Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-139401
PROSPECTUS
4,687,000
Shares
GlobalSCAPE,
inc.
Common
Stock
This
prospectus relates to resales of up to 4,687,000 shares of our common stock
consisting of (i) 3,415,000 shares of common stock and (ii) 1,272,000
shares of common stock issuable upon exercise of warrants. A total of 3,380,000 shares of common stock
and 1,352,000 warrants were originally sold to the Selling Stockholders in a
transaction that was completed on November 16, 2006. The warrants have a 5-year term. During 2007, warrants to purchase a total of
80,000 shares were exercised in a cashless exercise resulting in the issuance
of 35,000 shares of common stock.
The
shares of common stock to which this prospectus relates may be sold from time
to time by and for the account of the Selling Stockholders named in this
prospectus or in supplements to this prospectus. The Selling Stockholders may sell all or a
portion of these shares from time to time in market transactions, in negotiated
transactions or otherwise.
See
Plan of Distribution on page 20 for additional information on the methods of
sale.
We
will not receive any of the proceeds from the sale of the shares of common
stock offered by the Selling Stockholders.
We may, however, receive cash proceeds upon the exercise of warrants to
purchase 1,272,000 shares of common stock with an exercise price of $3.15 per
share held by the Selling Stockholders.
If all of such warrants are exercised for cash, we will receive
aggregate cash proceeds from such exercise of approximately $4.0 million.
Our
common stock is quoted on the American Stock Exchange under the symbol GSB.
On April 28, 2008, the last reported sales price of our common stock on
the American Stock Exchange was $2.22 per share.
Investing in these securities involves risks. You should carefully review the information
contained in this prospectus under the heading Risk Factors beginning on page 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY
STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is May 6, 2008.
TABLE OF
CONTENTS
SUMMARY
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1
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RISK
FACTORS
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7
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USE OF
PROCEEDS
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16
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MARKET
FOR OUR COMMON STOCK
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16
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DIVIDEND
POLICY
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17
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SELLING
STOCKHOLDERS
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17
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PLAN
OF DISTRIBUTION
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20
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DESCRIPTION
OF CAPITAL STOCK
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22
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SHARES
ELIGIBLE FOR FUTURE SALE
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25
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LEGAL
MATTERS
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27
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EXPERTS
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28
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WHERE
YOU CAN FIND MORE INFORMATION
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28
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i
Preliminary Notes
GlobalSCAPE®, CuteFTP®,
CuteFTP Pro®, CuteMX®, CuteZIP®, CuteSite Builder®, PureCMS®, CuteHTMn® and
CuteMAP® are registered trademarks of GlobalSCAPE, Inc., GlobalSCAPE
Secure FTP Server, GlobalSCAPE Transfer Engine, and GlobalSCAPE Enhanced File
Transfer Server are trademarks of GlobalSCAPE, Inc. Other trademarks and tradenames in this
prospectus are the property of their respective owners.
In this prospectus, we use
the following terms:
FTP or File Transfer
Protocol is a protocol used to transfer files over the internet.
HTTP or Hyper Text
Transfer Protocol is a protocol commonly used to transfer hypertext documents
between a web server and a web browser.
S/Key is a security system
in which a one-time challenge-response password scheme is used to authenticate
access to data. The purpose of S/Key is
to eliminate the need for the same password to be sent over a network each time
a password is needed for access.
SSH/2 or Secure Shell is a
protocol that provides encrypted network communications between two computers.
SSL or Secure Socket Layer
uses cryptography to encrypt data between the web server and the web browser.
Forward Looking Information
This prospectus contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended.
Forward-looking statements are those statements that are not of
historical fact, but describe managements beliefs and expectations. We have identified many of the
forward-looking statements in this prospectus by using words such as
anticipate, believe, could, estimate, may, expect, and
intend. Although we believe these beliefs and expectations are
reasonable, our operations involve a number of risks and uncertainties,
including those described in the Risk Factors section of this prospectus
and other documents filed with the Securities and Exchange Commission. Therefore, our actual results could differ
materially from those discussed in this prospectus and such other documents.
SUMMARY
This is only a summary and
does not contain all of the information that you should consider before
investing in our common stock. You
should read the entire prospectus carefully, including the Risk Factors
section and the information incorporated by reference from our other filings
with the SEC.
GlobalSCAPE
We develop and distribute
secure managed file transfer, or MFT, software for individuals and business
users to safely send files over the internet.
We have also developed Wide-Area File System, or WAFS, collaboration and
Continuous Data Protection, or CDP, software which further enhance the ability
to share and backup files within the infrastructure of a companys wide and
local area networks, or WAN and LAN at WAN and LAN speeds. Our MFT products ensure the privacy of
critical information such as financial data, medical records, customer files
and other similar documents. In
addition, these products ensure compliance with government regulations relating
to the protection of information while allowing users to reduce IT costs,
increase efficiency, track and audit transactions and automate processes. Our WAFS and CDP products provide data
replication, acceleration of file transfer, sharing/collaboration and
continuous data backup and recovery to our customers. We believe that we are uniquely positioned to
provide secure transfer, sharing, and replication of files that need to be
transmitted inside the users firewall to distributed offices, or outside the
users firewall to business and trading partners.
Our initial product,
CuteFTP, a file transfer protocol client program used mostly by individuals and
small businesses, was first distributed in 1996 over the internet and has
achieved significant success and popularity.
We built on this success by steadily adding complementary products such
as the enterprise versions of our file transfer programs, Secure FTP Server and
Enhanced File Transfer Server, and establishing an internal sales organization
and reseller network. We believe we now
have a reputation as a provider of easy-to use, affordable file transfer and
collaboration software for individual, small business and enterprise
users. Since 2000, we have focused on
enhancing our portfolio of products to meet the increasing demand for data
security, overcoming the challenges of latency and bandwidth limitations for
supporting branch offices and geographically distributed locations, allowing
enterprises to backup data across their LAN and WAN as changes are made, and
offering solutions that permit non-technical personnel to contribute content to
their organizations Web sites. Our
software is used worldwide across a wide range of industries. Through the end of 2007, we had distributed
over 1.9 million software licenses to our customer base which includes
individual consumers, small to medium-sized businesses, as well as some of the
largest corporations in the world.
We are a Delaware
corporation and were incorporated in 1996.
Our offices are located at 6000 Northwest Parkway, Suite 100, San
Antonio, Texas 78249. Our phone number
is (210) 308-8267 and our website is located at www.globalscape.com. Information contained on our website is not
part of this prospectus.
1
Products
Our products include
Windows®-based, Mac based, browser-based and server software applications.
FTP Client Programs
File transfer protocol, or
FTP, is the language used for file transfers from computer to computer across
the internet. FTP is most commonly used
to download a file from a server using the internet or to upload a file to a
server.
CuteFTP
.
CuteFTP is a client-side
program, meaning that it permits a user to request a file from or send a file
to an FTP server or host computer. The
user base for this program ranges from corporate IT professionals who use it to
transfer data between locations via the internet, to individual Web site
operators who use it to upload their Web pages to their Web hosting
provider. CuteFTP simplifies use of file
transfer protocol by hiding the technical processes behind a user-friendly,
graphical interface, which allows users to drag `n drop files between
computers. CuteFTP has won several
awards, including the CNet Editors Choice award, and has been favorably
reviewed in leading online and print trade journals such as PC Magazine,
WindowsNT, Yahoo Internet Life, CNets Download.com and Tucows, as being the
most powerful, easy-to-use file transfer protocol program available. We offer CuteFTP in German, French, Spanish,
Japanese and Traditional and Simplified Chinese. CuteFTP was first released in February 1995
by its original author, and was first distributed as a commercial product by
GlobalSCAPE in April 1996. In October 2003,
GlobalSCAPE released CuteFTP Mac, our easy-to use FTP client for the Macintosh
operating system. CuteFTP Mac
incorporates many of the popular features of CuteFTP for Windows, while
adhering to Apples Aqua® interface and usability guidelines.
CuteFTP Pro
.
CuteFTP Pro is a secure FTP
client program designed for advanced users and information technology
professionals. CuteFTP Pro incorporates
standards for encrypting data during transport and at rest, accelerating
transfer of large files, and automating common file transfer tasks. It includes various features attractive to
advanced users such as multi-part and concurrent file transfers to maximize
transfer speed, scheduled file transfers, automated site backups and scripting
ability for automating FTP tasks.
CuteFTP Pro has been favorably reviewed by leading online publications
including CNets Download.com, ZDNet and PC Review. CuteFTP Pro was released in March 2001
and CuteFTP MAC Pro was released in April 2004.
File Transfer Servers
FTP transfers require two
software programs: a client program to start a transfer and a server to accept
the connection. Our file transfer server
programs are designed to provide business with increased security and speedier
file transport when compared to e-mail.
2
Secure FTP Server
.
Secure FTP Server complements
CuteFTP Pro and other professional FTP clients by enabling encrypted transfers
using SSL, SSH2 and advanced S/KEY password encryption. When used with CuteFTP Pro, Secure FTP Server
offers a complete digital certificate management system, giving system administrators
the ability to create, sign, import, export and add digital certificates, as
well as kick off back-end processes. The
latter functionality can be used as a partial or total replacement for more
complex enterprise-level electronic data interchange systems, or EDI. Additional features include full remote
management capability, the ability to operate multiple FTP sites with unique
directory structures from a single server and manage user accounts with
advanced restriction settings for maximum security and control. Secure FTP Server has been favorably reviewed
by leading online publications including Server Watch and File Forum. GlobalSCAPE Secure FTP Server was first
released in January 2002.
Enhanced File Transfer Server.
Enhanced File Transfer
Server, EFT, is an enterprise file server, building on the base features of
Secure FTP Server by providing digital certificate management, multiple secure
protocols, remote administration, flexible authentication choices, extensive
automation and advanced security options.
The latest version, EFT Server 5, helps customers achieve regulatory
compliance with Payment Card Industry, or PCI, Data Security Standard, or DSS,
by providing hardened security settings and compliance reporting options. EFT also offers modules that can be
integrated into the base software such as DMZ Gateway, which provides a
multi-tiered security solution for traversing network walls; OpenPGP, a
dual-key encrypted storage solution; Secure Ad-Hoc, which is an alternative
solution to e-mail for sending large file attachments; and auditing and
reporting of server transactions.
Data Replication Products
Businesses with multiple locations have a need to
access data in a timely, efficient manner and to be able to move and share data
throughout their organizations. Our data
replication products allow users to maintain and synchronize their live data
files in multiple remote server locations and to restore data to any point in
time.
Wide Area File System (WAFS)
.
Our Wide Area File System product delivers a
unified and accelerated file access system, instant file-sharing and
server-to-server mirroring across any distance, with full coherency and at LAN
access speeds. WAFS delivers a true wide
area file solution for any distance, and any number and any complexity of
files. Continuous, real-time
multi-directional acceleration and mirroring technology ensures that data
exists in multiple places simultaneously and in complete synchronization, no
matter where a change in any file is made.
The data mirrors between servers on the LAN, virtual private network, or
VPN, or crossing firewalls in real time.
In addition, users can
leverage file locking capabilities across the LAN and WAN.
Our WAFS ensures bandwidth
efficient WAN utilization; that users have access to the most recent data. The off-line mode ensures continued data
access in the event of WAN or server outage.
Our WAFS software is easy to deploy and manage remotely.
CDP
.
Our continuous backup software inexpensively
delivers true real-time continuous data protection. Our software-only solution supports the
ability to backup any
3
number
of branch servers or remote laptops to one or more centrally located
systems. CDP transparently and continuously captures data from local and
remote servers, eliminating the backup window and restoring data rapidly. Bandwidth requirements are minimal since only
file differences are transferred to the backup system.
Enterprise
.
Enterprise is designated for companies that
need both WAFS or multi-directional mirroring and real-time backup. It includes all the features of the entire
WAFS and CDP product line.
Internet Products
We offer a variety of software products that can be
purchased and downloaded directly from our automated website. These products range in price from $3.99 to
$249.00 for a single license. These
products are easy to install and use, making them good products to attract
users to our website.
Maintenance and Support
We offer maintenance and
support contracts for all of our products which includes content, upgrades and
technical support. Standard technical
support is limited to the reporting and
correction of product defects and installation and configuration
assistance. CuteFTP, EFT Server, and
Secure Server support is available 8:00 AM to 6:00 PM US Central Time,
Monday-Friday, excluding major US holidays.
WAFS and CDP support is available 8:00 AM to 5:30 US Eastern Time,
Monday-Friday, excluding major US holidays.
Strategy
Our goal is to build upon
our successful market position in FTP, WAFS and CDP, to provide business users
with secure and efficient solutions for their growing file access, file
transfer, and data replication and protection needs. For example, in 2007, we introduced upgrades
to EFT 5.0, CuteFTP 8.0, the Secure Ad Hoc Transfer module, and the HS-PCI
module ensuring compliance with DSS. We
continue to enhance and develop high quality, affordable software that enables
organizations and individuals to easily create, move and manage Web and
file-based data in a secure, collaborative environment. We have successfully established a brand in
the market for internet software productivity tools with our file management
products, CuteFTP and CuteFTP Pro. We
believe that our continued growth will come not only through the further
development of our SecureFTP Server and Enhanced File Transfer products and the
growing demand for file security when transferring information across the
internet, but also through the aggressive sales and marketing of our WAFS and
CDP products, which we believe represent two high growth markets. Based upon estimates by Gartner, Inc.,
and other consulting groups in our markets, we believe that the WAN
optimization/WAFS market is currently $300 million annually and growing at 20%
- 30% per year, and the CDP market is of similar size but in the early stages
of adoption and growing rapidly. In
addition, we believe that the WAFS and CDP products are highly
4
complementary
to our traditional Secure File Transfer products facilitating cross sales and
new customer penetration.
GlobalSCAPE believes that
our products represent a low cost solution for businesses for their access,
secure file transfer, and data replication and protection requirements because
we do not require the purchase of a whole suite of products. Our Secure FTP Server, Enhanced File
Transfer, WAFS and CDP products offer modules to form the comprehensive
solutions needed by businesses to solve their particular needs. Maintenance and support agreements are
purchased with most of our higher-end server products by businesses. We will also continue to market our content
management solutions that help non-technical professionals manage their
organizations Web sites without reliance on information technology
professionals.
Key elements of our strategy
are:
Continue to enhance and develop our products.
Corporate and individual
users are increasingly concerned with security and data replication and
protection. We have added the EFT
enterprise solution to our product line for businesses to meet the needs of
security issues when transferring files in and out of their servers across the
internet and we acquired Availl in 2006 in order to offer customers a data
replication and protection solution.
We believe that
the future success of our business will be dependent upon our ability to
improve our current products and to introduce new products, through research
and development, innovations by our employees, strategic partnerships, and
acquisitions.
We intend to
accelerate the development and improvement of our current products throughout
2008 to meet the demand for file transfer security and data replication and
protection through Enhanced File Transfer Server, WAFS and CDP and to consumers
and smaller businesses through our other well known FTP products, CuteFTP Home
and CuteFTP Professional and Secure FTP Server.
Pursue strategic product and acquisition opportunities
.
We will continue to look for opportunities to
develop, acquire or add synergistic products or technologies that enhance the
success of these products. In 2005, we
added modules and further developed our Secure FTP Server and EFT
products. In September 2006, we
acquired Availl which allowed us to add our WAFS and CDP products. We continue to seek potential acquisitions
and strategic partnerships.
Continue to develop a more robust reseller channel
.
During 2007, we continued our emphasis on the
development of third party reseller channels by hiring sales people with
reseller sales backgrounds and developing relationships with new
resellers. In particular, we attempt to
reach value-added resellers such as system design consultants. We believe sales will be significantly
enhanced if we are able to recruit numerous resellers who have existing
relationships with prospective customers.
Increase our maintenance and support business
. Maintenance and support contracts are an
important part of our product offering for our Enhanced File Transfer Server,
WAFS and CDP. Our maintenance and
support revenues increased by 171% from 2005 to 2006, and 112% from 2006 to
2007.
5
Develop internal sales staff
.
During 2007, we continued the development of
our internal direct sales force to better sell more complex products, such as
Enhanced File Transfer, Secure FTP Server, WAFS and CDP. We intend to continue to develop our sales
staff through additional employees, further training and certification.
Continue to develop online marketing capabilities
.
We believe we have
significant expertise in driving online sales via online marketing activities,
including product placement on third party sites such as search engines and
referral sites, and electronic mail campaigns.
This type of sales activity is particularly well suited to certain lower
priced products because of the lower cost of sale. We intend to continue to leverage our
established Web presence to drive online sales as well as supporting direct and
reseller sales efforts.
The Offering
Common
stock offered by Selling Stockholders
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4,687,000
shares
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Use of proceeds
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We will not receive any of
the proceeds from the sale of the shares of our common stock by the Selling
Stockholders. We did receive $3.4 million of gross proceeds, before expenses,
from the sale of 3,380,000 shares of common stock and warrants to purchase
1,352,000 shares of common stock pursuant to the securities purchase
agreement of which we used $3.2 million to repay indebtedness under our term
loan. We have repaid all amounts outstanding under the term loan. The term
loan bore interest at 1.25% above Silicon Valley Banks prime rate and
matured on September 22, 2009. The proceeds of the term loan were used
to pay the cash portion of the purchase price in the Availl acquisition. We
may also receive cash proceeds upon the exercise of 1,272,000 warrants to
purchase common stock which remain outstanding with an exercise price of
$3.15 held by the Selling Stockholders. If all of such warrants are exercised
for cash, we will receive aggregate cash proceeds from such exercise of
approximately $4.0 million. See Use of Proceeds on page 16.
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AMEX
Symbol
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GSB
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6
RISK FACTORS
An investment in the
securities offered by this prospectus involves a high degree of risk. You should consider carefully the following
risk factors in addition to the other information contained in this prospectus
before making a decision to invest in our common stock.
Risks Related to
Operations
If we are unable to develop new and enhanced products
and services that achieve widespread market acceptance, or if we are unable to
continually improve the performance, features, and reliability of our existing
products and services, our business and operating results could be adversely
affected.
Our future success depends
on our ability to respond to the rapidly changing needs of our customers by
developing or introducing new products, product upgrades, and services on a
timely basis. We have in the past
incurred, and we believe that we will continue to incur, significant research
and development expenses as we strive to remain competitive. New product development and introduction
involves a significant commitment of time and resources and is subject to a
number of risks and challenges, including:
·
Managing the
length of the development cycle for new products and product enhancements,
which has frequently been longer than we originally expected.
·
Adapting to
emerging and evolving industry standards and to technological developments by
our competitors and customers.
·
Extending the
operation of our products and services to new platforms and operating systems.
·
Entering into
new or unproven markets with which we have limited experience.
·
Managing new
product and service strategies, including integrating our various security and
file replication technologies, management solutions, customer service and
support into unified enterprise security and file replication solutions.
·
Incorporating
acquired products and technologies.
·
Developing or
expanding efficient sales channels.
·
Obtaining
sufficient licenses to technology and technical access from operating system
software vendors on reasonable terms to enable the development and deployment
of interoperable products, including source code licenses for certain products
with deep technical integration into operating systems.
If we are not successful in
managing these risks and challenges, or if our new products, product upgrades,
and services are not technologically competitive or do not achieve market
acceptance, we could have expended substantial resources and capital without
realizing sufficient revenues in return, and our business and operating results
could be adversely affected.
7
Fluctuations in demand for our products and services
are driven by many factors and a decrease in demand for our products could
adversely affect our financial results.
We are subject to fluctuations in demand for our products and services
due to a variety of factors, including competition, product obsolescence,
technological change, budget constraints of our actual and potential customers,
level of broadband usage, awareness of security threats to IT systems, and
other factors. While such factors may,
in some periods, increase product sales, fluctuations in demand can also
negatively impact our product sales. If
demand for our products declines, our revenues and gross margin could be
adversely affected.
If we fail to manage our sales and distribution
channels effectively or if our partners choose not to market and sell our
products to their customers, our operating results could be adversely affected.
We sell our products to customers primarily through our direct sales
force and through resellers. Sales
through these different channels involve distinct risks, including the
following:
Direct
Sales.
A
significant portion of our revenues is derived from sales by our direct sales
force to end-users. Special risks
associated with this sales channel include:
·
Longer sales
cycles associated with direct sales efforts.
·
Difficulty in
hiring, retaining, and motivating our direct sales force.
·
Substantial
amounts of training for sales representatives to become productive, including
regular updates to cover new and revised products.
Indirect
Sales Channels.
A
significant portion of our revenues is derived from sales through indirect
channels, including distributors that sell our products to end-users and other
resellers. This channel involves a
number of risks, including:
·
Our lack of
control over the timing of delivery of our products to end-users.
·
Our resellers
and distributors are not subject to minimum sales requirements or any
obligation to market our products to their customers.
·
Our reseller
and distributor agreements are generally nonexclusive and may be terminated at
any time without cause.
·
Our resellers
and distributors frequently market and distribute competing products and may,
from time to time, place greater emphasis on the sale of these products due to
pricing, promotions, and other terms offered by our competitors.
Our products are complex and operate in a wide variety
of computer configurations, which could result in errors or product failures.
Because we offer very
complex products, undetected errors, failures or bugs may occur, especially
when products are first introduced or when new versions are released. Our products are often installed and used in
large-scale computing environments with different operating systems, system
management software, and equipment and networking configurations, which may
cause errors or failures in our products or may expose undetected errors,
failures or bugs in
8
our
products. Our customers computing
environments are often characterized by a wide variety of standard and
non-standard configurations that make pre-release testing for programming or
compatibility errors very difficult and time-consuming. In addition, despite testing by us and
others, errors, failures or bugs may not be found in new products or releases
until after commencement of commercial shipments. In the past, we have discovered software
errors, failures, and bugs in certain of our product offerings after their
introduction and have experienced delayed or lost revenues during the period
required to correct these errors.
Errors, failures or bugs in
products released by us could result in negative publicity, product returns,
loss of or delay in market acceptance of our products, loss of competitive
position, or claims by customers or others.
Many of our end-user customers use our products in applications that are
critical to their businesses and may have a greater sensitivity to defects in
our products than to defects in other, less critical, software products. In addition, if an actual or perceived breach
of information integrity or availability occurs in one of our end-user customers
systems, regardless of whether the breach is attributable to our products, the
market perception of the effectiveness of our products could be harmed. Alleviating any of these problems could
require significant expenditures of our capital and other resources and could
cause interruptions, delays, or cessation of our product licensing, which could
cause us to lose existing or potential customers and could adversely affect our
operating results.
We have grown, and may continue to grow, through
acquisitions that give rise to risks and challenges that could adversely affect
our future financial results.
We
have in the past acquired, and we expect to acquire in the future, other
businesses, business units and technologies.
Acquisitions involve a number of special risks and challenges,
including:
·
Complexity,
time, and costs associated with the integration of acquired business
operations, workforce, products, and technologies into our existing business,
sales force, employee base, product lines, and technology.
·
Diversion of
management time and attention from our existing business and other business
opportunities.
·
Loss or
termination of employees, including costs associated with the termination or
replacement of those employees.
·
Assumption of
debt or other liabilities of the acquired business, including litigation
related to alleged liabilities of the acquired business.
·
The incurrence
of additional acquisition-related debt as well as increased expenses and
working capital requirements.
·
Dilution of
stock ownership of existing stockholders, or earnings per share.
·
Increased costs
and efforts in connection with compliance with Section 404 of the
Sarbanes-Oxley Act.
·
Substantial
accounting charges for restructuring and related expenses, write-off of
in-process research and development, impairment of goodwill, amortization of
intangible assets, and stock-based compensation expense.
9
If
integration of our acquired businesses is not successful, we may not realize
the potential benefits of an acquisition or may undergo other adverse effects
that we currently do not foresee. To
integrate acquired businesses, we must implement our technology systems in the
acquired operations and integrate and manage the personnel of the acquired
operations. We also must effectively
integrate the different cultures of acquired business organizations into our
own in a way that aligns various interests, and may need to enter new markets
in which we have no or limited experience and where competitions in such
markets have stronger market positions.
Any
of the foregoing, and other factors, could harm our ability to achieve
anticipated levels of profitability from acquired businesses or to realize
other anticipated benefits of acquisitions.
In addition, because acquisitions of high technology companies are
inherently risky, no assurance can be given that our previous or future
acquisitions will be successful and will not adversely affect our business,
operating results, or financial condition.
We utilize open source software in some of our
products.
The open source software
community develops software technology for free use by anyone. We have relied on open source technology for
the encryption features in our CuteFTP Pro and Secure FTP Server products. Our reliance on open source code software
may impose limitations on our ability to commercialize our solution and
may subject us to possible intellectual property litigation.
We incorporate a limited
amount of open source code software into our products, and we may use more
open source code software in the future.
Open source code may impose limitations on our ability to
commercialize our products because, among other reasons, open source license
terms may be ambiguous and may result in unanticipated obligations
regarding our solution, and open source software cannot be protected under
trade secret law. In addition, it
may be difficult for us to accurately determine the developers of the open
source code and whether the acquired software infringes third-party
intellectual property rights. As a
result, we could be subject to suits by parties claiming ownership of what we
believe to be open source software.
Claims of infringement or misappropriation against us could be costly
for us to defend and could require us to seek to obtain licenses from third
parties in order to continue offering our solution, to re-engineer our solution
or to discontinue the sale of our solution in the event re-engineering could
not be accomplished on a timely basis.
If this occurs, our business and operating results could be harmed.
In addition, from time to
time there have been claims challenging the ownership of open source software
against companies that incorporate open source software into their
products. We use a limited amount of
open source software in our solution and may use more open source software
in the future. As a result, we could be
subject to suits by parties claiming ownership of what we believe to be open
source software. Any of this litigation
could be costly for us to defend, hurt our results of operations and financial
condition or require us to devote additional research and development resources
to change our solution.
10
If we lose key personnel we may not be able to
execute our business plan.
Our future success depends
on the continued services of key members of our management team. These individuals are difficult to replace
because of the intense competition for similarly skilled people. In addition, new members of the management
team may not be productive for weeks or months as they learn about our
products and the administration within GlobalSCAPE.
We may not be able to compete effectively with
larger, better-positioned companies, resulting in lower margins and loss of
market share.
We operate in intensely competitive markets that
experience rapid technological developments, changes in industry standards,
changes in customer requirements, and frequent new product introductions and
improvements. If we are unable to
anticipate or react to these competitive challenges or if existing or new
competitors gain market share in any of our markets, our competitive position
could weaken and we could experience a drop in revenues that could adversely
affect our business and operating results.
To compete successfully, we must maintain a successful research and
development effort to develop new products and services and enhance existing
products and services, effectively adapt to changes in the technology or
product rights held by our competitors, appropriately respond to competitive
strategy, and effectively adapt to technological changes and changes in the
ways that our information is accessed, used, and stored within our enterprise
and consumer markets. If we are
unsuccessful in responding to our competitors or to changing technological and
customer demands, we could experience a negative effect on our competitive
position and our financial results.
We compete with a variety of
companies who have significantly greater revenues and financial resources than
GlobalSCAPE as well as greater personnel and technical resources. For example, CuteFTP and CuteFTP Pro compete
with products offered by Ipswitch, Inc. and Microsoft Corporation, EFT
competes with products from Sterling Commerce and several other vendors, and
WAFS competes with Riverbed Technology which recently completed an initial
public offering. Large companies
may be able to develop new technologies more quickly than we can, to offer
a broader array of products, and to respond more quickly to new opportunities,
industry standards or customer requirements.
For example, Sterling Commerce receives approximately $50 million in
maintenance contract revenue annually, providing them with significant
resources for product development and marketing. Some competitors may also be able to
adopt more aggressive pricing strategies.
For example, Ipswitch gives an older version of its file transfer
protocol program away for free for non-commercial use, and Microsoft includes
file transfer protocol functionality in its internet browser, which it
distributes for free. Increased
competition may result in lower operating margins and loss of market
share. Additional competitors
may enter the market and may have significantly greater capabilities
and resources than we do.
It may be difficult for us to recruit software
developers and other technical and management personnel because we are a
relatively small company.
We compete intensely with
other internet software development and distribution companies internationally
to recruit and hire from a limited pool of qualified personnel. Some
11
qualified
candidates prefer to work for larger, better known companies.. In order to attract and retain personnel in a
competitive marketplace, we believe that we must provide a competitive
compensation package, including cash and equity-based compensation. The volatility in our stock price may from
time to time adversely affect our ability to recruit or retain employees. In addition, we may be unable to obtain
required stockholder approvals of future increases in the number of shares
available for issuance under our equity compensation plans, and recent changes
in accounting rules require us to treat the issuance of employee stock
options and other forms of equity-based compensation as compensation
expense. As a result, we may decide to
issue fewer equity-based incentives and may be impaired in our efforts to
attract and retain necessary personnel.
If we are unable to hire and retain qualified employees, or conversely,
if we fail to manage employee performance or reduce staffing levels when
required by market conditions, our business and operating results could be
adversely affected.
Key personnel have left our
company in the past and there likely will be additional departures of key
personnel from time to time in the future.
The loss of any key employee could result in significant disruptions to our
operations, including adversely affecting the timeliness of product releases,
the successful implementation and completion of company initiatives, the
effectiveness of our disclosure controls and procedures and our internal
control over financial reporting, and the results of our operations. In addition, hiring, training, and
successfully integrating replacement sales and other personnel could be time
consuming, may cause additional disruptions to our operations, and may be
unsuccessful, which could negatively impact future revenues.
Our ability to develop our software will be seriously
impaired if we are not able to use our foreign subcontractors.
We rely on foreign
subcontractors to help us develop our software.
If these programmers decided to stop working for us, or if we were
unable to continue using them because of political or economic instability, we
would have difficulty finding comparably skilled developers. In addition, we would likely have to pay considerably
more for the same work, especially if we used U.S. personnel. If we could not replace the programmers, it
would take us significantly longer to develop our products.
We may incur losses as we attempt to expand our
business.
We intend to expand our
business and therefore expect to expend significant additional resources on
developing our sales force, developing a more robust reseller program, research
and development, marketing and product development. As a result, we may need to expend significant
resources to accomplish these goals. If
we fail to successfully develop and market new products or improve our direct
and channel sales results, we may not be able to achieve the necessary
revenue growth and may not be profitable.
Our operations are vulnerable to security breaches
that could harm the quality of our products and services or disrupt our ability
to deliver our products and services.
Third parties
may breach our system security and damage our products and services or
misappropriate confidential customer information. This might cause us to lose customers, or
12
even
cause customers to make claims against us for damages. In addition, we may be required to
expend significant resources to protect against security breaches and/or to
address problems caused by such breaches.
Increased customer demands on our technical support
services may adversely affect our relationships with our customers and our
financial results.
We offer technical support
services with many of our products. We
may be unable to respond quickly enough to accommodate short-term increases in
customer demand for support services. We
also may be unable to modify the format of our support services to compete with
changes in support services provided by competitors or successfully integrate
support for our customers. Further
customer demand for these services, without corresponding revenues, could
increase costs and adversely affect our operating results.
Our products may expose customers to invasion of
privacy, causing customer dissatisfaction.
Our Secure FTP Server and
Enhanced File Transfer are intended to provide outsiders access to a customers
computer, making the customer vulnerable to security breaches, which could
result in the loss of their privacy or property. Customers suffering invasions of privacy or
other harm could result in customer dissatisfaction and possible claims against
us for any resulting damages.
Risks Related to Stock
Ownership
Our stock price is/may be volatile.
The trading price of our
common stock has been and could continue to be subject to wide fluctuations in
response to certain factors, including:
·
Quarter-to-quarter
variations in results of operations;
·
Our
announcements of new products;
·
Our competitors
announcements of new products;
·
Our product
development or release schedule;
·
General
conditions in the software industry; and
·
Investor
perceptions and expectations regarding our products, plans and strategic
position and those of our competitors and customers.
In addition, the public
stock markets experience extreme price and trading volume volatility,
particularly in high-technology sectors of the market. This volatility has significantly affected
the market prices of securities of many technology companies for reasons often
unrelated to the operating performance of the specific companies. The broad market fluctuations
may adversely affect the market price of our common stock.
13
Accounting charges may cause fluctuations in our
quarterly financial results.
Our financial results may be affected by non-cash and
other accounting charges, including:
·
Amortization of
intangible assets, including acquired product rights
·
Impairment of
goodwill
·
Stock-based
compensation expense
·
Restructuring
charges
·
Impairment of
long-lived assets
For example, in connection
with our acquisition of Availl in 2006, we have recorded approximately $5.2
million of acquired product rights and other intangible assets and
$4.6 million of goodwill. We have
recorded and will continue to record future amortization charges with respect
to a portion of these intangible assets.
In addition, we will evaluate our long-lived assets, including property
and equipment, goodwill, acquired product rights, and other intangible assets,
whenever events or circumstances occur which indicate that these assets might
be impaired.
We do not pay dividends on our common stock.
We have not paid a dividend
on our common stock and have no plan to do so in the near future. In addition, the terms of our revolving
credit facility prohibit the payment of dividends.
Anti-takeover provisions in our charter and Delaware
law could inhibit others from acquiring us.
Some of the provisions of our certificate of incorporation and bylaws
and in Delaware law could, together or separately:
·
discourage
potential acquisition proposals;
·
delay or
prevent a change in control; and
·
limit the price
that investors may be willing to pay in the future for shares of our
common stock.
In particular, our
certificate of incorporation and bylaws prohibit stockholders from voting by
written consent or calling meetings of the stockholders. We are also subject to Section 203 of
the Delaware General Corporation Law, which generally prohibits a Delaware
corporation from engaging in any of a broad range of business combinations with
any interested stockholder, as defined in the statute, for a period of three
years following the date on which the stockholder became an interested
stockholder.
Our directors and executive officers continue to have
substantial control over us
Our directors and executive
officers, together with their affiliates and related persons, beneficially own,
in the aggregate, approximately 46% of our outstanding common stock at
14
December 31,
2007. As a result, these stockholders,
acting together, would have the ability to control GlobalSCAPE and direct its
policies including the outcome of matters submitted to our stockholders for
approval, such as the election of directors and any merger, consolidation or
sale of all or substantially all of our assets.
In addition, our certificate of incorporation and bylaws provide for our
Board of Directors to be divided into three classes of directors serving
staggered three-year terms. As a result,
approximately one-third of our Board of Directors will be elected each year.
Stockholders ownership of our stock may be
significantly diluted, affecting the value of the stock.
There were options for
1,965,434 shares outstanding under our employee stock option plans as of April 28,
2008, of which 846,766 were vested as of April 28, 2008. We have filed registration statements under
the Securities Act, covering stock issued upon the exercise of options by
non-affiliates, and we may file a registration statement covering options
held by affiliates as well. If we do not
file a registration statement covering affiliates, affiliates who exercise
their options may choose to sell the stock under an exemption from
registration, such as Rule 144 under the Securities Act. The exercise of these options and sale of the
resulting stock could depress the value of our stock.
Risks Relate
d
to Legal Uncertainty
We are vulnerable to claims that our products infringe
third-party intellectual property rights particularly because our products are
partially developed by independent parties.
We may be exposed to
future litigation based on claims that our products infringe the intellectual
property rights of others. This risk is
exacerbated by the fact that some of the code in our products is developed by
independent parties or licensed from third parties over whom we have less
control than we exercise over internal developers. In addition, we expect that infringement
claims against software developers will become more prevalent as the number of
products and developers grows and the functionality of software programs in the
market increasingly overlaps. Claims of
infringement could require us to re-engineer our products or seek to obtain
licenses from third parties in order to continue offering its products. In addition, an adverse legal decision
affecting our intellectual property, or the use of significant resources to
defend against this type of claim could place a significant strain on our
financial resources and harm our reputation.
We may not be able to protect our intellectual
property rights.
Our software code, and trade
and service marks are some of our most valuable assets. Given the global nature of the internet and
our business, we are vulnerable to the misappropriation of this intellectual
property, particularly in foreign markets, such as China and Eastern Europe,
where laws or law enforcement practices are less developed. The global nature of the internet makes it
difficult to control the ultimate destination or security of our software,
making it more likely that unauthorized third parties will copy certain
portions of our proprietary information or reverse engineer the proprietary
information used in its programs. If our
proprietary rights were infringed by a third-party, and we did not have
adequate legal recourse,
15
our
ability to earn profits, which are highly dependent on those rights, would be
severely diminished.
Other companies may own, obtain or claim
trademarks that could prevent, limit or interfere with our use of our
trademarks.
Our various trademarks are
important to our business. If we were to
lose the use of any of our trademarks, our business would be harmed and we
would have to devote substantial resources towards developing an independent
brand identity. Defending or enforcing
our trademark rights at a local and international level could result in the
expenditure of significant financial and managerial resources.
USE OF PROCEEDS
The Selling Stockholders
will receive all proceeds from the sale of the shares of common stock offered
by this prospectus. We will not receive
any proceeds from the sale of the shares of common stock offered by this
prospectus. We did receive $3.4 million
of gross proceeds, before expenses, from the sale of 3,380,000 shares of common
stock and warrants to purchase 1,352,000 shares of common stock pursuant to the
securities purchase agreement of which we used $3.2 million to repay
indebtedness under our term loan. We
have repaid all amounts outstanding under the term loan. The term loan bore interest at 1.25% above
Silicon Valley Banks prime rate and matured on September 22, 2009. The proceeds of the term loan were used to
pay the cash portion of the purchase price in the Availl acquisition. We may also receive cash proceeds upon the
exercise of 1,272,000 warrants to purchase our common stock with an exercise
price of $3.15 per share held by the Selling Stockholders. If all of such warrants are exercised for
cash, we will receive aggregate cash proceeds from such exercise of
approximately $4.0 million, which will be used for general corporate purposes.
MARKET FOR OUR COMMON
STOCK
Our common stock is listed
on the American Stock Exchange under the symbol GSB and began trading on July 19,
2007. As of December 31, 2008,
there were approximately 2,371 holders of record of our common stock. The table below sets forth the quarterly high
and low bid prices for our common stock for the last three fiscal years.
|
|
Fiscal Year ended December 31,
|
|
|
|
2005
|
|
2006
|
|
2007
|
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
First Quarter (ending
March 31)
|
|
$
|
0.32
|
|
$
|
0.16
|
|
$
|
3.20
|
|
$
|
1.05
|
|
$
|
3.35
|
|
$
|
2.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter (ending
June 30)
|
|
$
|
0.40
|
|
$
|
0.25
|
|
$
|
3.75
|
|
$
|
2.21
|
|
$
|
4.00
|
|
$
|
2.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter (ending
September 30)
|
|
$
|
3.00
|
|
$
|
0.31
|
|
$
|
3.25
|
|
$
|
2.50
|
|
$
|
5.90
|
|
$
|
2.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter (ending
December 31)
|
|
$
|
4.90
|
|
$
|
1.08
|
|
$
|
3.50
|
|
$
|
2.16
|
|
$
|
7.71
|
|
$
|
3.85
|
|
16
The closing price on April 28,
2008 was $2.22. All prices listed above
prior to July 19, 2007 are over-the-counter market quotations which
reflect inter-dealer prices, without retail mark-up, mark-down, or commission
and may not necessarily represent actual transactions.
DIVIDEND POLICY
We have never paid a cash
dividend, and do not expect to do so in the foreseeable future. The terms of our revolving credit facility
prohibit the payment of dividends.
SELLING STOCKHOLDERS
We are registering the
shares to permit the Selling Stockholders and their pledgees, donees,
transferees and other successors-in-interest that receive their shares from the
Selling Stockholders as a gift, partnership distribution or other non-sale
related transfer after the date of this prospectus to resell the shares when
and as they deem appropriate. As of April 28,
2008, the following table sets forth:
·
the name of
each Selling Stockholder;
·
the number and
percent of shares of our common stock that each Selling Stockholder
beneficially owned prior to the offering for resale of the shares under this
prospectus, including warrants to purchase common shares and options to
purchase common shares that are exercisable within 60 days of the date of this
prospectus;
·
the number of
shares of our common stock that may be offered for resale for the account of
each Selling Stockholder under this prospectus; and
·
the number and
percent of shares of our common stock to be beneficially owned by each Selling
Stockholder after the offering of the resale shares (assuming all of the
offered resale shares are sold by each Selling Stockholder).
The number of shares in the
column Number of Shares Being Offered represents all of the shares that each
Selling Stockholder may offer under this prospectus. We do not know how long each Selling
Stockholder will hold the shares before selling them or how many shares they
will sell and we currently have no agreements, arrangements or understandings
with the stockholders regarding the sale of any of the resale shares. The shares offered by this prospectus may be
offered from time to time by each Selling Stockholder listed below.
This table is prepared
solely based on information supplied to us by the listed Selling Stockholder,
any Schedules 13D or 13G and Forms 3 and 4, and other public documents filed
with the SEC, and assumes the sale of all of the resale shares.
17
Name
|
|
Shares of Common Stock Beneficially Owned Prior to Offering
|
|
Percentage
|
|
Number of Shares Being Offered
|
|
Shares of Common Stock Beneficially Owned After the Offering
|
|
Percentage
|
|
Zeke, L.P. (1)
|
|
1,680,000
|
|
9.8
|
|
1,680,000
|
|
0
|
|
0
|
|
Edward Antoian (1)
|
|
1,680,000
|
|
9.8
|
|
1,680,000
|
|
0
|
|
0
|
|
SF Capital Partners, Ltd. (2)
|
|
1,680,000
|
|
9.8
|
|
1,680,000
|
|
0
|
|
0
|
|
Michael A. Roth (2)
|
|
1,680,000
|
|
9.8
|
|
1,680,000
|
|
0
|
|
0
|
|
Brian J. Stark (2)
|
|
1,680,000
|
|
9.8
|
|
1,680,000
|
|
0
|
|
0
|
|
Enable Growth Partners, L.P. (3)
|
|
357,000
|
|
2.08
|
|
357,000
|
|
0
|
|
0
|
|
Enable Opportunity Partners, L.P. (3)
|
|
42,000
|
|
*
|
|
42,000
|
|
0
|
|
0
|
|
Pierce Diversified Strategy Master Fund, LLC Ena (3)
|
|
21,000
|
|
*
|
|
21,000
|
|
0
|
|
0
|
|
Mitch Levine(3)
|
|
420,000
|
|
2.44
|
|
420,000
|
|
0
|
|
0
|
|
Dolphin Offshore Partners, L.P. (4)
|
|
392,000
|
|
2.28
|
|
392,000
|
|
0
|
|
0
|
|
Peter E. Salas (4)
|
|
392,000
|
|
2.28
|
|
392,000
|
|
0
|
|
0
|
|
Emancipation Capital Master Ltd. (5)
|
|
235,000
|
|
1.37
|
|
235,000
|
|
0
|
|
0
|
|
Charles Frumberg (5)
|
|
235,000
|
|
1.37
|
|
235,000
|
|
0
|
|
0
|
|
Iroquois Master Fund Ltd. (6)
|
|
140,000
|
|
*
|
|
140,000
|
|
0
|
|
0
|
|
Joshua Silverman (6)
|
|
140,000
|
|
*
|
|
140,000
|
|
0
|
|
0
|
|
Nite Capital LP (7)
|
|
100,000
|
|
*
|
|
100,000
|
|
0
|
|
0
|
|
Keith A. Goodman (7)
|
|
100,000
|
|
*
|
|
100,000
|
|
0
|
|
0
|
|
Fort Mason Partners, L.P. (8)
|
|
2,436
|
|
*
|
|
2,436
|
|
0
|
|
0
|
|
Fort Mason Master, L.P. (9)
|
|
37,564
|
|
*
|
|
37,564
|
|
0
|
|
0
|
|
Dan German (8)(9)
|
|
40,000
|
|
*
|
|
40,000
|
|
0
|
|
0
|
|
*
Less than 1%
(1)
Includes
480,000 shares issuable upon exercise of the Warrants. The Warrants are subject to certain
limitations on exercise. See Description
of Capital StockGeneralWarrants for more information. Edward Antoian, in his capacity as the
general partner of Zeke, L.P., has voting and investment control over the
shares held by Zeke, L.P. Mr. Antoian
disclaims beneficial ownership of all of such shares. The address of Zeke, L.P. is: c/o Chartwell Investment Partners, 1235
Westlakes Drive, Suite 400, Berwyn, PA 19312.
(2)
Includes
480,000 shares issuable upon exercise of the Warrants. The Warrants are subject to certain
limitations on exercise. See Description
of Capital StockGeneralWarrants for more information. Michael A. Roth and Brian J. Stark are the
Managing Members of Stark Offshore Management, LLC, which acts as the
investment manager and has the sole power to direct the management of SF Capital
Partners, Ltd. Through Stark Offshore,
Messers. Roth and Stark possess voting and dispositive power over all of the
shares. Messers. Roth and Stark disclaim
18
beneficial ownership of all of such
shares. The address of SF Capital
Partners is: c/o Stark Offshore
Management, LLC, 3600 South Lake Drive, St. Francis, WI 53235.
(3)
Includes
120,000 shares issuable upon exercise of the Warrants. The Warrants are subject to certain
limitations on exercise. See Description
of Capital StockGeneralWarrants for more information. Mitch Levine, in his capacity as the Managing
Partner of Enable Growth Partners, L.P., Enable Opportunity Partners, L.P. and
Pierce Diversified Strategy Master Fund, LLC Ena has voting and investment control
over the shares held by Enable Growth Partners, L.P., Enable Opportunity
Partners, L.P. and Pierce Diversified Strategy Master Fund, LLC Ena. Mr. Levine disclaims beneficial
ownership of all of such shares. The
address of Enable Growth Partners, L.P., Enable Opportunity Partners, L.P. and
Pierce Diversified Strategy Master Fund, LLC Ena is: One Ferry Building, Suite 255, San
Francisco, CA 94111.
(4)
Includes
112,000 shares issuable upon exercise of the Warrants. The Warrants are subject to certain limitations
on exercise. See Description of Capital
StockGeneralWarrants for more information.
Peter E. Salas, in his capacity as the general partner of Dolphin
Offshore Partners, L.P., has voting and investment control over the shares held
by Dolphin Offshore Partners, L.P. Mr. Salas
disclaims beneficial ownership of all of such shares. The address of Dolphin Offshore Partners,
L.P. is: c/o Dolphin Asset Management
Corp., 129 East 17
th
Street, New York, NY 10003.
(5)
Charles
Frumberg has voting and investment control over the shares held by Emancipation
Capital Master Ltd. Mr. Frumberg
disclaims beneficial ownership of all such shares. The address of Emancipation Capital Master
Ltd. is: 1120 Avenue of the Americas, Suite 1504,
New York, NY 10036.
(6)
Includes 40,000
shares issuable upon exercise of the Warrants.
The Warrants are subject to certain limitations on exercise. See Description of Capital
StockGeneralWarrants for more information.
Joshua Silverman, has voting and investment control over the shares held
by Iroquois Master Fund, Ltd. Mr. Silverman
disclaims beneficial ownership of all of such shares. The address of Iroquois Master Fund, Ltd.
is: 641 Lexington Avenue, 26
th
Floor, New York, NY 10022.
(7)
Keith A.
Goodman, in his capacity as the manager of Nite Capital LLC, the general
partner of Nite Capital LP, has voting and investment control over the shares
held by Nite Capital LP. Mr. Goodman
disclaims beneficial ownership of all of such shares. The address of Nite Capital LP is: 100 East Cook Avenue, Suite 201,
Libertyville, IL 60048.
(8)
Includes 2,436
shares issuable upon exercise of the Warrants.
The Warrants are subject to certain limitations on exercise. See Description of Capital
StockGeneralWarrants for more information. Dan German, in his capacity as
the managing member of Fort Mason Capital, LLC, the general partner of Fort
Mason Partners L.P., has voting and investment control over the shares held by
Fort Mason Partners L.P. Mr. German disclaims beneficial ownership
of all such shares. The address for Fort Mason Partners L.P. is: 580
California Street, Suite 1925, San Francisco, CA 94104.
(9)
Includes 37,564
shares issuable upon exercise of the Warrants.
The Warrants are subject to certain limitations on exercise. See Description of Capital
StockGeneralWarrants for more information. Dan German, in his capacity as
the managing member of Fort Mason Capital, LLC, the general partner of Fort
Mason Partners L.P., has voting and investment control over the shares held by
Fort Mason Master, L.P. Mr. German disclaims beneficial ownership of
all such shares. The address for Fort Mason Master, L.P. is: 580
California Street, Suite 1925, San Francisco, CA 94104.
19
PLAN OF DISTRIBUTION
The Selling Stockholders,
which as used herein includes donees, pledgees, transferees or other
successors-in-interest selling shares of common stock or interests in shares of
common stock received after the date of this prospectus from a Selling
Stockholder as a gift, pledge, partnership distribution or other transfer, may,
from time to time, sell, transfer or otherwise dispose of any or all of their
shares of common stock or interests in shares of common stock on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These dispositions may be
at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the
time of sale, or at negotiated prices.
The Selling Stockholders may
use any one or more of the following methods when disposing of shares or
interests therein:
·
ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
·
block trades in
which the broker-dealer will attempt to sell the shares as agent, but may
position and resell a portion of the block as principal to facilitate the
transaction;
·
purchases by a
broker-dealer as principal and resale by the broker-dealer for its account;
·
an exchange
distribution in accordance with the rules of the applicable exchange;
·
privately
negotiated transactions;
·
short sales
effected after the date the registration statement of which this prospectus is
a part is declared effective by the SEC;
·
through the
writing or settlement of options or other hedging transactions, whether through
an options exchange or otherwise;
·
broker-dealers
may agree with the Selling Stockholders to sell a specified number of such
shares at a stipulated price per share; and
·
a combination
of any such methods of sale.
The Selling Stockholders
may, from time to time, pledge or grant a security interest in some or all of
the shares of common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock, from time to time, under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending the list of Selling
Stockholders to include the pledgee, transferee or other successors in interest
as Selling Stockholders under this prospectus.
The Selling Stockholders also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
20
In connection with the sale of our common stock or
interests therein, the Selling Stockholders may enter into hedging transactions
with broker-dealers or other financial institutions, which may in turn engage
in short sales of the common stock in the course of hedging the positions they
assume. The Selling Stockholders may
also sell shares of our common stock short and deliver these securities to
close out their short positions, or loan or pledge the common stock to
broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into
option or other transactions with broker-dealers or other financial
institutions or the creation of one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of shares offered
by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).
The aggregate proceeds to
the Selling Stockholders from the sale of the common stock offered by them will
be the purchase price of the common stock less discounts or commissions, if
any. Each of the Selling Stockholders
reserves the right to accept and, together with their agents from time to time,
to reject, in whole or in part, any proposed purchase of common stock to be
made directly or through agents. We will
not receive any of the proceeds from this offering. Upon any exercise of any
warrants by payment of cash, however, we will receive the exercise price of the
warrants.
The Selling Stockholders
also may resell all or a portion of the shares in open market transactions in
reliance upon Rule 144 under the Securities Act of 1933, provided that
they meet the criteria and conform to the requirements of that rule.
The Selling Stockholders and
any underwriters, broker-dealers or agents that participate in the sale of the
common stock or interests therein may be underwriters within the meaning of Section 2(11)
of the Securities Act. Any discounts,
commissions, concessions or profit they earn on any resale of the shares may be
underwriting discounts and commissions under the Securities Act. Selling stockholders who are underwriters
within the meaning of Section 2(11) of the Securities Act will be subject
to the prospectus delivery requirements of the Securities Act.
To the extent required, the
shares of our common stock to be sold, the names of the Selling Stockholders,
the respective purchase prices and public offering prices, the names of any
agents, dealer or underwriter, any applicable commissions or discounts with
respect to a particular offer will be set forth in an accompanying prospectus
supplement or, if appropriate, a post-effective amendment to the registration
statement that includes this prospectus.
In order to comply with the
securities laws of some states, if applicable, the common stock may be sold in
these jurisdictions only through registered or licensed brokers or
dealers. In addition, in some states the
common stock may not be sold unless it has been registered or qualified for
sale or an exemption from registration or qualification requirements is
available and is complied with.
We have advised the Selling
Stockholders that the anti-manipulation rules of Regulation M under the
Exchange Act may apply to sales of shares in the market and to the activities
of the Selling Stockholders and their affiliates. In addition, we will make copies of this
prospectus (as it may be supplemented or amended from time to time) available
to the Selling Stockholders for
21
the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The Selling Stockholders may
indemnify any broker-dealer that participates in transactions involving the
sale of the shares against certain liabilities, including liabilities arising
under the Securities Act.
We have agreed to indemnify
the Selling Stockholders against liabilities, including liabilities under the
Securities Act and state securities laws, relating to the registration of the
shares offered by this prospectus.
We have agreed with the
Selling Stockholders to keep the registration statement of which this
prospectus constitutes a part effective until the earlier of (1) such time
as all of the shares covered by this prospectus have been disposed of pursuant
to and in accordance with the registration statement or (2) the date on
which the shares may be sold pursuant to Rule 144(k) of the
Securities Act.
DESCRIPTION OF
CAPITAL STOCK
General
We are authorized to issue
40,000,000 shares of common stock, par value $0.001 per share, and 10,000,000
shares of preferred stock, par value $0.001 per share. At April 28, 2008, there were 17,190,704
shares of our common stock and no shares of preferred stock issued and
outstanding.
Common
Stock
. Holders of our common stock
are entitled to cast one vote for each share held of record on all matters
submitted to a vote of stockholders and are not entitled to cumulate votes for
the election of directors. Holders of our
common stock do not have preemptive rights to subscribe for additional shares
of common stock we issue. Holders of our
common stock are entitled to receive dividends as may be declared by the Board
of Directors out of funds legally available therefor. Under the terms of our revolving credit
facility, we may not pay dividends on shares of the common stock. In the event of liquidation, holders of the
common stock are entitled to share pro rata in any distribution of our assets
remaining after payment of liabilities, subject to the preferences and rights
of the holders of any outstanding shares of Preferred Stock. All of the outstanding shares of the common
stock are fully paid and nonassessable.
Preferred
Stock
. Our Board of Directors may,
without further action of our stockholders, issue shares of preferred stock in
one or more series and fix the designations, powers, preferences and relative,
participating, optional or other rights of such series and any qualifications,
limitations or restrictions. Our Board
of Directors may, without further action by our stockholders, issue shares of
preferred stock which it has designated. The rights of holders of our common
stock will be subject to, and may be adversely affected by, the rights of
holders of preferred stock. While the
issuance of preferred stock provides flexibility in connection with additional
financing, possible acquisitions and other corporate purposes, future issuances
may have the effect of delaying, deferring or preventing the change of control
in us without further action by our stockholders and may discourage bids for
the common stock at a premium over the market price.
22
Warrants
. We issued warrants to purchase 1,352,000
shares of common stock in connection with the sale of the common stock to the
Selling Stockholders on November 16, 2006.
During 2007, warrants to purchase a total of 80,000 shares were
exercised in a cashless exercise resulting in the issuance of 35,000 shares
of common stock. The warrants expire on May 15,
2012 and are exercisable at a price of $3.15 per share, subject to certain
adjustments. The exercise price will
not, in any event, be adjusted to a price of less than $2.81 per share except
in the event of stock dividends, stock splits or similar events. No holder of a warrant may exercise any
portion of a warrant if after giving effect to such exercise such holder
(together with its affiliates, and any other person or entity acting as a
group) would beneficially own in excess of 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon exercise of such holders warrant.
This limitation may be waived by a holder, at its election, upon not less than
61 days prior notice to GlobalSCAPE, to change the limitation to 9.99% of the
number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of such holders
warrant.
2000
Stock Option Plan
. Under the
GlobalSCAPE, Inc. 2000 Stock Option Plan (the Employee Plan), which was
approved by the Board of Directors and became effective on May 17, 2001, a
maximum of 3,660,000 shares of GlobalSCAPE common stock may be awarded. The exercise price, term and other conditions
applicable to each stock option granted under the Employee Plan are generally
determined by the Board of Directors.
The exercise price of stock options is set on the grant date and may not
be less than the fair market value per share of our stock on that date. The options generally become exercisable over
a three-year period and expire after ten years.
There were options for 1,805,434 shares outstanding under our employee
stock option plans as April 28, 2008, of which 846,766 were vested as of April 28,
2008.
2006
Non-Employee Directors Equity Incentive Plan
. On December 19, 2006, the GlobalSCAPE
Board of Directors adopted the GlobalSCAPE, Inc. 2006 Non-Employee
Directors Long-Term Equity Incentive Plan, or the 2006 Directors Plan. The 2006 Directors Plan was approved by the
stockholders in June 2007. Under
this plan, a maximum of 500,000 shares of GlobalSCAPE common stock may be
awarded. At April 28, 2008, options
to purchase a total of 160,000 shares were outstanding of which 80,000 were
vested at April 28, 2008. The 2006
Directors Plan is administered by the Compensation Committee of the Board of
Directors which will set the exercise price, term and other conditions
applicable to each stock option granted under the Plan. If options, as opposed to shares, are
awarded, the exercise share price shall be no less than 100% of the fair market
value on the date of the award while the option terms and vesting schedules are
at the discretion of the Compensation Committee. The 2006 Directors Plan provides that each
year, at the first regular meeting of the Board of Directors immediately
following GlobalSCAPEs annual stockholders meeting, each non-employee
director shall be granted or issued awards of 20,000 shares of GlobalSCAPE
common stock, for participation in Board and Committee meetings during the
previous calendar year. The maximum
annual award for any one person is 20,000 shares of GlobalSCAPE common stock.
Anti-takeover Effects of Certain Provisions of the
Certificate of Incorporation and Bylaws
Our certificate of
incorporation and bylaws provide for our Board of Directors to be divided into
three classes of directors serving staggered three-year terms. As a result,
23
approximately
one-third of our Board of Directors will be elected each year. Our certificate of incorporation and bylaws
provide that our Board of Directors will consist of not less than three nor
more than 12 members, with the exact number to be determined from time to time
by the affirmative vote of a majority of directors then in office. Our Board of Directors, and not our
stockholders, has the authority to determine the number of directors, and could
prevent any stockholder from obtaining majority representation on our Board of
Directors by enlarging the Board of Directors and by filling the new
directorships with the stockholders own nominees. In addition, directors may be removed by the
stockholders only for cause.
Our certificate of
incorporation and bylaws provide that special meetings of our stockholders may
be called only by the Chairman of the Board, the President or a majority of the
members of our Board of Directors. This
provision may make it more difficult for stockholders to take actions opposed
by our Board of Directors.
Our certificate of
incorporation and bylaws provide that any action required to be taken or which
may be taken by holders of our common stock must be effected at a duly called
annual or special meeting of such holders, and may not be taken by any written
consent of such stockholders. These
provisions may have the effect of delaying consideration of a stockholder
proposal until the next annual meeting unless a special meeting is called by the
persons set forth above. The provisions
of the certificate of incorporation and bylaws prohibiting stockholder action
by written consent could prevent the holders of a majority of the voting power
of GlobalSCAPE from using the written consent procedure to take stockholder
action and taking action by consent without giving all of our stockholders
entitled to vote on a proposed action the opportunity to participate in
determining such proposed action.
Anti-Takeover Statutes
In addition to the provisions
of our certificate of incorporation and bylaws described above, certain
provisions of Delaware law could make more difficult the acquisition of us by
means of a tender offer, a proxy contest, or otherwise, and the removal of
incumbent officers and directors. These
provisions are expected to discourage certain types of coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of GlobalSCAPE to first negotiate with our Board of Directors.
We are subject to Section 203
of the Delaware General Corporation Law.
This provision generally prohibits a Delaware corporation from engaging
in any business combination with any interested stockholder for a period of
three years following the date the stockholder became an
interested stockholder, unless:
·
prior to such
date, the Board of Directors approved either the business combination or the
transaction that resulted in the stockholders becoming an interested
stockholder;
·
upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned by persons who are directors and also officers
and
24
by employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
·
on or
subsequent to such date, the business combination is approved by the Board of
Directors and authorized at an annual meeting or special meeting of
stockholders and not by written consent, by the affirmative vote of at least 66
2/3% of the outstanding voting stock that is not owned by the interested
stockholder.
Section 203 defines a
business combination to include:
·
any merger or
consolidation involving the corporation and the interested stockholder;
·
any sale,
transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder;
·
subject to
certain exceptions, any transaction that results in the issuance or transfer by
the corporation of any stock of the corporation to the interested stockholder;
·
any transaction
involving the corporation that has the effect of increasing the proportionate
share of the stock of any class or series of the corporation beneficially owned
by the interested stockholder; or
·
the receipt by
the interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation.
In general, Section 203
defines an interested stockholder as any entity or person beneficially owning
15% or more of the outstanding voting stock of a corporation, or an affiliate
or associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of a corporation at any time within three years prior
to the time of determination of interested stockholder status and any entity or
person affiliated with or controlling or controlled by such entity or person.
Transfer Agent
The transfer agent for our
common stock is Mellon Investor Services, LLC.
SHARES ELIGIBLE FOR
FUTURE SALE
We cannot predict what
effect, if any, market sales of shares of common stock or the availability of
shares of common stock for sale will have on the market price of our common
stock. Nevertheless, sales of
substantial amounts of common stock in the public market, or the perception
that such sales could occur, could materially and adversely affect the market
price of our common stock and could impair our future ability to raise capital
through the sale of our equity or equity-related securities at a time and price
that we deem appropriate.
25
Upon the completion of this
offering, we will have 18,422,704 shares of our common stock outstanding
(including the shares issuable upon exercise of the warrants). In addition, options to purchase an aggregate
of 1,965,434 shares outstanding under our employee stock option plans as of April 28,
2008, of which 846,766 were vested as of April 28, 2008. Of these shares, the 4,687,000 shares of our
common stock sold in this offering will be freely tradable by persons other
than our affiliates, as that term is defined in Rule 144 under the
Securities Act of 1933, without restriction or further registration under the
Securities Act of 1933.
The remaining shares of our
common stock outstanding upon completion of this offering are deemed restricted
securities under Rule 144 under the Securities Act of 1933. After
expiration of the lock-up agreements described below, all of these restricted
securities will be eligible for sale in the public market on the date of this
prospectus under Rule 144.
Rule 144
Sales by Non-Affiliates.
In general, under Rule 144, a holder of
restricted common shares who is not and has not been one of our affiliates at
any time during the three months preceding the proposed sale can resell the
shares as follows:
·
If we have been
a reporting company under the Exchange Act for at least 90 days immediately
before the sale, then:
·
beginning six
months after the shares were acquired from us or any of our affiliates, the
holder can resell the shares, subject to the condition that current public
information about us must be available (as described below), but without any
other restrictions; and
·
beginning one
year after the shares were acquired from us or any of our affiliates, the
holder can resell the shares without any restrictions.
·
If we have not
been a public reporting company under the Exchange Act for at least 90 days
immediately before the sale, then the holder may not resell the shares until at
least one year has elapsed since the shares were acquired from us or any of our
affiliates, and may resell the shares without restrictions after that time.
Sales by Affiliates.
In general, under Rule 144, a holder of
restricted common shares who is one of our affiliates at the time of the sale
or any time during the three months preceding the sale can resell shares,
subject to the restrictions described below.
·
If we have been
a public reporting company under the Exchange Act for at least 90 days
immediately before the sale, then at least six months must have elapsed since
the shares were acquired from us or one of our affiliates; in all other cases,
at least one year must have elapsed since the shares were acquired from us or
one of our affiliates.
·
The number of
shares sold by such person within any three-month period cannot exceed the
greater of:
·
1% of the total
number of our common shares then outstanding; or
26
·
the average
weekly trading volume of our common shares during the four calendar weeks
preceding the date on which notice on Form 144 with respect to the sale is
filed with the SEC (or, if Form 144 is not required to be filed, the four
calendar weeks preceding the date the selling broker receives the sell order).
·
Conditions
relating to the manner of sale, notice requirements (filing of Form 144
with the SEC) and the availability of public information about us must also be
satisfied.
Current Public Information.
For sales by affiliates and non-affiliates,
the satisfaction of the current public information requirement depends on
whether we are a public reporting company under the Exchange Act.
·
If we have been
a public reporting company for at least 90 days immediately before the sale,
then the current public information requirement is satisfied if we have filed
all periodic reports (other than Form 8-K) required to be filed under the
Exchange Act during the 12 months immediately before the sale (or such shorter
period as we have been required to file those reports).
·
If we have not
been a public reporting company for at least 90 days immediately before the
sale, then the requirement is satisfied if specified types of basic information
about us (including our business, management and our financial condition and
results of operations) are publicly available.
No assurance can be given as
to (1) the likelihood of an active market for our common shares
developing, (2) the liquidity of any such market, (3) the ability of
the shareholders to sell the shares or (4) the prices that shareholders
may obtain for any of the shares. No
prediction can be made as to the effect, if any, that future sales of shares or
the availability of shares for future sale will have on the market price
prevailing from time to time. Sales of
substantial amounts of our common shares, or the perception that such sales
could occur, may adversely affect prevailing market prices of the common
shares. See Risk
Factors Risks Related to Stock Ownership.
Rule 701
Under Rule 701, common
stock acquired upon the exercise of certain currently outstanding options
granted under our stock plans may be resold, (1) by persons other than
affiliates, beginning 90 days after the effective date of this offering,
subject to the manner-of-sale provisions of Rule 144, and (2) by
affiliates, subject to the manner-of-sale, current public information and
filing requirements of Rule 144, in each case, without compliance with the
one-year holding period requirement of Rule 144.
LEGAL MATTERS
The validity of the issuance
of common stock offered hereby will be passed upon for us by Jackson Walker
L.L.P., San Antonio, Texas.
27
EXPERTS
Our financial statements as
of December 31, 2007 and 2006 and for each of the years in the three year
period ended December 31, 2007 have been audited by PMB Helin Donovan, LLP
(formerly Helin, Donovan, Trubee & Wilkinson, LLP), an independent registered
public accounting firm, as stated in their report with respect thereto, and are
included in this prospectus and in the registration statement in reliance upon
the authority of PMB Helin Donovan, LLP as experts in accounting and auditing.
WHERE YOU CAN FIND
MORE INFORMATION
We are required to file
annual, quarterly and special reports, and other information with the SEC. You may read and copy any document which we
have filed at the SECs public reference room at:
Securities and Exchange Commission
100 F. Street, N.E.
Washington, D.C. 20549
Please call the SEC at
1-800-SEC-0330 for more information on the operation of the public reference
room. Copies of our SEC filings are also
available to the public from the SECs web site at www.sec.gov.
Documents filed by us
pursuant to the Securities Exchange Act may be reviewed and/or obtained through
the Securities and Exchange Commissions Electronic Data Gathering Analysis and
Retrieval System, which is publicly available through the Securities and Exchange
Commissions web site (http://www.sec.gov).
We will provide to each
person, including any beneficial owner, to whom a prospectus is delivered, a
copy of any or all of the reports or documents that have been incorporated by
reference in the prospectus contained in the registration statement of which
this prospectus is a part but not delivered with this prospectus. We will provide those reports and documents
upon written or oral request and at no cost to the requester. Requests for reports or documents should be
submitted to the company at the following address or telephone number:
GlobalSCAPE, Inc.
6000 Northwest Parkway, Suite 100
San Antonio, Texas 78249
(210) 308-8267
Each of the reports and
documents may also be accessed through our website which is located at
www.globalscape.com.
This prospectus is part of a
registration statement that we have filed with the SEC relating to the
securities offered hereby. As permitted
by SEC rules, this prospectus does not contain all of the information we have
included in the registration statement and the accompanying exhibits and
schedules we file with the SEC. You may
refer to the registration statement, exhibits and
28
schedules
for more information about us and such securities. The registration statement, exhibits and
schedules are available at the SECs public reference room or through its
Internet website.
The SEC allows us to incorporate
by reference information into this Prospectus, which means that we can
disclose important information to you by referring you to another document or
report filed separately with the SEC.
The information incorporated by reference is deemed to be a part of this
prospectus, except to the extent any information is superseded by this
prospectus. The following documents
which have been filed by us with the SEC and contain important information
about us are incorporated into this prospectus:
·
Annual Report
on Form 10-K for the year ended December 31, 2007 and filed with the
SEC on March 26, 2008;
·
Current Report
on Form 8-K dated January 7, 2008 and filed with the SEC on January 7, 2008;
·
Current Report
on Form 8-K dated February 20, 2008 and filed with the SEC on February 20,2008;
·
Current Report
on Form 8-K dated March 10, 2008 and filed with the SEC on March 10,2008;
and
·
The description
of GlobalSCAPEs common stock contained in GlobalSCAPEs Registration Statement
on Form 8-A filed on July 17, 2007, including any amendments or
reports filed for the purpose of updating such description.
Notwithstanding the
foregoing, information that we elect to furnish, but not file, or have
furnished, but not filed, with the SEC in accordance with SEC rules and
regulations is not incorporated into the registration statement or this
prospectus and does not constitute a part hereof.
All documents filed by
GlobalSCAPE pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act (excluding any information furnished to the SEC) subsequent to the date of
this filing and prior to the termination of this offering shall be deemed to be
incorporated in this Prospectus and to be a part hereof from the date of the
filing of such document. Any statement
contained in a document incorporated or deemed to be incorporated by reference
into this prospectus will be deemed to be modified or superseded for purposes
of this prospectus to the extent that a statement contained in this prospectus
or any other subsequently filed document that is deemed to be incorporated by
reference into this prospectus modifies or supersedes the statement. Any statement so modified or superseded will
not be deemed, except as so modified or superseded, to constitute a part of
this prospectus.
29
4,687,000 Shares
GLOBALSCAPE, INC.
Common Stock
PROSPECTUS
The date of this prospectus is May 6, 2008
Until
June 16, 2008, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the
dealers obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
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