SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
AMENDMENT NO. 3
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Internet Pictures Corporation
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(Name of Issuer)
COMMON STOCK
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(Title of Class of Securities)
46059S200
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(CUSIP Number)
Warner B. Rodda, Esq.
Paradigm Capital Equity Partners, LLC
6410 Poplar Ave., Ste 395
Memphis, TN 38119
(901) 682-6060
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
March 25, 2002
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following page(s))
Page 1 of 9 pages
Page 2 of 9 pages
CUSIP No. 46059S200 13D
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(1) Names of Reporting Persons. SS or I.R.S. Identification Nos. of Above Persons
Image Investor Portfolio, a separate series of Memphis Angels, LLC
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(2) Check The Appropriate Box If A Member Of A Group (a):X
(b):
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(3) SEC Use Only
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(4) Source Of Funds*
WC
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(5) Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To Items 2(d) Or 2(e):
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(6) Citizenship Or Place Of Organization
Delaware
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Number Of Shares (7) Sole Voting Power 8,091,825 (1)
Beneficially Owned
By Each Reporting
Person With (8) Shared Voting Power 0
(9) Sole Dispositive Power 8,091,825 (1)
(10) Shared Dispositive Power 0
(11) Aggregate Amount Beneficially Owned By Each Reporting Person 8,091,825 (1)
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(12) Check If The Aggregate Amount In Row (11) Excludes Certain Shares* [ ]
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(13) Percent Of Class Represented By Amount In Row (11) 54.7% (2)
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(14) Type Of Reporting Person OO
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(1) Consists of shares of Common Stock issuable upon conversion of (i)
500,000 shares of Series B Preferred Stock acquired in the Third Closing
(as defined herein) upon conversion of the outstanding principal of a
convertible promissory note that had been issued in connection with the
First Closing and Second Closing (each as defined herein) and 13,830
shares of Series B Preferred Stock issued in consideration for
substantially all of the accrued interest on such promissory note at the
time of conversion; (ii) 250,000 shares of Series B Preferred Stock
underlying warrants (the "Tranche A Warrants") issued in the First
Closing and Second Closing; and (iii) 115,000 shares of Series B
Preferred Stock acquired upon partial exercise of a warrant (the
"Tranche B Warrant") in the Third Closing. Each share of Series B
Preferred Stock is currently convertible into 9.2075 shares of Common
Stock (subject to adjustment--See Item 4 of this Amendment).
(2) Calculated in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended. The Reporting Person's actual voting interest
is 42.0% because all shares of Series B Preferred Stock, including the
shares acquired by the New Investors (as defined herein), vote on an
as-converted basis with the Common Stock.
SEE INSTRUCTION BEFORE FILLING OUT!
Page 3 of 9 pages
CUSIP No. 46059S200 13D
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(1) Names of Reporting Persons. SS or I.R.S. Identification Nos. of Above Persons
Memphis Angels, LLC
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(2) Check The Appropriate Box If A Member Of A Group (a):X
(b):
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(3) SEC Use Only
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(4) Source Of Funds*
WC
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(5) Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To Items 2(d) Or 2(e):
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(6) Citizenship Or Place Of Organization
Delaware
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Number Of Shares (7) Sole Voting Power 8,091,825 (1)
Beneficially Owned
By Each Reporting
Person With (8) Shared Voting Power 0
(9) Sole Dispositive Power 8,091,825 (1)
(10) Shared Dispositive Power 0
(11) Aggregate Amount Beneficially Owned By Each Reporting Person 8,091,825 (1)
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(12) Check If The Aggregate Amount In Row (11) Excludes Certain Shares* [ ]
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(13) Percent Of Class Represented By Amount In Row (11) 54.7% (2)
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(14) Type Of Reporting Person OO
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(1) Consists of shares of Common Stock issuable upon conversion of (i)
500,000 shares of Series B Preferred Stock acquired in the Third Closing
(as defined herein) upon conversion of the outstanding principal of a
convertible promissory note that had been issued in connection with the
First Closing and Second Closing (each as defined herein) and 13,830
shares of Series B Preferred Stock issued in consideration for
substantially all of the accrued interest on such promissory note at the
time of conversion; (ii) 250,000 shares of Series B Preferred Stock
underlying warrants (the "Tranche A Warrants") issued in the First
Closing and Second Closing; and (iii) 115,000 shares of Series B
Preferred Stock acquired upon partial exercise of a warrant (the
"Tranche B Warrant") in the Third Closing. Each share of Series B
Preferred Stock is currently convertible into 9.2075 shares of Common
Stock (subject to adjustment--See Item 4 of this Amendment). All of such
shares are held or may be acquired by Image Investor Portfolio, a
separate series of Memphis Angels LLC, a Delaware limited liability
company.
(2) Calculated in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended. The Reporting Person's actual voting interest
is 42.0% because all shares of Series B Preferred Stock, including the
shares acquired by the New Investors (as defined herein), vote on an
as-converted basis with the Common Stock.
SEE INSTRUCTION BEFORE FILLING OUT!
Page 4 of 9 pages
CUSIP No. 46059S200 13D
---------
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(1) Names of Reporting Persons. SS or I.R.S. Identification Nos. of Above Persons
Paradigm Capital Equity Partners, LLC
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(2) Check The Appropriate Box If A Member Of A Group (a):X
(b):
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(3) SEC Use Only
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(4) Source Of Funds*
AF
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(5) Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To Items 2(d) Or 2(e):
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(6) Citizenship Or Place Of Organization
Delaware
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Number Of Shares (7) Sole Voting Power 8,091,825 (1)
Beneficially Owned
By Each Reporting
Person With (8) Shared Voting Power 0
(9) Sole Dispositive Power 8,091,825 (1)
(10) Shared Dispositive Power 0
(11) Aggregate Amount Beneficially Owned By Each Reporting Person 8,091,825 (1)
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(12) Check If The Aggregate Amount In Row (11) Excludes Certain Shares* [ ]
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(13) Percent Of Class Represented By Amount In Row (11) 54.7% (2)
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(14) Type Of Reporting Person OO
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(1) Consists of shares of Common Stock issuable upon conversion of (i)
500,000 shares of Series B Preferred Stock acquired in the Third Closing
(as defined herein) upon conversion of the outstanding principal of a
convertible promissory note that had been issued in connection with the
First Closing and Second Closing (each as defined herein) and 13,830
shares of Series B Preferred Stock issued in consideration for
substantially all of the accrued interest on such promissory note at the
time of conversion; (ii) 250,000 shares of Series B Preferred Stock
underlying warrants (the "Tranche A Warrants") issued in the First
Closing and Second Closing; and (iii) 115,000 shares of Series B
Preferred Stock acquired upon partial exercise of a warrant (the
"Tranche B Warrant") in the Third Closing. Each share of Series B
Preferred Stock is currently convertible into 9.2075 shares of Common
Stock (subject to adjustment--See Item 4 of this Amendment). All of such
shares are held or may be acquired by Image Investor Portfolio, a
separate series of Memphis Angels LLC, a Delaware limited liability
company, of which Paradigm Capital Equity Partners, LLC, a Delaware
limited liability company, is the Manager.
(2) Calculated in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended. The Reporting Person's actual voting interest
is 42.0% because all shares of Series B Preferred Stock, including the
shares acquired by the New Investors (as defined herein), vote on an
as-converted basis with the Common Stock.
SEE INSTRUCTION BEFORE FILLING OUT!
Page 5 of 9 pages
CUSIP No. 46059S200 13D
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(1) Names of Reporting Persons. SS or I.R.S. Identification Nos. of Above Persons
Paradigm Holdings
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(2) Check The Appropriate Box If A Member Of A Group (a):X
(b):
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(3) SEC Use Only
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(4) Source Of Funds*
AF
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(5) Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To Items 2(d) Or 2(e):
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(6) Citizenship Or Place Of Organization
Delaware
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Number Of Shares (7) Sole Voting Power 8,091,825 (1)
Beneficially Owned
By Each Reporting
Person With (8) Shared Voting Power 0
(9) Sole Dispositive Power 8,091,825 (1)
(10) Shared Dispositive Power 0
(11) Aggregate Amount Beneficially Owned By Each Reporting Person 8,091,825 (1)
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(12) Check If The Aggregate Amount In Row (11) Excludes Certain Shares* [ ]
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(13) Percent Of Class Represented By Amount In Row (11) 54.7% (2)
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(14) Type Of Reporting Person PN
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(1) Consists of shares of Common Stock issuable upon conversion of (i)
500,000 shares of Series B Preferred Stock acquired in the Third Closing
(as defined herein) upon conversion of the outstanding principal of a
convertible promissory note that had been issued in connection with the
First Closing and Second Closing (each as defined herein) and 13,830
shares of Series B Preferred Stock issued in consideration for
substantially all of the accrued interest on such promissory note at the
time of conversion; (ii) 250,000 shares of Series B Preferred Stock
underlying warrants (the "Tranche A Warrants") issued in the First
Closing and Second Closing; and (iii) 115,000 shares of Series B
Preferred Stock acquired upon partial exercise of a warrant (the
"Tranche B Warrant") in the Third Closing. Each share of Series B
Preferred Stock is currently convertible into 9.2075 shares of Common
Stock (subject to adjustment--See Item 4 of this Amendment). All of such
shares are held or may be acquired by Image Investor Portfolio, a
separate series of Memphis Angels LLC, a Delaware limited liability
company, of which Paradigm Capital Equity Partners, LLC, a Delaware
limited liability company, is the Manager, of which Paradigm Holdings, a
Delaware general partnership, is the Managing Member.
(2) Calculated in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended. The Reporting Person's actual voting interest
is 42.0% because all shares of Series B Preferred Stock, including the
shares acquired by the New Investors (as defined herein), vote on an
as-converted basis with the Common Stock.
SEE INSTRUCTION BEFORE FILLING OUT!
Page 6 of 9 pages
CUSIP No. 46059S200 13D
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(1) Names of Reporting Persons. SS or I.R.S. Identification Nos. of Above Persons
Frank A. McGrew IV
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(2) Check The Appropriate Box If A Member Of A Group (a):X
(b):
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(3) SEC Use Only
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(4) Source Of Funds*
AF
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(5) Check Box If Disclosure Of Legal Proceedings Is Required Pursuant To Items 2(d) Or 2(e):
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(6) Citizenship Or Place Of Organization
Tennessee
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Number Of Shares (7) Sole Voting Power
Beneficially Owned
By Each Reporting
Person With (8) Shared Voting Power 8,091,825 (1)
(9) Sole Dispositive Power
(10) Shared Dispositive Power 8,091,825 (1)
(11) Aggregate Amount Beneficially Owned By Each Reporting Person 8,091,825 (1)
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(12) Check If The Aggregate Amount In Row (11) Excludes Certain Shares* [ ]
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(13) Percent Of Class Represented By Amount In Row (11) 54.7% (2)
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(14) Type Of Reporting Person IN
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(1) Consists of shares of Common Stock issuable upon conversion of (i)
500,000 shares of Series B Preferred Stock acquired in the Third Closing
(as defined herein) upon conversion of the outstanding principal a
convertible promissory note that had been issued in connection with the
First Closing and Second Closing (each as defined herein) and 13,830
shares of Series B Preferred Stock issued in consideration for
substantially all of the accrued interest on such promissory note at the
time of conversion; (ii) 250,000 shares of Series B Preferred Stock
underlying warrants (the "Tranche A Warrants") issued in the First
Closing and Second Closing; and (iii) 115,000 shares of Series B
Preferred Stock acquired upon partial exercise of a warrant (the
"Tranche B Warrant") in the Third Closing. Each share of Series B
Preferred Stock is currently convertible into 9.2075 shares of Common
Stock (subject to adjustment--See Item 4 of this Amendment). All of such
shares are held or may be acquired by Image Investor Portfolio, a
separate series of Memphis Angels LLC, a Delaware limited liability
company, of which Paradigm Capital Equity Partners, LLC, a Delaware
limited liability company, is the Manager, of which Paradigm Holdings, a
Delaware general partnership, is the Managing Member, of which Mr.
McGrew is the Managing Partner.
(2) Calculated in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, as amended. The Reporting Person's actual voting interest
is 42.0% because all shares of Series B Preferred Stock, including the
shares acquired by the New Investors (as defined herein), vote on an
as-converted basis with the Common Stock.
SEE INSTRUCTION BEFORE FILLING OUT!
Page 7 of 9 pages
ITEM 1. SECURITY AND ISSUER.
This Amendment No. 3 to Schedule 13D (this "Amendment") relates to the
Common Stock, $.001 par value per share (the "shares"), of Internet Pictures
Corporation, a Delaware corporation (the "Company"), and is being filed on
behalf of the undersigned to amend the Schedule 13D originally filed on May 24,
2001 (the "Schedule 13D") and amended on May 30, 2001 and October 1, 2001. The
principal executive offices of the Company are located at 3160 Crow Canyon Road,
Suite 400, San Ramon, CA 94503, (925) 242-4000. Unless otherwise indicated, all
capitalized terms used herein but not defined shall have the same meaning as set
forth in the Schedule 13D.
ITEM 4. PURPOSE OF THE TRANSACTION.
The eighth paragraph of Item 4 of the Schedule 13D is amended and restated in
its entirety as follows:
In accordance with the provisions of the Purchase Agreement, the
Company's Board of Directors was reduced from nine to seven members at the time
of the Second Closing. At the time of the Second Closing, four directors
resigned from the Board of Directors of the Company and four nominees of Image,
including Mr. McGrew, were appointed to fill the resulting vacancies in the
Board of Directors of the Company. Pursuant to the Purchase Agreement, Image was
entitled to retain its representatives on the Board of Directors until the Third
Closing. In connection with the Third Closing, Mr. McGrew resigned from the
Board of Directors of the Company and the resulting vacancy was filled by a
representative of First Avenue Partners, L.P ("First Avenue"), a New Investor.
Pursuant to the terms of the Preferred Stockholders Agreement described below,
following the Third Closing, one additional representative of Image resigned
from the board and the resulting vacancy was filled by a representative
designated by NewSouth Capital Management Inc. ("NewSouth"), another New
Investor. Following the Third Closing, the holders of Series B Preferred Stock
are entitled, as a class, to elect four of the Company's seven directors.
The eighteenth paragraph of Item 4 of the Schedule 13D is amended and restated
in its entirety as follows:
The Company's amended certificate of designation setting forth the
rights and privileges of the Series B Preferred Stock (the "Certificate of
Designation") provides, in pertinent part, that the shares of Series B Preferred
Stock vote on an as-converted basis with the Common Stock (subject to certain
class vote matters). The Series B Preferred Stock accrues dividends at 8% per
annum and has a liquidation preference of $20 per share plus all accrued and
unpaid dividends (as adjusted for any stock dividends, stock splits,
combinations, recapitalizations or other similar corporate events). The Series B
Preferred Stock was initially convertible into Common Stock at a conversion
price of $2.50 (the "Conversion Price") per share (or 8 shares of Common Stock
per share of Series B Preferred Stock). The Conversion Price is subject to
adjustment for stock splits, stock dividends, combinations, recapitalizations
and other similar corporate events. Additionally, the Series B Preferred Stock
contained a reset feature (the "Reset Feature") that could result in a one-time
reduction of the Conversion Price if the average daily closing price of the
Common Stock for the twenty days prior to the 180 day anniversary of the Third
Closing (the "Average Closing Price") was below $2.50. If the Reset Feature was
triggered, the Conversion Price would be reset to the greater of the Average
Closing Price or $2.00. On March 25, 2002 (the 180 day anniversary of the Third
Closing), the Average Closing Price was calculated to be
Page 8 of 9 pages
$2.17. As a result, the Reset Feature was triggered, resulting in a reduction in
the Conversion Price to $2.17 per share. The triggering of the Reset Feature
increases the number of shares of Common Stock issuable upon conversion of the
Series B Preferred Stock to 9.2075 shares. The Conversion Price is also subject
to a weighted-average antidilution adjustment in the event that the Company
sells shares of Common Stock (or securities convertible into, or exercisable or
exchangeable for Common Stock) at a price less than the Conversion Price,
subject to certain exceptions.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 of the Schedule 13D is hereby amended and restated in its entirety as
follows:
Each of the Filing Persons may be deemed to beneficially own 8,091,825
shares of Common Stock. Such shares, based on the capitalization of the Company
as of October 15, 2001 (as reported in its Form 10-Q filed on October 31, 2001),
constitute 54.7% of the Common Stock. However, the Filing Persons' actual voting
interest is 42.0% because all shares of Series B Preferred Stock, including the
shares acquired by the New Investors, vote on an as-converted basis with the
Common Stock.
The 8,091,825 shares of Common Stock beneficially owned by the Filing
Persons include 4,731,089 shares of Common Stock underlying the 513,830 shares
of Series B Preferred Stock that Image acquired upon conversion of the principal
amount of, and substantially all of the accrued interest on, the Promissory Note
at the Third Closing and 1,058,862 shares of Common Stock underlying the 115,000
shares of Series B Preferred Stock that Image acquired upon exercise of a
portion of the Tranche B Warrant at the Third Closing. It also includes an
additional 2,301,874 shares of Common Stock issuable upon conversion of 250,000
shares of Series B Preferred Stock currently underlying the Tranche A Warrants.
Other than under the transactions described above, no transactions in
the Common Stock of the Company have been effected by Image, Memphis Angels,
PCEP, Paradigm or Mr. McGrew, or to the knowledge of Image, Memphis Angels,
PCEP, Paradigm or Mr. McGrew, by any of the general partners of Paradigm, during
the past 60 days.
To the knowledge of the Filing Persons, no other person has the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the securities covered by this Schedule 13D.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
Page 9 of 9 pages
SIGNATURES
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned each certifies that the information set forth in this statement
is true, complete and correct.
Dated: March 26, 2002
IMAGE INVESTOR PORTFOLIO,
a separate series of
MEMPHIS ANGELS, LLC,
a Delaware limited liability company
By: PARADIGM CAPITAL EQUITY
PARTNERS, LLC,
its Manager
By: PARADIGM HOLDINGS,
its Managing Member
By: /s/ Frank A. McGrew IV
-----------------------
Name: Frank A. McGrew IV
Title: Managing Partner
PARADIGM CAPITAL EQUITY
PARTNERS, LLC,
a Delaware limited liability company
By: PARADIGM HOLDINGS,
its Managing Member
By: /s/ Frank A. McGrew IV
----------------------
Name: Frank A. McGrew IV
Title: Managing Partner
PARADIGM HOLDINGS,
a Delaware general partnership
By: /s/ Frank A. McGrew IV
----------------------
Name: Frank A. McGrew IV
Title: Managing Partner
FRANK A. MCGREW IV
/s/ Frank A. McGrew IV
-----------------------------