As filed with the Securities and Exchange Commission on June 20 , 1997
Registration Statement No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
PEN INTERCONNECT, INC.
(Exact name of registrant as specified in its charter)
Utah 3357 87-0430260
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of incorporation) Classification Code Number) Identification No.)
Pen Interconnect, Inc. James S. Pendleton, Chairman
2351 South 2300 West Pen Interconnect, Inc.
Salt Lake City, Utah 84119 2351 South 2300 West
(801) 973-6090 Salt Lake City, Utah 84119
(Address, including zip code, and (801) 973-6090
telephone number, including area (Name, address, including zip
code, of registrant's principal code, and telephone number,
executive offices) including area code, of agent
for service)
Copy to:
Oscar D. Folger, Esq.
James W. Lucas, Esq.
521 Fifth Avenue
New York, New York 10175
(212) 697-6464
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. /_/
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. /_/
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. /_/
<PAGE>
CALCULATION OF REGISTRATION FEE
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Title of Each Class Proposed Maximum Proposed Maximum
of Securities Being Amount Being Offering Price per Aggregate Offering Amount of
Registered Registered Share (1) Price Registration Fee
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 3,029,516 $ 1.625 $ 4,922,963 $ 1,491.81
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1 Estimated for purposes of computing the registration fee pursuant to Rule
457 ( c) at $1.625 per Share based upon the average of the high and low
prices of $1.75 and $1.50, respectively, on June 19, 1997.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE , 1997
Pen Interconnect, Inc.
3,029,516 Shares of Common Stock
-------------------
This Prospectus relates to the offering of an aggregate of 3,029,516
shares of the Common Stock, par value $.01 per share ("Common Stock"), of Pen
Interconnect, Inc. (the "Company"). The Common Stock is sometimes referred to
hereinafter as "Securities." The Company's Common Stock and Warrants have been
publicly traded since November 1995, when the Company completed an underwritten
initial public offering of 1,000,000 shares of Common Stock and warrants to
purchase 1,000,000 shares of Common Stock (the "Initial Public Offering"). Only
persons named herein as Selling Security Holders may rely upon this Prospectus
for resale of Securities owned by them. The Securities included herein are being
offered as follows:
- 2,585,000 shares of Common Stock are being offered by Selling Security
Holders, issuable upon exercise of warrants or options ("Warrants") at
prices ranging from $2.00 to $2.75 per share.
- - 444,516 shares of Common Stock are being offered by various Selling
Security Holders.
The Company will receive the exercise prices payable upon exercise of
the Warrants. The Company will not receive any proceeds from the sale of the
Common Stock by the Selling Security Holders. The Company has been advised by
the Selling Security Holders that there are no underwriting arrangements with
respect to the sale of any Securities. The Securities will be sold from time to
time by the Selling Security Holders in the over-the-counter market at then
prevailing prices and in private transactions at negotiated prices. Usual and
customary brokerage fees, if any, may be paid by the Selling Security Holders in
connection with sales by the Selling Security Holders.
The Common Stock and Warrants are quoted on the Nasdaq National Market
System under the symbols "PENC" and "PENCW," respectively. The closing sale
prices of the Company's Common Stock and Warrants on June 19, 1997 as quoted on
the Nasdaq National Market System, were $ 1.50 and $ 0.4375, respectively.
---------------------
<PAGE>
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK AS WELL AS
IMMEDIATE AND SUBSTANTIAL DILUTION.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
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==============================================================================================================================
Price Underwriting Proceeds to Proceeds to
to Public (1) Discounts and Company(1) Selling Security
Commissions (1) Holders (1)
<S> <C> <C> <C> <C>
Per
Share............................
Total.................................
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</TABLE>
(1) Not determinable at this time.
The date of this Prospectus is June , 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934 ("Exchange Act") and in accordance therewith files reports
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information may be inspected at the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: Suite 1400, 500 West Madison Street, Chicago, Illinois 60661- 2511;
Seven World Trade Center - 13th Floor, New York, New York 10048; and Suite 500
East, 5757 Wilshire Boulevard, Los Angeles, California 90036-3648. Copies of
such material may be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549, at prescribed rates, and can also be
accessed electronically through the Commissions Web Site at http;\\www.sec.gov.
------------------------
The Company will furnish its security holders with annual reports
containing audited financial statements at the end of each fiscal year. In
addition, the Company may, from time to time, issue unaudited interim reports
and financial statements.
THE FOLLOWING LEGEND WILL APPEAR IN RED INK ON THE FRONT PAGE OF THE PROSPECTUS
IN THE EVENT THAT THE PROSPECTUS IS CIRCULATED PRIOR TO BEING DECLARED EFFECTIVE
BY THE COMMISSION:
"The information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell nor the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State."
<PAGE>
The Company
Pen Interconnect, Inc. (the "Company") develops and produces on a
turnkey basis, interconnections solutions for original equipment manufacturers
("OEMs") in the computer, computer peripheral, and other computer related
industries, such as the telecommunications, instrumentation and testing
equipment industries. The Company's products connect electronic equipment such
as computers, to various external devices (such as video screens, printers,
external disk drives, modems, telephone jacks, peripheral interfaces and
networks) and connect devices within the equipment (such as power supplies,
computer hard drives and PC cards). The InCirT Division is engaged in the
electronic manufacturing services industry (EMSI), and provides sophisticated
ISO 9002-certified assembly and testing services for complex printed circuit
boards and subsystems. In addition, the Company's MOTO-SAT division is a
manufacturer of satellite receiving systems for recreational vehicles. The
Company was incorporated under the laws of the State of Utah on September 30,
1985. The Company maintains divisions located in Salt Lake City, Utah and
Tustin, California. The Tustin subsidiary was acquired in April 1996 for cash
and common stock from Cerplex Group, Inc. During the fiscal year ended September
30, 1996 the Company also had a division located in San Jose, California. The
San Jose division was sold by the Company in November 1996. The executive
offices of the Company are located at 2351 South 2300 West, Salt Lake City, Utah
84119. Its telephone number is 801-973-6090.
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
securities offered by this Prospectus.
Factors Affecting Operating Results
The Company's operating results are affected by a wide variety of
factors, many of which are beyond the control of the Company, which could
adversely impact its net sales and profitability. The factors include the
Company's ability to design and introduce new products on a timely and
cost-effective basis, market acceptance of products of both the Company and its
customers, customer demand for the products of the Company and its customers,
the level of orders that are received and can be shipped in a quarter, customer
order patterns and seasonality, changes in product mix, product performance and
reliability, product obsolescence, the amount of any product returns, the
availability and costs of raw materials, equipment and other supplies, the
cyclical nature of both the computer industry and the markets addressed by the
Company's products, technological changes, competition and competitive pressures
on prices, and economic conditions in the markets served by the Company. The
Company believes its ability to continue to increase its manufacturing capacity
to meet customer demand and maintain satisfactory delivery schedules will be an
important competitive factor. The Company's products find application in a wide
variety of computer, computer peripheral, medical, telecommunications and
industrial control products. A slowdown in demand for products that utilize the
Company's products as a result of economic or other conditions in the markets
served by the Company or other broad-based factors could adversely affect the
Company's operating results. In addition, the Company will be adversely affected
if OEMs increase their own manufacture of interconnections or if large
manufacturers of cables, printed circuit board assemblies or connectors seek a
greater share of the molded cable assembly business.
Wide market acceptance of the Personal Computer Memory Card
International Association ("PCMCIA") standards and increasing sales of products
using the PCMCIA standards have been critical to the Company's growth prospects.
The success of the PCMCIA standards, however, cannot be accurately predicted
since such success will depend on the promotional efforts of leading computer
manufacturers and user acceptance. In addition, market acceptance of PCMCIA
standards can be expected to displace a portion of the Company's business for
traditional cabling. Further, the establishment of a significant market for
PCMCIA related products can be
<PAGE>
expected to result in increased competition in this market. Manufacturers of
PCMCIA devices have standardized the connections between these devices and
internal computer devices and with cables leading to connections with the
external environment, such as the connection between PCMCIA modem devices and
cables to outside telephone jacks. There has been no standardization of the
connections between these cables and external devices, leading to substantial
need for customization of cabling. The Company's PCMCIA sales rely on custom
work for connections to external devices and will be significantly and adversely
affected should manufacturers succeed in standardizing these connections. As a
result, further standardization of PCMCIA devices could adversely affect the
Company's business.
Need to Establish and Expand Customer Base
Sales by the Company have historically been concentrated with several large
customers. The Company has worked to reduce its dependence on several large
customers, however sales to Xircom Inc. still accounted for approximately 16% of
total sales for the year ended September 30, 1996. The loss of this major
customer, or other significant customers or a substantial reduction in a major
customer's purchases, may significantly and adversely affect the Company.
In addition to the concentration of the Company's sales among some
large customers, the Company's relationships with many of its customers,
including Xircom, are relatively new. Most of the Company's growth and new
customers have resulted from the PCMCIA cabling and contract manufacturing
market. Although the Company was one of the earliest entrants in the market for
PCMCIA compatible cable interconnections, the Company has been involved in this
new market for only about three years and cannot assess the stability of its
relationships with the new PCMCIA market customers.
The Company's sales to a particular customer also can vary
significantly depending on the life cycles of the customer's products. As a
result of the rapid pace of technological development in the computer and
computer peripheral industries, products frequently have life cycles of less
than a year. Demand for the Company's products and services can diminish
significantly as a customer's products reach the end of their useful sales lives
or become so standardized as to be appropriate for high volume, low cost
production. The Company must continue to expand its customer base in order to
consistently have customers that have products at the beginning of their life
cycles when demand for the Company's customized cable interconnection
development and production services is greatest. Therefore, the Company's future
prospects depend significantly on its ability to establish and maintain
long-term customer relationships over the sales lives of multiple products and
to add new customers in the rapidly changing market for compatible products.
Dependence on New Products and Technologies
The Company's future operating results will depend to a significant
extent on its ability to continue to develop and introduce on a timely basis new
products, which compete effectively on the basis of price and performance and
which address customer requirements. The success of new product introductions
depends on various factors, including proper new product selection, timely
completion and introduction of new product designs and the use and market
acceptance of customers' end products. The Company's inability to design,
develop and introduce competitive products on a timely basis could adversely
affect its future operating results. Some of the Company's products also require
compatibility with products manufactured by third-party vendors. There can be no
assurance the Company will be able to maintain compatibility in the event such
vendors modify their products. In addition, there can be no assurance that
products or technologies developed by others will not render the Company's
products noncompetitive or obsolete.
<PAGE>
Technological Obsolescence
The industries that the Company serves are marked by rapid
technological change. The Company must continuously modify its existing products
and seek to develop new products in order to remain competitive. There can be no
assurance that new technological developments will not adversely affect the
Company. Specifically, technology has been recently developed using
electromagnetic transmission on infrared and UHF frequencies that fulfill the
functions of some of the Company's cable products. Although this technology is
still subject to significant obstacles, such as maintaining the security of the
transmissions and improving their capacity and clarity, the successful
development of "wireless" local data transmission could render many of the
Company's current products obsolete.
Limited Proprietary Technology
The Company does not have any patented technology. It regards aspects
of its manufacturing processes as trade secrets and seeks to protect this
know-how with secrecy agreements. There can be no assurance, however, that these
agreements will be enforceable in the event of a breach. Therefore, even if the
Company is able to develop successful new products, the Company may be limited
in its ability to prevent competitors from copying these products. In addition,
the Company has no registered trademarks, and products manufactured by the
Company typically do not refer to the Company by name or mark.
Management of Growth
The Company is currently experiencing a period of significant expansion.
The Company's ability to manage its expansion effectively will require it to
continue to enhance its operational, financial and management systems. If the
Company is unable to manage its acquisitions effectively, the Company's results
of operations could be adversely affected.
Factors Affecting Supplies
Many of the Company's suppliers are located outside the United States.
The purchase of materials from foreign suppliers may be adversely affected by
political and economic conditions abroad. Protectionist trade legislation in
either the United States or foreign countries, such as a change in the current
tariff structures or other trade policies, could adversely affect the Company's
ability to purchase materials from foreign suppliers. Also, to the extent that
such foreign transactions are denominated in currencies other than the U.S.
dollar, the Company may be exposed to exchange rate fluctuations. Although the
Company has not entered into non-U.S. dollar transactions and has not incurred
any material exchange gains or losses to date, there can be no assurance that
the Company will not enter into such transactions in the future or that
fluctuations in the currency exchange rates in the future will not have an
adverse effect on the Company's operations.
Certain key component parts used in the Company's interconnection
products are available from only one or a limited number of suppliers, and the
Company currently does not have long-term agreements with any suppliers of
components. Any reduction or interruption in supply from third-party contractors
would adversely affect the Company's results of operations unless or until
alternative sources are established. Moreover, operating results could be
adversely affected by the receipt of defective components, an increase in prices
from suppliers or the inability of the Company to obtain lower prices in
response to competitive price reductions. Finally, some of the Company's
suppliers may also enter the manufacture of custom cable interconnections, which
could adversely affect the Company's business by directly competing with the
Company and by ceasing or delaying supplies to the Company.
<PAGE>
Competition
Many of the markets for the Company's products are highly competitive. The
Company competes directly with numerous other contract manufacturers that, like
the Company, obtain raw material from suppliers and in turn manufacture for
customers. The Company also indirectly competes with computer cabling and
connector manufacturers and major OEMs that produce their own cable assemblies.
In all product lines, such manufacturing and OEMs generally are substantially
larger and have greater resources than the Company. As new products become
standardized and are produced in large quantities, foreign producers in
countries with lower labor costs than the United States will be better able to
compete for production of the products since they can generally offer lower
prices than the Company. The Company also competes with other OEM companies to
obtain supplies. A number of the companies from which the Company buys material
maintain proprietary control of their newly designed products.
Impact of Price Variations of Raw Materials
Although the Company does not manufacture the cable sub components
itself, the raw materials purchased from manufacturers are a significant
component of the Company's cost of sales. The prices of such materials can vary
substantially based upon many factors including world economic and political
conditions. The Company may be able to pass on increases in material costs
resulting from increases in raw material costs to its customers. However, the
Company generally bids on projects in advance and may not be able to pass on
increased costs to the extent that raw material costs increase more than
anticipated.
Dependence on Key Personnel
The Company's success depends to a significant extent upon the continued
service of James S. Pendleton, its Chairman and Chief Executive Officer; Wayne
R. Wright, its Vice Chairman and Chief Financial Officer; Alan Weaver its
President and Chief Operations Officer and Stephen J. Fryer, its Senior Vice
President, Sales and Marketing. The Company has employment agreements with
Messrs. Pendleton and Wright which expire in January 2000, and with Mr. Weaver
which expires April 2000. The Company has obtained $1,000,000 key person life
insurance on Mr. Wright and Mr. Pendleton and $500,000 on Mr. Weaver. The
Company also will continue to depend on other members of its senior staff as
well as on its ability to continue to attract, retain and motivate additional
qualified personnel. The competition for experienced personnel is intense, and
the loss of the services of one or more of the Company's key employees could
have a material adverse effect on the Company. There can be no assurance that
the Company will be successful in retaining its existing key employees or in
attracting and retaining any additional personnel it requires.
Potential Future Need for Additional Funds
Management believes that additional working capital may be required to
meet its future operating costs, for business expansion opportunities and to
adequately support its China strategic manufacturing alliance in addition to its
existing cash balances, borrowings available under the line of credit, and cash
generated from operations. However, there can be no assurance that such
additional financing, if required, would be available on
favorable terms if at all or that such additional financing, if available, would
not result in substantial dilution of the equity interests of existing
stockholders.
Maintenance Criteria for Nasdaq Securities; Penny Stock Rules
Since March 13, 1996, the Common Stock and Warrants of the Company have
been quoted on the National Association of Securities Dealers Automated
Quotation System ("Nasdaq") National Market System. The Common Stock and
Warrants were previously quoted on the Nasdaq Small-Cap Market. To maintain its
listing on the Nasdaq National Market System, the Company must continue to be
registered under Section 12(g) of the
<PAGE>
Exchange Act and have net tangible assets of at least $1,000,000 (or more if the
Company sustains operating losses), a public float of at least 200,000 shares
with a market value of at least $1,000,000, at least 300 stockholders, a minimum
bid price of $1.00 per share and at least two market makers. In addition, Nasdaq
has proposed increasing the requirements for maintaining National Market System
listing to net tangible assets of at least $4,000,000, a public float of at
least 750,000 shares with a market value of at least $5,000,000 and at least 400
stockholders. As of September 30, 1996, the Company would have complied with the
new proposed requirements except for the market value of the public shares. When
the new requirements go into effect the Company will need to comply within six
months. There can be no assurance that the Company in the future will meet the
requirements for continued listing on the Nasdaq National Market System with
respect to the Common Stock or Warrants. If the Company's securities fail to
maintain a Nasdaq listing, the market value of the Common Stock and Warrants
likely would decline and purchasers in this offering likely would find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, the Common Stock and Warrants.
In addition, if the Company fails to maintain at least a Nasdaq
Small-Cap Market listing for its securities, and no other exclusion from the
definition of a "penny stock" under the Exchange Act is available, then any
broker engaging in a transaction in the Company's securities would be required
to provide any customer with a risk disclosure document, disclosure of market
quotations, if any, disclosure of the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
values of the Company's securities held in the customer's accounts. The bid and
offer quotation and compensation information must be provided prior to effecting
the transaction and must be contained on the customer's confirmation. If brokers
become subject to the "penny stock" rules when engaging in transactions in the
Company's securities, they would become less willing to engage in such
transactions, thereby making it more difficult for purchasers in this offering
to dispose of their shares.
Potential Reduction in Exercise Price of Warrants
The Company can reduce the exercise price of the Warrants upon notice
to the Warrant holders and may seek to promote the exercise of the Warrants by
reducing the exercise price thereof. The Company has no current plans to effect
such a reduction in the exercise price of the Warrants and holders of Warrants
should not anticipate such a reduction.
Effect of Issuance of Preferred Stock
Certain provisions of the Company's Certificate of Incorporation allow
the Company to issue Preferred Stock with voting, liquidation and dividend
rights senior to those of the Common Stock without the approval of the Company's
stockholders. The issuance of Preferred Stock could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding stock
of the Company and result in the dilution of the value of the then current
stockholders' Common Stock. The Company has no present plans to issue shares of
Preferred Stock.
Shares Eligible for Future Sale
Sales of substantial amounts of Common Stock of the Company in the
public market could adversely affect prevailing market prices. All of the
3,033,407 shares of Common Stock outstanding as of March 31, 1997 are eligible
for resale in the public market, subject to compliance with Rule 144 under the
Securities Act, or are currently registered for public sale.
Dividends Not Likely
The Company has never paid dividends on its Common Stock and does not
anticipate that it will pay dividends in the foreseeable future. Any earnings
that may be generated will be used to finance the growth of the
<PAGE>
Company's business. In addition, the Company's revolving credit facility
prohibits the payment of cash dividends without the lender's consent.
Control by Current Directors
As of June 20, 1997, the current directors will own approximately 37.4%
of the issued and outstanding shares of Common Stock (assuming no exercise of
any outstanding options or warrants). Accordingly, the current directors will be
able to substantially influence the election of the Company's directors, to
cause an increase in the authorized capital or the dissolution, merger, or sale
of the assets of the Company and generally to control the affairs of the
Company.
USE OF PROCEEDS
The net proceeds to the Company from the sale of 2,585,000 shares of
Common Stock upon exercise of Warrants would be approximately $5,627,500 after
taking into account estimated offering expenses of approximately $50,000. The
Company will receive no proceeds from the sale of Securities held by any Selling
Security Holders. There can be no assurance that any or all of the Warrants or
options will be exercised and accordingly, the Company might receive no or only
minimal proceeds.
Any proceeds received from the exercise of Warrants would be added to
working capital. The Company has no definite plans for the use of any proceeds
from the exercise of the Warrants, except the repayment of certain debt, nor has
the Company made specific allocations as to the use of any such proceeds. The
proceeds could be used for current manufacturing, administrative, marketing or
research and development expenses, the acquisition of inventory or related
businesses, the repurchase of certain of the Company's outstanding securities,
or the repayment of debt. Future events, including changes in the economic
climate and/or the Company's planned business operations, including the success
or lack thereof of the various intended business activities, may make shifts in
the allocation of funds amongst these categories necessary or desirable. Any
such shifts will be at the discretion of the Board of Directors of the Company.
In its financial planning, the Company has not assumed the receipt of any funds
from the exercise of the Warrants. Prior to expenditure, any net proceeds will
be invested in short-term interest bearing securities or money market funds.
MATERIAL DEVELOPMENTS
No reportable material developments have occurred since the Company's
filing of its quarterly report on Form 10-QSB for the six months ended March 31,
1997.
LEGAL PROCEEDINGS
On February 14, 1997, Touche Electronics, Inc., ("Touche") and TMCI
Electronics, Inc., ("TMCI") filed a demand for arbitration in California
alleging that, in connection with the sale of the San Jose Division, (the
Division) (1) the Company overstated the value of the Division's inventory, (2)
the Division's vendors have refused to deal with Touche and TMCI, and (3) the
Company failed to disclose certain accounts payable. The Company is vigorously
contesting those allegations in the arbitration.
On April 8, 1997, the Company filed a complaint against TMCI, Touche and an
individual in the Superior Court of the State of California, in and for the
County of Santa Clara, with respect to the defaulted Notes (the Notes were
<PAGE>
part of the sale of the Division to Touche and Touche has not made the required
payments on the notes) (the "Complaint"). In the Complaint, the Company made
claims against TMCI, Touche and the other defendants for, among other things,
breach of contract, fraud, conversion and claim and delivery. The Company has
also filed motions in the lawsuit for writs of attachment and possession and has
requested an order allowing the Company to attach the equipment and other assets
acquired by TMCI and Touche in the sale of the Division. Hearings on those
motions occured on May 29, 1997. The Company's writ of attachment motion was
denied. The Company now intends to pursue the appointment of an arbitrator for
purposes of resolving certain "offset" claims of the makers of the promissory
notes and to enforce full payment of the obligations.
PLAN OF DISTRIBUTION
All of the Securities being offered hereunder are being offered for the
respective accounts of the Selling Security Holders. The Company will not
receive any proceeds from the sale of these Securities by the Selling Security
Holders, although it will receive the exercise prices of such Warrants when and
if the Warrants are exercised. The sale of Securities by the Selling Security
Holders may be effected from time to time in transactions in the
over-the-counter market, in negotiated transactions, through the writing or
timing of options on the Securities, or through a combination of such methods of
sale, at fixed prices, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Such
transactions may include block transactions by or for the account of the Selling
Security Holders. If any Securities, or options thereon, are sold pursuant to
this Prospectus at a fixed price or at a negotiated price which is in either
case other than the prevailing market price or in a block transaction to a
purchaser who resells, or if any Selling Security Holder pays compensation to a
broker-dealer that is other than the usual and customary discounts, concessions
or commissions, or if there are any arrangements either individually or in the
aggregate that would constitute a distribution of the Securities, a
post-effective amendment to the Registration Statement of which this Prospectus
is a part would need to be filed and declared effective by the Securities and
Exchange Commission before such Selling Security Holder could make such sale,
pay such compensation or make such distribution. The Company is under no
obligation to file a post-effective amendment to the Registration Statement of
which this Prospectus is a part under such circumstances.
The Selling Security Holders may effect transactions in their
Securities by selling their Securities directly to purchasers, through
broker-dealers acting as agents for the Selling Security Holders or to
broker-dealers who may purchase the Selling Security Holders' Securities as
principals and thereafter sell such Securities from time to time in the
over-the-counter market, in negotiated transactions, or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Security Holders and/or the
purchasers for whom such broker-dealers may act as agents or to whom they may
sell as principals, or both.
The Selling Security Holders and any broker-dealers who act in
connection with the sale of the Securities hereunder may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any commissions received by them and profit on any sale of the Securities as
principal might be deemed to be underwriting discounts and commissions under the
Securities Act.
SELLING SECURITY HOLDERS
An aggregate of 3,029,516 shares of Common Stock are being offered for
sale by Selling Security Holders. The following table sets forth certain
information with respect to the Selling Security Holders. The Company will not
receive any of the proceeds from the sale of the shares of Common Stock,
although it will receive proceeds from the exercise of the Warrants, if
exercised.
<PAGE>
<TABLE>
<CAPTION>
Beneficial Beneficial
Ownership of Ownership of
Shares of Shares of
Common Stock Securities to be Common Stock
Selling Security Holders Prior to Sale Sold After Sale
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<S> <C> <C> <C>
KLS Enterprises 100,000 100,000 0
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Arnold and Melvin Fischman 100,000 100,000 0
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The Trading Post, Inc. 25,000 25,000 0
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Milton Haber 25,000 25,000 0
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John Thompson 50,000 50,000 0
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William Thompson 50,000 50,000 0
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Jerome Kossoff 50,000 50,000 0
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Sara Leifer 50,000 50,000 0
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Toby Roth 50,000 50,000 0
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Hamerkaz 200,000 200,000 0
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Ira Weingarten 50,000 50,000 0
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Rose Frankel 50,000 50,000 0
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Isadore Handler 50,000 50,000 0
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Joseph & Regina Handler 50,000 50,000 0
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Yeshiva Beth Hillel 50,000 50,000 0
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Lisa Grossman 350,000 350,000 0
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Greendel Equities, Inc. 100,000 100,000 0
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Redstone Securities, Inc. 400,000 400,000 0
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The Cerplex Group 444,516 444,516 0
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CLR Associates 75,000 75,000 0
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National Bank of Canada 10,000 10,000 0
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Seafish Partners 200,000 200,000 0
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West End Capital Corp. Ptd. LTD. 200,000 200,000 0
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Paulette Marie Brodchandel 300,000 300,000 0
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</TABLE>
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LEGAL MATTERS
Certain legal matters with respect to the shares of Common Stock
offered hereby have been passed upon for the Company by Oscar D. Folger, Esq.,
New York, New York.
EXPERTS
The financial statements of Pen Interconnect, Inc., as of September 30,
1996, and for each of the two years then ended, incorporated by reference from
the Company's annual report on Form 10-KSB for the fiscal year ended September
30, 1996, have been audited by Grant Thornton LLP, independent certified public
accountants, as set forth in their report appearing therein, and are included in
reliance upon such report given upon the authority of said firm as experts in
auditing and accounting.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed with the Commission by
the Company, are incorporated herein by reference and made a part hereof. The
Commission file number for all documents which are incorporated by reference is
1-14072.
(1) Annual Report on Form 10-KSB for the fiscal year ended September 30,
1996.
1 Quarterly Report on Form 10-QSB for the three months ended December
31, 1996.
(3) Quarterly Report on Form 10-QSB for the three months ended March 31,
1997.
In addition, all documents filed by the Company pursuant to Sections 13
(a), 13 (c), 14 and 15 (d) of the Exchange Act, prior to the termination of the
offering of the securities covered by this Prospectus or the filing of a
post-effective amendment which indicates that all securities have been sold or
which deregisters all securities then remaining unsold, shall be deemed to be
incorporated in this Prospectus and made a part hereof by reference from the
date of filing each such document. Any statement contained in an earlier
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded to
constitute a part of this Prospectus.
<PAGE>
INDEMNIFICATION
The Certificate of Incorporation of the Company provides that all
directors, officers, employees and agents of the Company shall be entitled to be
indemnified by the Company to the fullest extent permitted by law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
AVAILABLE INFORMATION
This Prospectus contains certain information concerning the Company and
its securities, but does not contain all the information set forth in the
Registration Statement and the Exhibits thereto filed with the Commission under
the Securities Act of 1933, as amended, to which reference is made. Any summary
from the Exhibits contained in this Prospectus is necessarily incomplete and
must not be considered as a full statement of the provisions of such
instruments.
<PAGE>
PEN INTERCONNECT, INC.
3,029,516 shares of Common Stock
-------------------------------
PROSPECTUS
-------------------------------
June , 1997
II-1
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Securities and Exchange Commission Registration Fee $ 1,492
Nasdaq Listing Fee 17,500
Printing and Engraving 2,000
Transfer Agent's Fee and Expenses 1,000
Legal Fees and Expenses 8,000
Blue Sky Qualification Fees and Expenses 10,000
Accountants' Fees and Expenses 5 ,000
Miscellaneous Expenses 5,008
--------
Total $ 50,000
==========
Item 15. Indemnification of Directors and Officers
The Company has entered into agreements with each director and officer
in which the Company agrees to indemnify each director and officer to the
maximum extent permitted by law.
The Company's Certificate of Incorporation provides that all directors,
officers, employees and agents of the Registrant shall be entitled to be
indemnified by the Company to the fullest extent permitted by law. The
Certificate of Incorporation also provides as follows:
The corporation shall, to the fullest extent permitted by the Act, as
the same may be amended and supplemented, indemnify all directors,
officers, employees, and agents of the corporation whom it shall have
power to indemnify thereunder from and against any and all of the
expenses, liabilities, or other matters referred to therein or covered
thereby. Such right to indemnification or advancement of expenses
shall continue as to a person who has ceased to be a director,
officer, employee, or agent of the corporation, and shall inure to the
benefit of the heirs, executives, and administrators of such persons.
The indemnification and advancement of expenses provided for herein
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement may be entitled under any bylaw,
agreement, vote of shareholders or of disinterested directors or
otherwise. The corporation shall have the right to purchase and
maintain insurance on behalf of its directors, officers, employees or
agents to the full extent permitted by the Act, as the same may be
amended or supplemented.
Sections 16.10a-902 and 16.10a-903 of the Utah Revised Business
Corporation Act concerning indemnification of officers, directors, employees and
agents are set forth below.
16-10a-902 Authority to Indemnify Directors.
(1) Except as provided in Subsection (4), a corporation may indemnify
an individual made a party to a proceeding because he is or was a director,
against liability incurred in the proceeding if:
(a) his conduct was in good faith; and
(b) he reasonably believed that his conduct was in, or not opposed
to the corporation's best interests; and
II-2
<PAGE>
(c) in the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful.
(2) A director's conduct with respect to any employee benefit plan for
a purpose he reasonably believed to be in or not opposed to the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of Subsection (1)(b).
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contender or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(4) A corporation may not indemnify a director under this section:
(a) in connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to
the corporation; or
(b) in connection with any other proceeding charging that
the director derived an improper personal benefit, whether
or not involving action in his official capacity, in which
proceeding he was adjudged liable on the basis that he
derived an improper personal benefit.
(5) Indemnification permitted under this section in connection
with a proceeding by or in the right of the corporation is
limited to reasonable expenses incurred in connection with the
proceeding.
16-10a-903 Mandatory Indemnification of Directors.
Unless limited by its articles of incorporation, a corporation shall
indemnify a director who was successful, on the merits or otherwise, in the
defense of any proceeding, or in the defense of any claim, issue or matter in
the proceeding, to which he was a party because he is or was a director of the
corporation, against reasonable expenses incurred by him in connection with the
proceeding or claim with respect to which he has been successful.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers, and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to the court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Pursuant to the Underwriter's Warrant Agreement between the Company and
the Underwriter of the Company's Initial Public Offering, included as Exhibit 1
to this Registration Statement, the holders of the Underwriter's Warrants are
indemnified by the Company, against certain civil liabilities under the Act.
II-3
<PAGE>
Item 16. Exhibits.
Exhibit No. Description
3.1 Restated Certificate of Incorporation, as amended*
3.2 By-Laws*
5.1 Opinion and Consent of Oscar D. Folger, Esq.
1 Consent of Oscar D. Folger, Esq. (Included in exhibit 5.1)
23.2 Consent of Grant Thornton LLP
* Incorporated by reference from registration statement on Form SB-2, File No.
33-96444-D
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any fact or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in the volume
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the high and low and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the table in the effective
registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (1) (i) and (1) (ii) do not
apply if the registration statement is on Form S-3, or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) That for purposes of determining any liability under the Securities
Act of 1933, each filing of Registrant's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and, where
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<PAGE>
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form S-3 and authorized this
registration statement to be signed on its behalf by the undersigned in Salt
Lake City, Utah as of the 20th day of June, 1997.
PEN INTERCONNECT, INC.
By /s/ James S. Pendleton
James S. Pendleton,
Chairman/ Chief Executive Officer
Each person whose signature appears below hereby constitutes and
appoints James S. Pendleton as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him or her and in his or
her name, place and stead in any and all capacities to sign any and all
amendments (including post-effective amendments) to this Registration Statement
on Form S-3 and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission under the
Securities Act of 1933. Pursuant to the requirements of the Securities Act of
1933, this registration statement was signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ James S. Pendleton CEO and June 20, 1997
- --------------------------
James S. Pendleton Chairman
/s/ Wayne R. Wright Vice Chairman and CFO June 20, 1997
- -------------------
Wayne R. Wright (Principal Accounting and
Financial Officer)
/s/ C. Reed Brown Director June 20, 1997
- ---------------------------
C. Reed Brown
/s/ Stephen J. Fryer Director and Senior Vice June 20, 1997
- --------------------
Stephen J. Fryer President of Sales and Marketing
/s/ James Harward
- --------------------
James Harward Director June 20, 1997
II-6
<PAGE>
Exhibit 5.1
LAW OFFICES OF OSCAR D. FOLGER
521 Fifth Avenue
NEW YORK, NEW YORK 10175
June 19, 1997
Pen Interconnect Inc.
2351 South 2300 West
Salt Lake City, Utah 84119
Re: Form S-3 Registration Statement
Gentlemen:
We have acted as counsel for Pen Interconnect Inc., a Utah corporation
(the "Company"), in connection with the registration by the Company of 3,029,516
shares of Common Stock, par value $0.01 per share (the "Securities"), which are
the subject of a Registration Statement on Form S-3 under the Securities Act of
1933, as amended (the "Act"). As counsel to the Company we have examined and
relied upon the original or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records and other instruments as we
have deemed necessary in order to render the following opinion.
On the basis of and subject to the foregoing, it is our opinion that
Securities to be issued and sold by the Company have been duly authorized and,
when issued and sold, will be duly issued and fully paid and non-assessable.
We hereby consent to the filing of this opinion as a exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Registration Statement. In giving such consent, we do not hereby
admit that we came within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the Rules and
Regulations of the Securities and Exchange Commission thereunder.
This opinion is to be used only in connection with the offer and sale
of the Securities as variously referred to herein while the Registration
Statement is in effect.
Very Truly Your,
/s/ Oscar D. Folger
Oscar D. Folger
II-7
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We have issued our report dated November 22, 1996 accompanying the
financial statements of Pen Interconnect, Inc. appearing in the 1996 Annual
Report on Form 10-KSB for the year ended September 30, 1996 which is
incorporated by reference in this Registration Statement. We consent to the
incorporation by reference in the Registration Statement of the aforementioned
report, and to the use of our name as it appears under the caption "Experts."
\s\ Grant Thornton LLP
Salt Lake City, Utah
June 16, 1997
II-8
