As filed with the Securities and Exchange Commission on April 26, 2005
Registration No. 333-123696
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1 to
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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eLEC COMMUNICATIONS CORP.
(Name of Small Business Issuer in Its Charter)
New York 4813 13-2511270
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
75 South Broadway, Suite 302
White Plains, New York 10601
(914) 682-0214
(Address and Telephone Number of Principal Executive Offices)
75 South Broadway, Suite 302
White Plains, New York 10601
(Address of Principal Place of Business or Intended Principal Place of Business)
Paul H. Riss, Chief Executive Officer
eLEC Communications Corp.
75 South Broadway, Suite 302
White Plains, New York 10601
(914) 682-0214
(Name, address and telephone number of agent for service)
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Copies to:
Eric M. Hellige, Esq.
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022-4441
Telephone: (212) 421-4100
Facsimile: (212) 326-0806
Approximate Date of Commencement of Proposed Sale to the Public: From time
to time after this Registration Statement becomes 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,
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 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 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. ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.
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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.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Reference is made to Sections 721 through 725 of the Business Corporation
Law of the State of New York (the "BCL"), which provides for indemnification of
directors and officers of New York corporations under certain circumstances.
Section 722 of the BCL provides that a corporation may indemnify directors
and officers as well as other employees and individuals against judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees, in connection with actions or proceedings, whether civil or criminal
(other than an action by or in the right of the corporation, a "derivation
action"), if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
their conduct was unlawful. A similar standard is applicable in the case of
derivative actions, except that indemnification only extends to amounts paid in
settlement and reasonable expenses (including attorneys' fees) incurred in
connection with the defense or settlement of such actions, and the statute does
not apply in respect of a threatened action, or a pending action that is settled
or otherwise disposed of, and requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. Section 721 of the BCL provides that Article 7 of the BCL is
not exclusive of other indemnification that may be granted by a corporation's
certificate of incorporation, disinterested director vote, shareholders vote,
agreement or otherwise.
Article XII of the Registrant's by-laws requires the Registrant to
indemnify its officers and directors to the fullest extent permitted under the
BCL. Article XII of the Registrant's by-laws further provides that no director
of the Registrant shall be personally liable to the Registrant or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except that no indemnification shall be made in respect of (1) a threatened
action, or a pending action which is settled or otherwise disposed of, or (2)
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Registrant unless and only to the extent that the court in
which such action or suit was brought or, if no action was brought, any court of
competent jurisdiction determines upon application that, in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such portion of the settlement and expenses as the court deems
proper.
Section 402(b) of the BCL provides that a corporation's certificate of
incorporation may include a provision that eliminates or limits the personal
liability of the corporation's directors to the corporation or its shareholders
for damages for any breach of a director's duty, provided that such provision
does not eliminate or limit (1) the liability of any director if a judgment or
other final adjudication adverse to the director establishes that the director's
acts or omissions were in bad faith or involved intentional misconduct or a
knowing violation of law or that the director personally gained a financial
profit or other advantage to which the director was not legally entitled or that
the director's acts violated Section 719 of the BCL; or (2) the liability of any
director for any act or omission prior to the adoption of a provision authorized
by Section 402(b) of the BCL. Article Sixth of the Registrant's Certificate of
Incorporation, as amended, provides that no director of the Registrant shall be
liable to the Registrant or its shareholders for any breach of duty in such
capacity except as provided in Section 402(b) of the BCL.
Any amendment to or repeal of the Registrant's Certificate of
Incorporation or by-laws shall not adversely affect any right or protection of a
director or officer of the Registrant for or with respect to any acts or
omissions of such director or officer occurring prior to such amendment or
repeal.
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The Registrant maintains directors and officers insurance which, subject
to certain exclusions, insures the directors and officers of the Registrant
against certain losses which arise out of any neglect or breach of duty
(including, but not limited to, any error, misstatement, act, or omission) by
the directors or officers in the discharge of their duties, and insures the
Registrant against amounts which it has paid or may become obligated to pay as
indemnification to its directors and/or officers to cover such losses.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing, the Registrant has been informed that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Item 25. Other Expenses of Issuance and Distribution
The following table sets forth the expenses expected to be incurred by us
in connection with the issuance and distribution of the common stock registered
hereby, all of which expenses, except for the Securities and Exchange Commission
registration fee, are estimates:
Description Amount
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Securities and Exchange Commission registration fee ........... $ 276
Accounting fees and expenses .................................. 3,500
Legal fees and expenses ....................................... 25,000
Miscellaneous fees and expenses ............................... 1,224
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Total ............................................... $30,000
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Item 26. Recent Sales of Unregistered Securities
In February 2005, we issued a secured convertible term note (the
"Convertible Term Note") in the principal amount of $2,000,000 to Laurus Master
Fund, Ltd. ("Laurus"). The Convertible Term Note is convertible into shares of
our common stock at a fixed conversion price of $0.63 per share of common stock.
We also issued Laurus a warrant (the "Laurus Warrants") to purchase up to
793,650 shares of our common stock, at an exercise price of (i) $0.72 per share
for the first 264,550 shares acquired; (ii) $0.79 per share for the next 264,550
shares acquired and (iii) $0.95 per share for the remaining shares acquired. The
Laurus Warrants expire on February 8, 2012. The Convertible Term Note and the
warrant were issued in reliance on the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
on the basis that their issuance did not involve a public offering, no
underwriting fees or commissions were paid by us in connection with such sale
and Laurus represented to us that it was an "accredited investor," as defined in
the Securities Act.
In February 2005, we paid to Source Capital Group, Inc. ("Source
Capital"), in consideration of the introduction made by Source Capital of Laurus
to the Company, a finder's fee in the amount of $160,000 and issued to or at the
direction of Source Capital common stock purchase warrants (the "Source
Warrants") to purchase up to an aggregate of 253,968 shares of common stock at
an exercise price of $0.63 per share. The Source Warrants expire on February 8,
2009. The Source Warrants were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act, on the basis that
their issuance did not involve a public offering and satisfied the conditions of
Rule 506 of the Securities Act, and Source Capital represented to us that it is
an "accredited investor," as defined in the Securities Act.
In December 2004, we sold 160,000 shares of our stock in conjunction with
the sale of a promissory note in the principal amount of $328,767.12 to an
unaffiliated third party for an aggregate purchase price of $300,000. Such
shares were issued in reliance upon the exemption from registration
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provided by Section 4(2) of the Securities Act, on the basis that such issuances
did not involve a public offering, no underwriter fees or commissions were paid
in connection with such issuances and the unaffiliated third party represented
to us that he was an "accredited investor" as defined in Regulation D under the
Securities Act.
In August 2003 and October 2003, we issued an aggregate of 450,000 and
180,000 shares of our common stock, respectively, to three investors in
conjunction with certain financing agreements as interest expense. Such shares
were issued in reliance upon the exemption from registration provided by Section
4(2) of the Securities Act, on the basis that such issuances did not involve a
public offering, no underwriter fees or commissions were paid in connection with
such issuances and the recipients were "accredited investors" as defined in
Regulation D under the Securities Act of 1933, as amended.
Item 27. Exhibits
(3) Articles of Incorporation and By-laws
(a) Certificate of Incorporation, as amended, incorporated by reference
to our Registration Statement on Form S-1 filed with the Securities
and Exchange Commission on August 27, 1969 under Registration Number
2-34436.
(b) Certificate of Amendment of the Certificate of Incorporation,
incorporated by reference to our definitive proxy statement filed
with the Securities and Exchange Commission in connection with our
Annual Meeting of Shareholders held in May 1984.
(c) Certificate of Amendment to the Certificate of Incorporation,
incorporated by reference to Exhibit 3(b) to our Annual Report on
Form 10-K for the year ended November 30, 1988.
(d) Certificate of Amendment to the Certificate of Incorporation,
incorporated by reference to Exhibit 3(e) to our Annual Report on
Form 10-K for the year ended November 30, 1994, as amended.
(e) Certificate of Amendment of the Certificate of Incorporation,
incorporated by reference to Exhibit 3 to our Quarterly Report on
Form 10-Q for the quarter ended August 30, 1995.
(f) Certificate of Amendment of the Certificate of Incorporation,
incorporated by reference to Exhibit 3(f) to our Annual Report on
Form 10-K for the year ended November 30, 1998.
(g) Certificate of Amendment of the Certificate of Incorporation,
incorporated by reference to Exhibit 3.2 to our Quarterly Report on
Form 10-Q for the quarter ended August 31, 1998.
(h) Certificate of Amendment of the Certificate of Incorporation,
incorporated by reference to Exhibit 3(1) to our Current Report on
Form 8-K dated November 16, 1999.
(i) By-laws, amended and restated as of December 1996, incorporated by
reference to Exhibit 3(e) to our Annual Report on Form 10-K for the
year ended November 30, 1996.
(5) Opinion re: Legality
(a) Opinion of Pryor Cashman Sherman & Flynn LLP*
(10) Material Contracts
(a) 1995 Stock Option Plan, incorporated by reference to Exhibit 10(I)
to our Annual Report on Form 10-K for the year ended November 30,
1995, as amended.
(b) 1996 Restricted Stock Award Plan, incorporated by reference to
Exhibit A to our Proxy Statement dated October 24, 1996.
(c) Non-Employee Director Stock Option Plan, dated March 30, 2001,
incorporated by reference to Exhibit 10(c) to our Annual Report on
Form 10-KSB for the year ended November 30, 2003.
(d) Lease Agreement between South Broadway WP, LLC, Landlord, and New
Rochelle Telephone Corp., Tenant, dated August 2003, incorporated by
reference to Exhibit 10(d) to our Annual Report on Form 10-KSB for
the year ended November 30, 2003.
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(e) Office Lease between Lexin Celebration, LLC, as Landlord, and Vox
Communications Corp., as Tenant, dated January 25, 2005,
incorporated by reference to Exhibit 10(e) to our Annual Report on
Form 10-KSB for the year ended November 30, 2004.
(f) Securities Purchase Agreement, dated as of February 8, 2005, between
eLEC Communications Corp. and Laurus Master Fund, Ltd., incorporated
by reference to Exhibit 10.1 to our Current Report on Form 8-K dated
February 8, 2005.
(g) Secured Convertible Term Note, dated as of February 8, 2005, between
eLEC Communications Corp. and Laurus Master Fund, Ltd., incorporated
by reference to Exhibit 10.2 to our Current Report on Form 8-K dated
February 8, 2005.
(h) Master Security Agreement, dated as of February 8, 2005, among us,
New Rochelle Telephone Corp., Telecarrier Services, Inc., Vox
Communications Corp., Line One, Inc., AVI Holding Corp. and
TelcoSoftware.com Corp. in favor of Laurus Master Fund, Ltd.,
incorporated by reference to Exhibit 10.3 to our Current Report on
Form 8-K dated February 8, 2005.
(i) Stock Pledge Agreement, dated as of February 8, 2005, executed by
eLEC Communications Corp. in favor of Laurus Master Fund, Ltd.,
incorporated by reference to Exhibit 10.4 to our Current Report on
Form 8-K dated February 8, 2005.
(j) Subsidiary Guaranty, dated as of February 8, 2005, executed by New
Rochelle Telephone Corp., Telecarrier Services, Inc., Vox
Communications Corp., Line One, Inc., AVI Holding Corp. and
TelcoSoftware.com Corp., incorporated by reference to Exhibit 10.5
to our Current Report on Form 8-K dated February 8, 2005.
(k) Registration Rights Agreement, dated as of February 8, 2005, between
eLEC Communications Corp. and Laurus Master Fund, Ltd., incorporated
by reference to Exhibit 10.6 to our Current Report on Form 8-K dated
February 8, 2005.
(l) Common Stock Purchase Warrant, dated as of February 8, 2005, between
eLEC Communications Corp. and Laurus Master Fund, Ltd., incorporated
by reference to Exhibit 10.7 to our Current Report on Form 8-K dated
February 8, 2005.
(m) Form of Common Stock Purchase Warrant, dated as of February 8, 2005,
issued by eLEC Communications Corp. to or on the order of Source
Capital Group, Inc., incorporated by reference to Exhibit 10.8 to
our Current Report on Form 8-K dated February 8, 2005.
(22) Subsidiaries - The significant wholly-owned subsidiaries are as follows:
Name Jurisdiction of Organization
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New Rochelle Telephone Corp. New York
Telecarrier Services, Inc. Delaware
VoX Communications Corp Delaware
(23) Consent of Experts and Counsel
(a) Consent of Nussbaum, Yates & Wolpow, P.C.(1)
(b) Consent of Pryor Cashman Sherman & Flynn LLP (included in their
opinion filed as Exhibit 5(a))
(24) Powers of Attorney
(a) Powers of Attorney of certain officers and directors of the Company
(included on the signature page of this Registration Statement as
originally filed).
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* Previously filed.
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Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Securities Act") may be permitted to directors, officers
and controlling persons of the Company, we have 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 Company 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, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned Company hereby undertakes that:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement;
(iii) Include any additional or changed information on the plan of
distribution.
(2) For determining liability under the Securities Act, the Company will
treat each such post-effective amendment as a new Registration Statement of the
securities offered, and the offering of such securities at that time to be the
initial bona fide offering.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
Registration Statement for the securities offered in the Registration Statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it met all
the requirements of filing on Form SB-2 and authorized this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, in White
Plains, New York on April 25, 2005.
eLEC COMMUNICATIONS CORP.
By: /s/Paul H. Riss
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Paul H. Riss
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 1 to Registration Statement was signed by the following persons in
the capacities and on the dates stated.
Signature Title Date
/s/ Paul H. Riss Chairman of the Board, Chief Executive April 25, 2005
------------------------------ Officer and Chief Financial Officer
Paul H. Riss (principal financial officer, principal
accounting officer and principal executive
officer)
* Director April 25, 2005
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Michael H. Khalilian
* Director April 25, 2005
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Greg M. Cooper
* Director April 25, 2005
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Gayle Greer
*By: /s/ Paul H. Riss
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Paul H. Riss
Attorney-in-fact