901)
1998
($3,557,548)
1999
$1,118,134
2000
($7,671,014)
2001
($5,081,559)
2002
($4,908,856)
2003
($4,214,202)
2004
($4,612,026)
Although
we expect to be profitable in the future, we may not be. Our profitability
in 2005 is dependent on the signing of additional license agreements or
obtaining additional research funding. We may, however, continue to incur
additional operating losses for an extended period of time as we continue to
develop proof of concepts. We do, however, expect the magnitude of those losses,
if they continue, to decrease. We have funded our operations to date primarily
through the proceeds from the sale of our equity securities and debt offerings.
We are primarily a contract research and development organization and are
dependent on license agreements and research funding to achieve profitability.
In order to continue development of our technology, we anticipate
that
substantial research and development expenditures will continue to be
incurred.
We
have no current royalty agreements producing significant
revenue
Our
future strategy is dependent on licensing our technology to other companies
and
obtaining royalties based on products that these licensees develop and sell.
We
have no plans to manufacture and sell any carbon nanotube field emission
products ourselves, and as such, we have no carbon nanotube field emission
product revenues. We signed a license agreement in 1999, for a one-time, up
front, payment of approximately $5.6 million. This was a non-exclusive license
to Canon, Inc. that covered substantially all of our field emission patents,
but
excluding the basic carbon nanotube patent and specific applications for
other
field emission display patents including, but not limited to, large area color
displays. This license will produce no future revenue unless Canon decides
to
license the additional patents or the excluded field emission display
applications. In 2002, we signed another license agreement with a large Japanese
display manufacturer. This license agreement calls for us to be paid royalties
equal to 2% of the licensee’s sales of products using our technology. The
licensee also will receive credit against royalties due under the agreement
for
$2 million of research funding and up-front payments that the licensee has
provided to us from 2001 to 2003. Accordingly, no royalties will be due under
the agreement until sales of the licensee’s products exceed $100
million.
We
expect
to license our technology to be used in other applications. See additional
discussion in the risk factor “Our technology development is in its early stages
and the outcome is uncertain”. It is our intention that all future license
agreements will include a provision that requires the payment of ongoing
royalties, although there can be no assurance that will occur.
Our
revenues have been dependent on government contracts in the
past
In
many
years, a significant part of our revenues is derived from contracts with
agencies of the United States government. Following is a summary of those
revenues for the past ten years:
We
currently have binding commitments for future government funding of
approximately $130,000. We do not intend to seek any government funding unless
it directly relates to achievement of our strategic objectives.
Contracts
involving the United States government are, or may be, subject to various risks
including, but not limited to, the following:
·
Unilateral
termination for the convenience of the
government
·
Reduction
or modification in the event of changes in the government's requirements
or budgetary constraints
Increased
or unexpected costs causing losses or reduced profits under fixed-price
contracts or unallowable costs under cost reimbursement
contracts
·
Potential
disclosure of our confidential information to third
parties
·
The
failure or inability of the prime contractor to perform its prime
contract
in circumstances where we are a
subcontractor
·
The
failure of the government to exercise options provided for in the
contracts
·
The
right of the government to obtain a non-exclusive, royalty free,
irrevocable world-wide license to technology developed under contracts
funded by the government if we fail to continue to develop the
technology.
The
health effects of nanotechnology are unknown
There
is
no scientific agreement, but some scientists believe that in some cases,
nanomaterials may be hazardous to an individual’s health or the environment. The
science of nanotechnology is based on arranging atoms in such a way as to modify
or build materials in such a way as never made in nature; and therefore the
effects are unknown. The Company takes appropriate precautions for its employees
working with carbon nanotubes and believes that any health risks related to
carbon nanotubes used in potential products can be minimized. Future research
into the effects of nanomaterials in general, and carbon nanotubes in
particular, on health and environmental issues may have an adverse effect on
products using our technology.
We
may have future capital needs and the source of that funding is
uncertain
We
expect
to continue to incur substantial expenses for R&D, product testing, and
administrative overhead. The majority of R&D expenditures are for the
development of our technologies. Some of the proposed products using our
technology may not be available for commercial sale or routine use for a period
of up to two years. Commercialization of existing and proposed products that
would use our technology may require additional capital in excess of our current
capital. A shortage of capital could prevent us from achieving profitability
for
an extended period of time. Because the timing and receipt of revenues from
the
sale of products using our technology will be tied to the achievement of certain
product development, testing, manufacturing and marketing objectives, which
cannot be predicted with certainty, there may be substantial fluctuations in
our
results of operations. If revenues do not increase as rapidly as anticipated,
or
if product development and testing require more funding than anticipated, we
may
be required to curtail our expansion and/or seek additional financing from
other
sources. We may seek additional financing through the offer of debt or equity
or
any combination of the two at any time, although we do not expect to seek
additional financing for the remainder of the year.
We
have
developed a plan to allow us to maintain operations until we are able to sustain
ourselves and we believe our current cash levels are sufficient to fund
operations until we reach that point. We have the existing resources to continue
operations for a period through at least the end of 2005. Our plan is primarily
dependent on raising funds through the licensing of our technology and revenue
generated from performing contract research services. We intend to raise capital
through debt or equity offerings, only if necessary. We expect to sign
significant license and development contracts within the next year, although
there can be no assurances that this will occur.
Our
plan
is based on current development plans, current operating plans, the current
regulatory environment, historical experience in the development of electronic
products and general economic conditions. Changes could occur which would cause
certain assumptions on which this plan is based to be no longer valid. Our
plan
is primarily dependent on increasing revenues, licensing our technology, and
raising additional funds through additional debt and equity offerings, only
if
necessary. If adequate funds were not available from operations or additional
sources of financing, we may have to eliminate, or reduce substantially,
expenditures for research and development, and testing of our products. We
may
have to obtain funds through arrangements with other entities that may require
us to relinquish rights to certain of our technologies or products. These
actions could materially and adversely affect us.
As
a
licensee of certain research technologies through license and assignment
agreements with Microelectronics and Computer Technology Corporation (“MCC”), we
have acquired rights to develop and commercialize certain research technologies.
In certain cases, we are required to pay royalties on the sale of products
developed from the licensed technologies and fees on revenues from sublicensees.
We also have to pay for the costs of filing and prosecuting patent applications.
The agreement is subject to termination by either party, upon notice, in the
event of certain defaults by the other party. We expect any royalty payments
to
be made to MCC to be insignificant based on the substantial amounts of revenues
that would have to be generated to offset the costs of maintaining the patents
over the years.
We
have
also licensed certain patents related to carbon nanotube technology from Till
Keesman (“the Keesman patents”). We licensed 6 patents in 2000 in exchange for a
payment of $250,000 payable in shares of our common stock. Under the terms
of
the agreement, we are obligated to pay license fees equal to 50% of any
royalties received by the Company related to these patents. We are allowed
to
offset certain expenses, up to a maximum of $50,000 per year, against payments
due under this agreement. The agreement also contains provisions related to
minimum license fee payments. A total of $1,000,000 of minimum payments has
been
made, with the last payment made in May 2004. No future minimum payments are
due
and the minimum payments made to date can be offset against future royalties
due
under the license agreement. Certain of the products that we are developing
may,
in part, be based on some of the patents that we have licensed.
We
may be unable to enforce or defend our ownership and use of proprietary
technology
Our
ability to compete effectively with other companies will depend on our ability
to maintain the proprietary nature of our technology. Although we have been
awarded patents, have filed applications for patents, or have licensed
technology under patents that we do not own, the degree of protection offered
by
these patents or the likelihood that pending patents will be issued is
uncertain. Competitors in both the United States and foreign countries, many
of
which have substantially greater resources and have made substantial investment
in competing technologies, may already have, or may apply for and obtain patents
that will prevent, limit or interfere with our licensees ability to make and
sell our products using our technology. Competitors may also intentionally
infringe on our patents. The defense and prosecution of patent suits is both
costly and time-consuming, even if the outcome is favorable to us. In foreign
countries, the expenses associated with such proceedings can be prohibitive.
In
addition, there is an inherent unpredictability in obtaining and enforcing
patents in foreign countries. An adverse outcome in the defense of a patent
suit
could subject us to significant liabilities to third parties. Although third
parties have not asserted infringement claims against us, there is no assurance
that third parties will not assert such claims in the future. A major law firm
has reviewed our patent portfolio and agreed to handle litigation related to
certain of our patents
on a contingency basis.
We
also
rely on unpatented proprietary technology, and there is no assurance that others
will not independently develop the same or similar technology, or otherwise
obtain access to our proprietary technology. To protect our rights in these
areas, we require employees, consultants, advisors and collaborators to enter
into confidentiality agreements. These agreements may not provide meaningful
protection for our trade secrets, know-how, or other proprietary information
in
the event of any unauthorized use, misappropriation or disclosure of such trade
secrets, know-how, or other proprietary information. While we have attempted
to
protect proprietary technology that we develop or acquire and will continue
to
attempt to protect future proprietary technology through patents, copyrights
and
trade secrets, we believe that our success will depend upon further innovation
and technological expertise.
The
loss of key personnel could adversely affect our business
Our
future success will depend on our ability to attract and retain highly qualified
scientific, technical and managerial personnel. Competition for such personnel
is intense. We may not be able to attract and retain all personnel necessary
for
the development of our business. In addition, much of the know-how and processes
developed by us reside in our key scientific and technical personnel. The loss
of the services of key scientific, technical and managerial personnel could
have
a material adverse effect on us until we are able to replace those
personnel.
We
are exposed to litigation liability
We
have
lawsuits that arise in the normal course of business. We have been subject
to
litigation in the past and have settled litigation in the past that has resulted
in material payments. We expect all current lawsuits to be resolved with no
material impact on our financial statements, and we are unaware of any other
potential significant litigation. If we were to become subject to a judgment
that exceeds our ability to pay, that judgment would have a material impact
on
our financial condition and could affect our ability to continue in
existence.
We
have never paid dividends
Nano-Proprietary,
Inc. has never paid cash dividends on its equity securities and does not intend
to pay cash dividends in the foreseeable future. To the extent the Company
has
earnings in the future, the Company intends to reinvest such earnings in the
business operations of the Company.
Shares
of our common stock are eligible for future sale
As
of
October 27, 2005, there were 99,746,440 shares of Nano-Proprietary, Inc. common
stock outstanding, of which 94,299,938 shares of such common stock were freely
tradable without restriction or further registration under the Securities Act
by
persons other than “affiliates” of Nano-Proprietary, Inc.. As of that date, the
remaining shares of Nano-Proprietary, Inc. common stock were deemed “restricted
securities,” as defined in Rule 144 under the Securities Act, and may not be
resold in the absence of registration under the Securities Act or pursuant
to an
exemption from such registration, including exemptions provided by Rule 144
under the Securities Act. Under Rule 144, persons who have held securities
for a
period of at least one year may sell a limited amount of such securities without
registration under the Securities Act. Rule 144(k) also permits, under certain
circumstances, persons who are not affiliates of Nano-Proprietary, Inc., to
sell
their restricted securities without quantity limitations once they have
completed a two-year holding period.
The
Registration Statement, of which this Prospectus is a part, pertains to
1,802,393 shares of common stock which are currently “restricted securities”;
and 95,000 shares of common stock which underlie existing warrants.
Nano-Proprietary, Inc. is obligated to maintain the effectiveness of the
Registration Statement for varying periods of time, pursuant to separate
agreements with certain groups of the selling shareholders.
In
addition to the shares of common stock which are outstanding as of October27,2005, a total of 8,618,260 shares of common stock have been reserved for
issuance pursuant to our stock option plans. An additional 95,000 shares of
common stock have also been reserved for issuance upon the exercise of warrants
that have been issued by Nano-Proprietary, Inc.
No
prediction can be made as to the effect, if any, that future sales, or the
availability of shares of Nano-Proprietary, Inc. common stock for future sales,
will have on the market price prevailing from time to time. Sales of substantial
amounts of Nano-Proprietary, Inc. common stock by Nano-Proprietary, Inc. or
by
shareholders who hold “restricted securities,” or the perception that such sales
may occur, could adversely affect prevailing market prices for the common
stock.
The
price
of our common stock could be adversely affected by the sale of stock by selling
shareholders
Sales
of
or offers to sell substantial blocks of common stock currently held by certain
shareholders, or the perception by investors, investment professionals or
securities analysts of the possibility that such sales may occur could adversely
affect the price of and market for the common stock.
Upon
registration in accordance with its obligations, the selling shareholders will
be permitted to sell up to 1,897,393 shares of common stock, of which 95,000
are
shares of common stock subject to issuance upon the exercise of certain
warrants. The shares (assuming the exercise of all warrants subject to the
Registration Statement) represent approximately 1.90% of the shares of common
stock outstanding on the date hereof. A total of 1,415,000 of these shares
were
previously registered and this registration statement only updates the previous
registration statement. We will not receive any proceeds from sales of shares
held by such selling shareholders. Nano-Proprietary, Inc. will receive the
proceeds from the exercise of any warrants to purchase shares of common stock.
The exercise prices of the warrants range from $1.00 to $2.00 per share of
Nano-Proprietary, Inc.’s common stock. It is unlikely that significant amounts
of the warrants will be exercised until the trading price of the common stock
significantly exceeds the exercise price of the warrants, if at all.
Nano-Proprietary,
Inc.’s Restated Articles and Bylaws contain a number of provisions which could
make its acquisition by means of an unsolicited tender offer, a proxy contest
or
otherwise, more difficult, including the following:
·
the
Board is authorized to issue series of preferred stock that could,
depending on the terms of such series, impede the completion of a
merger,
tender offer or other takeover
attempt;
·
the
Board of Directors is divided into three classes of directors, with
the
result that approximately one-third of the Board of Directors are
elected
each year; and
·
except
in limited circumstances, no shares of our preferred stock may be
issued
or sold to any officer or director of Nano-Proprietary, Inc. or any
shareholder owning more than five percent (5%) of Nano-Proprietary,
Inc.’s
common stock without the affirmative vote of a majority of its
disinterested shareholders.
Our
Restated Articles and Bylaws limit our directors’ liability and provide for
indemnification of directors and officers
Nano-Proprietary,
Inc.’s Restated Articles provide that a director will only be liable to
Nano-Proprietary, Inc. for the following:
·
breaches
of his duty of loyalty to Nano-Proprietary, Inc. and its shareholders,
·
acts
or omissions not in good faith or which constitute a breach of duty
of a
director of Nano-Proprietary, Inc. or involves intentional misconduct
or a
knowing violation of law,
·
transactions
from which a director receives an improper benefit, whether or not
the
benefit resulted from an action taken within the scope of the director’s
office,
·
acts
or omissions for which liability is specifically provided by statute,
and
·
acts
relating to unlawful stock purchases or payments of dividends.
Thus,
Nano-Proprietary, Inc. may be prevented from recovering damages for certain
alleged errors or omissions by its directors.
The
Bylaws also provide that, under certain circumstances, Nano-Proprietary, Inc.
will indemnify its officers and directors for liabilities incurred in connection
with their good faith acts. Such an indemnification payment might deplete our
assets. While Texas law permits a shareholder to bring a derivative action
on
behalf of a corporation, the law relating to the remedies available to corporate
shareholders is constantly changing. Shareholders who have questions concerning
the fiduciary obligations of the officers and directors of Nano-Proprietary,
Inc. should consult with independent legal counsel. Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of Nano-Proprietary, Inc. pursuant to the
foregoing provisions, or otherwise, Nano-Proprietary, Inc. 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.
The
market for our common stock is volatile
The
market price of the shares of Nano-Proprietary, Inc. common stock, like that
of
the common stock of many emerging technology companies, has fluctuated
significantly in recent years and will likely continue to fluctuate in the
future. The prices of securities of emerging technology companies currently
rise
rapidly in response to certain events, such as announcements concerning product
developments, licenses and patents, although the outcome of such events may
not
be fully determined. It is expected that these reactions will continue in the
future. Similarly, prices of such securities may fall rapidly if unfavorable
results are encountered in product development or market acceptance. In the
event that Nano-Proprietary, Inc. achieves earnings from the sale of products,
securities analysts may begin predicting quarterly earnings. The failure of
our
earnings to meet analysts’ expectations could result in a significant rapid
decline in the market price of our common stock. In addition, the stock market
has experienced and continues to experience extreme price and volume
fluctuations which have affected the market price of the equity securities
of
many technology companies and which have often been unrelated to the operating
performance of those companies. Such broad market fluctuations, as well as
general economic and political conditions, may adversely affect the market
price
of the common stock.
There
are risks associated with forward-looking statements
This
prospectus contains some forward-looking statements. Forward-looking statements
give our current expectations or forecasts of future events. You can identify
these statements by the fact that they do not relate strictly to historical
or
current facts. They use words such as “anticipate”, “believe”, “expect”,
“estimate”, “project”, “intend”, “plan”, and other words and terms of similar
meaning in connection with any discussion of future operating or financial
performance. In particular, these include statements relating to future actions,
prospective products or product approvals, future performance or results of
current and anticipated products, sales efforts, expenses, the outcome of
contingencies such as legal proceedings, and financial results. From time to
time, we also may provide oral or written forward-looking statements in other
materials we release to the public.
Any
or
all of our forward-looking statements in this report and in any other public
statements we make may turn out to be wrong. They can be affected by inaccurate
assumptions we might make or by known or unknown risks or uncertainties. Many
factors mentioned in the following discussion, for example, product development,
competition, and the availability of funding, will be important in determining
future results. Consequently, no forward-looking statement can be guaranteed.
Actual future results may vary materially.
We
undertake no obligation to publicly update any forward-looking statements,
whether as the result of new information, future events, or otherwise. You
are
advised, however, to consult any further disclosures we make on related subjects
in our 10-Q, 8-K, and 10-K reports to the SEC. Also note that we have provided
the above cautionary discussion of risks, uncertainties, and possibly inaccurate
assumptions relevant to our business. These are factors that we think could
cause our actual results to differ materially from expected and historical
results. Other factors besides those listed above could also adversely affect
the Company. This discussion is provided as permitted by the Private Securities
Litigation Reform Act of 1995.
The
selling shareholders will receive all of the net proceeds from the sale of
the
shares of Nano-Proprietary, Inc. common stock sold. Pursuant to this prospectus,
Nano-Proprietary, Inc. will not receive any of the proceeds from the sale of
the
shares by the selling shareholders. Nano-Proprietary, Inc. will receive the
proceeds from the exercise of the warrants, which proceeds will be used for
working capital. The exercise prices of the warrants ranges from $1.00 to $2.00
per share of Nano-Proprietary, Inc.’s common stock. It is unlikely that
significant amounts of the warrants will be exercised until the trading price
of
the common stock exceeds the exercise price of the warrants, if at
all.
We
are
registering the shares of common stock on behalf of the Selling Shareholders.
Sales of shares may be made by the Selling Shareholders, including their
respective donees, transferees, pledgees or other successors-in-interest
directly to purchasers or to or through underwriters, broker-dealers or through
agents. The Selling Shareholders hold shares of Nano-Proprietary’s common stock
which are (1) currently “restricted securities”, or (2) issuable upon exercise
of certain outstanding warrants to purchase shares of Nano-Proprietary’s common
stock. Sales may be made from time to time on the NASDAQ OTC BB or any other
exchange upon which our shares may trade in the future at market prices
prevailing at the time of sale, at prices related to market prices, or at
negotiated or fixed prices. The shares may be sold by one or more of, or a
combination of, the following:
·
a
block trade in which the broker-dealer so engaged 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 such broker-dealer,
including resale for its account, pursuant to this
prospectus;
·
ordinary
brokerage transactions and transactions in which the broker solicits
purchases;
·
through
options, swaps or derivatives;
·
in
privately negotiated transactions;
·
in
making short sales or in transactions to cover short sales;
and
·
put
or call option transactions relating to the
shares.
The
Selling Shareholders may effect these transactions by selling shares directly
to
purchasers or to or through broker-dealers, which may act as agents or
principals. These broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Shareholders and/or
the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Selling
Shareholders may also sell shares of common stock short and deliver shares
covered by this prospectus to close out short positions, provided that the
short
sale is made after the registration statement is declared effective and a copy
of this prospectus is delivered in connection with the short sale. The Selling
Shareholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities.
The
Selling Shareholders may enter into hedging transactions with broker-dealers
or
other financial institutions. In connection with those transactions, the
broker-dealers or other financial institutions may engage in short sales of
the
shares or of securities convertible into or exchangeable for the shares in
the
course of hedging positions they assume with the Selling Shareholders. The
Selling Shareholders may also enter into options or other transactions with
broker-dealers or other financial institutions which require the delivery of
shares offered by this prospectus to those broker-dealers or other financial
institutions. The broker-dealer or other financial institution may then resell
the shares pursuant to this prospectus (as amended or supplemented, if required
by applicable law, to reflect those transactions).
The
Selling Shareholders and any broker-dealers that act in connection with the
sale
of shares may be deemed to be “underwriters” within the meaning of Section 2(11)
of the Securities Act of 1933, and any commissions received by broker-dealers
or
any profit on the resale of the shares sold by them while acting as principals
may be deemed to be underwriting discounts or commissions under the Securities
Act. The Selling Shareholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares
against liabilities, including liabilities arising under the Securities Act.
The
Company has agreed to indemnify each of the Selling Shareholders and each
Selling Shareholder has agreed, severally and not jointly, to indemnify the
Company against some liabilities in connection with the offering of the shares,
including liabilities arising under the Securities Act.
Those
Selling Shareholders that may be deemed to be “underwriters” within the meaning
of Section 2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act. Resales and reoffers of the shares
by the Selling Shareholders must also be accompanied by the delivery of a copy
of the prospectus. Copies of the prospectus shall be delivered to each Selling
Shareholder after the registration statement, of which this prospectus is a
part, is declared effective, along with a copy of Nano-Proprietary’s Form 10-K/A
for the fiscal year ended December 31, 2004. Each person to whom a prospectus
is
delivered shall also be provided, without charge, a copy of Nano-Proprietary’s
latest Form 10-Q. To the extent required by applicable law, the specific shares
to be sold, the names of the Selling Shareholders, the respective purchase
prices and public offering prices, the names of any agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a
particular offer will be set forth in an accompanying prospectus.
We
have
informed the Selling Shareholders that the anti-manipulative provisions of
Regulation M promulgated under the Securities Exchange Act of 1934 may apply
to
their sales in the market.
Selling
Shareholders also may resell all, or a portion, of the shares in open market
transactions in reliance upon Rule 144 under the Securities Act, provided they
meet the criteria and conform to the requirements of Rule 144.
There
can
be no assurance that the Selling Shareholders will sell any or all of the shares
offered by them in this prospectus. Nano-Proprietary has filed the registration
statement, of which this prospectus forms a part, to comply with the exercise
by
certain Selling Shareholders of demand registration rights granted to such
Selling Shareholders, and to comply with certain “piggyback” regis-tration
rights granted to other Selling Shareholders.
Upon
being notified by a Selling Shareholder that a material arrangement has been
entered into with a broker-dealer for the sale of shares through a block trade,
special offering, exchange distribution or secondary distribution or a purchase
by a broker or dealer, we will file a supplement to this prospectus, if required
pursuant to Rule 424(b) under the Securities Act, disclosing:
·
the
name of each such Selling Shareholder and of the participating
broker-dealer(s);
·
the
number of shares involved;
·
the
initial price at which the shares were
sold;
·
the
commissions paid or discounts or concessions allowed to the
broker-dealer(s), where applicable;
·
that
such broker-dealer(s) did not conduct any investigation to verify
the
information set out or incorporated by reference in this prospectus;
and
·
other
facts material to the transactions.
In
addition, we will file a supplement to this prospectus when a Selling
Shareholder notifies us that a donee or pledgee intends to sell more than 500
shares of common stock.
Expenses
Associated with Registration
We
are
paying all expenses and fees in connection with the registration of the shares.
The Selling Shareholders will bear all brokerage or underwriting discounts
or
commissions paid to broker-dealers in connection with the sale of the
shares.
2005
Private Placements
In
February 2005, in a private placement, Nano-Proprietary, Inc. issued a total
of
1,200,000 shares of its common stock and received net proceeds of $3,000,000.
In
October 2005, in a private placement, Nano-Proprietary, Inc. issued a total
of
482,393 shares of its common stock and received net proceeds of $1,000,000.
All
of these shares were issued pursuant to Rule 506 of Regulation D.
2004
Private Placements
In
February 2004, in a private placement, Nano-Proprietary, Inc. issued a total
of
401,887 shares of its common stock and received net proceeds of $1,065,000.
All
of these shares were issued pursuant to Rule 506 of Regulation D.
2003
Private Placements
From
January 1, 2003 through December 31, 2003, in a series of private placements,
Nano-Proprietary, Inc. issued a total of 7,607,097 shares of its common stock
and received net proceeds of $4,812,943. All of these shares were issued
pursuant to Rule 506 of Regulation D.
Other
Selling Shareholders
Nano-Proprietary,
Inc. has agreed to give the shareholders listed herein as the Other Selling
Shareholders “piggyback” registration rights regarding shares underlying certain
warrants and shares held by these holders. Pursuant to these “piggyback” rights,
Nano-Proprietary, Inc. agreed to use its best efforts to have the common stock
and the common stock issuable upon the exercise of these warrants included
in
the Registration Statement, of which this prospectus is a part.
This
prospectus covers offers of the shares of common stock owned by the Selling
Shareholders. The following table lists the names of the selling shareholders
as
well as (1) the number of shares of common stock, and (2) the number of shares
of common stock underlying existing warrants held as of October 27, 2005.
Because Nano-Proprietary, Inc. does not know how many shares may be sold by
the
selling shareholders pursuant to this prospectus, no estimate can be given
as to
the number of the shares that will be held by the selling shareholders upon
termination of this offering. None of the selling shareholders have, or have
had
within the last three years, any material relationship with us, or any
predecessor or affiliate.
This
percentage was calculated including shares issuable upon the exercise
of
warrants into shares of the Company’s Common Stock or upon the conversion
of notes payable into share of the Company’s Common
Stock.
The
authorized capital stock of Nano-Proprietary, Inc. consists of 120,000,000
shares of common stock, par value $.001 per share, and 2,000,000 shares of
preferred stock, par value $1 per share. The preferred stock may be issued
in
series; however no shares of preferred stock are currently either issued or
outstanding.
After
giving effect to the exercise of all 95,000 warrants which are subject to the
prospectus, there would be 99,841,440 shares of common stock issued and
outstanding. A total of 8,618,260 shares of common stock are reserved for
issuance under Nano-Proprietary, Inc.’s stock option plans.
Common
stock
The
holders of common stock are entitled to one vote per share, voting with the
holders of any other class of stock entitled to vote, without regard to class,
on all matters to be voted on by the share-holders, including the election
of
directors. All issued and outstanding shares of common stock are fully paid
and
nonassessable. The common stock is currently listed on the OTC Bulletin
Board.
Subject
to any prior and superior rights of the preferred stock, the holders of common
stock are entitled to receive dividends when, and if, declared by the Board
of
Directors from funds legally available. Currently, no series of preferred stock
has rights that are prior and superior to the common stock with respect to
dividends.
In
the
event of any liquidation, dissolution or winding up of the affairs of
Nano-Proprietary, Inc., the holders of the common stock are entitled to receive,
pro rata, any assets of the company remaining after payment has been made in
full to the holders of any series of preferred stock with a liquidation
preference.
Preferred
stock
The
preferred stock may be issued from time to time in one or more series as may
be
established and designated from time to time by the Board of Directors by
resolution. The voting powers, prefer-ences and relative, participating,
optional and other special rights and the qualifications, limitations or
restrictions of any series of preferred stock shall be as stated in the
resolution or resolutions of the Board of Directors that provides for the
designation of such series. With the exception of shares issued pursuant to
any
duly adopted stock option plan of Nano-Proprietary, Inc., no shares of preferred
stock may be issued to any officer or director of Nano-Proprietary, Inc. or
any
shareholder who directly or indirectly owns greater than five percent (5%)
of
the issued and outstanding voting stock of Nano-Proprietary, Inc. or any
affiliate of such persons, without the affirmative vote of a majority in
interest of the disinterested shareholders. Under the Texas Business Corporation
Act, each series of preferred stock is entitled to vote as a class with respect
to a proposed amendment to Nano-Proprietary, Inc.’s Restated Articles of
Incorporation in certain circumstances. As of October 27, 2005, there is no
preferred stock of Nano-Proprietary, Inc. outstanding.
Shares
Eligible for Future Sale
As
of
October 27, 2005, there were 99,746,440 shares of common stock outstanding,
of
which 94,299,938 shares of common stock were freely tradable without restriction
or further registration under the Securities Act by persons other than
“affiliates” of the Company. As of that date, the remaining shares of common
stock were deemed “restricted securities,” as defined in Rule 144 under the
Securities Act, and may not be resold in the absence of registration under
the
Securities Act or pursuant to an exemption from such registration, including
exemptions provided by Rule 144 under the Securities Act. Under Rule 144,
persons who have held securities for a period of at least one year may sell
a
limited amount of such securities without registration under the Securities
Act.
Rule 144 also permits, under certain circumstances, persons who are not
affiliates of Nano-Proprietary, Inc., to sell their restricted securities
without quantity limitations once they have completed a two-year holding
period.
The
Registration Statement, of which this prospectus is a part, pertains
to:
·
1,802,393 shares
of common stock which are currently “restricted securities”;
and
·
95,000
shares of common stock which underlie existing
warrants.
We
are
obligated to maintain the effectiveness of the Registration Statement for
varying periods of time, pursuant to separate agreements with certain groups
of
the selling shareholders.
In
addition to the shares of common stock which are outstanding as of October24,2005, 8,618,260 shares of common stock have been reserved for issuance pursuant
to Nano-Proprietary, Inc.’s stock option plans. A total of 95,000 shares of
common stock have also been reserved for issuance upon exercise of warrants
that
have been issued by Nano-Proprietary, Inc. (all of which are subject to this
prospectus).
No
prediction can be made as to the effect, if any, that future sales, or the
availability of shares of common stock for future sales, will have on the market
price prevailing from time to time. Sales of substantial amounts of common
stock
by Nano-Proprietary, Inc. or by shareholders who hold “restricted securities,”
or the perception that such sales may occur, could adversely affect prevailing
market prices for the common stock.
Transfer
Agent and Registrar
The
transfer agent and registrar for the common stock is Registrar and Transfer
Company, 10 Commerce Drive, Cranford, New Jersey07016-3572.
Nano-Proprietary,
Inc.’s Restated Articles currently contain provisions which could be considered
to have anti-takeover effects. First, the authorized and unissued shares of
Nano-Proprietary, Inc.’s preferred stock and common stock could be used by
incumbent management to make more difficult and thereby discourage an attempt
to
acquire control of Nano-Proprietary, Inc., even though some shareholders may
deem such an acquisition desirable. For example, the shares of unissued
preferred stock and unissued common stock could be privately placed with
pur-chasers who might support the Board of Directors in opposing a hostile
takeover bid. The issuance of the unissued preferred stock with voting rights
and/or the unissued common stock could also be used to dilute the stock
ownership and voting power of a third party seeking to remove directors, replace
incum-bent directors, accomplish certain business combinations, or alter, amend,
or replace provisions in Nano-Proprietary, Inc.’s Restated Articles. To the
extent that it impedes any such attempt, the unissued preferred stock and
unissued common stock may serve to perpetuate current management. From time
to
time, Nano-Proprietary, Inc. evaluates potential transactions and acquisitions,
which if consummated, may require the issuance of the unissued preferred stock
or unissued common stock.
Nano-Proprietary,
Inc.’s Restated Articles require a classified Board of Directors pursuant to
which only one-third (1/3) of the Board of Directors is elected each year for
a
term of three years. Therefore, even when a shareholder, or a group of
shareholders, has sufficient voting power to elect all of the directors to
be
elected every year, Nano-Proprietary, Inc.’s classified Board could have the
effect of requiring two successive annual meetings to replace a majority of
the
Board of Directors and three annual meetings to replace the entire Board of
Directors. There is no cumulative voting with respect to the election of
directors.
Nano-Proprietary,
Inc.’s Restated Articles also contain a provision which states that, with the
sole excep-tion of shares issued pursuant to the duly adopted stock option
plans, no shares of Nano-Proprietary, Inc.’s preferred stock shall be issued or
sold to any officer or director of Nano-Proprietary, Inc., or any shareholder
who directly or indirectly owns more than five percent (5%) of the issued and
outstanding voting stock of Nano-Proprietary, Inc., or any affiliate of such
a
person, without the affirmative vote of a majority in interest of the
disinterested shareholders of Nano-Proprietary, Inc..
Nano-Proprietary,
Inc. shall not be obligated to deliver notices or offer voting stock for sale
pursuant to these provisions in respect of the following issuances of voting
stock: (a) pursuant to employee, director or consultant stock option, purchase,
bonus, exchange or other such plans or upon the exercise of options or other
rights granted there under, and (b) in connection with transactions in which
shares of voting stock are issued to security holders of a company being
acquired by Nano-Proprietary, Inc. or to a company some or all of whose assets
are being acquired by Nano-Proprietary, Inc..
The
Restated Articles limit the liability of directors of Nano-Proprietary, Inc.
in
their capacity as directors. Specifically, the directors of Nano-Proprietary,
Inc. will not be liable to Nano-Proprietary, Inc. or its shareholders for
monetary damages for an act or omission in a director’s capacity as a director,
except for liability for the following:
·
for
any breach of the director’s duty of loyalty to Nano-Proprietary, Inc. or
its shareholders,
·
for
any act or omis-sion not in good faith which constitutes a breach
of duty
of the director to Nano-Proprietary, Inc. or acts or omis-sions which
involve intentional misconduct or a knowing violation of the law,
·
for
transactions from which a director received an improper benefit,
whether
or not the benefit resulted from an action taken within the scope
of the
director’s office,
·
for
an act or omission for which the liability of a director is expressly
provided for by an applicable statute, or
·
for
acts related to an unlawful stock repurchase or payment of a
dividend.
The
overall effect of the provisions in Nano-Proprietary, Inc.’s current Restated
Articles described above would be to make more difficult or discourage a merger,
tender, offer or proxy contest, even if such trans-action or occurrence
generally is favorable to the interests of the shareholders, or they may delay
or frustrate the assumption of control by a holder of a large block of
Nano-Proprietary, Inc.’s securities and the removal of incumbent management,
even if such removal may be beneficial to the shareholders.
The
consolidated balance sheets as of December 31, 2004 and 2003 and the
consolidated state-ments of operations, stockholders’ equity (deficit) and cash
flows for the years then ended, incorporated by reference in this prospectus,
have been incorporated herein in reliance on the report, of Sprouse &
Anderson L.L.P., independent accountants, given on the authority of that firm
as
experts in accounting and auditing.
Legal
matters in connection with the common stock offered hereby have been passed
upon
for the Company by Donald T. Locke, Esq. Mr. Locke will opine that (1) the
shares of common stock held by the selling shareholders and (2) the shares
of
common stock underlying the warrants, when such shares are duly delivered
against payment as provided in the warrants, shall all be validly issued, fully
paid, and nonassessable.
This
prospectus is part of a Registration Statement on Form S-2 that we filed with
the Commission. This prospectus does not contain all of the information in
the
Registration Statement. The Registration Statement contains more information
than this prospectus regarding Nano-Proprietary, Inc. and its common stock,
including exhibits and schedules. You can get a copy of the Registration
Statement from the SEC at the address below or from its Internet
site.
We
file
annual, quarterly and current reports, proxy statements and other information
with the SEC. You may read and copy the documents we file with the SEC at the
SEC’s public reference room at 450 Fifth Street, N.A., Judiciary Plaza,
Washington, D.C. 20549. You should call 1-800-SEC-0330 for more information
on
the public reference room. You can request copies of these documents upon
payment of a duplicating fee by writing to the SEC at the Public Reference
Section at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a Web site that contains information regarding registrants at
http:\\www.sec.gov. Copies of our public filings are also available on our
website at http:\\www.nano-proprietary.com.
Nano-Proprietary,
Inc.’s common stock is included in the OTC Bulletin Board under the symbol
“NNPP”. Reports, proxy statements, and other information concerning the Company
can be inspected at the National Association of Securities Dealers, Inc., 1735
K
Street, 3rd Floor, Washington, D.C.20006 or obtained by calling the NASDAQ
Public Reference Room Disclosure Group at 1-800-638-8241.
The
Commission allows us to “incorporate” into this prospectus information we file
with the Commission in other documents. This means we can disclose important
information to you by referring to other documents which we have filed that
contain that information. The following documents, which have been filed by
Nano-Proprietary, Inc. with the Commission pursuant to the Exchange Act (File
No. 1-11602), are incorporated by reference in this prospectus and shall be
deemed to be a part hereof:
(1)
Nano-Proprietary,
Inc.’s Annual Report on Form 10-K/A for the fiscal year ended December31,2004;
(2)
Nano-Proprietary,
Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March31, 2005;
(3)
Nano-Proprietary,
Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended June30,2005;
(4)
Nano-Proprietary,
Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2005;
(5)
Nano-Proprietary,
Inc.’s Current Report on Form 8-K dated January 4, 2005 (Item
1.01);
(6)
Nano-Proprietary,
Inc.’s Current Report on Form 8-K dated February 18, 2005 (Item
3.02);
(7)
Nano-Proprietary,
Inc.’s Current Report on Form 8-K dated March 8, 2005 (Item
8.01);
(8)
Nano-Proprietary,
Inc.’s Current Report on Form 8-K dated April 12, 2005 (Items 8.01 &
9.01);
(9)
Nano-Proprietary,
Inc.’s Current Report on Form 8-K dated April 20, 2005 (Items 8.01 &
9.01);
(10)
Nano-Proprietary,
Inc.’s Current Report on Form 8-K dated July 13, 2005 (Items 1.01 &
9.01);
(11)
Nano-Proprietary,
Inc.’s Current Report on Form 8-K dated July 21, 2005 (Items 7.01 &
9.01);
(12)
Nano-Proprietary,
Inc.’s Current Report on Form 8-K dated July 28, 2005 (Items 1.01 &
9.01);
(13)
Nano-Proprietary,
Inc.’s Current Report on Form 8-K dated September 9, 2005 (Item
8.01);
(14)
Nano-Proprietary,
Inc.’s Current Report on Form 8-K dated Oct. 25, 2005 (Items 3.02 &
9.01); and
(15)
The
description of Nano-Proprietary, Inc.’s common stock which is contained in
its Registration Statement on Form 8-A filed on November 19, 1992,
pursuant to Section 12 of the Securities Exchange Act of 1934, including
any amendment or report filed for the purpose of updating such
description.
You
may
request a copy of the documents incorporated by reference at no cost. Requests
for copies should be directed in writing or by telephone to:
Nano-Proprietary,
Inc., 3006 Longhorn Boulevard, Suite 107, Austin, Texas78758
DISCLOSURE
OF
COMMISSION POSITION ON INDEMNIFICATON
FOR
SECURITIES ACT LIABILITY
Article
2.02A(16) and Article 2.01-1 of the Texas Business Corporation Act and Article
VIII of Nano-Proprietary, Inc.’s Bylaws provide it with broad powers and
authority to indemnify its directors and officers and to purchase and maintain
insurance for such purposes. Pursuant to such statutory and Bylaw provisions,
Nano-Proprietary, Inc. has purchased insurance against certain costs of
indemnification that may be incurred by it and its officers and directors.
Additionally,
Article Seven(C) of the Restated Articles, provides that a director of
Nano-Proprietary, Inc. is not liable to the company or its shareholders for
monetary damages for any act or omission in the director’s capacity as director,
except that Article Seven(C) does not eliminate or limit the liability of a
director for:
·
breaches
of his duty of loyalty to Nano-Proprietary, Inc. and its
shareholders;
·
acts
or omissions not in good faith or which constitute a breach of duty
of a
director or involve intentional misconduct or a knowing violation
of
law;
·
transactions
from which a director receives an improper benefit, whether or not
the
benefit resulted from an action taken within the scope of the director’s
office;
·
acts
or omissions for which liability is specifically provided by statute;
and
·
acts
relating to unlawful stock purchases or payments of
dividends.
Article
Seven(C) also provides that any subsequent amendments to Texas statutes that
further limit the liability of directors will inure to the benefit of the
directors, without any further action by shareholders. Any repeal or
modification of Article Seven(C) shall not adversely affect any right of
protection of a director existing at the time of the repeal or modification.
The
foregoing discussion is not intended to be exhaustive and is qualified in its
entirety by each of such documents and such statutes.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such
issue.
You
should rely only on the information contained in this prospectus.
We have
not authorized anyone to give you information different from that
contained in this prospectus. The selling shareholders are offering
to
sell, and seeking offers to buy, shares of Nano-Proprietary common
stock
only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the
date
of this prospectus, regardless of the time of the delivery of this
prospectus or of any sale of the shares.
Item
14.Other
Expenses of Issuance and Distribution
The
estimated fees and expenses payable in connection with this offering, all of
which are payable by Nano-Proprietary, Inc., are as follows:
Securities
and Exchange Commission registration fee
$
100.00
Printing
and edgarization expenses
$
500.00
Legal
fees and expenses
$
2,500.00
Accounting
fees and expenses
$
2,500.00
Miscellaneous
$
400.00
Total
$
6,000.00
Item
15.Indemnification
of Directors and Officers
Article
2.02A(16) and Article 2.01-1 of the Texas Business Corporation Act and Article
VIII of Nano-Proprietary, Inc.’s Bylaws provide it with broad powers and
authority to indemnify its directors and officers and to purchase and maintain
insurance for such purposes. Pursuant to such statutory and Bylaw provisions,
Nano-Proprietary, Inc. has purchased insurance against certain costs of
indemnification that may be incurred by it and its officers and directors.
See
“Item 17. Undertakings” for a description of the Securities and Exchange
Commission’s position regarding such indemnification provisions.
Additionally,
Article Seven (C) of the Restated Articles, provides that a director of
Nano-Proprietary, Inc. is not liable to the company or its shareholders for
monetary damages for any act or omis-sion in the director’s capacity as
director, except that Article Seven (C) does not eliminate or limit the
lia-bil-ity of a director for:
•
breaches
of his duty of loyalty to Nano-Proprietary, Inc. and its
shareholders;
•
acts
or omissions not in good faith or which constitute a breach of duty
of a
director or involve intentional misconduct or a knowing violation
of
law;
•
transactions
from which a director receives an improper benefit, whether or not
the
benefit resulted from an action taken within the scope of the director’s
office;
•
acts
or omissions for which liability is specifically provided by statute;
and
•
acts
relating to unlawful stock purchases or payments of
dividends.
Article
Seven(C) also provides that any subsequent amendments to Texas statutes that
further limit the liability of directors will inure to the benefit of the
directors, without any further action by shareholders. Any repeal or
modification of Article Seven(C) shall not adversely affect any right of
protection of a director existing at the time of the repeal or
modification.
The
foregoing discussion is not intended to be exhaustive and is qualified in its
entirety by each of such documents and such statutes.
See
Index
to Exhibits-on page II - 5 for a descriptive response to this item.
Item
17.Undertakings
(a)
The
undersigned registrant hereby takes:
(1) To
file, during any period in which offers or sales are being made,
a
post-effective amendment to this Registration
Statement:
(i) To
include any material information with respect to the plan of dis-tribution
not previously disclosed in the Registration Statement or any material
change to such information in the Registration
Statement.
(2) That,
for the purpose of determining any liability under the Securities
Act of
1933, each such post-effective amendment shall be deemed to be a
new
registration statement relating to the securities offered therein,
and the
offering of such securities at that time shall be deemed to be the
initial
bona fide offering thereof
(3) To
remove from registration by means of a post-effective amendment any
of the
securities being registered which remain unsold at the termination
of the
offering.
(b) The
undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the
registrant’s annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each
filing of
an employee benefit plan’s annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference
in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar
as indemnification for liabilities arising under the Securities Act
of
1933 may be permitted to directors, officers and controlling persons
of
the registrant pursuant to the foregoing provi-sions, or otherwise,
the
registrant has been advised that in the opinion of the Securities
and
Exchange Commission such indemnification is against public policy
as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by
a director, officer or controlling per-son of the registrant in the
successful defense of any action, suit or proceeding) is asserted
by such
direc-tor, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication
of
such issue.
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies
that
it has reasonable grounds to believe that it meets the requirements for filing
on Form S-2 and has duly caused this Registration Statement to be signed on
behalf of the undersigned, thereunto duly authorized, in the City of Austin,
State of Texas, on November 1, 2005.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
The
exhibits indicated by an asterisk (*) are incorporated by reference from
previous filings with the Commission.
Exhibit
Number
Description
of Exhibit
4.1*
Form
of Certificate for shares of the Company’s common stock (Exhibit 4.1 to
the Company’s Registration Statement on Form SB-2 (No. 33-51466-FW) dated
January 7, 1993).
4.2*
Form
of Regulation D Subscription agreement by and between the Company
and the
participants of private placements (Exhibit 4.3 to the Company’s Annual
Report on Form 10-K for the year ended December 31,2004.)
Regulation
D Subscription agreement by and between the Company and Pinnacle
Fund,
L.P. (Exhibit 4.1 to the Company’s Current Report on Form 8K dated October25, 2005.)
5.1
Opinion
of Donald T. Locke, Esq. as to certain legal aspects of the offering.
23.1
Consent
of Donald T. Locke, Esq. (included in Exhibit 5.1).
23.2
Consent
of Sprouse & Anderson L.L.P.
24
Powers
of Attorney
II-5
Dates Referenced Herein and Documents Incorporated by Reference
