<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 24, 1996
REGISTRATION NO. 33-80647
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 5
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ORION ACQUISITION CORP. I
(Name of small business issuer as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6799 (A BLANK CHECK COMPANY) 13-3853272
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employee
of
incorporation or organization) Classification Code Number) Identification
Number)
</TABLE>
850 THIRD AVENUE, 10TH FLOOR, NEW YORK, NEW YORK 10022 (212) 750-5822
(Address, including zip code, and telephone number, including area code, of
small business issuer's principal executive offices)
DAVID J. MITCHELL, ORION ACQUISITION CORP. I, 850 THIRD AVENUE, 10TH FLOOR, NEW
YORK, NEW YORK 10022 (212) 750-5822
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------------------
COPIES TO:
<TABLE>
<S> <C>
W. Raymond Felton, Esq. James M. Jenkins, Esq.
Greenbaum, Rowe, Smith, Ravin, Davis & Harter, Secrest & Emery
Himmel
P.O. Box 5600 700 Midtown Tower
Woodbridge, New Jersey 07095-0988 Rochester, New York 14604
(908) 549-5600 (716) 232-6500
</TABLE>
----------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
----------------------------------
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, please check the following box. / /
----------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
AMOUNT MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE
SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (1)
<S> <C> <C>
Units consisting of one share of Common Stock, $.01 par value, and one Class A Warrant
to purchase one share of Common Stock (2)(3)......................................... 920,000 $ 10.00
Common Stock, $.01 par value (4)...................................................... 920,000 $ 9.00
Class B Warrants to purchase one Unit (5)............................................. 368,000 $ 5.75
Units, issuable upon exercise of the Class B Warrants, consisting of one share of
Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Common
Stock (3)(6)......................................................................... 368,000 $ .125
Common Stock, $.01 par value (6)...................................................... 368,000 $ 9.00
Representative's Warrants to purchase Units........................................... 80,000
Units, issuable upon exercise of the Representative's Warrants, consisting of one
share of Common Stock, $.01 par value, and one Class A Warrant to purchase one share
of Common Stock (8).................................................................. 80,000 $ 11.00
Common Stock, $.01 par value (4)...................................................... 80,000 $ 9.00
Representative's Warrants to purchase Class B Warrants................................ 32,000 $ .001
Class B Warrants, issuable upon exercise of the Representative's Warrants (8)......... 32,000 $ 5.775
Units, issuable upon exercise of the Class B Warrants, consisting of one share of
Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Common
Stock (8)............................................................................ 32,000 $ .25
Common Stock, $.01 par value (4)...................................................... 32,000 $ 9.00
Total.................................................................................
<CAPTION>
PROPOSED
MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF OFFERING REGISTRATION
SECURITIES TO BE REGISTERED PRICE (1) FEE
<S> <C> <C>
Units consisting of one share of Common Stock, $.01 par value, and one Class A Warrant
to purchase one share of Common Stock (2)(3)......................................... $ 9,200,000 $ 3,172.41
Common Stock, $.01 par value (4)...................................................... $ 8,280,000 $ 2,855.17
Class B Warrants to purchase one Unit (5)............................................. $ 2,116,000 $ 729.66
Units, issuable upon exercise of the Class B Warrants, consisting of one share of
Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Common
Stock (3)(6)......................................................................... $ 46,000 $ 15.86
Common Stock, $.01 par value (6)...................................................... $ 3,312,000 $ 1,142.07
Representative's Warrants to purchase Units........................................... $ 5 (7)
Units, issuable upon exercise of the Representative's Warrants, consisting of one
share of Common Stock, $.01 par value, and one Class A Warrant to purchase one share
of Common Stock (8).................................................................. $ 880,000 $ 303.45
Common Stock, $.01 par value (4)...................................................... $ 720,000 $ 248.28
Representative's Warrants to purchase Class B Warrants................................ $ 5 (7)
Class B Warrants, issuable upon exercise of the Representative's Warrants (8)......... $ 184,800 $ 63.72
Units, issuable upon exercise of the Class B Warrants, consisting of one share of
Common Stock, $.01 par value, and one Class A Warrant to purchase one share of Common
Stock (8)............................................................................ $ 8,000 $ 2.76
Common Stock, $.01 par value (4)...................................................... $ 288,000 $ 99.31
Total................................................................................. $ 8,632.69
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(b).
(2) Includes 120,000 Units which the Underwriters have the option to purchase to
cover over-allotments.
(3) Together with such indeterminate number of additional securities as may be
issued pursuant to the anti-dilution provisions of the Class A Warrants and
the Class B Warrants pursuant to Rule 416(a).
(4) Issuable upon exercise of the Class A Warrants.
(5) Includes 48,000 Class B Warrants which the Underwriters have the option to
purchase to cover over-allotments.
(6) Issuable upon exercise of the Class B Warrants.
(7) No registration fee required pursuant to Rule 457(g).
(8) Together with such indeterminate number of additional securities as may be
issued pursuant to the anti-dilution provisions of the Representative's
Warrants pursuant to Rule 416(a).
----------------------------------
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>
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 OR 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>
SUBJECT TO COMPLETION, DATED OCTOBER 24, 1996
ORION ACQUISITION CORP. I
800,000 UNITS, AT $10.00 PER UNIT, EACH UNIT CONSISTING OF ONE SHARE OF COMMON
STOCK
AND ONE REDEEMABLE CLASS A WARRANT ENTITLING THE HOLDER THEREOF TO PURCHASE,
UPON CONSUMMATION
OF A BUSINESS COMBINATION, ONE SHARE OF COMMON STOCK AT A PRICE OF $9.00
320,000 REDEEMABLE CLASS B UNIT PURCHASE WARRANTS, AT $5.75 PER CLASS B WARRANT,
EACH CLASS B WARRANT ENTITLING THE HOLDER THEREOF TO PURCHASE, UPON THE
CONSUMMATION OF A BUSINESS COMBINATION, ONE UNIT AT A PRICE OF $.125
Orion Acquisition Corp. I, a Delaware corporation (the "Company"), hereby
offers in a Specialized Merger and Acquisition Allocated Risk TransactionSM
("SMA(2)RTSM") 800,000 Units (the "Units"), each consisting of one share of
Common Stock, par value $.01 per share (the "Common Stock"), and one Redeemable
Class A Common Stock Purchase Warrant (the "Class A Warrants"), and 320,000
Redeemable Class B Unit Purchase Warrants (the "Class B Warrants"), each
entitling the holder thereof to purchase one Unit for $.125 at the time of a
Business Combination, as defined. The Units and the Class B Warrants, which are
being offered in the same offering, will be sold and traded separately. The
Common Stock and the Class A Warrants will become separable and transferable at
such time as H.J. Meyers & Co., Inc. (the "Representative") may determine, but
in no event will the Representative allow separate trading of the securities
comprising the Units until the preparation of an audited balance sheet of the
Company reflecting receipt by the Company of the proceeds of this offering and
the filing by the Company with the Securities and Exchange Commission of a
Current Report on Form 8-K which includes such audited balance sheet (the
"Separation Date"). The Representative will act as representative of the several
underwriters (the "Underwriters"). Each Class A Warrant will entitle the holder
thereof to purchase one share of Common Stock at a price per share of $9.00,
commencing upon the consummation of a Business Combination, as defined, until
the fifth anniversary of the date of this Prospectus. Each Class B Warrant will
entitle the holder thereof to purchase one Unit at a price per Unit of $.125
commencing upon the consummation of a Business Combination until the first
anniversary of such date. (The Class A Warrants and the Class B Warrants are
sometimes hereinafter collectively referred to as the "Warrants.") Furthermore,
the Warrants are redeemable, each as a class, in whole and not in part, at the
option of the Company, at a price of $.05 per Warrant at any time, upon not less
than 30 days' prior written notice to the registered holders thereof, provided
that the Company has consummated a Business Combination, as defined, and that
the last sale price of the Common Stock, if the Common Stock is listed for
trading on an exchange or interdealer quotation system which provides last sale
prices, or, the average of the closing bid and asked quotes for the Common
Stock, if the Common Stock is listed for trading on an interdealer quotation
system which does not provide last sale prices, on all 10 of the trading days
ending on the day immediately prior to the day on which the Company gives notice
of redemption, has been $11.00 or higher.
Prior to this offering, there has been no public market for the Units, the
shares of Common Stock or the Warrants and there can be no assurance that such a
market will develop for any of such securities after the completion of this
offering. The offering prices of the Units and the Class B Warrants and the
exercise prices and terms of the Warrants have been arbitrarily determined by
the Company and the Representatives, and bear no relationship to the Company's
assets, book value, or other generally accepted criteria of value. For
additional information regarding the factors considered in determining the
initial public offering prices of the Units and the Class B Warrants and the
exercise prices and the terms of the Warrants, see "Risk Factors" and
"Underwriting." The Company anticipates that the Units, the Common Stock, the
Class A Warrants and the Class B Warrants will be quoted on the OTC Bulletin
Board under the symbols "ORIOU," "ORIO," "ORIOW" and "ORIOL," respectively.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION AND SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. SEE "RISK
FACTORS" (PAGE 15) AND
"DILUTION."
THIS OFFERING WILL NOT BE CONDUCTED IN ACCORDANCE WITH RULE 419 OF REGULATION C
OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). RULE 419 OF THE ACT WAS
DESIGNED, TO STRENGTHEN REGULATION OF SECURITIES OFFERINGS BY BLANK CHECK
COMPANIES WHICH CONGRESS HAS FOUND TO HAVE BEEN A COMMON VEHICLE FOR
FRAUD AND MANIPULATION IN THE PENNY STOCK MARKET. THE COMPANY IS A BLANK
CHECK COMPANY BUT IS NOT SUBJECT TO RULE 419 OF THE ACT BECAUSE THE
COMPANY'S NET TANGIBLE ASSETS AFTER ITS RECEIPT OF THE PROCEEDS OF
THIS OFFERING WILL EXCEED $5,000,000. ACCORDINGLY, INVESTORS IN
THIS OFFERING WILL NOT RECEIVE THE SUBSTANTIVE PROTECTION PROVIDED
BY RULE 419 OF THE ACT. SEE "RISK
FACTORS." (PAGE 15)
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>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS (1) COMPANY (2)(3)
<S> <C> <C> <C>
Per Unit.................................................... $10.00 $.600 $9.400
Per Class B Warrant......................................... $5.75 $.575 $5.175
Total (4)................................................... $9,840,000 $664,000 $9,176,000
</TABLE>
(FOOTNOTES ON NEXT PAGE)
The Units and the Class B Warrants are being offered by the Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to its right to withdraw, cancel or modify this
offering and to reject any order in whole or in part. It is expected that
delivery of certificates will be made at the offices of H.J. Meyers & Co., Inc.,
1895 Mount Hope Avenue, Rochester, New York 14620, on or about November ,
1996.
H.J. MEYERS & CO., INC.
------------------
THE DATE OF THIS PROSPECTUS IS OCTOBER , 1996.
<PAGE>
- ------------------------
(1) Does not include additional compensation to the Representative in the form
of a non-accountable expense allowance of 3% of the gross proceeds of this
offering. For indemnification arrangements with the Underwriters and
additional compensation payable to the Representative, see "Underwriting."
(2) Before deducting estimated offering expenses, including the Representatives'
non-accountable expense allowance of $295,200 payable by the Company.
(3) Used as a basis for calculating the underwriting discounts with respect to
the Units. A portion of the net proceeds from the sale of the Class B
Warrants equal to the discounts and the Representative's non-accountable
expense allowance attributable to the sale of the Units will be deposited
into escrow with the Proceeds Escrow Agent (as defined). See "The Company --
Escrow of Offering Proceeds."
(4) The Company has granted the Underwriters a 30-day option to purchase up to
120,000 additional Units and/or 48,000 additional Class B Warrants upon the
same terms and conditions as set forth above, solely to cover
over-allotments, if any. If such over-allotment option is exercised in full,
the total Price to Public, Underwriting Discounts and Proceeds to Company
will be $11,316,000, $763,600, and $10,552,400, respectively. See
"Underwriting."
"SMA(2)RTSM" AND "SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK
TRANSACTIONSM" ARE SERVICEMARKS OF BRIGHT LICENSING CORP. ("BRIGHT"). BRIGHT HAS
GRANTED THE COMPANY, PURSUANT TO A LICENSE AGREEMENT EXECUTED BY BRIGHT AND THE
COMPANY, A NON-EXCLUSIVE LICENSE TO USE, FOR PURPOSES OF MARKETING THIS
OFFERING, THE SMA(2)RTSM AND SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK
TRANSACTIONSM SERVICEMARKS.
THE SMA(2)RTSM SERVICEMARK HAS BEEN LICENSED TO THE COMPANY FOR PURPOSES OF
MARKETING THIS OFFERING AND IS BEING USED AS AN ACRONYM TO DESCRIBE THE RISK
ALLOCATION FEATURE OF THIS OFFERING. USE OF THE SMA(2)RTSM SERVICEMARK, HOWEVER,
SHOULD IN NO WAY BE CONSTRUED BY AN INVESTOR AS AN ENDORSEMENT OF THE MERITS OF
THIS OFFERING.
INVESTORS SHOULD BE ADVISED THAT A SMA(2)RTSM, OR SPECIALIZED MERGER AND
ACQUISITION ALLOCATED RISK TRANSACTIONSM, IS IN NO WAY RELATED OR SIMILAR TO A
SPACSM, OR SPECIFIED PURPOSE ACQUISITION COMPANYSM (WHICH ARE SERVICEMARKS OF
GKN SECURITIES CORP.), AND INVESTORS SHOULD NOT CONSTRUE A SMA(2)RTSM AS BEING
SIMILAR TO A SPACSM OR A SPECIFIED PURPOSE ACQUISITION COMPANYSM. NONE OF THE
OFFICERS, DIRECTORS OR CONTROLLING PERSONS OF THE COMPANY OR THE REPRESENTATIVES
ARE AFFILIATED WITH ANY OF THE OFFICERS, DIRECTORS OR CONTROLLING PERSONS OF THE
OWNERS OF THE SPACSM AND SPECIFIED PURPOSE ACQUISITION COMPANYSM SERVICEMARKS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, THE
COMMON STOCK OR THE WARRANTS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
THE COMPANY HAS REGISTERED THE SECURITIES, OR AN EXEMPTION FROM REGISTRATION
HAS BEEN OBTAINED (OR IS OTHERWISE AVAILABLE), ONLY IN THE STATES OF COLORADO,
DELAWARE, FLORIDA, HAWAII, ILLINOIS, LOUISIANA, MARYLAND, NEW YORK, RHODE
ISLAND, SOUTH CAROLINA AND THE DISTRICT OF COLUMBIA (THE "PRIMARY DISTRIBUTION
STATES") AND INITIAL SALES MAY ONLY BE MADE IN SUCH JURISDICTIONS. MORE
SPECIFICALLY, THE COMPANY HAS REGISTERED THE SECURITIES BY FILING IN COLORADO,
BY COORDINATION IN DELAWARE, ILLINOIS, MARYLAND, RHODE ISLAND AND SOUTH CAROLINA
ii
<PAGE>
AND BY NOTIFICATION IN FLORIDA, LOUISIANA AND NEW YORK. EXEMPTIONS FROM
REGISTRATION HAVE BEEN OBTAINED (OR ARE OTHERWISE AVAILABLE) IN HAWAII AND THE
DISTRICT OF COLUMBIA. PURCHASERS OF SECURITIES IN THIS OFFERING MUST BE
RESIDENTS OF THE PRIMARY DISTRIBUTION STATES. THE SECURITIES WILL BE IMMEDIATELY
AVAILABLE FOR RESALE IN EACH OF THE PRIMARY DISTRIBUTION STATES AND IN THE
COMMONWEALTH OF PENNSYLVANIA. UNLESS AN APPLICABLE EXEMPTION IS AVAILABLE,
PURCHASERS OF SECURITIES EITHER IN THIS OFFERING OR IN ANY SUBSEQUENT TRADING
MARKET WHICH MAY DEVELOP MUST BE RESIDENTS OF SUCH JURISDICTIONS. THE COMPANY
WILL AMEND THIS PROSPECTUS FOR THE PURPOSE OF DISCLOSING ADDITIONAL STATES, IF
ANY, IN WHICH THE COMPANY'S SECURITIES WILL BE ELIGIBLE FOR RESALE IN THE
SECONDARY TRADING MARKET.
FLORIDA RESIDENTS:
FLORIDA RESIDENTS WHO PURCHASE CLASS B WARRANTS WILL BE UNABLE TO EXERCISE
THESE WARRANTS TO PURCHASE UNITS UNLESS AND UNTIL THE UNITS ISSUABLE UPON
EXERCISE OF THE CLASS B WARRANTS HAVE BEEN REGISTERED FOR SALE IN FLORIDA OR ARE
ESTABLISHED TO BE EXEMPT FROM THE REQUIREMENT OF SUCH REGISTRATION. FLORIDA LAW
GENERALLY PRECLUDES THE REGISTRATION OF SECURITIES THAT ARE NOT LISTED ON A
SECURITIES EXCHANGE OR THE NASDAQ SYSTEM WHEN THE OFFERING PRICE OF SUCH
SECURITIES IS $5.00 OR LESS PER SHARE. BECAUSE THE "EXERCISE PRICE" OF CLASS B
WARRANTS IS $.25, THE "OFFERING PRICE" OF THE UNITS ISSUABLE UPON EXERCISE OF
THE CLASS B WARRANTS COULD BE CONSIDERED NOT GREATER THAN $5.00 IF THE OFFERING
PRICE OF THE CLASS B WARRANTS IS NOT ADDED TO ITS EXERCISE PRICE IN MAKING THAT
DETERMINATION. FOR THIS REASON, NO PERMIT TO SELL THE UNITS ISSUABLE UPON
EXERCISE OF THE CLASS B WARRANTS IN FLORIDA HAS BEEN OBTAINED. THERE CAN BE NO
ASSURANCE THAT THE UNITS ISSUABLE UPON EXERCISE OF THE CLASS B WARRANTS WILL
EVER BE REGISTERED IN FLORIDA OR ESTABLISHED TO BE EXEMPT FROM THE REQUIREMENT
OF SUCH REGISTRATION.
iii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS
PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS
ASSUMES THAT THE OVER-ALLOTMENT OPTION GRANTED TO THE UNDERWRITERS IS NOT
EXERCISED. INVESTORS SHOULD CONSIDER CAREFULLY THE INFORMATION SET FORTH IN THIS
PROSPECTUS UNDER THE HEADING "RISK FACTORS."
THE COMPANY
BUSINESS OBJECTIVES
The Company, which is a "blank check" or "blind pool" company, was formed on
August 9, 1995 to serve as a vehicle to effect a merger, exchange of capital
stock, asset acquisition or other business combination (a "Business
Combination") with an operating business (a "Target Business"). The business
objective of the Company is to effect a Business Combination with a Target
Business which the Company believes has significant growth potential. The
Company intends to utilize the net proceeds of this offering, equity securities,
debt securities, bank borrowings or a combination thereof in effecting a
Business Combination.
The Company will seek to acquire a Target Business without limiting itself
to a particular industry. Most likely, the Target Business will be primarily
located in the United States, although the Company reserves the right to acquire
a Target Business primarily located outside the United States. In seeking a
Target Business, the Company will consider, without limitation, businesses which
(i) offer or provide services or develop, manufacture or distribute goods in the
United States or abroad, including, without limitation, in the following areas:
health care and health products, educational services, environmental services,
consumer-related products and services (including amusement and/ or recreational
services), personal care services, voice and data information processing and
transmission and related technology development or (ii) is engaged in wholesale
or retail distribution. The Company will not acquire a Target Business unless
the fair market value of such business, as determined by the Company based upon
standards generally accepted by the financial community, including revenues,
earnings, cash flow and book value (the "Fair Market Value"), is at least 80% of
the net assets of the Company at the time of the consummation of a Business
Combination (the "Fair Market Value Test"). If the Company determines that the
financial statements of a proposed Target Business do not clearly indicate that
the Fair Market Value Test has been satisfied, the Company will obtain an
opinion from an investment banking firm that is a member of the National
Association of Securities Dealers, Inc. (the "NASD") with respect to the
satisfaction of such criteria. The Company has not had any contact or
discussions with any entity or representatives of any entity regarding a
Business Combination. While the Company may, under certain circumstances, seek
to effect Business Combinations with more than one Target Business, in all
likelihood, as a result of its limited resources, the Company will have the
ability to effect only a single Business Combination with a Target Business. The
Company does not intend to register as a broker-dealer, merge with or acquire a
registered broker-dealer, or otherwise become a member of the NASD.
BUSINESS EXPERIENCE OF PRINCIPALS
The executive officers and the other directors of the Company have business
experience which has provided them with skills which the Company believes will
be helpful in evaluating potential Target Businesses and negotiating a Business
Combination.
RETENTION OF INDEPENDENT INVESTMENT BANKER
At some time following the completion of this offering, the Company will
engage an independent investment banking firm which is a member in good standing
of the NASD to assist the Company in identifying, evaluating, structuring and
negotiating potential Business Combinations.
ESCROW OF INITIAL PUBLIC OFFERING PROCEEDS
Upon completion of this offering, an aggregate of $8,000,000 (or $9,200,000
if the Underwriters' over-allotment option is exercised in full), representing
an amount equal to the gross proceeds from
<PAGE>
the sale of the Units, will be placed in an escrow account maintained by Chase
Manhattan Bank, N.A. (the "Proceeds Escrow Agent"), subject to release upon the
earlier of (1) receipt by the Proceeds Escrow Agent of: (i) written notice from
the Company of the Company's completion of a transaction or series of
transactions in which at least 50% of the gross proceeds from this offering are
committed to a specific line of business as a result of a Business Combination
(including any redemption payments), (ii) a written opinion of counsel of the
Company, reasonably acceptable to the Proceeds Escrow Agent, that a Business
Combination was approved by a vote of two-thirds of the shares of Common Stock
of the Company, as required by this Prospectus, and that the holders of more
than 20% of the Common Stock of the Company have not elected to redeem their
Common Stock, as required by this Prospectus, and (iii) a written certification
from the Company that the fair market value (as determined by the Company, based
upon standards generally accepted by the financial community, including
revenues, earnings, cash flow, and book value) of the Target Business exceeds
80% of the net value of the assets of the Company and that all other actions
required by the Company for the release of the escrow proceeds have been met, or
(2) either (i) after 18 months of the date of effectiveness of this offering (or
24 months if the Proceeds Escrow Agent has received notice within the initial 18
month period that the Extension Criteria, as herein defined, have been
satisfied) if the Proceeds Escrow Agent has not received written notice from the
Company of the Company's completion of a transaction or series of transactions
in which at least 50% of the gross proceeds from this offering are committed to
a specific line of business as a result of a Business Combination, or (ii)
receipt by the Proceeds Escrow Agent of written notification to distribute the
escrow proceeds in connection with a liquidation of the Company to the holders
of Common Stock purchased as part of the Units sold in this offering or in the
open market thereafter, or (iii) receipt by the Proceeds Escrow Agent of written
notification to distribute part of the escrow proceeds to the holders of record
of Common Stock purchased as part of the Units sold in this offering or in the
open market thereafter who elected to have their shares redeemed in accordance
with the terms set forth in this Prospectus. The Company will notify the
Representative and the NASD prior to the release of funds from the escrow
account. All proceeds held in the escrow account will be invested, until
released, in short-term United States government securities, including treasury
bills, cash and cash equivalents. Except as noted below, the proceeds to the
Company from the sale of the Class B Warrants will not be placed in escrow.
Rather, these proceeds will be used (i) to repay indebtedness, (ii) to pay the
balance of a $100,000 license fee, or $90,000, to Bright pursuant to a license
agreement executed by Bright and the Company, (iii) to cover all the expenses
incurred by the Company in this offering, including the Underwriters' discounts
and the Representative's non-accountable expense allowance, and (iv) to fund the
Company's operating expenses, including investment banking fees and the costs of
business, legal and accounting due diligence on prospective Target Businesses,
until the consummation of a Business Combination. In addition, a portion of the
net proceeds from the sale of the Class B Warrants equal to the Underwriters'
discounts and the Representative's non-accountable expense allowance with
respect to the Units, as noted in clause (iii) above, will be placed in the
above mentioned escrow account for the benefit of purchasers of Common Stock as
part of the Units sold in this offering and in the open market thereafter.
Management is unaware of any circumstance under which this policy, through
management's own initiative, may be changed.
STOCKHOLDER APPROVAL OF BUSINESS COMBINATIONS
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the Business Combination is such as would not ordinarily
require stockholder approval under applicable state law. In connection with such
request, the Company intends to provide stockholders with disclosure
documentation in accordance with the proxy solicitation regulations under the
Securities Exchange Act of 1934, as amended (the "Proxy Rules"), including
audited financial statements, concerning a Target Business. All of the Company's
present stockholders, including all directors and the Company's executive
officers, have agreed to vote all of their respective shares of Common Stock in
accordance with the vote of the majority of the shares voted by all other
stockholders of the Company ("non-affiliated public stockholders") with respect
to any such Business Combination. A Business Combination will not be consummated
unless approved by a vote of two-thirds of the shares of Common Stock voted by
the
2
<PAGE>
stockholders (in person or by proxy). In addition, the Delaware General
Corporation Law requires approval of certain mergers and consolidations by a
majority of the outstanding stock entitled to vote. Holders of Warrants who
otherwise do not own any shares of Common Stock will not be entitled to vote on
any Business Combination.
REDEMPTION RIGHTS
At the time the Company seeks stockholder approval of any potential Business
Combination, the Company will offer (the "Redemption Offer") to each of the
non-affiliated public stockholders of the Company the right, for a specified
period of time of not less than 20 calendar days, to redeem his shares of Common
Stock at a price equal to the Liquidation Value (as defined below) of such
shares as of the record date established for determining the stockholders
entitled to vote with respect to the approval of a Business Combination (the
"Record Date"). The Redemption Offer will be described in the disclosure
documentation relating to the proposed Business Combination. The "Liquidation
Value" for each share of Common Stock will be determined as of the Record Date
by dividing (A) the greater of (i) the Company's net worth as reflected in the
Company's then current financial statements as audited by the Company's
independent accountants, or (ii) the amount of the proceeds of the Company in
the escrow account (including interest earned thereon) by (B) the number of
shares held by non-affiliated public stockholders; however, in no event will the
Liquidation Value of each share of Common Stock be less than $10.00 plus
interest earned thereon. In connection with the Redemption Offer, if
non-affiliated public stockholders holding 20% or less of the shares of Common
Stock elect to redeem their shares, the Company may, but will not be required
to, proceed with such Business Combination and, if the Company elects to so
proceed, will redeem such shares at their Liquidation Value as of the Record
Date. In any case, if non-affiliated public stockholders holding more than 20%
of the Common Stock elect to redeem their shares, the Company will not proceed
with such potential Business Combination and will not redeem such shares. All
holders of Common Stock and all holders of Warrants prior to the date of this
Prospectus will be allowed to participate in a Redemption Offer only if they
purchase shares of Common Stock in this offering or on the open market
thereafter, and only as to any shares of Common Stock so purchased.
ESCROW OF OUTSTANDING SHARES
All of the shares of Common Stock and Series A Preferred Stock (the
"Escrowed Stock") outstanding immediately prior to the date of this Prospectus
have been placed in escrow with Greenbaum, Rowe, Smith, Ravin, Davis & Himmel
(the "Share Escrow Agent"), until the earlier of (i) the occurrence of the
consummation of the first Business Combination or (ii) 18 months from the date
of this Prospectus provided that such 18-month period will be extended by six
months to 24 months from the date of this Prospectus if, prior to the expiration
of the 18-month period, the Company has become a party to a letter of intent or
a definitive agreement to effect a Business Combination (the "Extension
Criteria"). During the escrow period, the holders of the Escrowed Stock will not
be able to sell or otherwise transfer their respective shares of Escrowed Stock
(with the exceptions described below), but will retain all other rights as
stockholders of the Company, including, without limitation, the right to vote
escrowed shares of Common Stock, subject to their agreement to vote all of their
shares in accordance with the vote of a majority of the non-affiliated public
stockholders with respect to a consummation of a Business Combination or
liquidation proposal, but excluding the right to request the redemption of
Escrowed Stock pursuant to a Redemption Offer. Subject to compliance with
applicable securities laws, any such holder may transfer his, her or its
Escrowed Stock to a family member or to a trust established for the benefit of
himself, herself, or a family member or to another affiliated entity (with the
consent of the Representative which will not be unreasonably withheld) or, in
the event of the holder's death, by will or operation of law, or in the case of
its dissolution or merger, provided that any such transferee must agree as a
condition to such transfer to be bound by the restrictions on transfer
applicable to the original holder and, in the case of present stockholders other
than the holders of the Placement Shares, that the transferor (except in the
case of death) or successsor will continue to be deemed the beneficial owner (as
defined in Regulation 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of such transferred shares.
3
<PAGE>
Each of the executive officers and the other directors of the Company has
agreed to surrender his shares to the Company at the purchase price at which
such shares were acquired ($.10 per share) if he resigns prior to the
consummation of the first Business Combination.
RESTRICTIONS ON SALE OF OUTSTANDING SHARES
All of the shares of Common Stock outstanding prior to the date of this
Prospectus other than 20,000 shares of Common Stock issued in a private
placement by the Company in November 1995 (the "Placement Shares") and the
shares of Common Stock issuable upon the exercise of options granted to the
Company's officers and directors and the exercise of warrants included in the
units issuable upon exercise of such options are referred to herein as
"Founders' Shares". The Founders' Shares are subject to an agreement with the
holders of the Founders' Shares not to sell or otherwise transfer such shares
for a period of 24 months from the date the currently outstanding Founders'
Shares were originally issued (August 18, 1995), but in no event earlier than
120 days following the consummation of the first Business Combination. However,
subject to compliance with applicable securities laws, any such holder may
transfer Founders' Shares to a family member or to a trust established for the
benefit of himself, herself, or to a family member or to another affiliated
entity (with the consent of the Representative which will not be unreasonably
withheld) or in the event of the holder's death by will or operation of law, or
its dissolution or merger, provided that any such transferee or successor must
agree as a condition to such transfer to be bound by the restrictions on
transfer applicable to the original holder and that the transferor or its
principals, if the transferor is an entity (except in the case of death) will
continue to be deemed the beneficial owner (as defined in Regulation 13d-3
promulgated under the Exchange Act) of such transferred shares. The certificates
representing the Founders' Shares will bear a restrictive legend with respect to
such restrictions and the Company's transfer agent will note such restrictions
on the Company's transfer books and records. See "Management -- Options to
Purchase Units."
The Placement Shares are subject to an agreement with the holders of the
Placement Shares not to sell or otherwise transfer such shares for a period
ending the earlier of 24 months from the date such shares were issued (November
15, 1995) or 60 days following the consummation of the first Business
Combination.
The Company has outstanding 94 shares of Series A Preferred Stock which are
held by CDIJ Capital Partners, L.P. ("CDIJ"), an indirect affiliate of Bright.
The shares are convertible to Common Stock on the basis of one thousand shares
of Common Stock for each share of Series A Preferred Stock for a one year period
commencing upon the consummation of a Business Combination. The 94,000 shares of
Common Stock issuable upon conversion of the Company's outstanding Series A
Preferred Stock will be offered by a Prospectus at the time of a Business
Combination and thereafter will be freely tradable under applicable securities
laws. However, the holders of such shares have agreed not to sell or otherwise
transfer such shares until 60 days following the consummation of the first
Business Combination and to limit the volume of such sales to the amount that is
permitted by Rule 144 ("Rule 144") promulgated under the Securities Act of 1933,
as amended. Subject to other conditions, Rule 144 permits sales, within any
three-month period, of a number of shares that does not exceed the greater of 1%
of the total number of outstanding shares of the same class or, if the shares
are quoted on an exchange or on NASDAQ, the average weekly trading volume during
the four calendar weeks preceding the sale. See "Risk Factors -- Shares Eligible
for Future Sale."
POSSIBLE LIQUIDATION OF THE COMPANY IF NO BUSINESS COMBINATION
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit for
stockholder consideration a proposal to liquidate the Company and distribute to
the then holders of Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, the amounts in the interest bearing
escrow account. Thereafter, all remaining assets available for distribution will
be distributed to the non-affiliated public stockholders of the Company after
payment of liabilities and after redemption of the Company's outstanding
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<PAGE>
Series A Preferred Stock at its liquidation value, $9,400. Since the proceeds to
the Company from the sale of the Class B Warrants will be used (i) to repay
indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, due
to Bright pursuant to a license agreement executed by Bright and the Company,
(iii) to cover all the expenses incurred by the Company in this offering,
including the Underwriters' discounts and the Representative's non-accountable
expense allowance, and (iv) to fund the Company's operating expenses, including
investment banking fees and the costs of business, legal and accounting due
diligence on prospective Target Businesses, until the consummation of a Business
Combination, the amount per share remaining for distribution, in the event of a
liquidation of the Company, to the holders of Common Stock acquired as part of
the Units sold in this offering or in the open market thereafter, and exclusive
of any income earned on the proceeds held in the escrow account, will be
approximately equal to the initial public offering price per Unit in this
offering of $10.00 per Unit (assuming no value is attributed to the Warrants
included in the Units offered hereby). All of the present stockholders,
including the Company's executive officers and other directors and their
affiliates, are required by the escrow agreement to which their stock is subject
to vote their shares of Common Stock in accordance with the vote of the majority
of all non-affiliated public stockholders of the Company with respect to any
liquidation proposal. See "The Company -- Escrow of Outstanding Shares." Holders
of Warrants, however, will only be entitled to vote on any liquidation proposal,
and allowed to participate in any liquidation distribution, if they purchase
shares of Common Stock in this offering or on the open market thereafter, but
only as to any shares of Common Stock so purchased. Present stockholders,
including officers, directors and their affiliates, will not participate in any
liquidation distribution with respect to the shares of Common Stock owned by
them as of the date of this Prospectus.
THE OFFERING
<TABLE>
<S> <C>
Securities offered to the
public............................ 800,000 Units, at $10.00 per Unit and 320,000 Class B
Warrants, at $5.75 per Class B Warrant. Each Unit
consists of one share of Common Stock and one Class A
Warrant entitling the holder thereof to purchase one
share of Common Stock at a price of $9.00. Each Class B
Warrant entitles the holder thereof to purchase one Unit
for $.125 per Unit at the time of a Business
Combination. The Units and the Class B Warrants, which
are being offered in the same offering, will be sold and
traded separately. The securities comprising the Units
will become separable and transferable at such time as
the Representative may determine, but in no event will
the Representative allow separate trading of the
securities comprising the Units until the preparation of
an audited balance sheet of the Company reflecting
receipt by the Company of the proceeds of this offering
and the filing by the Company with the Commission of a
Current Report on Form 8-K which includes such audited
balance sheet. See "Description of Securities" and
"Principal Stockholders."
Proposed OTC Bulletin Board
Symbols........................... Units -- ORIOU
Common Stock -- ORIO
Class A Warrants -- ORIOW
Class B Warrants -- ORIOL
Common Stock outstanding prior to
the offering...................... 106,000 shares.
Common Stock to be outstanding
after the offering (1)............ 906,000 shares.
</TABLE>
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<TABLE>
<S> <C>
Warrants:
Number of Class A and Class B
Warrants to be outstanding after
the offering (2)................ 800,000 Class A Warrants and 320,000 Class B Warrants.
Exercise price of Class A War-
rants and Class B Warrants...... The exercise price of each Class A Warrant is $9.00 per
share of Common Stock and the exercise price of each
Class B Warrant is $.125 per Unit, each subject to
adjustment in certain circumstances. See "Description of
Securities."
Exercise period................. The exercise period of the Class A Warrants will
commence upon the consummation of a Business Combination
and will expire at 5:00 p.m., New York City time, on the
fifth anniversary of the date of this Prospectus. The
exercise period of the Class B Warrants will commence
upon the consummation of a Business Combination and will
expire at 5:00 p.m., New York City time, on the first
anniversary of the date of a Business Combination.
Redemption...................... The Warrants are redeemable by the Company, each as a
class, in whole and not in part, at the option of the
Company, at a price of $.05 per Warrant at any time,
upon not less than 30 days' prior written notice to the
registered holders thereof, provided that the Company
has consummated a Business Combination and that the last
sale price of the Common Stock, if the Common Stock is
listed for trading on an exchange or interdealer
quotation system which provides last sale prices, or,
the average of the closing bid and asked quotes for the
Common Stock, if the Common Stock is listed for trading
on an interdealer quotation system which does not
provide last sale prices, on all 10 of the trading days
ending on the day immediately prior to the day on which
the Company gives notice of redemption, has been $11.00
or higher.
</TABLE>
(1) Excludes a total of 2,360,666.6 shares of Common Stock, consisting of: (i)
800,000 shares of Common Stock reserved for issuance upon the exercise of
the Class A Warrants, (ii) 320,000 shares of Common Stock reserved for
issuance upon exercise of the Units underlying the Class B Warrants, (iii)
320,000 shares of Common Stock reserved for issuance upon exercise of the
Class A Warrants comprising a part of the Units underlying the Class B
Warrants, (iv) 120,000 shares of Common Stock included in the Units subject
to the Underwriters' over-allotment option, (v) 120,000 shares of Common
Stock reserved for issuance upon the exercise of the Class A Warrants
included in the Units subject to the Underwriters' over-allotment option,
(vi) 48,000 shares of Common Stock reserved for issuance upon exercise of
the Units underlying the Class B Warrants subject to the Underwriters'
over-allotment option, (vii) 48,000 shares of Common Stock reserved for
issuance upon exercise of the Class A Warrants comprising a part of the
Units underlying the Class B Warrants subject to the Underwriters'
over-allotment option, (viii) 266,666.6 shares of Common Stock reserved for
issuance upon exercise of options to purchase Units granted to executive
officers and directors of the Company, (ix) 94,000 shares of Common Stock
reserved for issuance upon conversion of the Company's outstanding Series A
Preferred Stock, (x) 80,000 shares of Common Stock included in the Units
reserved for issuance upon exercise of warrants to purchase 80,000 Units,
exercisable over a period of four years commencing one year from the date of
this Prospectus, being sold to the Representative (the "Representative's
Unit Purchase Warrants"), (xi) 80,000 shares of Common Stock reserved for
issuance upon the exercise of the Class A Warrants included in the Units
reserved for issuance
6
<PAGE>
upon exercise of the Representative's Unit Purchase Warrants, (xii) 32,000
shares of Common Stock included in the Units reserved for issuance upon
exercise of a warrant to purchase 32,000 Class B Warrants, exercisable over
a period of four years commencing one year from the date of this Prospectus,
being sold to the Representative's (the "Representative's Class B
Warrants"), and (xiii) 32,000 shares of Common Stock reserved for issuance
upon exercise of Class A Warrants comprising a part of the Units underlying
the Representative's Class B Warrants. See "Management," "Underwriting" and
"Certain Transactions."
(2) Excludes (i) 133,333.3 Class A Warrants comprising part of the Units
issuable upon exercise of options granted to executive officers and
directors of the Company; (ii) 120,000 Class A Warrants and 48,000 Class B
Warrants included in the Units and Class B Warrants subject to the
Underwriters' over-allotment option, (iii) an additional 48,000 Class A
Warrants comprising a part of the Units underlying the Class B Warrants
subject to the Underwriters' over-allotment option, (iv) 80,000 Class A
Warrants included in the Units reserved for issuance upon exercise of the
Representative's Unit Purchase Warrants, (v) 32,000 Class B Warrants
underlying the Representative's Class B Warrants and (vi) 32,000 Class A
Warrants underlying the Units underlying the Representative's Class B
Warrants. See "Management" and "Underwriting."
THE SMA(2)RTSM STRUCTURE
Essentially, a Specialized Merger and Acquisition Allocated Risk
TransactionSM (SMA(2)RTSM) provides an investor in this offering with an
opportunity to purchase Units for $10.00 each, the proceeds of which will be
placed into escrow for the benefit of stockholders and will be returned if the
Company does not effect a Business Combination; and/or Class B Warrants (which
are exercisable into Units) for $5.875 each (the $5.75 purchase price plus the
$.125 exercise price), the proceeds of which will not be placed in escrow, but
rather will be used (i) to repay indebtedness, (ii) to pay the balance of a
$100,000 license fee, or $90,000, due to Bright pursuant to a license agreement
executed by Bright and the Company, (iii) to cover all of the Company's expenses
incurred in this offering, including the Underwriters' discounts and the
Representative's non-accountable expense allowance, and (iv) to fund the
Company's operating expenses, including investment banking fees and the costs of
business, legal and accounting due diligence on prospective Target Businesses.
Consequently, if the Class B Warrants were exercised, holders of Class B
Warrants would pay substantially less for the Units issuable upon exercise of
such Class B Warrants than holders of Units and, accordingly, may realize a
higher return on their investment. Holders of Class B Warrants, however, risk
the loss of their investment if the Company fails to effect a Business
Combination, while holders of shares of Common Stock comprising part of the
Units benefit from the Company's escrow of an amount equal to the gross proceeds
from the sale of the Units in this offering.
RISK FACTORS
The securities offered in this Specialized Merger and Acquisition Allocated
Risk TransactionSM (SMA(2)RTSM) involve a high degree of risk and immediate
substantial dilution and should not be purchased by investors who cannot afford
the loss of their entire investment. Prior to this offering there has been no
public market for the Units, the Common Stock, the Class A Warrants or the Class
B Warrants and there can be no assurance that such a market will develop after
completion of this offering. Such risk factors include, among others, the
following: the Company's lack of operating history and limited resources;
discretionary use of proceeds; no escrow security for the purchasers of the
Warrants; intense competition in selecting a Target Business and effecting a
Business Combination; and, because of the Company's limited resources, the
possibility that the Company's due diligence investigation of a potential
Business Combination will be restricted, especially in the case of a Target
Business outside the United States. Investors will incur immediate substantial
dilution. See "Risk Factors," "Dilution" and "Use of Proceeds."
7
<PAGE>
USE OF PROCEEDS
The Company intends to use substantially all of the net proceeds of the
offering, together with the interest earned thereon, to attempt to effect a
Business Combination, including selecting and evaluating potential Target
Businesses and structuring, negotiating and consummating a Business Combination
(including possible payment of finder's fees or other compensation to persons or
entities which provide assistance or services to the Company). Approximately 81%
of the gross proceeds of the offering by the Company (representing an amount
equal to the $8,000,000 gross proceeds from the sale of the Units as a
percentage of the gross proceeds of this offering) will be held in an escrow
account maintained by the Proceeds Escrow Agent, until the earlier of written
notification by the Company to the Proceeds Escrow Agent (i) of the Company's
completion of a transaction or series of transactions in which at least 50% of
the gross proceeds from this offering is committed to a specific line of
business as a result of a consummation of a Business Combination (including any
redemption payments), or (ii) to distribute the escrowed proceeds, in connection
with a liquidation of the Company, to the then holders of the Common Stock
purchased as part of the Units sold in this offering or acquired in the open
market thereafter. All proceeds held in the escrow account will be invested,
until released, in short-term United States government securities, including
treasury bills, cash and cash equivalents.
Except as noted below, the proceeds to the Company from the sale of the
Class B Warrants will not be placed in escrow. Rather, these proceeds will be
used (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license
fee, or $90,000, due to Bright pursuant to a license agreement executed by
Bright and the Company, (iii) to cover all of the expenses incurred by the
Company in this offering, including the Underwriters' discounts and the
Representative's non-accountable expense allowance, and (iv) to fund the
Company's operating expenses, including investment banking fees and the costs of
business, legal and accounting due diligence on prospective Target Businesses,
until the Company effects a Business Combination. See "Proposed Business --
Servicemark License." However, in addition, a portion of the net proceeds from
the sale of the Class B Warrants equal to the Underwriters' discounts and the
Representative's non-accountable expense allowance with respect to the Units
will be placed in the above-mentioned escrow account for the benefit of
purchasers of Common Stock as part of the Units sold in this offering and in the
open market thereafter. In addition, proceeds from the sale of the Class B
Warrants will be used for the general administrative expenses of the Company,
including legal and accounting fees and administrative support expenses in
connection with the Company's reporting obligations under the Exchange Act. The
Company may seek to issue additional securities if it requires additional funds
to meet its operating and administrative expenses. The Company has agreed with
the Representative that it will not issue (other than pursuant to this offering)
any securities or grant options or Warrants to purchase any securities of the
Company without the consent of the Representative for a period of 18 months from
the date of this Prospectus and for up to six additional months if the Extension
Criteria have been satisfied.
To the extent that the Company's securities are used as consideration to
effect a Business Combination, the balance of the net proceeds of this offering
not expended will be used to finance the operations (including the possible
repayment of debt) of the Target Business. No cash compensation will be paid to
any officer or director until after the consummation of the first Business
Combination. Since the role of the Company's current directors and executive
officers after a consummation of a Business Combination is uncertain, the
Company has no ability to determine what remuneration, if any, will be paid to
such persons after such consummation of a Business Combination.
8
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial information set forth below is derived from the more
detailed financial statements appearing elsewhere in this prospectus. Such
information should be read in conjunction with such financial statements,
including the notes thereto.
<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------
<S> <C> <C>
Balance Sheet Data:
Total assets............................................................. $ 211,270 $ 8,547,279
Total liabilities........................................................ 185,023 --
Deficit accumulated during development stage............................. (27,353) (47,929)
Series A preferred stock................................................. 1 1
Stockholders' equity and common stock subject to redemption.............. 26,247 8,547,279
</TABLE>
- ------------------------
(1) Gives effect to the sale of the Units at the initial public offering price
of $10.00 per Unit, the sale of the Class B Warrants at the initial public
offering price of $5.75 per Class B Warrant and initial application of the
estimated net proceeds (after the payment of all estimated offering
expenses, including the Representative's non-accountable expense allowance)
of $8,710,000 therefrom. See "Use of Proceeds". Assumes no exercise of the
Underwriters' over-allotment option or the Representative's Warrants. See
"Underwriting".
(2) In the event the Company consummates a Business Combination, the redemption
rights afforded to the non-affiliated public stockholders may result in the
conversion into cash of up to 20% of the aggregate number of shares held by
the non-affiliated public stockholders, amounting to 160,000 shares, at a
per share redemption price equal to (A) the greater of (i) the Company's net
worth or (ii) the amount of proceeds of the Company in the escrow account
(including income earned thereon) divided by (B) the number of shares held
by non-affiliated public stockholders, but not less than $10.00 per share
plus interest earned thereon.
9
<PAGE>
THE COMPANY
BUSINESS OBJECTIVE
The Company, which is a "blank check" or "blind pool" company, was formed in
August 1995 to serve as a vehicle to effect a Business Combination with a Target
Business which the Company believes has significant growth potential. The
Company intends to utilize the net proceeds of this offering, equity securities,
debt securities, bank borrowings or a combination thereof in effecting a
Business Combination. The Company will seek to acquire a Target Business without
limiting itself to a particular industry. Most likely, the Target Business will
be primarily located in the United States, although the Company reserves the
right to acquire a Target Business primarily located outside the United States.
In seeking a Target Business, the Company will consider, without limitation,
businesses which (i) offer or provide services or develop, manufacture or
distribute goods in the United States or abroad, including, without limitation,
in the following areas: health care and health products, educational services,
environmental services, consumer related products and services (including
amusement and/or recreational services), personal care services, voice and data
information processing and transmission and related technology development or
(ii) is engaged in wholesale or retail distribution. The Company will not effect
a Business Combination with a Target Business unless the Fair Market Value of
such business is at least 80% of the net assets of the Company at the time of
consummation of such Business Combination. If the Company determines that the
financial statements of a Proposed Target Business do not clearly indicate that
the Fair Market Value Test has been satisfied, the Company will obtain an
opinion from an investment banking firm that is a member in good standing of the
NASD with respect to the satisfaction of such criteria. The Company has not had
any contact or discussions with representatives of any Target Business regarding
a consummation of a Business Combination. While the Company may, under certain
circumstances, seek to effect Business Combinations with more than one Target
Business, in all likelihood, as a result of its limited resources, the Company
will have the ability to effect only a single Business Combination. The Company
does not intend to register as a broker-dealer, merge with or acquire a
registered broker-dealer, or otherwise become a member of the NASD.
BUSINESS EXPERIENCE OF PRINCIPALS
The executive officers and the other directors of the Company have business
experience which has provided them with skills which the Company believes will
be helpful in evaluating potential Target Businesses and negotiating and
consummating a Business Combination. Prior to their involvement with the
Company, none of the directors or the executive officers of the Company has been
involved in any "blind pool" or "blank check" offerings, with the exception of
David J. Mitchell, the Company's Chairman and Chief Executive Officer. From
December 1993 until June 1995, Mr. Mitchell served as a director and Secretary
of Israel Tech Acquisition Corporation, a public company, which acquired the
assets of, and changed its name to, Kellstrom Industries, Inc. in June 1995.
From March 1995 until August 1995, Mr. Mitchell served as a director, Chief
Financial Officer, Treasurer and Secretary of European Gateway Acquisition
Corporation, a public company, which acquired Bogen Communication, Inc. and
changed its name to Bogen Communications International, Inc. in August 1995. Mr.
Mitchell continues to serve as a director of both Kellstrom Industries, Inc. and
Bogen Communications International, Inc., which are both public companies, as of
the date of this Prospectus. See "Management."
RETENTION OF INDEPENDENT INVESTMENT BANKER
The Company will engage an independent investment banking firm to aid in
identifying, evaluating, structuring, negotiating and consummating a Business
Combination.
ESCROW OF OFFERING PROCEEDS
Upon completion of the offering by the Company, approximately 81% of the
gross proceeds therefrom (representing an amount equal to the $8,000,000 gross
proceeds from the sale of the Units as a percentage of the gross proceeds of
this offering) will be placed in an escrow account maintained by the Proceeds
Escrow Agent, subject to release upon the earlier of (1) receipt by the Proceeds
Escrow
10
<PAGE>
Agent of: (i) written notice from the Company of the Company's completion of a
transaction or series of transactions in which at least 50% of the gross
proceeds from this offering are committed to a specific line of business as a
result of a Business Combination (including any redemption payments), (ii) a
written opinion of counsel of the Company, reasonably acceptable to the Proceeds
Escrow Agent, that a Business Combination was approved by a vote of two-thirds
of the shares of Common Stock of the Company, as required by this Prospectus,
and that the holders of more than 20% of the Common Stock of the Company have
not elected to redeem their Common Stock, as required by this Prospectus, and
(iii) a written confirmation from the Company, that the fair market value (as
determined by the Company, based upon standards generally accepted by the
financial community, including revenues, earnings, cash flow, and book value) of
the Target Business exceeds 80% of the net value of the assets of the Company,
and that all other actions required by the Company for the release of the escrow
proceeds have been met, or (2) either (i) after 18 months of the date of
effectiveness of this offering (or 24 months if the Proceeds Escrow Agent has
received notice within the initial 18 month period that the Extension Criteria,
as herein defined, have been satisfied) if the Proceeds Escrow Agent has not
received written notice from the Company of the Company's completion of a
transaction or series of transactions in which at least 50% of the gross
proceeds from this offering are committed to a specific line of business as a
result of a Business Combination, or (ii) receipt by the Proceeds Escrow Agent
of written notification to distribute the escrow proceeds in connection with a
liquidation of the Company to the holders of Common Stock purchased as part of
the Units sold in this offering or in the open market thereafter, or (iii)
receipt by the Proceeds Escrow Agent of written notification to distribute part
of the escrow proceeds to the holders of record of Common Stock purchased as
part of the Units sold in this offering or in the open market thereafter who
elected to have their shares redeemed in accordance with the terms set forth in
this Prospectus. All proceeds held in the escrow account will be invested, until
released, in short-term United States government securities, including treasury
bills, cash and cash equivalents. Except as noted below, the proceeds to the
Company from the sale of the Class B Warrants will not be placed in escrow.
Rather, these proceeds will be used (i) to repay indebtedness, (ii) to pay the
balance of a $100,000 license fee, or $90,000, due to Bright pursuant to a
license agreement executed by Bright and the Company, and (iii) to cover all of
the expenses incurred by the Company in this offering, including the
Underwriters' discounts and the Representative's non-accountable expense
allowance, (iv) to fund the Company's operating expenses, including investment
banking fees and the costs of business, legal and accounting due diligence on
prospective Target Businesses until the Company effects a Business Combination.
In addition, a portion of the net proceeds from the sale of the Class B Warrants
equal to the Underwriters' discounts and the Representative's non-accountable
expense allowance payable with respect to the Units, as noted in clause (iii)
above, will be placed in the above-mentioned escrow account for the benefit of
purchasers of Common Stock as part of the Units sold in this offering and in the
open market thereafter. As a result, if the escrowed funds are paid to the
holders of Units, the payment will equal the gross purchase price for the Unit
(plus any interest earned thereon), notwithstanding that the Company paid the
Underwriters' discount and the Representative's non-accountable expense
allowance out of such gross proceeds. To the extent that the proceeds from the
sale of the Class B Warrants are less than the expenses the Company incurs
seeking to effect a Business Combination, the Company would need additional
financing. There can be no assurance that the Company would be able to arrange
any such additional financing. Management is unaware of any circumstances under
which this policy, through management's own initiative, may be changed. See "Use
of Proceeds."
STOCKHOLDER APPROVAL OF BUSINESS COMBINATIONS
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the Business Combination is such as would not ordinarily
require stockholder approval under applicable state law. In connection with such
request, the Company intends to provide stockholders with disclosure
documentation in accordance with the Proxy Rules, including audited financial
statements, concerning a Target Business. All of the Company's present
stockholders, including all directors and its executive officers, have agreed as
part of the escrow agreement to which their stock is subject to vote their
respective shares of
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Common Stock in accordance with the vote of the majority of the shares voted by
all non-affiliated public stockholders of the Company with respect to any
consummation of such Business Combination. See "The Company -- Escrow of
Outstanding Shares." A Business Combination will not be consummated unless
approved by a vote of two-thirds of the shares of Common Stock (in person or by
proxy). In addition, the Delaware General Corporation Law requires approval of
certain mergers and consolidations by a majority of the outstanding stock
entitled to vote thereon. Holders of Warrants who otherwise do not own any
shares of Common Stock will not be entitled to vote on any Business Combination.
REDEMPTION RIGHTS
At the time the Company seeks stockholder approval of any potential Business
Combination, the Company will offer to each of the non-affiliated public
stockholders of the Company the right, for a specified period of time of not
less than 20 days, to redeem his shares of Common Stock at a price equal to the
Liquidation Value of such shares as of the Record Date. The Redemption Offer
will be described in the disclosure documentation relating to the proposed
Business Combination. See "Proposed Business -- 'Blind Pool' -- Offering." The
Liquidation Value for each share of Common Stock will be determined as of the
Record Date by dividing (A) the greater of (i) the Company's net worth as
reflected in the Company's financial statements and audited by the Company's
independent accountants or (ii) the amount of the proceeds of the Company in the
escrow account (including all interest earned thereon) by (B) the number of
shares held by non-affiliated public stockholders; however, in no event will the
Liquidation Value of each share of Common Stock be less than $10.00 plus
interest earned thereon. In connection with the Redemption Offer, if
non-affiliated public stockholders holding 20% or less of the shares of Common
Stock elect to redeem their shares, the Company may, but will not be required
to, proceed with such Business Combination and, if the Company elects to so
proceed, will redeem such shares at their Liquidation Value as of the Record
Date. In any case, if non-affiliated public stockholders holding more than 20%
of the Common Stock elect to redeem their shares, the Company will not proceed
with such potential Business Combination and will not redeem such shares. All
holders of Common Stock and all holders of Warrants prior to the date of this
Prospectus will be allowed to participate in a Redemption Offer only if they
purchase shares of Common Stock in this offering or on the open market
thereafter, and only as to any shares of Common Stock so purchased.
ESCROW OF OUTSTANDING SHARES
All of the shares of Escrowed Stock outstanding immediately prior to the
date of this Prospectus have been placed in escrow with the Shares Escrow Agent
until the earlier of (i) the occurrence of the first Business Combination, (ii)
18 months from the date of this Prospectus provided that such 18-month period
will be extended by six months to 24 months from the date of this Prospectus if
the Extension Criteria has been satisfied. During the escrow period, the holders
of the Escrowed Stock will not be able to sell or otherwise transfer their
respective shares of the Escrowed Stock (with certain exceptions), but will
retain all other rights as stockholders of the Company, including, without
limitation, the right to vote escrowed shares of Common Stock, subject to their
agreement to vote their shares in accordance with a vote of a majority of the
non-affiliated public stockholders with respect to a consummation of a Business
Combination or liquidation proposal, but excluding the right to request the
redemption of Escrowed Stock pursuant to a Redemption Offer. Subject to
compliance with applicable securities laws, any such holder may transfer his,
her or its Escrowed Stock to a family member or to a trust established for the
benefit of himself, herself, or a family member or to another affiliated entity
(with the consent of the Representative which will not be unreasonably withheld)
or, in the event of the holder's death, by will or operation of law, or in the
case of its dissolution or merger, provided that any such transferee must agree
as a condition to such transfer to be bound by the restrictions on transfer
applicable to the original holder and, in the case of present stockholders other
than the holders of the Placement Shares, that the transferor (except in the
case of death) or successor will continue to be deemed the beneficial owner (as
defined in Regulation 13d-3 promulgated under the Exchange Act of such
transferred shares.
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Each executive officer and director has also agreed to surrender his shares
to the Company at the purchase price at which such shares were acquired ($.10
per share) if he resigns prior to the occurrence of the first Business
Combination.
RESTRICTION ON SALE OF OUTSTANDING SHARES
All of the Founders' Shares are subject to an agreement with the holders of
the Founders' Shares not to sell or otherwise transfer such shares for a period
of 24 months from the date the currently outstanding Founders' Shares were
originally issued (August 18, 1995), but in no event earlier than 120 days
following the consummation of the first Business Combination. However, subject
to compliance with applicable securities laws, any such holder may transfer
Founders' Shares to a family member or to a trust established for the benefit of
himself, herself, or a family member or to another affiliated entity (with the
consent of the Representative which will not be unreasonably withheld) or in the
event of the holder's death by will or operation of law, or in the case of its
dissolution or merger, provided that any such transferee or successor must agree
as a condition to such transfer to be bound by the restrictions on transfer
applicable to the original holder and that the transferor or its principals, if
the transferor is an entity (except in the case of death) will continue to be
deemed the beneficial owner (as defined in Regulation 13d-3 promulgated under
the Exchange Act) of such transferred shares. The certificates representing the
Founders' Shares will bear a restrictive legend with respect to such
restrictions and the Company's transfer agent will note such restrictions on the
Company's transfer books and records.
In addition, the holders of the Placement Shares have agreed not to directly
or indirectly sell, offer to sell, grant an option for the sale of, transfer,
assign, pledge, hypothecate or otherwise encumber any of the Placement Shares
without the prior written consent of the Company until the earlier of 24 months
from the date such shares were issued (November 15, 1995) or 60 days following
the consummation of the first Business Combination.
The Company has outstanding 94 shares of Series A Preferred Stock which are
held by CDIJ, an indirect affiliate of Bright. The shares are convertible to
Common Stock on the basis of one thousand shares of Common Stock for each share
of Series A Preferred Stock during the one year period commencing upon the
consummation of a Business Combination. The 94,000 shares of Common Stock
issuable upon conversion of the Company's outstanding Series A Preferred Stock
will be offered by a prospectus at the time of a Business Combination and
thereafter will be freely tradable under applicable securities laws. However,
CDIJ, for itself and any transferees of the Series A Preferred Stock, has agreed
not to sell or otherwise transfer such shares until 60 days following the
consummation of the first Business Combination and to limit the volume of such
sales to the amount that is permitted by Rule 144 ("Rule 144") promulgated under
the Securities Act of 1933, as amended. Subject to other conditions, Rule 144
permits sales, within any three-month period, of a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the shares are quoted on an exchange or on NASDAQ, the average
weekly trading volume during the four calendar weeks preceding the sale. See
"Risk Factors -- Shares Eligible for Future Sale."
POSSIBLE LIQUIDATION AFTER EIGHTEEN MONTHS IF NO BUSINESS COMBINATION
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit for
stockholder consideration a proposal to liquidate the Company and distribute to
the then holders of Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, the amounts in the escrow account.
Thereafter, all remaining assets available for distribution will be distributed
to the non-affiliated public stockholders of the Company after payment of
liabilities and after redemption of the Company's outstanding Series A Preferred
Stock at its liquidation value, $9,400. Since the proceeds to the Company from
the sale of the Class B Warrants will be used (i) to repay indebtedness, (ii) to
pay the balance of a $100,000 license fee, or $90,000, due to Bright pursuant to
a license agreement executed by Bright and the Company, (iii) to
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cover all the expenses incurred by the Company in this offering, including the
Underwriters' discounts and the Representative's non-accountable expense
allowance, and (iv) to fund the Company's operating expenses, including
investment banking fees and the costs of business, legal and accounting due
diligence on prospective Target Businesses, until the Company effects a Business
Combination, the amount per share remaining for distribution, in the event of a
liquidation of the Company, to the holders of Common Stock acquired as part of
the Units sold in this offering or in the open market thereafter, and exclusive
of any income earned on the proceeds held in the escrow account (which will be
distributed to the holders of Common Stock along with the funds in the escrow
account), will be approximately equal to the initial public offering price per
Unit in this offering of $10.00 per Unit (assuming no value is attributed to the
Warrants included in the Units offered hereby). All of the present stockholders,
including the Company's executive officers and other directors and their
affiliates, are required by the escrow agreement to which their stock is subject
to vote their shares of Common Stock in accordance with the vote of the majority
of all non-affiliated public stockholders of the Company with respect to any
liquidation proposal. Holders of Warrants, however, will only be entitled to
vote on any liquidation proposal, and allowed to participate in any liquidation
distribution, if they purchase shares of Common Stock in this offering or on the
open market thereafter, but only as to any shares of Common Stock so purchased.
All of the present stockholders, including the Company's executive officers and
other directors and their affiliates, have agreed to waive their rights to
participate in any liquidation distribution with respect to the 106,000 shares
of Common Stock owned by them as of the date hereof. See "The Company -- Escrow
of Outstanding Shares."
To date, the Company's efforts have been limited to organizational
activities and this offering. The implementation of the Company's business
objectives is wholly contingent upon the successful sale of the Units and Class
B Warrants offered hereby. See "Proposed Business."
Essentially, a Specialized Merger and Acquisition Allocated Risk
TransactionSM (SMA(2)RTSM) provides an investor in this offering with an
opportunity to purchase Units for $10.00 each, the proceeds of which will be
placed into escrow for the benefit of stockholders, and shall be returned if the
Company does not effect a Business Combination; and/or Class B Warrants (which
are exercisable into Units) for $5.875 each (the $5.75 purchase price plus the
$.125 exercise price), the proceeds of which will not be placed in escrow, but
rather will be used to repay indebtedness, to pay a license fee to Bright, and
to cover all of the Company's expenses incurred in this offering. See "Use of
Proceeds." Consequently, if the Class B Warrants were exercised, holders of
Class B Warrants would pay substantially less for the Units issuable upon
exercise of such Class B Warrants than holders of Units and, accordingly, may
realize a higher return on their investment. Holders of Class B Warrants,
however, risk the loss of their investment if the Company fails to effect a
Business Combination, while holders of shares of Common Stock comprising part of
the Units benefit from the Company's escrow of an amount equal to the gross
proceeds from the sale of the Units in this offering.
The Company was organized under the laws of the State of Delaware on August
9, 1995. The Company's office is located at 850 Third Avenue, 10th Floor, New
York, New York 10022 and its telephone number is (212) 750-5822.
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RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING, BUT
NOT LIMITED TO, THE SEVERAL FACTORS DESCRIBED BELOW. THESE SECURITIES SHOULD BE
PURCHASED ONLY BY PERSONS WHO CAN AFFORD A LOSS OF THEIR ENTIRE INVESTMENT.
INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS INHERENT IN AND
AFFECTING THE BUSINESS OF THE COMPANY AND THIS OFFERING IN EVALUATING AN
INVESTMENT IN THE SECURITIES OFFERED HEREBY.
OFFERING NOT CONDUCTED IN ACCORDANCE WITH RULE 419
The Company's offering of Units and Class B Warrants is not being conducted
in accordance with Rule 419 promulgated by the Commission under the Securities
Act of 1933, as amended (the "Act"), which was adopted to strengthen the
regulation of securities offerings by "blank check" companies, which Congress
has found to have been common vehicles for fraud and manipulation in the penny
stock market. The Company is a "blank check" company not subject to Rule 419
under the Act because the Company's net tangible assets after its receipt of the
proceeds of this offering will exceed $5,000,000. Accordingly, investors in the
offering will not receive the substantive protection provided by Rule 419 under
the Act. Rule 419 under the Act requires that the securities to be issued and
the funds received in a blank check offering be deposited and held in an escrow
account until a Business Combination meeting specified criteria is completed.
Before a Business Combination can be completed and before the funds and
securities can be released, the blank check company is required to update the
registration statement with a post-effective amendment; and after the effective
date thereof the Company is required to furnish investors with the prospectus
produced thereby containing information, including audited financial statements,
regarding the proposed Target Business and its business. According to the rule,
the investors must have no fewer than 20 and no more than 45 days from the
effective date of the post-effective amendment to decide to remain an investor
or require the return of their investment funds. Any investor not making any
decision within said 45-day period is to automatically receive a return of his
investment funds. Unless a sufficient number of investors elect to remain
investors, all of the deposited funds in the escrow account must be returned to
all investors and none of the securities will be issued. Rule 419 under the Act
further provides that if the blank check company does not complete a Business
Combination meeting specified criteria within 18 months after the date of this
Prospectus, all of the deposited funds in the escrow account must be returned to
investors.
NO OPERATING HISTORY; LIMITED RESOURCES; NO PRESENT SOURCE OF REVENUES
The Company, incorporated on August 9, 1995, is a development stage company
and has not, as of the date hereof, attempted to seek a Business Combination.
Although certain of the Company's directors and its executive officers have had
extensive experience relating to the identification, evaluation and acquisition
of Target Businesses, the Company has no operating history and, accordingly,
there is only a limited basis upon which to evaluate the Company's prospects for
achieving its intended business objectives. None of the Company's officers,
directors, promoters or other persons engaged in management-type activities has
been previously involved with any blank check offerings. To date, the Company's
efforts have been limited to organizational activities and this offering. The
Company has limited resources and has had no revenues to date. In addition, the
Company will not achieve any revenues (other than investment income) until, at
the earliest, the consummation of a Business Combination. Moreover, there can be
no assurance that any Target Business, at the time of the Company's consummation
of a Business Combination, or at any time thereafter, will derive any material
revenues from its operations or operate on a profitable basis. See "Proposed
Business" and "Management -- Prior Blank Check Offerings."
"BLIND POOL" OFFERING; BROAD DISCRETION OF MANAGEMENT
Prospective investors who invest in the Company will do so without an
opportunity to evaluate the specific merits or risks of any one or more Business
Combinations. As a result, investors will be entirely dependent on the broad
discretion and judgment of management in connection with the
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allocation of the proceeds of the offering and the selection of a Target
Business. There can be no assurance that determinations ultimately made by the
Company will permit the Company to achieve its business objectives. See "Use of
Proceeds" and "Proposed Business."
ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO PROSPECTIVE BUSINESS COMBINATIONS;
INVESTMENT IN THE COMPANY VERSUS INVESTMENT IN A TARGET BUSINESS
"Blind pool" and "blank check" offerings are inherently characterized by the
absence of substantive disclosure, other than general descriptions, relating to
the intended application of the net proceeds of the offering. The Company has
not yet identified a prospective Target Business. Accordingly, investors will
have no substantive information concerning consummation of any specific Business
Combination in considering a purchase of Units and/or Class B Warrants in this
offering. The absence of disclosure can be contrasted with the disclosure which
would be necessary if the Company had already identified a Target Business as a
Business Combination candidate or if the Target Business were to effect an
offering of its securities directly to the public. There can be no assurance
that an investment in the securities offered hereby will not ultimately prove to
be less favorable to investors in this offering than a direct investment, if
such opportunity were available, in a Target Business. See "Proposed Business."
SEEKING TO ACHIEVE PUBLIC TRADING MARKET THROUGH BUSINESS COMBINATION
While a prospective Target Business may deem a consummation of a Business
Combination with the Company desirable for various reasons, a Business
Combination may involve the acquisition of, merger or consolidation with, a
company which does not need substantial additional capital, but which desires to
establish a public trading market for its shares, while avoiding what it may
deem to be adverse consequences of undertaking a public offering itself,
including time delays, significant expense, loss of voting control and the time
and expense incurred to comply with various Federal and state securities laws
that regulate initial public offerings. Nonetheless, there can be no assurance
that there will be an active trading market for the Company's securities
following the completion of a Business Combination or, if a market does develop,
as to the market price for the Company's securities. See "Proposed Business --
'Blind Pool' Offering -- Background."
UNCERTAIN STRUCTURE OF BUSINESS COMBINATION
The structure of a future transaction with a Target Business cannot be
determined at the present time and may take, for example, the form of a merger,
an exchange of stock or an asset acquisition. The Company may form one or more
subsidiary entities to effect a Business Combination and may, under certain
circumstances, distribute the securities of subsidiaries to the stockholders of
the Company. There cannot be any assurance that a market would develop for the
securities of any subsidiary distributed to stockholders or, if it did, any
assurance as to the prices at which such securities might trade. The structure
of a Business Combination or the distribution of securities to stockholders may
result in taxation of the Company, the Target Business or stockholders. See
"Proposed Business" and "Management."
UNSPECIFIED INDUSTRY AND TARGET BUSINESS; UNASCERTAINABLE RISKS
While the Company will target industries located in the United States, while
reserving the right to acquire a Target Business located elsewhere, the Company
has not selected any particular industry or Target Business in which to
concentrate its Business Combination efforts. None of the Company's directors or
its executive officer has had any contact or discussions with any entity or
representatives of any entity regarding a consummation of a Business
Combination. Accordingly, there is no basis for prospective investors to
evaluate the possible merits or risks of the Target Business or the particular
industry in which the Company may ultimately operate. In connection with
stockholder approval of consummation of a Business Combination, the Company
intends to provide stockholders with complete disclosure documentation,
including audited financial statements, concerning a Target Business.
Accordingly, any Target Business that is selected would need to have audited
financial statements or be audited in connection with the transaction. To the
extent that the Company effects a
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Business Combination with a financially unstable company or an entity in its
early stage of development or growth (including entities without established
records of revenues or income), the Company will become subject to numerous
risks inherent in the business and operations of financially unstable and early
stage or potential emerging growth companies. In addition, to the extent that
the Company effects a Business Combination with an entity in an industry
characterized by a high level of risk, the Company will become subject to the
currently unascertainable risks of that industry. An extremely high level of
risk frequently characterizes certain industries which experience rapid growth.
Although management will endeavor to evaluate the risks inherent in a particular
Target Business or industry, there can be no assurance that the Company will
properly ascertain or assess all such risks. See "Proposed Business."
In addition, to date, none of the Company's officers, directors, promoters,
affiliates or associates have had any preliminary contact or discussions with,
and there are no present plans, proposals, arrangements or understandings with
any representatives or owners of any business or company regarding the
possibility of consummating a Business Combination with such a business or
company.
PROBABLE LACK OF BUSINESS DIVERSIFICATION
As a result of the limited resources of the Company, the Company, in all
likelihood, will have the ability to effect only a single Business Combination.
Accordingly, the prospects for the Company's success will be entirely dependent
upon the future performance of a single business. Unlike certain entities which
have the resources to consummate several Business Combinations or entities
operating in multiple industries or multiple segments of a single industry, it
is highly likely that the Company will not have the resources to diversify its
operations or benefit from the possible spreading of risks or offsetting of
losses. The Company's probable lack of diversification may subject the Company
to numerous economic, competitive and regulatory developments, any or all of
which may have a material adverse impact upon the particular industry in which
the Company may operate subsequent to a consummation of a Business Combination.
The prospects for the Company's success may become dependent upon the
development or market acceptance of a single or limited number of products,
processes or services. Accordingly, notwithstanding the possibility of capital
investment in and management assistance to the Target Business by the Company,
there can be no assurance that the Target Business will prove to be commercially
viable. The Company has no present intention of either loaning any of the
proceeds of this offering to any Target Business or of purchasing or acquiring a
minority interest in any Target Business. Management is unaware of any
circumstances under which this policy, through management's own initiative, may
be changed. See "Use of Proceeds" and "Proposed Business."
PROCEEDS FROM SALE OF WARRANTS NOT PLACED IN ESCROW; WARRANTS NOT CURRENTLY
EXERCISABLE;
WARRANTS EXERCISABLE SUBJECT TO THE COMPANY'S COMPLIANCE WITH SECURITIES LAWS
Except as noted below, the proceeds to the Company from the sale of the
Class B Warrants will not be placed in escrow. Rather, these proceeds will be
used (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license
fee, or $90,000, to Bright pursuant to a license agreement executed by Bright
and the Company, (iii) to cover all of the expenses incurred by the Company in
this offering, including the Underwriters' discounts and the Representative's
non-accountable expense allowance, and (iv) to fund the Company's operating
expenses, including investment banking fees and fees of the Proceeds Escrow
Agent and the costs of business, legal and accounting due diligence on
prospective Target Businesses, until the Company effects a Business Combination.
In addition, a portion of the net proceeds from the sale of the Class B Warrants
equal to the Underwriters' discounts and the Representative's non-accountable
expense allowance with respect to the Units will be placed in the escrow account
with the Proceeds Escrow Agent for the benefit of purchasers of Units in this
offering and in the open market thereafter. Furthermore, the Warrants are not
exercisable until the Company effects a Business Combination, of which there can
be no assurance, provided the Company is then in compliance with all filings
required under the federal and state securities laws, and holders of Warrants
who do not own shares of Common Stock will not be allowed to participate in any
liquidation distribution of the proceeds from the escrow account. Consequently,
in the event the Company does
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not effect a Business Combination within 18 months from the date of this
Prospectus, or 24 months from the date of this Prospectus if the Extension
Criteria have been satisfied, and the stockholders of the Company elect to
liquidate the Company, the holders of Warrants will not receive any
distributions and will lose their entire investment in such Warrants. As such,
an investment in the Warrants therefore should be viewed as a highly speculative
investment and should only be made by an individual who can afford to lose his
entire investment. Holders of Class B Warrants would pay substantially less for
the Units issuable upon exercise of such Class B Warrants than holders of Units
and, accordingly, may realize a higher return on their investment than holders
of Units. By way of illustration, purchasers of Class B Warrants in this
offering will pay $5.875 per Unit (the sum of the $5.75 purchase price and the
$.125 exercise price), while purchasers of Units in this offering will pay
$10.00 per Unit. The proceeds to the Company from the sale of the Class B
Warrants will not be placed in escrow for the benefit of the holders of the
Class B Warrants and will be used to repay indebtedness and to cover all of the
Company's expenses incurred in this offering, including the Underwriters'
discounts and the Representative's non-accountable expense allowance with
respect to both the Units and the Class B Warrants, to pay the Proceeds Escrow
Agent and to pay the Company's costs of evaluating potential Business
Combinations and for administrative and operating expenses. Holders of Class B
Warrants risk the loss of all of their investment if the Company fails to effect
a Business Combination, while holders of shares of Common Stock comprising part
of the Units are protected from such loss by the Company's escrow of an amount
equal to the gross proceeds from the sale of the Units in this offering.
REPRESENTATIVE'S ABILITY TO MAINTAIN REQUIRED MINIMUM NET CAPITAL
As a registered broker-dealer, the Representative is required under the
Exchange Act and the rules promulgated thereunder to maintain minimum net
capital in order to conduct its broker-dealer operations. Currently, the
Representative has sufficient excess net capital to support its broker-dealer
operations, including its underwriting obligations to the Company. In the event,
however, that at any time the Representative should be unable to maintain its
minimum net capital requirements, it will be required to cease operations as a
broker-dealer. Any such cessation of operations by the Representative could have
a material adverse effect on the market price and liquidity of the securities
being offered hereby.
DEPENDENCE UPON EXECUTIVE OFFICERS AND BOARD OF DIRECTORS; LIMITED PRIOR BLIND
POOL EXPERIENCE
The ability of the Company to successfully effect a Business Combination
will be largely dependent upon the efforts of its executive officers and the
Board of Directors. Notwithstanding the significance of such persons, the
Company has not entered into employment agreements or other understandings with
any such personnel concerning compensation or obtained any "key man" life
insurance on their respective lives. The loss of the services of such key
personnel could have a material adverse effect on the Company's ability to
successfully achieve its business objectives. None of the Company's key
personnel are required to commit a substantial amount of their time to the
affairs of the Company and, accordingly, such personnel may have conflicts of
interests in allocating management time among various business activities.
However, the executive officers and the other directors of the Company will
devote such time as they deem reasonably necessary to carry out the business and
affairs of the Company, including the evaluation of potential Target Businesses
and the negotiation and consummation of a Business Combination, and, as a
result, the amount of time devoted to the business and affairs of the Company
may vary significantly depending upon, among other things, whether the Company
has identified a Target Business or is engaged in active negotiation of a
Business Combination. Although the officers and directors of the Company have
substantial experience in buying and selling businesses, they have no prior
experience in "blind pool" or "blank check" offerings, with the exception of
David J. Mitchell, the Company's Chairman and Chief Executive Officer. From
December 1993 until June 1995, Mr. Mitchell served as a director and Secretary
of Israel Tech Acquisition Corporation, a public company, which acquired the
assets of, and changed its name to, Kellstrom Industries, Inc. in June 1995.
From March 1995 until August 1995, Mr. Mitchell served as a director, Chief
Financial Officer, Treasurer and Secretary of European Gateway Acquisition
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Corporation, a public company, which acquired Bogen Communication, Inc. and
changed its name to Bogen Communications International, Inc. in August 1995. Mr.
Mitchell continues to serve as a director of both Kellstrom Industries, Inc. and
Bogen Communications International, Inc., which are both public companies, as of
the date of this Prospectus. See "Management.". The Company will rely upon the
expertise of such persons, and the Board does not anticipate that it will hire
additional personnel. However, if additional personnel are required, there can
be no assurance that the Company will be able to retain such necessary
additional personnel. See "Proposed Business" and "Management."
CONFLICTS OF INTEREST
None of the Company's directors or executive officers are required to commit
their full time to the affairs of the Company and it is likely that such persons
will not devote a substantial amount of time to the affairs of the Company. Such
personnel will have conflicts of interest in allocating management time among
various business activities. As a result, the consummation of a Business
Combination may require a greater period of time than if the Company's
management devoted their full time to the Company's affairs. However, the
executive officers and other directors of the Company will devote such time as
they deem reasonably necessary to carry out the business and affairs of the
Company, including the evaluation of potential Target Businesses and the
negotiation and consummation of a Business Combination and, as a result, the
amount of time devoted to the business and affairs of the Company may vary
significantly depending upon, among other things, whether the Company has
identified a Target Business or is engaged in active negotiation and
consummation of a Business Combination. Prior to their involvement with the
Company, none of the directors or the executive officers of the Company has been
involved in any "blind pool" or "blank check" offerings, with the exception of
David J. Mitchell, the Company's Chairman and Chief Executive Officer. From
December 1993 until June 1995, Mr. Mitchell served as a director and Secretary
of Israel Tech Acquisition Corporation, a public company, which acquired the
assets of, and changed its name to, Kellstrom Industries, Inc. in June 1995.
From March 1995 until August 1995, Mr. Mitchell served as a director, Chief
Financial Officer, Treasurer and Secretary of European Gateway Acquisition
Corporation, a public company, which acquired Bogen Communication, Inc. and
changed its name to Bogen Communications International, Inc. in August 1995. Mr.
Mitchell continues to serve as a director of both Kellstrom Industries, Inc. and
Bogen Communications International, Inc., which are both public companies, as of
the date of this Prospectus. See "Management.". To avoid certain conflicts of
interest, the executive officers and directors of the Company, and owners of
five percent or more of the Company's Common Stock (after giving effect to this
offering, but without giving effect to the exercise, if any, of the Warrants to
be issued in this offering), have agreed that they will not, until the
consummation of the first Business Combination, introduce a suitable proposed
merger, acquisition or consolidation candidate to another blank check company.
For such purposes, suitable shall mean any business opportunity which, under
Delaware law, may reasonably be required to be presented to the Company. Certain
of the persons associated with the Company are and may in the future become
affiliated with entities engaged in business activities similar to those
intended to be conducted by the Company. Such persons may have conflicts of
interest in determining to which entity a particular business opportunity should
be presented. In general, officers and directors of a corporation incorporated
under the laws of the State of Delaware are required to present certain business
opportunities to such corporation. Accordingly, as a result of multiple business
affiliations, certain of the Company's directors and executive officers may have
similar legal obligations to present certain business opportunities to multiple
entities. There can be no assurance that any of the foregoing conflicts will be
resolved in favor of the Company. See "Management."
LIMITED ABILITY TO EVALUATE TARGET BUSINESS MANAGEMENT; POSSIBILITY THAT
MANAGEMENT WILL CHANGE
The role of the present management in the operations of a Target Business of
the Company following a Business Combination cannot be stated with certainty.
Although the Company intends to scrutinize closely the management of a
prospective Target Business in connection with its evaluation of the
desirability of effecting a Business Combination with such Target Business, and
will retain an
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independent investment banking firm which is a member in good standing of the
NASD to assist the Company in this regard, there can be no assurance that the
Company's assessment of such management will prove to be correct, especially in
light of the possible inexperience of current key personnel of the Company in
evaluating certain types of businesses. While it is possible that certain of the
Company's directors or executive officers will remain associated in some
capacities with the Company following a consummation of a Business Combination,
it is unlikely that any of them will devote a substantial portion of their time
to the affairs of the Company subsequent thereto. Moreover, there can be no
assurance that such personnel will have significant experience or knowledge
relating to the operations of the Target Business acquired by the Company. The
Company may also seek to recruit additional personnel to supplement the
incumbent management of the Target Business. There can be no assurance that the
Company will successfully recruit additional personnel or that the additional
personnel will have the requisite skills, knowledge or experience necessary or
desirable to enhance the incumbent management. In addition, there can be no
assurance that the future management of the Company will have the necessary
skills, qualifications or abilities to manage a public company embarking on a
program of business development. See "Proposed Business" and "Management."
POSSIBLE BUSINESS COMBINATION WITH A TARGET BUSINESS OUTSIDE THE UNITED STATES
The Company may effectuate a Business Combination with a Target Business
located outside the United States. In such event, the Company may face the
additional risks of language barriers, different presentations of financial
information, different business practices, and other cultural differences and
barriers. Furthermore, due to the Company's limited resources, it may be
difficult to assess fully these additional risks. Therefore, a Business
Combination with a Target Business outside the United States may increase the
risk that the Company will not achieve its business objectives.
COMPETITION
The Company expects to encounter intense competition from other entities
having business objectives similar to those of the Company. Many of these
entities, including venture capital partnerships and corporations, other blind
pool companies, large industrial and financial institutions, small business
investment companies and wealthy individuals, are well-established and have
extensive experience in connection with identifying and effecting Business
Combinations directly or through affiliates. Many of these competitors possess
greater financial, technical, human and other resources than the Company and
there can be no assurance that the Company will have the ability to compete
successfully. The Company's financial resources will be limited in comparison to
those of many of its competitors. Further, such competitors will generally not
be required to seek the prior approval of their own stockholders, which may
enable them to close a Business Combination more quickly than the Company. This
inherent competitive limitation may compel the Company to select certain less
attractive Business Combination prospects. There can be no assurance that such
prospects will permit the Company to achieve its stated business objectives. See
"Proposed Business."
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS
In the event that the Company succeeds in effecting a Business Combination,
the Company will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly larger number of
competitors, including competitors with greater financial, marketing, technical,
human and other resources than the initial competitors in the industry. The
degree of competition characterizing the industry of any prospective Target
Business cannot presently be ascertained. There can be no assurance that,
subsequent to a consummation of a Business Combination, the Company will have
the resources to compete in the industry of the Target Business effectively,
especially to the extent that the Target Business is in a high-growth industry.
See "Proposed Business."
ADDITIONAL FINANCING REQUIREMENTS
The Company has had no revenues to date and will be entirely dependent upon
the proceeds of this offering to implement its business objectives. The Company
will not achieve any revenues (other
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than investment income) until, at the earliest, the consummation of a Business
Combination. Although the Company anticipates that the net proceeds of this
offering will be sufficient to effect a Business Combination, inasmuch as the
Company has not yet identified any prospective Target Business candidates, the
Company cannot ascertain with any degree of certainty the capital requirements
for any particular Business Combination. In the event that the net proceeds of
this offering prove to be insufficient for purposes of effecting a Business
Combination (because of the size of the Business Combination or other reasons),
the Company will be required to seek additional financing. There can be no
assurance that such financing will be available on acceptable terms, or at all.
To the extent that additional financing proves to be unavailable when needed to
consummate a particular Business Combination, the Company would, in all
likelihood, be compelled to restructure the transaction or abandon that
particular Business Combination and seek an alternative Target Business
candidate, if possible. In addition, in the event of the consummation of a
Business Combination, the Company may require additional financing to fund the
operations or growth of the Target Business. The failure by the Company to
secure additional financing could have a material adverse effect on the
continued development or growth of the Target Business. The Company does not
have any arrangements with any bank or financial institution to secure
additional financing and there can be no assurance that any such arrangement, if
required or otherwise sought, would be available on terms deemed to be
commercially acceptable and in the best interests of the Company. See "Proposed
Business."
POSSIBLE USE OF DEBT FINANCING; DEBT OF A TARGET BUSINESS
There currently are no limitations on the Company's ability to borrow funds
to increase the amount of capital available to the Company to effect a Business
Combination. However, the Company's limited resources and lack of operating
history will make it difficult to borrow funds. The amount and nature of any
borrowings by the Company will depend on numerous considerations, including the
Company's capital requirements, the Company's perceived ability to meet debt
service on any such borrowings and the then prevailing conditions in the
financial markets, as well as general economic conditions. There can be no
assurance that debt financing, if required or sought, would be available on
terms deemed to be commercially acceptable by and in the best interests of the
Company. The inability of the Company to borrow funds required to effect or
facilitate a Business Combination, or to provide funds for an additional
infusion of capital into a Target Business, may have a material adverse effect
on the Company's financial condition and future prospects. Additionally, to the
extent that debt financing ultimately proves to be available, any borrowings may
subject the Company to various risks traditionally associated with indebtedness,
including the risks of interest rate fluctuations and insufficiency of cash flow
to pay principal and interest. Furthermore, a Target Business may have already
incurred borrowings and, therefore, all the risks inherent thereto. See "Use of
Proceeds" and "Proposed Business."
REDEMPTION RIGHTS
At the time the Company seeks stockholder approval of any potential Business
Combination, the Company will offer to each of the non-affiliated public
stockholders of the Company the right, for a specified period of time of not
less than 20 calendar days, to redeem his shares of Common Stock at a price
equal to the Liquidation Value of such shares as of the Record Date. The
Redemption Offer will be described in the disclosure documentation relating to
the proposed Business Combination. In connection with the Redemption Offer,
should non-affiliated public stockholders holding 20% or less of the Common
Stock elect to redeem their shares, the Company may, but will not be required
to, proceed with the proposed Business Combination and, if the Company elects to
so proceed, will redeem such shares at their Liquidation Value as of the Record
Date. In any case, if non-affiliated public stockholders holding more than 20%
of such Common Stock elect to redeem their shares, the Company will not proceed
with the proposed Business Combination and will not redeem any shares of Common
Stock. As a result of the foregoing, the Company's ability to consummate a
particular Business Combination may be impaired. Moreover, holders of Common
Stock prior to the date of this
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Prospectus and holders of Warrants will only be allowed to participate in a
Redemption Offer if they purchase shares of Common Stock in this offering or on
the open market thereafter, but only as to any shares of Common Stock so
purchased.
POSSIBLE LIQUIDATION OF THE COMPANY IF NO BUSINESS COMBINATION
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit for
stockholder consideration a proposal to liquidate the Company and distribute to
the then holders of Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, the amounts in the interest bearing
escrow account. Thereafter, all remaining assets available for distribution will
be distributed to the non-affiliated public stockholders of the Company after
payment of liabilities and after redemption of the Company's outstanding Series
A Preferred Stock at its liquidation value, $9,400. Since the proceeds to the
Company from the sale of the Class B Warrants will be used (i) to repay
indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, due
to Bright pursuant to a license agreement executed by Bright and the Company,
(iii) to cover all the expenses incurred by the Company in this offering,
including the Underwriters' discounts and the Representative's non-accountable
expense allowance, and (iv) to fund the Company's operating expenses, including
possible investment banking fees and the costs of business, legal and accounting
due diligence on prospective Target Businesses, until the consummation of a
Business Combination, the amount per share remaining for distribution in the
event of liquidation of the Company to the holders of Common Stock acquired as
part of the Units sold in this offering or in the open market thereafter, and,
exclusive of any income earned on the proceeds held in the escrow account, will
be approximately equal to the initial public offering price per Unit in this
offering ($10.00 per Unit assuming no value is attributed to the Warrants
included in the Units offered hereby).
There can be no assurance that the Company will effect a Business
Combination within 18 months from the date of this Prospectus, or within 24
months from the date of this Prospectus if the Extension Criteria have been
satisfied. All of the Company's present stockholders, including the Company's
executive officers and other directors and their affiliates, are required to
vote their shares of Common Stock in accordance with the vote of the majority of
all non-affiliated public stockholders of the Company with respect to any such
liquidation proposal. Holders of Warrants, however, will only be entitled to
vote on any liquidation proposal, and allowed to participate in any liquidation
distribution, only if they purchase shares of Common Stock in this offering or
on the open market thereafter, and only as to any shares of Common Stock so
purchased. Present stockholders of the Company will not participate in any
liquidation distribution with respect to the shares of Common Stock owned by
them as of the date hereof.
INVESTMENT COMPANY ACT CONSIDERATIONS
The regulatory scope of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), which was enacted principally for the purpose of
regulating vehicles for pooled investments in securities, extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading in securities. The Investment Company Act may, however, also
be deemed to be applicable to a company which does not intend to be
characterized as an investment company but which, nevertheless, engages in
activities which may be deemed to be within the definitional scope of certain
provisions of the Investment Company Act. The Company believes that its
anticipated principal activities, which will involve acquiring control of an
operating company, will not subject the Company to regulation under the
Investment Company Act. Nevertheless, there can be no assurance that the Company
will not be deemed to be an investment company, particularly during the period
prior to consummation of a Business Combination. If the Company is deemed to be
an investment company, the Company may become subject to certain restrictions
relating to the Company's activities, including restrictions on the nature of
its investments and the issuance of securities. In addition, the Investment
Company Act imposes certain requirements on companies deemed to be within its
regulatory scope, including registration as an investment company, adoption
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of a specific form of corporate structure and compliance with certain burdensome
reporting, recordkeeping, voting, proxy, disclosure and other rules and
regulations. In the event of the characterization of the Company as an
investment company, the failure by the Company to satisfy such regulatory
requirements, whether on a timely basis or at all, would, under certain
circumstances, have a material adverse effect on the Company.
DIVIDENDS UNLIKELY
The Company does not expect to pay dividends prior to the consummation of a
Business Combination. The payment of dividends after consummating any such
Business Combination, if any, will be contingent upon the Company's revenues and
earnings, if any, capital requirements and general financial condition
subsequent to consummation of a Business Combination. The payment of any
dividends subsequent to a Business Combination will be within the discretion of
the Company's then Board of Directors. The Company presently intends to retain
all earnings, if any, for use in the Company's business operations and
accordingly, the Board does not anticipate declaring any dividends in the
foreseeable future. See "Description of Securities -- Dividends."
UNCERTAINTY OF SERVICEMARKS
The servicemarks SMA(2)RTSM and Specialized Merger and Acquisition Allocated
Risk TransactionSM are owned by Bright. Bright has granted the Company a
non-exclusive license to use, for the sole purpose of marketing this offering,
the SMA(2)RTSM and Specialized Merger and Acquisition Allocated Risk
TransactionSM servicemarks. There can be no assurance that a third party owning
or using a similar servicemark or trademark will not object to, or seek to
prohibit, the Company's use of the SMA(2)RTSM or Specialized Merger and
Acquisition Allocated Risk TransactionSM servicemarks. The Company does not
believe, however, that its business will be adversely affected if it is unable
to utilize either, or both, of these servicemarks. See "Proposed Business --
Servicemark License," "Management -- Directors and Officers" and "Certain
Transactions."
AUTHORIZATION OF ADDITIONAL SECURITIES
The Company's Certificate of Incorporation authorizes the issuance of
10,000,000 shares of Common Stock. Upon completion of this offering (assuming no
exercise of the Underwriters' over-allotment option or any Warrants or other
options, or conversion of the outstanding Series A Preferred Stock), there will
be 9,094,000 authorized but unissued shares of Common Stock available for
issuance. However, a total of 2,360,666.66 shares of Common Stock are reserved
for issuance, consisting of the following: 800,000 shares of Common Stock are
reserved for issuance upon the exercise of the Class A Warrants, 320,000 shares
of Common Stock are reserved for issuance upon exercise of the Units underlying
the Class B Warrants, 320,000 shares of Common Stock are reserved for issuance
upon exercise of the Class A Warrants comprising a part of the Units underlying
the Class B Warrants, 120,000 shares of Common Stock are included in the Units
subject to the Underwriters' over-allotment option, 120,000 shares of Common
Stock are reserved for issuance upon the exercise of the Class A Warrants
included in the Units subject to the Underwriters' over-allotment option, 48,000
shares of Common Stock are reserved for issuance upon exercise of the Units
underlying the Class B Warrants subject to the Underwriters' over-allotment
option, 48,000 shares of Common Stock are reserved for issuance upon exercise of
the Class A Warrants comprising a part of the Units underlying the Class B
Warrants subject to the Underwriters' over-allotment option, 266,666.6 shares of
Common Stock are reserved for issuance upon exercise of options to purchase
Units granted to executive officers of the Company, 94,000 shares of Common
Stock are reserved for issuance upon conversion of the Company's outstanding
Series A Preferred Stock, 80,000 shares of Common Stock are included in the
Units reserved for issuance upon exercise of Representative's Unit Purchase
Warrants, 80,000 shares of Common Stock are reserved for issuance upon the
exercise of the Class A Warrants included in the Units reserved for issuance
upon exercise of the Representative's Unit Purchase Warrants, 32,000 shares of
Common Stock are included in the Units reserved for issuance upon exercise of
the Representative's Class B Warrants, and 32,000 shares of Common Stock
reserved for issuance upon exercise of Class A Warrants comprising a part of the
Units underlying the Representative's Class B
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Warrants. See "Management," "Underwriting" and "Certain Transactions." Although
the Company's Board of Directors has the power to issue any or all of such
shares without stockholder approval, the Company has agreed with the
Representative that for a period of 18 months from the date of this Prospectus,
and for up to six additional months if the Extension Criteria have been
satisfied, it will not issue (other than pursuant to this offering) any shares
of Common Stock or grant Common Stock purchase options or warrants without the
consent of the Representative, except in connection with effecting a Business
Combination. See "Underwriting." Although the Company has no commitments as of
the date of this Prospectus to issue any shares of Common Stock other than as
described in this Prospectus, the Company will, in all likelihood, issue a
substantial number of additional shares in connection with or following a
Business Combination. To the extent that additional shares of Common Stock are
issued, the Company's stockholders would experience dilution of their respective
ownership interests in the Company. Additionally, if the Company issues a
substantial number of shares of Common Stock in connection with or following a
Business Combination, a change in control of the Company may occur which may
affect, among other things, the Company's ability to utilize net operating loss
carryforwards, if any. Furthermore, the issuance of a substantial number of
shares of Common Stock may adversely affect prevailing market prices, if any,
for the Common Stock and could impair the Company's ability to raise additional
capital through the sale of its equity securities. See "Proposed Business" and
"Description of Securities."
The Company's Certificate of Incorporation also authorizes the issuance of
1,000,000 shares of preferred stock (the "Preferred Stock"), with such
designations, powers, preferences, rights, qualifications, limitations and
restrictions of such series as the Board of Directors, subject to the laws of
the State of Delaware, may determine from time to time. Accordingly, the Board
of Directors is empowered, without stockholder approval, to issue Preferred
Stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of Common Stock
and Warrants. The Company has agreed with the Representative, however, that for
a period of 18 months from the date of this Prospectus, and for up to six
additional months if the Extension Criteria have been satisfied, it will not
issue any additional shares of Preferred Stock without the consent of the
Representative, except in connection with the consummation of a Business
Combination. In addition, the Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company does not currently intend to issue
any shares of Preferred Stock, there can be no assurance that the Company will
not do so in the future. As of the date of this Prospectus, the Company has
outstanding 94 shares of Preferred Stock, designated as Series A Preferred
Stock, which shares are non-voting and convertible to 94,000 shares of Common
Stock upon consummation of the first Business Combination. See "Proposed
Business" and "Description of Securities -- Series A Preferred Stock."
VOTING BY PRESENT STOCKHOLDERS
Upon consummation of this offering, the Company's directors and executive
officers will collectively own 52,500 shares of Common Stock and options to
purchase 133,333.3 units, each unit being identical to the Units issued in this
offering, representing approximately 15.2% of the issued and outstanding shares
of Common Stock (assuming no exercise of the Underwriters' over-allotment
option, the Representative's Unit Purchase Warrants or the Representative's
Class B Warrants or the conversion of the Series A Preferred Stock) and
approximately 15.2% of the voting power of the issued and outstanding shares of
Common Stock (subject to the foregoing assumptions). In the election of
directors, stockholders are not entitled to cumulate their votes for nominees.
Accordingly, as a practical matter, management may be able to elect all of the
Company's directors and otherwise direct the affairs of the Company. See
"Principal Stockholders," "Certain Transactions" and "Description of
Securities."
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OTC BULLETIN BOARD; NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF
OFFERING PRICE; LACK OF PUBLIC MARKET FOR SECURITIES
Prior to this offering, there has been no public trading market for the
Units, the Common Stock or the Warrants. The initial public offering prices of
the Units and the Class B Warrants and the respective exercise prices and terms
of the Warrants have been arbitrarily determined by negotiations between the
Company and the Representative and bear no relationship to such established
valuation criteria such as assets, book value or prospective earnings.
NASDAQ has recently adopted a policy whereby it will not list the securities
of a "blind pool" company. The Representative is seeking approval for listing of
the securities on the OTC Bulletin Board. The OTC Bulletin Board is an NASD
sponsored and operated inter-dealer automated quotation system for equity
securities not included in the NASDAQ system. The OTC Bulletin Board has only
recently been introduced as an alternative to "pink sheet" trading of
over-the-counter securities. Consequently, the liquidity and stock price of the
Company's securities in the secondary market may be adversely affected. There is
no assurance that a regular trading market will develop for any of the Company's
securities after this offering or that, if developed, any such market will be
sustained. Moreover, there can be no assurance that the Company's securities
will be listed on NASDAQ or any national securities exchanges following the
consummation of a Business Combination. See "Underwriting."
H.J. Meyers & Co., Inc., the Representative, intends to serve as the market
maker for the Company's securities. Neither the Company nor anyone acting on the
Company's behalf will take affirmative steps to request or encourage any other
broker-dealers to act as market makers for the Company's securities. To date,
there have not been any preliminary discussions or understandings between the
Company and any potential market makers, other than H.J. Meyers & Co., Inc.,
regarding the participation of such market makers in the future trading market,
if any, for the Company's securities.
Moreover, no member of management of the Company or any promoter or anyone
else acting at the Company's direction will recommend, encourage or advise
investors to open brokerage accounts with any broker-dealer making a market in
the Company's securities and the Company does not intend to influence investors
with regard to their decisions as to whether to hold or sell their securities of
the Company.
IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION
This offering involves an immediate and substantial dilution of $.57 per
share between the pro forma net tangible book value per share after the offering
of $9.43 and the initial public offering price of $10.00 per share allocable to
each share of Common Stock included in the Units (assuming no value is
attributed to the Class A Warrants included in the Units). The existing
stockholders of the Company, including its executive officers and directors,
acquired their shares of Common Stock at prices substantially lower than the
initial public offering price and, accordingly, new investors will bear
substantially all of the risks inherent in an investment in the Company.
Similarly, if and to the extent that the net tangible book value per share of
the securities of the Target Business being acquired (when divided by the number
of shares of the Common Stock to be issued) is less per share than the Company's
current net tangible book value per share, the Company's public stockholders
will suffer further dilution, since the issuance of such shares would result in
an immediate dilution of the net tangible book value per share of the then
consolidated financial position of the Company and the business being acquired.
See "Dilution."
POSSIBLE NEED TO SECURE NEW OFFICE SPACE
The Company, pursuant to an oral agreement, utilizes and will utilize the
offices of Mitchell & Co., Ltd. ("Mitchell & Co."), a company controlled by
David J. Mitchell, a stockholder of the Company and the Company's Chairman and
Chief Executive Officer, until the Company effects a Business Combination. The
Company will pay Mitchell & Co. $2,500 per month for rent, office and
secretarial services following completion of this offering. Management is
unaware of any circumstances under which the Company's utilization of these
offices, through management's own initiative, may be
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changed. In the event the Company, for whatever reason, is no longer able to
avail itself of this arrangement, it may be forced to secure new office space
and retain adequate secretarial assistance. There can be no assurance that the
Company, if required, could secure such new office space and retain such
secretarial assistance on favorable terms, if at all. Failure to maintain a
business office could adversely affect the Company's operations. See "Proposed
Business -- Facilities."
COMPLIANCE WITH PENNY STOCK RULES
The Company's securities will not initially be considered "penny stock" as
defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and the rules thereunder, since the price of each security is $5 or more. If the
price per security for any of the Company 's Units, Common Stock, Class A
Warrants or Class B Warrants were to drop below $5, that particular security of
the Company may come within the definition of a "penny stock". Unless such
security is otherwise excluded from the definition of "penny stock," the penny
stock rules apply with respect to that particular security. One such exemption
from the definition of a "penny stock" is for securities of an issuer which has
assets in excess of $5 million, as represented by audited financial statements.
In the present situation, the Company will have assets in excess of $5 million
and expects to have audited financial statements (in addition to those included
in this Prospectus) shortly after its Registration Statement is declared
effective with the Securities and Exchange Commission. Once such audited
financial statements have been obtained, none of the securities of the Company
will be considered "penny stock," even if their price falls below $5, so long as
the requirements for the other exception from the penny stock rules are met.
However, until such time as the Company has obtained audited financial
statements, the selling price of each security must be $5 or more in order for
such security not to be classified as a "penny stock."
The penny stock rules require a broker-dealer prior to a transaction in
penny stock, not otherwise exempt from the rules, to deliver a standardized risk
disclosure document prepared by the Commission that provides information about
penny stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
sales person in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that the broker-dealer, not otherwise exempt from
such rules, must make a special written determination that the penny stock is
suitable for the purchaser and receive the purchaser's written agreement to the
transaction. These disclosure rules have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules. If any security of the Company becomes subject to the penny
stock rules, it may become more difficult to sell such securities. Such
requirements, if applicable, could result in reduction in the level of trading
activity for that particular security of the Company and could make it more
difficult for investors to sell that particular security. No assurance can be
given that any security of the Company will continue not to be classified as a
penny stock.
SHARES ELIGIBLE FOR FUTURE SALE
None of the 106,000 shares of Common Stock outstanding as of the date of
this Prospectus are eligible for sale under Rule 144 ("Rule 144") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). However,
the 20,000 Placement Shares and the 94,000 shares of Common Stock issuable upon
conversion of the Company's outstanding Series A Preferred Stock will be
registered under the Securities Act for sale at the time of a Business
Combination and will be freely tradable at that time, subject, however, to the
volume limitations of Rule 144 and CDIJ's agreement not to sell or otherwise
transfer such shares until 60 days after the first Business Combination in the
case of such 94,000 shares. In general, under Rule 144, as currently in effect,
subject to the satisfaction of certain other conditions, a person, including an
affiliate of the Company (or persons whose shares are aggregated), who has owned
restricted shares of Common Stock beneficially for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the Common Stock is quoted on
26
<PAGE>
an exchange or NASDAQ, the average weekly trading volume during the four
calendar weeks preceding the sale. A person who has not been an affiliate of the
Company for at least three months immediately preceding the sale and who has
beneficially owned the shares of Common Stock to be sold for at least three
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above. No prediction can be made as to the effect, if
any, that sales of such shares of Common Stock or the availability of such
shares for sale will have on the market prices for shares of Common Stock or
Warrants prevailing from time to time. Nevertheless, the sale of substantial
amounts of Common Stock in the public market would likely adversely affect
prevailing market prices for the Common Stock and Warrants and could impair the
Company's ability to raise capital through the sale of its equity securities.
See "Shares Eligible for Future Sale." The shares of Common Stock owned
immediately prior to the date hereof by all of the stockholders of the Company,
including the Placement Shares, will be placed in escrow. In addition, the
holders of the Placement Shares have agreed not to directly or indirectly sell,
offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of the Placement Shares without the prior
written consent of the Company until the earlier of 24 months from the date such
shares were issued (November 15, 1995) or 60 days following the consummation of
the first Business Combination. Furthermore, all of the holders of Founders'
Shares have agreed not to, directly or indirectly, sell, offer to sell, grant an
option for the sale of, transfer, assign, pledge, hypothecate or otherwise
encumber any of their shares of Common Stock or options to purchase Units (and
the securities issuable upon the exercise thereof) without the prior written
consent of the Company until two years from the date that the Founders' Shares
were issued (August 18, 1995) but in no event earlier than 120 days following
the consummation of the first Business Combination, subject to any additional
terms, conditions or restrictions that may be imposed in connection with the
consummation of a Business Combination. The Company has agreed with the
Representative that it will not grant such consent without the consent of the
Representative. See "Certain Transactions," "Shares Eligible for Future Sale,"
"Description of Securities" and "Underwriting."
STATE BLUE SKY REGISTRATION; RESTRICTED RESALES OF THE SECURITIES
The ability to register or qualify for sale the Units, the shares of Common
Stock and Class A Warrants comprising the Units and the Class B Warrants for
both initial sale and secondary trading will be limited because a significant
number of states have enacted regulations pursuant to their securities or
so-called "blue sky" laws restricting or, in many instances, prohibiting, the
sale of securities of "blind pool" issuers such as the Company within that
state. In addition, many states, while not specifically prohibiting or
restricting "blind pool" companies, would not register the securities to be
offered in this offering for sale in their states. Because of these regulations,
the Company has registered the securities being offered in this offering, or an
exemption from registration has been obtained (or is otherwise available), only
in the states of Colorado, Delaware, Florida, Georgia, Hawaii, Illinois,
Louisiana, Maryland, New York, Rhode Island and South Carolina and in the
District of Columbia (the "Primary Distribution States") and initial sales may
only be made in such jurisdictions. More specifically, the Company has
registered the securities by filing in Colorado, by coordination in Delaware,
Illinois, Maryland, Rhode Island and South Carolina and by notification in
Florida, Louisiana and New York. Exemptions from registration have been obtained
(or are otherwise available) in Georgia, Hawaii and the District of Columbia. In
addition, such securities will be immediately eligible for resale in the
secondary market in each of the Primary Distribution States and, pursuant to an
exemption provided to any nonissuer transaction except when directly or
indirectly for the benefit of an affiliate of the issuer, in the Commonwealth of
Pennsylvania. Such securities will be eligible for resale in the secondary
market 90 days after the date hereof in the states of Maine, Missouri, New
Mexico and Rhode Island and 180 days after the date hereof in the states of
Alabama, Oklahoma and South Dakota, in each case pursuant to an exemption
provided to a company which has securities registered pursuant to Section 12 of
the Exchange Act for the time period indicated. Because of regulations enacted
to prohibit the sale of securities of "blind pool" companies as well as the
unavailability of exemptions provided to companies whose securities are listed
on an exchange or are eligible
27
<PAGE>
for inclusion in recognized securities manuals such as Standard & Poor's
Corporation Records, it is not anticipated that a secondary trading market for
the Company's securities will develop in any of the other 31 states until
subsequent to consummation of a Business Combination, if at all.
Florida residents who purchase Class B Warrants will be unable to exercise
these warrants to purchase Units unless and until the Units issuable upon
exercise of the Class B Warrants have been registered for sale in Florida or are
established to be exempt from the requirement of such registration. Florida law
generally precludes the registration of securities that are not listed on a
securities exchange or the NASDAQ System when the offering price of such
securities is $5.00 or less per share. Because the "exercise price" of Class B
Warrants is $.125, the "offering price" of the Units issuable upon exercise of
the Class B Warrants could be considered not greater than $5.00 if the offering
price of the Class B Warrants is not added to its exercise price in making that
determination. For this reason, no permit to sell the Units issuable upon
exercise of the Class B Warrants in Florida has been obtained. There can be no
assurance that the Units issuable upon exercise of the Class B Warrants will
ever be registered in Florida or established to be exempt from the requirement
of such registration.
USE OF PROCEEDS
The net proceeds to the Company after deducting underwriting discounts and
estimated expenses (including the Representative's non-accountable expense
allowance) are estimated to be $8,710,000 ($10,065,028 if the Underwriters'
over-allotment option is exercised in full). Approximately 81% of the gross
proceeds of this offering (representing an amount equal to $8,000,000 gross
proceeds from the sale of the Units) will be held in an escrow account
maintained by the Proceeds Escrow Agent, until the earlier of written
notification by the Company to the Proceeds Escrow Agent (i) of the Company's
completion of a transaction or series of transactions in which at least 50% of
the gross proceeds from this offering is committed to a specific line of
business as a result of a Business Combination (including any redemption
payments), or (ii) to distribute the escrowed funds, in connection with a
liquidation of the Company, to the then holders of the Common Stock purchased as
part of the Units sold in this offering or in the open market thereafter. All
proceeds held in the escrow account will be invested, until released, in
short-term United States government securities, including treasury bills, cash
and equivalents.
The Company will use the net proceeds of this offering, together with the
income earned thereon, principally in connection with effecting a Business
Combination, including selecting and evaluating potential Target Businesses and
structuring and consummating a Business Combination (including possible payment
of finder's fees or other compensation to persons or entities which provide
assistance or services to the Company). The Company will not effect a Business
Combination with a Target Business unless the Fair Market Value of such business
is greater than 80% of the net assets of the Company at the time of such
consummation of a Business Combination. The Company has no present intention of
either loaning any of the proceeds of this offering to any Target Business or
purchasing a minority interest in any Target Business. Management is unaware of
any circumstances under which this policy, through management's own initiative,
may be changed. The Company does not have discretionary access to the monies in
the escrow account, including income earned on such amounts, and stockholders of
the Company will not receive any distribution of income (other than in
connection with the liquidation of the Company) or have any ability to direct
the use or distribution of such income. Thus, such income will cause the amount
in escrow to increase. The Company cannot use the escrowed amounts to pay the
costs of evaluating potential Business Combinations. The Company will use the
proceeds from the sale of the Class B Warrants (i) to repay indebtedness, (ii)
to pay the balance of a $100,000 license fee, or $90,000, to Bright pursuant to
a license agreement executed by Bright and the Company, (iii) to cover all the
expenses incurred by the Company in this offering, including the Underwriters'
discounts and the Representative's non-accountable expense allowance, and (iv)
to pay the costs of evaluating potential Business Combinations, including
investment banking fees, the fees of the Proceeds Escrow Agent and the costs of
business, legal and accounting due diligence on prospective Target Businesses.
See "Proposed Business -- Servicemark License." Such funds also will
28
<PAGE>
be used for the general and administrative expenses of the Company, including
legal and accounting fees and administrative support expenses in connection with
the Company's reporting obligations to the Commission. The Company does not
anticipate such fees and administrative expenses will exceed $100,000 per year.
The Company's anticipated uses of the net proceeds from the sale of the Class B
Warrants (assuming no exercise of the Underwriters' over-allotment option) are
quantified as follows:
<TABLE>
<CAPTION>
USE OF PROCEEDS AMOUNT PERCENTAGE
- ------------------------------------------------------------------- ------------- -----------
<S> <C> <C>
Escrow Account (1)................................................. $ 480,000 31.6%
Non-accountable Expense Allowance (2).............................. 295,200 19.5
Repayment of Indebtedness.......................................... 100,000 6.6
License Fee........................................................ 90,000 5.9
Expenses of Offering............................................... 169,600 11.2
Evaluation of Potential Business Combination....................... 382,000 25.2
------------- -----
$ 1,516,800 100.0%
------------- -----
------------- -----
</TABLE>
- ------------------------
(1) Represents the amount of the proceeds from the sale of the Class B Warrants
to be added to the Escrow Account to be maintained by the Proceeds Escrow
Agent, which amount equals the Underwriters' discount with respect to the
sale of the Units (assuming no exercise of the Underwriters' over-allotment
option). See "The Company -- Escrow of Offering Proceeds."
(2) Represents the non-accountable expense allowance payable to the Underwriters
in an amount equal to 3% of the gross proceeds from the sale of Units and
Class B Warrants (assuming no exercise of the Underwriters' over-allotment
option). See "Underwriting."
The Company may seek to issue additional securities if it requires
additional funds to meet its operating and administrative expenses. The Company
has agreed with the Representative that for a period of 18 months from the date
of this Prospectus and for up to six additional months if the Extension Criteria
have been satisfied, it will not issue (other than pursuant to this offering)
any securities or grant options or warrants to purchase any securities of the
Company without the consent of the Representative.
The Company anticipates that it will use a portion of the net proceeds of
the offering to repay indebtedness to several lenders evidenced by a series of
notes (the "Investor Notes"). The amount of this indebtedness is $100,000 plus
interest computed at the rate of 8% per year from November 15, 1995. The
proceeds of the borrowings under the Investor Notes were used to finance this
offering, including legal, accounting, printing and other costs. The Investor
Notes bear interest at 8% per year and both interest and principal are payable
in full upon the closing of this offering or May 15, 1997, whichever is earlier.
Following receipt of the net proceeds from the sale of the Class B Warrants
in this offering, the Company believes it will have sufficient available funds,
assuming that a Business Combination is not consummated, to operate for at least
the next 24 months. To the extent that Common Stock is used as consideration to
effect a Business Combination, the net proceeds of this offering not theretofore
expended will be used to finance the operations (including the possible
repayment of debt) of the Target Business. No cash compensation will be paid to
any officer or director until after the consummation of the first Business
Combination. However, the Company will pay rent for office space and a fee for
secretarial services to Mitchell & Co., Ltd., an affiliate of the Company's
Chairman and Chief Executive Officer of $2,500 per month commencing upon the
closing of this offering. See "Proposed Business -- Facilities." Since the role
of present management after a Business Combination is uncertain, the Company has
no ability to determine what remuneration, if any, will be paid to such persons
after a Business Combination. No portion of the gross proceeds from this
offering will be paid to the Company's officers, directors, their affiliates or
associates for expenses of this offering. Management is not aware of any
circumstances under which the aforementioned policy may be changed.
29
<PAGE>
The net proceeds from the sale of Class B Warrants in this offering, not
immediately required for the purposes set forth above, will be invested in
general debt obligations of the United States Government or other high-quality,
short-term interest-bearing investments, provided, however, that the Company
will attempt not to invest such net proceeds in a manner which may result in the
Company being deemed to be an investment company under the Investment Company
Act. The Company believes that, in the event a Business Combination is not
effected in the time allowed and to the extent that a significant portion of the
net proceeds from the sale of the Class B Warrants in this offering is not used
in evaluating various prospective Target Businesses, the interest income derived
from investment of the net proceeds from the sale of the Class B Warrants during
such period may be sufficient to defray continuing general and administrative
expenses, as well as costs relating to compliance with securities laws and
regulations (including associated professional fees). To the extent that a
Business Combination is not effected in the time allowed and the Company's
stockholders determine not to liquidate the Company, the Company believes that
such interest income, together with a small portion of the net proceeds from the
sale of the Class B Warrants in this offering, may be sufficient to defray
continuing expenses for a period of several additional years until the Company
consummates a Business Combination. If such remaining proceeds are insufficient
to maintain the operations of the Company, management will attempt to secure
additional financing or will again recommend the liquidation of the Company to
the stockholders. Since all of the present holders of the Company's Common Stock
have agreed to waive their respective rights to participate in a liquidation
distribution occurring prior to the first Business Combination, all of the
assets of the Company, including any interest and income earned on the proceeds
of this offering, which may be distributed upon such liquidation would be
distributed to the owners of the Common Stock other than the present
stockholders and to the holders of the Company's Series A Preferred Stock.
The Company will not pay ten percent (10%) or more in the aggregate of the
net proceeds of this offering (through repayment of indebtedness or otherwise)
to NASD members, affiliates, associated persons or related persons.
30
<PAGE>
DILUTION
The difference between the public offering price per share of Common Stock
(assuming no value is attributed to the Class A Warrants included in the Units)
and the pro forma net tangible book value per share of Common Stock of the
Company after this offering constitutes the dilution to investors in this
offering. Net tangible book value per share is determined by dividing the net
tangible book value of the Company (total tangible assets less total
liabilities) by the number of outstanding shares of Common Stock.
At June 30, 1996, net tangible book value of the Company was $(151,545) or
$(1.43) per share of Common Stock. After giving effect to the sale of 800,000
shares of Common Stock included in the Units offered hereby (and assuming no
value is attributed to the Class A Warrants included in such Units) and 320,000
Class B Warrants offered hereby and the initial application of the estimated net
proceeds therefrom, the pro forma net tangible book value of the Company at June
30, 1996, would be $8,547,279 or $9.43 per share, representing an immediate
increase in net tangible book value of $10.86 per share to existing stockholders
and an immediate dilution of $.57 per share to investors purchasing Units in
this offering ("New Investors"). The following table illustrates the foregoing
information with respect to dilution to New Investors on a per share basis
(assuming no value is attributed to the Warrants included in the Units):
<TABLE>
<CAPTION>
Public offering price per share of Common Stock (1)(2)............. $ 10.00
<S> <C> <C>
---------
Net tangible book value per share of Common Stock before this
offering.......................................................... $ (1.43)
Increase attributable to this offering............................. $ 10.86
---------
Pro forma net tangible book value per share of Common Stock after
this offering (3)................................................. 9.43
---------
Dilution to New Investors.......................................... $ .57
---------
---------
</TABLE>
The following table sets forth, with respect to existing stockholders and
investors in this offering, a comparison of the number shares of Common Stock
acquired from the Company, the percentage ownership of such shares, the total
consideration paid, the percentage of total consideration paid and the average
price per share:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED (1) TOTAL CONSIDERATION (1)
---------------------- -------------------------- PRICE
AMOUNT PERCENTAGE AMOUNT PERCENTAGE PER SHARE
--------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.............................. 106,000 11.7% $ 53,600 0.6% $ .51
New Investors...................................... 800,000 88.3 8,000,000(2) 99.4 $ 10.00
--------- ----- ------------- ----- -----------
906,000 100.0% $ 8,053,600 100.0%
--------- ----- ------------- -----
--------- ----- ------------- -----
</TABLE>
- ------------------------
(1) If the Underwriters' over-allotment option is exercised in full, the
investors in this offering will have paid $9,200,000 for 920,000 shares of
Common Stock, representing 99.8% of the total consideration for
approximately 89.7% of the total number of shares of Common Stock then
outstanding. The foregoing tables also assume no exercise of the
Representative's Unit Purchase Warrants, the Representative's Class B
Warrants, warrants owned by the Company's directors and executive officers
or the Warrants, or conversion of the Series A Preferred Stock. See
"Underwriting" and "Description of Capital Stock -- Series A Preferred
Stock."
(2) Assumes that no value is attributable to the Class A Warrants, and excludes
the consideration paid for the Class B Warrants.
(3) Pro forma net tangible book value after this offering assumes the initial
application of estimated net proceeds to the Company (after payment of all
offering expenses, including the Representatives' non-accountable expense
allowance) of $295,200. See "Use of Proceeds."
31
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996, and as adjusted to give effect to the sale of the Units and the Class
B Warrants being offered hereby:
<TABLE>
<CAPTION>
HISTORICAL AS ADJUSTED(1)
---------- --------------
<S> <C> <C>
Note Payable................................................................ $ 79,424 --
---------- --------------
Common Stock, subject to possible redemption, 160,000 shares at redemption
value (3).................................................................. $ -- $ 1,600,000
Preferred Stock, $.01 par value, 100 shares authorized, None outstanding, 94
shares subscribed for; 1,000,000 shares authorized, 94 shares issued and
outstanding as adjusted.................................................... 1 1
Subscription Receivable..................................................... (9,400) --
Common Stock, $.01 par value, 200,000 shares authorized, 106,000 shares
issued and outstanding; 10,000,000 shares authorized, 906,000 shares issued
and outstanding, as adjusted (2)........................................... 1,060 9,060
Additional paid in capital.................................................. 61,939 6,986,147
Deficit accumulated during the development stage............................ (27,353) (47,929)
---------- --------------
Total capitalization...................................................... $ 52,071 $ 8,547,279
---------- --------------
---------- --------------
</TABLE>
- --------------------------
(1) Adjusted to give effect to the sale of 800,000 Units and the 320,000 Class B
Warrants offered hereby at the public offering price of $10.00 per Unit and
$5.75 Class B per Warrant, respectively, and the receipt by the Company of
the estimated net proceeds (after the payment of all offering expenses,
including the Representative's non-accountable expense allowance) of
$8,710,000. See "Use of Proceeds."
(2) Excludes a total of 2,360,666.6 shares of Common Stock, consisting of: (i)
800,000 shares of Common Stock reserved for issuance upon the exercise of
the Class A Warrants, (ii) 320,000 shares of Common Stock reserved for
issuance upon exercise of the Units underlying the Class B Warrants, (iii)
320,000 shares of Common Stock reserved for issuance upon exercise of the
Class A Warrants comprising a part of the Units underlying the Class B
Warrants, (iv) 120,000 shares of Common Stock included in the Units subject
to the Underwriters' over-allotment option, (v) 120,000 shares of Common
Stock reserved for issuance upon the exercise of the Class A Warrants
included in the Units subject to the Underwriters' over-allotment option,
(vi) 48,000 shares of Common Stock reserved for issuance upon exercise of
the Units underlying the Class B Warrants subject to the Underwriters'
over-allotment option, (vii) 48,000 shares of Common Stock reserved for
issuance upon exercise of the Class A Warrants comprising a part of the
Units underlying the Class B Warrants subject to the Underwriters'
over-allotment option, (viii) 266,666.6 shares of Common Stock reserved for
issuance upon exercise of options for Units granted to executive officers of
the Company, (ix) 94,000 shares of Common Stock reserved for issuance upon
conversion of the Company's outstanding Series A Preferred Stock, which
shares of Common Stock will be offered for sale by this Prospectus at the
time of a Business Combination, (x) 80,000 shares of Common Stock included
in the Units reserved for issuance upon exercise of the Representative's
Unit Purchase Warrants, (xi) 80,000 shares of Common Stock reserved for
issuance upon the exercise of the Class A Warrants included in the Units
reserved for issuance upon exercise of the Representative's Unit Purchase
Warrants, (xii) 32,000 shares of Common Stock included in the Units reserved
for issuance upon exercise of the Representative's Class B Warrants, and
(xiii) 32,000 shares of Common Stock reserved for issuance upon exercise of
Class A Warrants comprising a part of the Units underlying the
Representative's Class B Warrants. See "Underwriting" and "Certain
Transactions."
(3) In the event the Company consummates a Business Combination, the redemption
rights afforded to the non-affiliated public stockholders may result in the
conversion into cash of up to 20% of the aggregate number of shares held by
the non-affiliated public stockholders at a per share redemption price equal
to (A) the greater of (i) the Company's net worth or (ii) the amount of
proceeds of the Company in the escrow account (including interest earned
thereon) divided by (B) the number of shares held by non-affiliated public
stockholders.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is currently in the development stage and is in the process of
raising capital. All activity of the Company to date has been related to its
formation and proposed financing. The Company's ability to commence operations
is contingent upon obtaining adequate financial resources through this offering.
All of the Company's costs to date have been paid out of available cash. The
Company will use the net proceeds of this offering, together with the income and
interest earned thereon, principally in connection with effecting a Business
Combination, including selecting and evaluating potential Target Businesses and
structuring and consummating a Business Combination (including possible payment
of finder's fees or other compensation to persons or entities which provide
assistance or services to the Company). The Company does not have discretionary
access to the income on the monies in the escrow account and stockholders of the
Company will not receive any distribution of the income (except in connection
with a liquidation of the Company) or have any ability to direct the use or
distribution of such income. Thus, such income will cause the amount in escrow
to increase. The Company cannot use the escrowed amounts to pay the costs of
evaluating potential Business Combinations and will use the proceeds from the
sale of the Class B Warrants (i) to repay indebtedness, (ii) to pay the balance
of a $100,000 license fee, or $90,000, to Bright pursuant to a license agreement
executed by Bright and the Company, (iii) to cover all the expenses incurred by
the Company in this offering, including the Underwriters' discounts, the
Representatives' non-accountable expense allowance with respect to both the
Units and the Class B Warrants, and the Proceeds Escrow Agent, and (iv) to pay
the costs of evaluating potential Business Combinations, including investment
banking fees and the costs of business, legal and accounting due diligence on
prospective Target Businesses. In addition, such funds will be used for the
general and administrative expenses of the Company, including legal and
accounting fees and administrative support expenses in connection with the
Company's reporting obligations to the Commission. The Company does not
anticipate such fees and administrative expenses will exceed $100,000 per year.
Following receipt of the net proceeds from the sale of the Class B Warrants in
this offering, the Company will have sufficient available funds, assuming that a
Business Combination is not consummated, to operate for at least the next 24
months. To the extent that Common Stock is used as consideration to effect a
Business Combination, the balance of the net proceeds of this offering not
theretofore expended will be used to finance the operations of the Target
Business. See "Use of Proceeds." No cash compensation will be paid to any
officer or director until after the consummation of the first Business
Combination. Since the role of present management after a Business Combination
is uncertain, the Company has no ability to determine what remuneration, if any,
will be paid to such persons after a Business Combination.
The net proceeds from the sale of the Class B Warrants in this offering not
immediately required for the purposes set forth above will be invested in
general debt obligations of the United States Government or other high-quality,
short-term interest-bearing investments, provided, however, that the Company
will attempt not to invest such net proceeds in a manner which may result in the
Company being deemed to be an investment company under the Investment Company
Act. The Company believes that, in the event a Business Combination is not
effected in the time allowed and to the extent that a significant portion of the
net proceeds of this offering is not used in evaluating various prospective
Target Businesses, the interest income derived from investment of such net
proceeds during such period may be sufficient to defray continuing general and
administrative expenses, as well as costs relating to compliance with securities
laws and regulations (including associated professional fees).
In the event that the Company does not effect a Business Combination within
18 months from the date of this Prospectus, or 24 months from the date of this
Prospectus if the Extension Criteria have been satisfied, the Company will
submit for stockholder consideration a proposal to liquidate the Company and
distribute to the then holders of Common Stock acquired as part of the Units
sold in this offering or in the open market thereafter, the amount held in the
escrow account. Thereafter, all remaining assets available for distribution will
be distributed to all holders of the Common Stock after
33
<PAGE>
payment of liabilities and after payment of a liquidation distribution of $9,400
to the holders of the Company's Series A Preferred Stock. To the extent that a
Business Combination is not effected in the time allowed and the Company's
stockholders determine not to liquidate the Company, the Company believes that
income from the escrow account, together with a small portion of the net
proceeds from the sale of the Class B Warrants in this offering, may be
sufficient to defray continuing expenses for a short period of time until the
Company consummates a Business Combination. However, because the Company cannot
estimate the amount of the proceeds from the sale of the Class B Warrants that
will be used to pursue a potential Business Combination, it cannot estimate what
amount of funds, if any, might be available to defray expenses or for how long,
if at all, such funds might be sufficient for that purpose. Since all of the
present holders of the Company's Common Stock have agreed to waive their
respective rights to participate in a liquidation distribution occurring prior
to the first Business Combination, all of the assets of the Company, including
any income and interest earned on the proceeds of this offering, which may be
distributed upon such liquidation would be distributed to the owners of the
Common Stock issued as part of the Units in this offering or in the open market
thereafter, after payment of a liquidation distribution of $9,400 to the holders
of the Series A Preferred Stock.
PROPOSED BUSINESS
INTRODUCTION
The Company, a development stage entity, was formed in August 1995 to serve
as a vehicle for the acquisition of, or the merger or consolidation with, a
Target Business. The Company intends to utilize the proceeds of this offering,
equity securities, debt securities, bank borrowings or a combination thereof in
effecting a Business Combination with a Target Business which the Company
believes has significant growth potential. The Company's efforts in identifying
a prospective Target Business are expected to emphasize businesses primarily
located in the United States; however, the Company reserves the right to acquire
a Target Business located primarily elsewhere. While the Company may, under
certain circumstances, seek to effect Business Combinations with more than one
Target Business, as a result of its limited resources the Company will, in all
likelihood, have the ability to effect only a single Business Combination. The
Company may effect a Business Combination with a Target Business which may be
financially unstable or in its early stages of development or growth.
"BLIND POOL" OFFERING
BACKGROUND. As a result of management's broad discretion with respect to
the specific application of the net proceeds of this offering, this offering can
be characterized as a "blind pool" or "blank check" offering. Although
substantially all of the net proceeds of this offering are intended to be
utilized generally to effect a Business Combination, such proceeds are not
otherwise being designated for any more specific purposes. Accordingly,
prospective investors who invest in the Company will do so without an
opportunity to evaluate the specific merits or risks of any one or more Business
Combinations. Consummation of a Business Combination may involve the acquisition
of, or merger or consolidation with, a company that does not need substantial
additional capital but which desires to establish a public trading market for
its shares, while avoiding what it may deem to be the adverse consequences of
undertaking a public offering itself, such as the time delays and significant
expenses incurred to comply with the various Federal and state securities laws
that regulate initial public offerings.
UNSPECIFIED INDUSTRY AND TARGET BUSINESS. The Company will seek to acquire
a Target Business without limiting itself to a particular industry. Most likely,
the Target Business will be primarily located in the United States, although the
Company reserves the right to acquire a Target Business primarily located
outside the United States. In seeking a Target Business, the Company will
consider, without limitation, businesses which (i) offer or provide services or
develop, manufacture or distribute goods in the United States or abroad,
including, without limitation, in the following areas: health care and health
products, educational services, environmental services, consumer-related
products and services (including amusement and/or recreational services),
personal care services, voice and data
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information processing and transmission and related technology development or
(ii) is engaged in wholesale or retail distribution. The Company will not
acquire a Target Business unless the Fair Market Value Test is satisfied. If the
Company determines that the financial statements of a proposed Target Business
do not clearly indicate that the Fair Market Value Test has been satisfied, the
Company will obtain an opinion from an investment banking firm (which is a
member of the NASD) with respect to the satisfaction of such criteria. None of
the Company's directors or its executive officer has had any preliminary contact
or discussions with any representative of any Target Business regarding
consummation of a Business Combination. Accordingly, there is no basis for
investors in this offering to evaluate the possible merits or risks of a
particular industry or the Target Business. In connection with stockholder
approval of a Business Combination, the Company intends to provide stockholders
with complete disclosure documentation, including audited financial statements,
concerning a Target Business. Accordingly, any Target Business that is selected
would need to have audited financial statements or be audited in connection with
the transaction. To the extent the Company effects a Business Combination with a
financially unstable company or an entity in its early stage of development or
growth (including entities without established records of revenue or income),
the Company will become subject to numerous risks inherent in the business and
operations of financially unstable and early stage or potential emerging growth
companies. In addition, to the extent that the Company effects a Business
Combination with an entity in an industry characterized by a high level of risk,
the Company will become subject to the currently unascertainable risks of that
industry. An extremely high level of risk frequently characterizes certain
industries which experience rapid growth. Although management will endeavor to
evaluate the risks inherent in a particular industry or Target Business, there
can be no assurance that the Company will properly ascertain or assess all
risks.
PROBABLE LACK OF BUSINESS DIVERSIFICATION. As a result of the limited
resources of the Company, the Company, in all likelihood, will have the ability
to effect only a single Business Combination. Accordingly, the prospects for the
Company's success will be entirely dependent upon the future performance of a
single business. Unlike certain entities that have the resources to consummate
several Business Combinations or entities operating in multiple industries or
multiple segments of a single industry, it is highly likely that the Company
will not have the resources to diversify its operations or benefit from the
possible spreading of risks or offsetting of losses. The Company's
probable lack of diversification may subject the Company to numerous economic,
competitive and regulatory developments, any or all of which may have a material
adverse impact upon the particular industry in which the Company may operate
subsequent to consummation of a Business Combination. The prospects for the
Company's success may become dependent upon the development or market acceptance
of a single or limited number of products, processes or services. Accordingly,
notwithstanding the possibility of capital investment in and management
assistance to the Target Business by the Company, there can be no assurance that
the Target Business will prove to be commercially viable. The Company has no
present intention of either loaning any of the proceeds of this offering to any
Target Business or of purchasing or acquiring a minority interest in any Target
Business.
OPPORTUNITY FOR STOCKHOLDER EVALUATION OR APPROVAL OF BUSINESS
COMBINATIONS. The investors in this offering will, in all likelihood, neither
receive nor otherwise have the opportunity to evaluate any financial or other
information which will be made available to the Company in connection with
selecting a potential Target Business until after the Company has entered into a
definitive agreement to effectuate a Business Combination. As a result,
investors in this offering will be almost entirely dependent on the judgment of
management in connection with the selection of a Target Business and the terms
of any Business Combination.
Under the Delaware General Corporation Law, various forms of Business
Combinations can be effected without stockholder approval. In addition, the form
of Business Combination will have an impact upon the availability of dissenters'
rights (i.e., the right to receive fair payment with respect to the Common
Stock) to stockholders disapproving of the proposed Business Combination. Under
current Delaware law, only a merger or consolidation may give rise to a
stockholder vote and to
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dissenters' rights. Nevertheless, the Company will afford holders of Common
Stock the right to approve the consummation of any Business Combination, whether
or not such approval would be required under applicable Delaware law. In
connection with such approval, the Company intends to provide stockholders with
complete disclosure documentation, including audited financial statements,
concerning a Target Business. The Company's present stockholders have agreed in
the escrow agreement to which their stock is subject to vote their respective
shares of Common Stock in accordance with the vote of the majority of the shares
voted by all non-affiliated public stockholders of the Company with respect to
the consummation of any Business Combination. Pursuant to the Company's
certificate of incorporation, a Business Combination will not be consummated
unless approved by a vote of two-thirds of the shares of Common Stock voted by
non-affiliated public stockholders (in person or by proxy). In addition, the
Delaware General Corporation Law requires approval of certain mergers and
consolidations by a majority of the outstanding stock entitled to vote.
Even if investors are afforded the right to approve a Business Combination
under the Delaware General Corporation Law, no dissenters' rights to receive
fair payment will be available for stockholders if the Company is to be the
surviving corporation unless the Certificate of Incorporation of the Company is
amended and as a result thereof: (i) alters or abolishes any preferential right
of such stock; (ii) creates, alters or abolishes any provision or right in
respect of the redemption of such shares or any sinking fund for the redemption
or purchase of such shares; (iii) alters or abolishes any preemptive right of
such holder to acquire shares or other securities; or (iv) excludes or limits
the right of such holder to vote on any matter, except as such right may be
limited by the voting rights given to new shares then being authorized of any
existing or new class.
LIMITED ABILITY TO EVALUATE MANAGEMENT OF A TARGET BUSINESS. The role of
the present management of the Company, following a Business Combination, cannot
be stated with any certainty. Although the Company intends to scrutinize closely
the management of a prospective Target Business in connection with its
evaluation of the desirability of effecting a Business Combination with such
Target Business, there can be no assurance that the Company's assessment of such
management will prove to be correct. While it is possible that certain of the
Company's directors or its executive officers will remain associated in some
capacities with the Company following consummation of a Business Combination, it
is unlikely that any of them will devote a substantial portion of their time to
the affairs of the Company subsequent thereto. Moreover, there can be no
assurance that such personnel will have significant experience or knowledge
relating to the operations of the particular Target Business. The Company also
may seek to recruit additional personnel to supplement the incumbent management
of the Target Business. There can be no assurance that the Company will have the
ability to recruit additional personnel or that such additional personnel will
have the requisite skills, knowledge or experience necessary or desirable to
enhance the incumbent management. In addition, there can be no assurance that
the future management of the Company will have the necessary skills,
qualifications or abilities to manage a public company intending to embark on a
program of business development.
SELECTION OF A TARGET BUSINESS AND STRUCTURING OF A BUSINESS
COMBINATION. Management of the Company will have substantial flexibility in
identifying and selecting a prospective Target Business within the specified
businesses. However, the Company's flexibility is limited to the extent that it
must satisfy the Fair Market Value Test. If the Company determines that the
financial statements of a proposed Target Business do not clearly indicate that
the Fair Market Value Test has been satisfied, the Company will obtain an
opinion from an investment banking firm that is a member of the NASD with
respect to the satisfaction of such criteria. As a result, investors in this
offering will be almost entirely dependent on the judgment of management in
connection with the selection of a Target Business. In evaluating a prospective
Target Business, management will consider, among other factors, the following:
(i) costs associated with effecting the Business Combination; (ii) equity
interest in and opportunity for control of the Target Business; (iii) growth
potential of the Target Business; (iv) experience and skill of management and
availability of additional personnel of the Target Business; (v) capital
requirements of the Target Business; (vi) competitive position of the Target
Business;
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(vii) stage of development of the Target Business; (viii) degree of current or
potential market acceptance of the Target Business; (ix) proprietary features
and degree of intellectual property or other protection of the Target Business;
(x) the financial statements of the Target Business; and (xi) the regulatory
environment in which the Target Business operates. The Company will retain an
independent investment banking firm which is a member in good standing of the
NASD to assist the Company in identifying, evaluating, structuring and
negotiating potential Business Combinations.
The foregoing criteria are not intended to be exhaustive and any evaluation
relating to the merits of a particular Target Business will be based, to the
extent relevant, on the above factors as well as other considerations deemed
relevant by management in connection with effecting a Business Combination
consistent with the Company's business objectives. In connection with its
evaluation of a prospective Target Business, management anticipates that it will
conduct a due diligence review which will encompass, among other things, meeting
with incumbent management and inspection of facilities, as well as a review of
financial, legal and other information which will be made available to the
Company.
The time and costs required to select and evaluate a Target Business
(including conducting a due diligence review) and to structure and consummate
the Business Combination (including negotiating relevant agreements and
preparing requisite documents for filing pursuant to applicable securities laws
and state "blue sky" and corporation laws) cannot presently be ascertained with
any degree of certainty. The Company's current executive officers and directors
intend to devote only a small portion of their time to the affairs of the
Company and, accordingly, consummation of a Business Combination may require a
greater period of time than if the Company's management devoted their full time
to the Company's affairs. However, each officer and director of the Company will
devote such time as they deem reasonably necessary to carry out the business and
affairs of the Company, including the evaluation of potential Target Businesses
and the negotiation of a Business Combination and, as a result, the amount of
time devoted to the business and affairs of the Company may vary significantly
depending upon, among other things, whether the Company has identified a Target
Business or is engaged in active negotiation of a Business Combination. Any
costs incurred in connection with the identification and evaluation of a
prospective Target Business with which a Business Combination is not ultimately
consummated will result in a loss to the Company and reduce the amount of
capital available to otherwise complete a Business Combination or for the
resulting entity to utilize.
The Company anticipates that various prospective Target Businesses will be
brought to its attention from various non-affiliated sources, including
securities broker-dealers, investment bankers, venture capitalists, bankers,
other members of the financial community and affiliated sources, including,
possibly, the Company's executive officer, directors and their affiliates. While
the Company has not yet ascertained how, if at all, it will advertise and
promote itself, it may elect to publish advertisements in financial or trade
publications seeking potential business acquisitions. While the Company does not
presently anticipate engaging the services of professional firms that specialize
in finding business acquisitions on any formal basis (other than the independent
investment banker), the Company may engage such firms in the future, in which
event the Company may pay a finder's fee or other compensation. In no event,
however, will the Company pay a finder's fee or commission to officers or
directors of the Company or any entity with which they are affiliated for such
service. Moreover, in no event shall the Company issue any of its securities to
any officer, director or promoter of the Company, or any of their respective
affiliates or associates, in connection with activities designed to locate a
Target Business. See "Management -- Conflicts of Interest." In addition, the
Company has agreed with the Representative that any finder's fee in connection
with the Company's first Business Combination will require approval by the
Company's Board of Directors. The Representative may act as finder in connection
with a Business Combination and receive compensation for such service, the
amount and form of which will be subject to negotiation at the time of
introduction of the Target Business to the Company. See "Underwriting."
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As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. The Company
will evaluate the possible tax consequences of any prospective Business
Combination and will endeavor to structure a Business Combination so as to
achieve the most favorable tax treatment to the Company, the Target Business and
their respective stockholders. There can be no assurance that the Internal
Revenue Service or relevant state tax authorities will ultimately assent to the
Company's tax treatment of a particular consummated Business Combination. To the
extent the Internal Revenue Service or any relevant state tax authorities
ultimately prevail in recharacterizing the tax treatment of a Business
Combination, there may be adverse tax consequences to the Company, the Target
Business and their respective stockholders. Tax considerations as well as other
relevant factors will be evaluated in determining the precise structure of a
particular Business Combination, which could be effected through various forms
of a merger, consolidation or stock or asset acquisition.
The Company may utilize cash derived from the net proceeds of this offering,
equity securities, debt securities or bank borrowings or a combination thereof
as consideration in effecting a Business Combination. Although the Company's
Board of Directors will have the power to issue any or all of the authorized but
unissued shares of Common Stock following the consummation of this offering, the
Company has agreed with the Representative that, for a period of 18 months from
the date of this Prospectus, and for up to six additional months if the
Extension Criteria have been satisfied, it will not issue (other than pursuant
to this offering) any securities or grant options or warrants to purchase any
securities of the Company without the consent of the Representative, except in
connection with effecting a Business Combination. Although the Company has no
commitments as of the date of this Prospectus to issue any shares of Common
Stock or options or warrants, other than as described in this Prospectus, the
Company will, in all likelihood, issue a substantial number of additional shares
in connection with the consummation of a Business Combination. To the extent
that such additional shares are issued, dilution to the interests of the
Company's stockholders will occur. Additionally, if a substantial number of
shares of Common Stock are issued in connection with the consummation of a
Business Combination, a change in control of the Company may occur which may
affect, among other things, the Company's ability to utilize net operating loss
carryforwards, if any.
There currently are no limitations on the Company's ability to borrow funds
to effect a Business Combination. However, the Company's limited resources and
lack of operating history may make it difficult to borrow funds. The amount and
nature of any borrowings by the Company will depend on numerous considerations,
including the Company's capital requirements, potential lenders' evaluation of
the Company's ability to meet debt service on borrowings and the then prevailing
conditions in the financial markets, as well as general economic conditions. The
Company does not have any arrangements with any bank or financial institution to
secure additional financing and there can be no assurance that such arrangements
if required or otherwise sought, would be available on terms commercially
acceptable or otherwise in the best interests of the Company. The inability of
the Company to borrow funds required to effect or facilitate a Business
Combination, or to provide funds for an additional infusion of capital into a
Target Business, may have a material adverse effect on the Company's financial
condition and future prospects, including the ability to effect a Business
Combination. To the extent that debt financing ultimately proves to be
available, any borrowings may subject the Company to various risks traditionally
associated with indebtedness, including the risks of interest rate fluctuations
and insufficiency of cash flow to pay principal and interest. Furthermore, a
Target Business may have already incurred debt financing and, therefore, all the
risks inherent thereto.
COMPETITION
The Company expects to encounter intense competition from other entities
having business objectives similar to that of the Company. Many of these
entities are well established and have extensive experience in connection with
identifying and effecting business combinations directly or through affiliates.
Many of these competitors possess greater financial, technical, human and other
resources than the Company and there can be no assurance that the Company will
have the ability to
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compete successfully. The Company's financial resources will be limited in
comparison to those of many of its competitors. Further, such competitors will
generally not be required to seek the prior approval of their own stockholders,
which may enable them to close a Business Combination more quickly than the
Company. This inherent competitive limitation may compel the Company to select
certain less attractive Business Combination prospects. There can be no
assurance that such prospects will permit the Company to satisfy its stated
business objectives.
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS
In the event that the Company succeeds in effecting a Business Combination,
the Company will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly large number of
competitors including competitors with increasingly greater financial,
marketing, technical, human and other resources than the initial competitors in
the industry. The degree of competition characterizing the industry of any
prospective Target Business cannot presently be ascertained. There can be no
assurance that, subsequent to a Business Combination, the Company will have the
resources to compete effectively, especially to the extent that the Target
Business is in a high-growth industry.
POSSIBLE LIQUIDATION OF THE COMPANY
In the event that the Company does not effect a Business Combination within
18 months from the date of this Prospectus, or 24 months from the date of this
Prospectus if the Extension Criteria have been satisfied, the Company will
submit for stockholder consideration a proposal to liquidate the Company and
distribute to the then holders of Common Stock acquired as part of the Units
sold in this offering or in the open market thereafter, the amounts in the
interest bearing escrow account. Thereafter, all remaining assets available for
distribution will be distributed to the non-affiliated public stockholders of
the Company after payment of liabilities and after the payment of a liquidation
distribution of $9,400 to the Holders of the Series A Preferred Stock. Since the
proceeds to the Company from the sale of the Class B Warrants will be used (i)
to repay indebtedness, (ii) to pay the balance of a $100,000 license fee, or
$90,000, to Bright pursuant to a license agreement executed by Bright and the
Company, (iii) to cover all the Company's expenses incurred in this offering,
including the Underwriters' discounts and non-accountable expense allowance, and
(iv) to fund the Company's operating expenses, including possible investment
banking fees and the costs of business, legal and accounting due diligence on
prospective Target Businesses, until the consummation of a Business Combination
the amount per share remaining for distribution, in the event of a liquidation
of the Company, to the holders of the Common Stock acquired as part of the Units
sold in this offering or in the open market thereafter, and exclusive of any
income earned from the escrow account, will be approximately equal to the
initial public offering price per Unit in this offering ($10.00 per Unit
assuming no value is attributed to the Warrants included in the Units offered
hereby). There can be no assurance that the Company will effect a Business
Combination within such period. All of the Company's present stockholders
including the Company's executive officers and other directors and their
affiliates are required to vote their shares of Common Stock in accordance with
the vote of the majority of all non-affiliated public stockholders of the
Company with respect to any liquidation proposal. Holders of Warrants, however,
will only be entitled to vote on any liquidation proposal, and allowed to
participate in any liquidation distribution, if they purchase shares of Common
Stock in this offering or on the open market thereafter, but only as to any
shares of Common Stock so purchased. Present stockholders including officers,
directors and their affiliates will not participate in any liquidating
distribution with respect to the shares of Common Stock owned by them as of the
date hereof.
CERTAIN SECURITIES LAWS CONSIDERATIONS
The Company has filed an application with the Commission to register the
Units, the Common Stock, the Class A Warrants and the Class B Warrants under the
provisions of Section 12(g) of the Exchange Act, and it will use its best
efforts to continue to maintain such registration until there has been a
consummation of a Business Combination or a liquidation of the Company. Such
registration
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will require the Company to comply with periodic reporting, proxy solicitation
and certain other requirements of the Exchange Act, including the requirement
that it submit to the Commission, prior to its dissemination, any proxy material
to be furnished to stockholders in connection with a proposed Business
Combination.
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the relative size of
the acquisition. Consequently, the Company will only be able to effect a
Business Combination with a prospective Target Business that has available
audited financial statements or has financial statements which can be audited.
FACILITIES
The Company, pursuant to an oral agreement, utilizes and will utilize the
offices of Mitchell & Co., a corporation controlled by David J. Mitchell, a
stockholder of the Company and the Company's Chairman and Chief Executive
Officer, until the acquisition of a Target Business. Following completion of
this offering, the Company will pay Mitchell & Co., $2,500 per month for rent,
office and secretarial services. Management is unaware of any circumstances
under which the Company's utilization of these offices, through management's own
initiative, may be changed.
SERVICEMARK LICENSE
The servicemarks SMA(2)RTSM and Specialized Merger and Acquisition Allocated
Risk TransactionSM are owned by Bright. Bright has granted the Company a
non-exclusive license to use, for the sole purpose of marketing this offering,
the SMA(2)RTSM and Specialized Merger and Acquisition Allocated Risk
TransactionSM servicemarks in consideration of a royalty equal to $100,000, of
which $10,000 has been paid and the balance of $90,000 is payable upon the
closing of this offering. There can be no assurance that a third party owning or
using a similar servicemark or trademark will not object to, or seek to
prohibit, the Company's use of the SMA(2)RTSM or Specialized Merger and
Acquisition Allocated Risk TransactionSM servicemarks. See "Certain
Transactions."
EMPLOYEES
As of the date of this Prospectus, the Company has no full time employees.
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MANAGEMENT
DIRECTORS AND OFFICERS
The current directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- -----------------------------------------------------------------------
<S> <C> <C>
David J. Mitchell 35 Chairman of the Board, Chief Executive Officer, Director
C. Thomas McMillen 44 Secretary, Treasurer, Director
A. J. Nassar 40 Director
</TABLE>
DAVID J. MITCHELL has been President of Mitchell & Co., Ltd., a New
York-based merchant banking company founded by him, since January 1991. He has
been Chairman of the Board, Chief Executive Officer and a director of the
Company since October 1996. Mr. Mitchell has also been a partner of Petherton
Capital Corporation, a privately owned real estate investment company, since
March 1992. Prior to 1991, Mr. Mitchell was employed in various positions at
several investment banking firms. Mr. Mitchell is a director of Holmes
Protection Group, a NASDAQ-listed company, Kellstrom Industries, Inc., a
NASDAQ-listed company, and Bogen Communications International, Inc., an American
Stock Exchange Company, as well as several private companies. Mr. Mitchell also
serves as a director and/or officer of various not-for-profit universities and
foundations.
C. THOMAS MCMILLEN has been Chairman and Chief Executive Officer of Complete
Wellness Centers, Inc., a physician practice management company founded by him,
since November 1994. He has been a director, Treasurer and Secretary of the
Company since October 1996. Mr. McMillen has been president of McMillen &
Company, Inc., a health care consulting firm, since January 1993. He served as
Chief Administrative Officer of CliniCorp, Inc. from November 1993 to March 1994
where he was responsible for a turnaround effort that resulted in CliniCorp's
first profit for the quarter ended November 1994. Until December 1994, Mr.
McMillen was a director of Clinicorp, which filed for bankruptcy in June 1996.
Mr. McMillen serves on the Board of Directors of Commodore Applied Technologies,
Inc., Integrated Communication Network, Inc. and CHG, Inc.
Mr. McMillen served three consecutive terms in the United States House of
Representatives from 1987 to 1993, representing the Fourth Congressional
District of Maryland. Prior to serving in Congress, Mr. McMillen played for
eleven seasons in the National Basketball Association for the New York Knicks,
the Atlanta Hawks and the Washington Bullets. Mr. McMillen was awarded a Rhodes
Scholarship and was a member of the United States Olympic Basketball Team in
1972. He currently serves as Co-chair of the President's Council on Physical
Fitness and Sports.
A.J. NASSAR has served as President, Chief Executive Officer, Treasurer and
a Director of The Maxim Group, Inc. since December 1990. From 1986 to 1990, Mr.
Nassar served as Vice President and Chief Operating Officer of Kenny Carpet and
Linoleum, Inc., a multistore retail carpet chain in western New York. He was
previously employed by Trend Carpet Mills and Queen Carpet Mills, both of which
are carpet manufacturers, where he was responsible for cultivating new markets
in the northeastern United States. In addition, Mr. Nassar has served as a
managing partner of K.K.N. Investment, a privately held real estate development
and holding company.
All directors hold office until the next annual meeting of stockholders and
the election and qualification of their successors. Directors receive no
compensation for serving on the Board of Directors other than the reimbursement
of reasonable expenses incurred in attending meetings. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board. The
Company has not entered into employment agreements or other understandings with
its directors or executive officers concerning compensation. No cash
compensation will be paid to any officer or director until after the
consummation of the first Business Combination. Since the role of present
management after the consummation of a Business Combination is uncertain, the
Company has no ability to determine what remuneration, if any, will be paid to
such persons after the consummation of a Business Combination.
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No family relationships exist among any of the named directors or the
Company's officers. No arrangement or understanding exists between any such
director or officer and any other person pursuant to which any director or
officer was elected as a director or officer of the Company.
There are no agreements or understandings for any officer or director of the
Company to resign at the request of another person and none of the officers or
directors of the Company are acting on behalf of, or will act at the direction
of, any other person.
The holder of the Company's outstanding Series A Preferred Stock is CDIJ, an
indirect affiliate of Bright, a private company which owns and has licensed to
the Company, for the purpose of marketing this offering, the servicemarks
SMA(2)RTSM and Specialized Merger and Acquisition Allocated Risk TransactionSM.
Other than as set forth in this Prospectus, no other relationships exist
between and among management stockholders and non-management stockholders.
Moreover, there are no arrangements, agreements or understandings between
non-management stockholders and management under which non-management
stockholders may directly or indirectly participate in or influence the
management of the Company's affairs. The Company has no knowledge of whether or
not non-management stockholders will exercise their voting right to continue to
elect the current directors to the Company's board. See "Conflict of Interest."
Each of the Company's officers and directors has agreed with the Company and
the Representatives that he will not, at any time, purchase any of the Class B
Warrants being sold in this offering. In addition, management stockholders have
agreed among themselves that they may not actively negotiate or otherwise
consent to the sale or purchase of any portion of their Common Stock or warrants
as a condition to or in connection with a proposed merger or acquisition
transaction. Management is not aware of any circumstances under which this
policy, through their own initiative, may be changed. Moreover, none of the
proceeds from this offering may be used, directly or indirectly, to purchase any
of management's shares of Common Stock or warrants.
OPTIONS TO PURCHASE UNITS
The Company has granted options to purchase 50,000 Units to each of David J.
Mitchell and C. Thomas McMillen in consideration for their service as directors
and officers of the Company and for 33,333.3 Units to Manhattan Associates LLC,
a special founder of the Company. The Units are identical to those to be sold
pursuant to this offering and each consists of one share of Common Stock and one
Class A Warrant to purchase one share of Common Stock at a price of $9.00 per
share. The options are exercisable for a period of three years from the date of
a Business Combination at an exercise price of $12.50 per Unit. The options are
non-qualified options subject to the rules contained in Section 83 of the
Internal Revenue Code. The options are fully vested; however, the options will
be cancelled as to any holder who is no longer a director or executive officer
prior to the first Business Combination. The shares issuable upon exercise of
the options and underlying warrants may not be sold or otherwise transferred
until 120 days after the first Business Combination.
CONFLICTS OF INTEREST
None of the Company's directors or officers is required to commit his full
time to the affairs of the Company and it is likely that such persons will not
devote a substantial amount of time to the affairs of the Company. Such
personnel will have conflicts of interest in allocating management time among
various business activities. As a result, the consummation of a Business
Combination may require a greater period of time than if the Company's
management devoted their full time to the Company's affairs. However, each
officer and director of the Company will devote such time as he deems reasonably
necessary to carry out the business and affairs of the Company, including the
evaluation of potential Target Businesses and the negotiation of a Business
Combination and, as a result, the amount of time devoted to the business and
affairs of the Company may vary significantly depending upon, among other
things, whether the Company has identified a Target Business or is engaged in
active negotiation of a Business Combination. Prior to their involvement with
the Company, none of the directors or officers of the Company has been involved
in any "blind pool" or "blank check" offerings. To avoid certain conflicts of
interest, the officers and directors of the Company and owners
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of five percent or more of the Company's Common Stock (after giving effect to
this offering and to the exercise of warrants owned by the Company's directors
and executive officers but without giving effect to the exercise, if any, of the
Representative's Unit Purchase Warrants, the Representative's Class B Warrants,
or the Warrants or the conversion of the Series A Preferred Stock), will be
required to agree that they will not, until the completion of the first Business
Combination, directly or indirectly, introduce a suitable proposed acquisition,
merger or consolidation candidate to another "blind pool." For such purposes,
"suitable" shall mean any business opportunity which, under Delaware law, may
reasonably be required to be presented to the Company. Certain of the other
persons associated with the Company are and may in the future become affiliated
with other entities engaged in business activities similar to those intended to
be conducted by the Company. In the course of their other business activities,
they may become aware of investment and business opportunities which may be
appropriate for presentation to the Company as well as the other entities with
which they are affiliated. Such persons may have conflicts of interest in
determining to which entity a particular business opportunity should be
presented. In general, officers and directors of a corporation incorporated
under the laws of the State of Delaware are required to present certain business
opportunities to such corporation. Under Delaware law, officers and directors
generally are required to bring business opportunities to the attention of such
corporation if: (i) such corporation could financially undertake the
opportunity; (ii) the opportunity is within the corporation's line of business;
and (iii) it would not be fair to the corporation and its stockholders for the
opportunity not to be brought to the attention of such corporation. Accordingly,
as a result of multiple business affiliations, certain of the Company's key
personnel may have similar legal obligations relating to presenting certain
business opportunities to multiple entities. In addition, conflicts of interest
may arise in connection with evaluations of a particular business opportunity by
the Board of Directors with respect to the foregoing criteria. There can be no
assurance that any of the foregoing conflicts will be resolved in favor of the
Company.
To minimize potential conflicts of interest, the Company is restricted from
pursuing any transactions with entities affiliated (by stock ownership or
otherwise) with an officer or director of the Company without the prior approval
of a majority of the Company's disinterested directors.
The directors and officers of the Company have agreed that neither they nor
any entity with which they are affiliated will be entitled to receive any
finder's fee in the event that they introduce the Company to a prospective
Target Business with which a Business Combination is ultimately consummated. In
addition, none of the directors or executive officers of the Company may
actively negotiate or otherwise consent to the purchase of any portion of such
person's securities in the Company as a condition to, or in connection with, a
proposed Business Combination.
In connection with any stockholder vote relating either to approval of a
Business Combination or the liquidation of the Company due to the failure of the
Company to effect a Business Combination within the time allowed, all of the
Company's present stockholders, including all of its officers and directors,
have agreed to vote all of their respective shares of Common Stock in accordance
with the vote of the majority of the shares voted by all non-affiliated public
stockholders of the Company (in person or by proxy) with respect to such
Business Combination or liquidation.
PRIOR BLANK CHECK OFFERINGS
None of the Company's officers, directors, promoters or other persons
engaged in management-type activities has been previously involved with any
blank check or blind pool offerings with the exception of Bright and David J.
Mitchell, the Company's Chairman and Chief Executive Officer. Bright's
experience is comprised of its corporate predecessor's licensing the SMA(2)RTSM
structure and servicemarks to Initial Acquisition Corp. and Bright licensing the
SMA(2)RTSM structure and servicemarks to Orion Acquisition Corp. II. From
December 1993 until June 1995, Mr. Mitchell served as a director and Secretary
of Israel Tech Acquisition Corporation, a public company, which acquired the
assets of, and changed its name to, Kellstrom Industries, Inc. in June 1995.
From March 1995 until August 1995, Mr. Mitchell served as a director, Chief
Financial Officer, Treasurer and Secretary of European Gateway Acquisition
Corporation, a public company, which acquired Bogen Communication, Inc. and
changed its name to Bogen Communications International, Inc. in August 1995. Mr.
Mitchell continues to serve as a director of both Kellstrom Industries, Inc. and
Bogen Communications International, Inc., which are both public companies, as of
the date of this Prospectus.
43
<PAGE>
CERTAIN TRANSACTIONS
In August 1995, the Company issued an aggregate of 52,500 shares of Common
Stock to its directors and their affiliates for a purchase price of $.10 per
share as follows: to Manhattan Associates, LLC, an affiliate of Arthur H.
Goldberg, Stanley Kreitman and Marshall Manley (who were then directors of the
Company), 37,500 shares and to A.J. Nassar, 15,000 shares. In November 1995, the
Company issued the 20,000 Placement Shares to five accredited investors at a
purchase price of $0.50 per share (before deducting offering expenses). These
five investors also loaned $100,000 to the Company, which amount is to be repaid
out of the proceeds of this offering. See "Use of Proceeds."
In October 1996, Manhattan Associates LLC, sold 25,000 shares of Common
Stock in two equal portions of 12,500 shares to David J. Mitchell and Thomas
McMillen for a purchase price of $.10 per share or $2,500 in the aggregate. Both
of such purchasers agreed to be bound by the restrictions on shares held by
officers and directors of the Company, which restrictions are described
elsewhere in this Prospectus. See "The Company--Escrow of Outstanding Shares and
Restriction on Sale of Outstanding Shares."
The Company has entered into an oral agreement with Mitchell & Co. to lease
office space and to be provided with secretarial and office services commencing
upon the closing of this offering. The Company will pay $2,500 per month to
Mitchell & Co. for rent and such services. See "Proposed Business --
Facilities."
In September 1995, Bright's predecessor granted the Company a non-exclusive
license to use, for the sole purpose of marketing this offering, Bright's
SMA(2)RTSM and Specialized Merger and Acquisition Allocated Risk TransactionSM
servicemarks. In consideration of Bright granting the non-exclusive license to
the Company, the Company is paying a total of $100,000.00 to Bright. The value
to be paid by the Company was negotiated at arm's length, although no objective
criteria were used to measure the value of the license. One important
consideration, however, is that Bright's corporate predecessor previously
licensed the SMA(2)RTSM name and structure to Initial Acquisition Corp. and
Bright licensed the SMA(2)RTSM name and structure Orion Acquisition Corp. II,
which successfully completed initial public offerings in May 1995 and July 1996,
respectively. The Company believes that the value it is paying for the license
to use the SMA(2)RTSM structure and servicemarks in this offering will enhance
the prospects of successfully completing this offering because the investment
community will be more likely to readily understand the SMA(2)RTSM structure by
associating it with the previous SMA(2)RTSM transaction.
CDIJ, an indirect affiliate of Bright, is the holder of the Company's
outstanding 94 shares of Series A Preferred Stock, which it purchased for
$9,400, and 1,000 shares of Common Stock, which it purchased for $.10 per share.
CDIJ paid cash for the Common Stock and issued a promissory note at an interest
rate of 8% payable upon the earlier of one year from the date of the note or the
closing of this offering for the Preferred Stock.
The purchase prices for all Common Stock and Preferred Stock sold by the
Company prior to the date of this Prospectus were established by negotiations
between the Board of Directors and the various investors.
The Company will require that any future transactions between the Company
and its officers, directors, principal stockholders and the affiliates of the
foregoing persons be on terms no less favorable to the Company than could
reasonably be obtained in arm's length transactions with independent third
parties and that any such transactions also be approved by a majority of the
Company's directors disinterested in the transaction. Management of the Company
has not yet ascertained the amount of remuneration that will be payable to the
Company's officers and directors following completion of a Business Combination.
Mr. Mitchell and the other directors of the Company may be deemed to be
"promoters" of the Company.
44
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of the date hereof, and as
adjusted to reflect the sale of the shares of Common Stock offered by the
Company hereby, based on information obtained from the persons named below, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known by the Company to be the owner of more than 5% of the outstanding shares
of Common Stock, (ii) each director, and (iii) all executive officers and
directors as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES OF COMMON
AMOUNT AND STOCK
NATURE OF ------------------------------
BENEFICIAL BEFORE AFTER
NAME OR GROUP (1) OWNERSHIP (2) OFFERING OFFERING (3)(4)
- ------------------------------------------------------------------------- ------------- ----------- -----------------
<S> <C> <C> <C>
David J. Mitchell 12,500 11.8% 4.9%
C. Thomas McMillen 12,500 11.8% 4.9%
Manhattan Associates, LLC 12,500 11.8% 4.9%
A.J. Nassar 15,000 14.1% 1.7%
Jude Spak 12,000 11.3% 1.3%
All executive officers and directors
as a group (four persons) 52,500(5) 49.5% 15.2%
</TABLE>
- ------------------------
(1) Each person and entity listed has an address in care of the Company.
(2) Unless otherwise noted, the Company believes that each person named in the
table has sole voting and investment power with respect to all shares of
Common Stock beneficially owned by him or it.
(3) Includes options to purchase 50,000, 50,000 and 33,333.3 Units, each unit to
be identical to the Units issued in this offering, to each of Mr. Mitchell,
Mr. McMillen and Manhattan Associates, LLC, respectively.
(4) Assumes no exercise of (i) the Underwriters' over-allotment option; (ii) the
Representative's Unit Purchase Warrants, (iii) the Representative's Class B
Warrants, (iv) the Warrants included in the Units offered hereby or (iv) any
other warrants owned by any of the named persons and assumes no conversion
of the Series A Preferred Stock. See "Underwriting" and "Description of
Capital Stock -- Series A Preferred Stock."
(5) Excludes options held by the Company's executive officers and directors to
purchase up to 100,000 Units in the aggregate for $12.50 per Unit. See
"Management -- Options to Purchase Units."
The shares of Common Stock and Series A Preferred Stock owned by the
Company's present stockholders, including the directors and executive officer of
the Company, excluding the Placement Shares, will be placed in escrow until the
earlier of (i) the consummation of the first Business Combination, or (ii) 18
months from the date of this Prospectus, subject to extension to 24 months from
the date of this Prospectus if the Extension Criteria have been satisfied.
During such period, such stockholders will not be able to sell or otherwise
transfer their respective shares of Common Stock (with certain exceptions), but
will retain all other rights as stockholders of the Company, including, without
limitation, the right to vote such shares of Common Stock (subject to their
agreement, as discussed above, to vote their shares in accordance with the vote
of a majority of the shares voted by non-affiliated public stockholders with
respect to the consummation of a Business Combination or liquidation proposal)
but excluding the right to request the redemption of escrowed shares pursuant to
a Redemption Offer. Subject to compliance with applicable securities laws, any
such holder may transfer his, her or its Common Stock held in escrow to a member
of his family or to a trust established for the benefit of himself, herself, or
a family member or to another affiliated entity (with the consent of the
Representative which will not be unreasonably withheld) or in the event of his
or her death by will or operation of law, provided that any such transferee
shall agree as a condition to
45
<PAGE>
such transfer to be bound by the restrictions on transfer applicable to the
original holder and, in the case of present stockholders, that the transferor
(except in the case of death) will continue to be deemed the beneficial owner
(as defined in Regulation 13d-3 promulgated under the Exchange Act).
Each of the Company's officers and directors has agreed with the Company and
the Representative that he will not, at any time, purchase any of the Class B
Warrants being sold in this offering.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company will be authorized to issue 10,000,000 shares of Common Stock,
par value $.01 per share. As of the date of this Prospectus, 106,000 shares of
Common Stock are outstanding, held of record by 16 persons. The holders of
Common Stock are entitled to one vote for each share held of record on all
matters to be voted on by stockholders. There is no cumulative voting with
respect to the election of directors, with the result that the holders of more
than 50% of the shares voting for the election of directors can elect all of the
directors. The holders of Common Stock are entitled to receive dividends when,
as and if declared by the Board of Directors out of the funds legally available
therefor. In the event of the liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining available for distribution after payment of liabilities and after
provision has been made for each class of stock, if any, having preference over
the Common Stock. All of the present stockholders of the Company have agreed to
waive their respective rights to participate in a liquidation distribution prior
to the consummation of the first Business Combination. Holders of shares of
Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
All of the outstanding shares of Common Stock are, and the shares of Common
Stock to be issued in this offering, when issued against payment therefor, will
be, validly authorized and issued, fully paid and nonassessable. The Company has
agreed with the Representatives that for a period of 18 months from the date of
this Prospectus, and for up to six additional months if the Extension Criteria
have been satisfied, it will not issue (other than pursuant to this offering)
any shares of Common Stock or grant Common Stock purchase options or warrants
without the consent of the Representatives, except in connection with effecting
a Business Combination.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of "blank check" preferred stock, par value $.01 per share (the
"Preferred Stock"), with such designations, powers, preferences, rights,
qualifications, limitations and restrictions of such series as the Board of
Directors, subject to the laws of the State of Delaware, may determine from time
to time. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue Preferred Stock with dividend, liquidation, conversion,
voting or other rights which could adversely affect the voting power or other
rights of the holders of Common Stock. The Company has agreed with the
Representatives, however, that for a period of 18 months from the date of this
Prospectus, and for up to six additional months if the Extension Criteria have
been satisfied, it will not issue any shares of Preferred Stock without the
consent of the Representatives, except in connection with a consummation of a
Business Combination. In addition, the Preferred Stock could be utilized, under
certain circumstances, as a method of discouraging, delaying or preventing a
change in control of the Company. Although the Company does not currently intend
to issue any additional shares of Preferred Stock, there can be no assurance
that the Company will not do so in the future.
SERIES A PREFERRED STOCK
As of the date of this Prospectus, the Company has outstanding 94 shares of
Series A Preferred Stock, owned by CDIJ. The purchase price for such shares,
$100.00 per share or $9,400 in the aggregate, is payable to the Company, with
interest, upon the earlier of November 15, 1996 or the closing of this offering.
The Series A Preferred Stock is non-voting, does not bear a dividend and has a
liquidation value of $100.00 per share. Each share of Series A Preferred Stock
will be convertible into
46
<PAGE>
1000 shares of Common Stock for a period one year following the consummation of
a Business Combination. In the event that a Business Combination does not occur
within 18 months of the date of this Prospectus, or 24 months if the Extension
Criteria are satisfied, the Series A Preferred Stock will be redeemed by the
Company for its liquidation value. The Company has agreed to register the Common
Stock issuable upon conversion of the Series A Preferred Stock at the time of a
Business Combination.
WARRANTS
The statements under this caption relating to the Warrants are merely a
summary and do not purport to be complete. However, such summary contains all
information with respect to such Warrants which the Company believes to be
material to investors. Such summary is qualified in its entirety by express
reference to the warrant agreement ("Warrant Agreement") between the Company and
American Stock Transfer & Trust Company, copies of which have been filed with
the Securities and Exchange Commission. Copies of the Warrant Agreement are
available for inspection at the offices of the Company.
As of the date hereof, each Class A Warrant will entitle the registered
holder thereof to purchase one share of Common Stock at a price of $9.00 per
share, subject to adjustment in certain circumstances. The Class A Warrants will
be initially exercisable upon the consummation of a Business Combination and
expire at 5:00 p.m., New York City time, on the fifth anniversary of the date of
this Prospectus.
As of the date hereof, each Class B Warrant will entitle the registered
holder thereof to purchase one Unit, comprised of one share of Common Stock and
one Class A Warrant to purchase one share of Common Stock, at a price of $.125
per Unit, subject to adjustment in certain circumstances. The Class B Warrants
will be initially exercisable upon the consummation of a Business Combination
and expire at 5:00 p.m., New York City time, on the first anniversary of the
date of a consummation of a Business Combination.
The Units and the Class B Warrants will be sold and traded separately. The
Common Stock and the Class A Warrants will become separable and transferable at
such time as the Representative may determine, but in no event before the
Separation Date. The Company may call the Warrants for redemption, each as a
class, in whole and not in part, at the option of the Company, at a price of
$.05 per Warrant at any time after the consummation of a Business Combination,
upon not less than 30 days' prior written notice, provided that the last sale
price of the Common Stock, if the Common Stock is listed for trading on an
exchange or interdealer quotation system which provides last sale prices, or,
the average of the closing bid and asked quotes, if the Common Stock is listed
for trading on an interdealer quotation system which does not provide last sale
prices, on all 10 of the trading days ending on the day immediately prior to the
day on which the Company gives notice of redemption, has been $11.00 or higher.
The warrantholders shall have exercise rights until the close of business on the
date fixed for redemption.
The exercise price and number of shares of Common Stock issuable on exercise
of the Class A Warrants are subject to adjustments under certain circumstances,
including in the event of a stock dividend, recapitalization, reorganization,
merger or consolidation of the Company. However, the Warrants are not subject to
adjustment for issuances of Common Stock at a price below their respective
exercise prices.
The Company has the right, in its sole discretion, to decrease the exercise
price of the Warrants for a period of not less than 30 days on not less than 30
days' prior written notice to the warrantholders, subject to compliance with
applicable laws such as, but not limited to, any prior notice provisions imposed
by the Commission, the NASD or any exchange on which the Company's Common Stock
is then listed. In addition, the Company has the right, in its sole discretion,
to extend the expiration date of the Warrants on five business days' prior
written notice to the warrantholders.
47
<PAGE>
The Warrants may be exercised upon surrender of the warrant certificate on
or prior to the applicable expiration date of the Class A Warrant or Class B
Warrant, as the case may be, at the offices of the warrant agent, with the
exercise form on the reverse side of the warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (by
certified check, payable to the Company) to the warrant agent for the number of
Warrants being exercised. The warrantholders do not have the rights or
privileges of holders of Common Stock, including, without limitation, the right
to vote on any matter presented to stockholders for approval.
The Company is required either to maintain the effectiveness of the
Registration Statement or to file a new registration statement with the
Commission, with respect to the securities underlying the Warrants prior to the
exercise of the Warrants and to deliver a prospectus as required by Section
10(a)(3) of the Securities Act with respect to such securities to the holders of
all Warrants prior to the exercise or redemption of such Warrants (except, if in
the opinion of counsel to the Company, such registration is not required under
the federal securities laws or if the Company receives a letter from the staff
of the Commission stating that it would not take any enforcement action if such
registration is not effected). In addition, and subject to the foregoing, the
Company is required to have a current Registration Statement on file with the
Commission and to effect appropriate qualifications under the laws and
regulations of the states in which the initial holders of the Warrants reside in
order to comply with applicable laws in connection with such exercise. There can
be no assurance, however, that the Company will be in a position to be able to
keep its Registration Statement current or to effect appropriate action under
applicable state securities laws, the failure of which may result in the
inability to exercise the Warrants or effect a resale or other disposition of
Common Stock issued upon such exercise. Florida residents who purchase Class B
Warrants will be unable to exercise these warrants to purchase Units unless and
until the Units issuable upon exercise of the Class B Warrants have been
registered for sale in Florida or are established to be exempt from the
requirement of such registration. Florida law generally precludes the
registration of securities that are not listed on a securities exchange or the
NASDAQ System when the offering price of such securities is $5.00 or less per
share. Because the "exercise price" of Class B Warrants is $.125, the "offering
price" of the Units issuable upon exercise of the Class B Warrants could be
considered not greater than $5.00 if the offering price of the Class B Warrants
is not added to its exercise price in making that determination. For this
reason, no permit to sell the Units issuable upon exercise of the Class B
Warrants in Florida has been obtained. There can be no assurance that the Units
issuable upon exercise of the Class B Warrants will ever be registered in
Florida or established to be exempt from the requirement of such registration.
No fractional shares will be issued upon exercise of the Warrants. However,
if a warrantholder exercises all Warrants then owned of record by him, the
Company will pay to such warrantholder, in lieu of the issuance of any
fractional share which is otherwise issuable to such warrantholder, an amount in
cash based on the market value of the Common Stock on the last trading day prior
to the exercise date.
DIVIDENDS
The Company does not expect to pay dividends prior to the consummation of a
Business Combination. Future dividends, if any, will be contingent upon the
Company's revenues and earnings, if any, capital requirements and general
financial condition subsequent to the consummation of a Business Combination.
The payment of dividends subsequent to the consummation of a Business
Combination will be within the discretion of the Company's then Board of
Directors. The Company presently intends to retain all earnings, if any, for use
in the Company's business operations and accordingly, the Board does not
anticipate declaring any dividends in the foreseeable future.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
The transfer and registrar agent for the Units and the Common Stock and the
transfer agent, registrar and warrant agent for the Warrants is American Stock
Transfer & Trust Company.
48
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering (but prior to a Business
Combination), the Company will have 906,000 shares of Common Stock outstanding
(1,026,000 shares if the Underwriters' over-allotment option is exercised in
full). Of these shares, the 800,000 shares sold by the Company in this offering
(920,000 shares if the Underwriters' over-allotment option is exercised in full)
will be freely tradable without restriction or further registration under the
Securities Act, except for any shares purchased by an "affiliate" of the Company
(as defined in the Securities Act and the rules and regulations thereunder)
which will be subject to the limitations of Rule 144 promulgated under the
Securities Act. All of the remaining 106,000 shares are deemed to be "restricted
securities", as that term is defined under Rule 144 promulgated under the
Securities Act, as such shares were issued in private transactions not involving
a public offering. None of such shares are eligible for sale under Rule 144.
However, 20,000 of such shares (the Placement Shares) along with the 94,000
shares issuable upon conversion of the outstanding Series A Preferred Stock are
expected to be registered under the Securities Act at the time of the Business
Combination.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated), who has beneficially owned
the restricted shares of Common Stock to be sold for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the Common Stock is quoted on an exchange or NASDAQ, the
average weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least the three
months immediately preceding the sale and who has beneficially owned the shares
of Common Stock to be sold for at least three years is entitled to sell such
shares under Rule 144 without regard to any of the limitations described above.
The holders of Founders' Shares have agreed not to, directly or indirectly,
sell, offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of their shares of Common Stock, 85,000
shares in the aggregate, until two years from the date the outstanding Founders'
Shares were issued (August 18, 1995), provided that such shares may in no event
be sold or otherwise transferred until 120 days following the completion of the
first Business Combination, subject to any additional terms, conditions or
restrictions that may be imposed in connection with the consummation of a
Business Combination. In addition, the holders of the Placement Shares have
agreed not to directly or indirectly sell, offer to sell, grant an option for
the sale of, transfer, assign, pledge, hypothecate or otherwise encumber any of
the Placement Shares without the prior written consent of the Company until the
earlier of 24 months from the date such shares were issued (November 15, 1995)
or 60 days following the consummation of the first Business Combination. The
Company has agreed with the Representative that it will not grant such consents
without the consent of the Representative.
Prior to this offering, there has been no market for the Common Stock, the
Units or the Warrants and no prediction can be made as to the effect, if any,
that market sales of restricted shares of Common Stock or the availability of
such shares for sale will have on the market prices prevailing from time to
time. Nevertheless, the possibility that substantial amounts of Common Stock may
be sold in the public market would likely adversely affect prevailing market
prices for the Common Stock, the Units and the Warrants and could impair the
Company's ability to raise capital through the sale of its equity securities.
49
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Company and the Underwriters, the Company has agreed to sell to the Underwriters
named below for whom the Representative is acting as representative, and the
Underwriters have severally and not jointly agreed to purchase, the number of
Units and Class B Warrants set forth opposite their respective names below.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF CLASS B
UNDERWRITER UNITS WARRANTS
- ---------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
H.J. Meyers & Co., Inc................................................
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel to
the Representatives and various other conditions. The nature of the
Underwriters' obligations are such that they are committed to purchase all of
the above Units and Class B Warrants if any are purchased.
As a registered broker-dealer, the Representative is required under the
Exchange Act and the rules promulgated thereunder to maintain minimum net
capital in order to conduct their broker-dealer operations. Currently, the
Representative has sufficient excess net capital to support their broker-dealer
operations, including their underwriting obligations to the Company. In the
event, however, that at any time the Representative should be unable to maintain
their minimum net capital requirements, they will have to cease operations as a
broker-dealer. Any such cessation of operations by the Representative could have
a material adverse effect on the market price and liquidity of the securities
being offered hereby. No assurance can be given, however, that the firm will be
able to maintain its required minimum net capital at all times during or
following the offering described herein.
The Company has been advised by the Representative that the Underwriters
propose to offer the Units and the Class B Warrants directly to the public at
the public offering prices set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $. per Unit
and $. per Class B Warrant. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $. per Unit and $. per Class B Warrant
to certain other dealers. The Representative has informed the Company that they
do not expect sales to discretionary accounts by the Underwriters to exceed 5%
of the securities offered by the Company hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company has
agreed to pay to the Representative a non-accountable expense allowance equal to
three percent of the gross proceeds derived from the sale of the Units and Class
B Warrants underwritten (including the sale of any Units and Class B Warrants
subject to the Underwriters' over-allotment option), $20,000 of which has been
paid to date.
The Company will reimburse the Representative on a nonaccountable basis in
an amount equal to 3% of the gross proceeds of this offering ($295,200 if the
Underwriters' overallotment option is not exercised).
The Company has agreed that no finder's or origination fees or similar
compensation will be paid to any of the Company's officers, directors or 5% or
greater stockholders or their respective affiliates in connection with or to
effect a Business Combination. If the Company enters into any finder's fee
agreement or similar agreement or arrangement with any person or entity other
than the Company's officers, directors or 5% or greater stockholders or their
respective affiliates in connection with or to effect the first Business
Combination (other than the independent investment banker), the finder's fee or
other consideration paid in connection therewith must be approved by the
Company's Board of Directors.
50
<PAGE>
The Company has agreed, in connection with the exercise of Warrants pursuant
to solicitation by the Representative, commencing one year from the date of this
Prospectus, to pay to the Representative an aggregate management fee of 10% of
the respective Warrant exercise prices, 8% of which will be reallowed to any
selected dealer who is a member of the NASD who solicited the exercise (which
may also be the Representative) for each Warrant exercised, provided, however,
that the Representatives will not be entitled to receive such compensation in
any Warrant exercise transaction in which (i) the market price of the Common
Stock of the Company at the time of the exercise is lower than the exercise
price of the Warrants in question; (ii) the Warrants are held in a discretionary
account under the control of the selected dealer; (iii) disclosure of
compensation arrangements is not made, in addition to the disclosure provided in
this Prospectus, in documents provided to holders of the Warrants at the time of
exercise; (iv) the exercise of the Warrants is unsolicited; and (v) the
solicitation of exercise of the Warrants was in violation of Rule 10b-6
promulgated under the 1934 Act. In determining the management fee, the
calculation will exclude 10% of the respective Warrant exercise prices, any
underlying warrants, options or convertible securities. Unless granted an
exemption by the Commission from Rule 10b-6, the Representative will be
prohibited from engaging in any market-making activities or solicited brokerage
activities with regard to the Company's securities during the periods prescribed
by Rule 10b-6 before the solicitation of the exercise of any Warrant until the
later of (a) the termination of such solicitation activity, or (b) the
termination by waiver or otherwise of any right the Representative may have to
receive a fee for the exercise of the Warrants following such solicitations. As
a result, the Representative may be unable to provide a market for the Company's
securities during certain periods while the Warrants are exercisable. The
Company has agreed not to solicit Warrant exercises other than through the
Representative.
The holders of Founders' Shares have agreed not to, directly or indirectly,
sell, offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of their shares of Common Stock, 86,000
shares in the aggregate, or any warrants to purchase Units (and the securities
issuable upon the exercise thereof) without the prior written consent of the
Company until two years from the date the outstanding Founders' Shares were
issued, (August 18, 1995), provided that such shares may in no event be sold or
otherwise transferred until 120 days following the completion of the first
Business Combination, subject to any additional terms, conditions or
restrictions that may be imposed in connection with the consummation of a
Business Combination. An appropriate legend shall be marked on the face of stock
certificates representing all such shares of Common Stock.
The Company has agreed with the Representative that for a period of 18
months from the date of this Prospectus, and for up to six additional months if
the Extension Criteria are satisfied, it will not issue (other than pursuant to
this offering) any securities or grant options or warrants to purchase any
securities of the Company without the consent of the Representative except in
connection with effecting a Business Combination.
The Company has granted to the Representative an option exercisable during
the 30-day period commencing on the date of this Prospectus to purchase from the
Company at the offering price less underwriting discounts, up to an aggregate of
120,000 additional Units and 48,000 additional Class B Warrants for the sole
purpose of covering over-allotments, if any. To the extent that the
Representative exercise such option, the Representative have the right to
require each Underwriter to purchase on a firm commitment basis approximately
the same percentage thereof that the number of Units and Class B Warrants to be
purchased by it or the Underwriters shown, in the above table bears to the total
shown. The Company will be obligated, pursuant to the option, to sell such Units
and Class B Warrants to the Representative or the Underwriters, as the
Representative directs.
In connection with this offering, the Company has agreed to sell to the
Representative, for nominal consideration, the Representative's Warrants. The
Representative's Warrants are initially exercisable at a price of $12.00 per
Unit and $6.90 per Class B Warrant for a period of four years, commencing one
year from the date of this Prospectus. The Units and Class B Warrants issuable
upon exercise of the Representative's Warrants are the same as the Units and
Class B Warrants being sold
51
<PAGE>
in this offering. The Representative's Warrants contain anti-dilution provisions
providing for adjustment of the number of warrants and exercise price under
certain circumstances. The Representative's Warrants grant to the holders
thereof certain rights of registration of the Units and Class B Warrants
issuable upon exercise of the Representative's Warrants.
The Company has also agreed that, for a period of two years form the closing
of this Offering, if it participates in any merger, consolidation or other
transaction which the Representative has brought to the Company (including an
acquisition of assets or stock for which it pays, in whole or in part, with
shares of the Company's Common Stock or other securities), which transaction is
consummated within thirty-six months of the closing of this Offering, then it
will pay for the Representative's services an amount equal to 5% of the first $2
million of value paid or value received in the transaction, 2% of any
consideration above $2 million and less than $4 million and 1% of any
consideration in excess of $4 million. The Company has also agreed that if,
during this two-year period, someone other than the Representative brings such a
merger, consolidation or other transaction to the Company, and if the Company in
writing retains the Representative for consultation or other services in
connection therewith, then upon consummation of the transaction the Company will
pay to the Representative as a fee the appropriate amount as set forth above or
as otherwise agreed to between the Company and the Representative.
Prior to this offering there has been no public market for any of the
Company's securities. Accordingly, the offering prices of the Units and Class B
Warrants and terms of the Class A Warrants underlying the Units were determined
by negotiation between the Company and the Representatives. Factors considered
in determining such price and terms, in addition to prevailing market
conditions, include an assessment of the Company's prospects. The public
offering prices of the Units and Class B Warrants do not bear any relationship
to assets, earnings, book value, or other criteria of value applicable to the
Company and should not be considered an indication of the actual value of the
Units or Class B Warrants. Such prices are subject to change as a result of
market conditions and other factors, and no assurance can be given that the
Units or Class B Warrants can be resold at their respective offering prices.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Nevertheless, it includes
all information concerning such agreements which the Company believes to be
material. Reference is made to copies of each such agreement which are filed as
exhibits to the Registration Statement.
LEGAL MATTERS
The legality of the securities being registered by this Registration
Statement is being passed upon by Greenbaum, Rowe, Smith, Ravin, Davis & Himmel,
Woodbridge, New Jersey. Harter, Secrest & Emery, Rochester, New York has acted
as counsel to the Representatives in connection with this offering.
EXPERTS
The financial statements included in this Prospectus have been audited by
BDO Seidman, LLP, independent certified public accountants, to the extent and
for the period set forth in their report appearing elsewhere herein, and is
included in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") under the
Securities Act with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and this
offering,
52
<PAGE>
reference is made to the Registration Statement, including the exhibits and
schedules filed therewith, copies of which may be obtained at prescribed rates
from the Commission at its principal office at 450 Fifth Street N.W.,
Washington, D.C. 20549, and at the following regional offices of the Commission:
75 Park Place, New York 10007, and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400 Chicago, Illinois, 60604. Descriptions contained in this
Prospectus as to the contents of any agreement or other documents filed as an
exhibit to the Registration Statement are not necessarily complete and each such
description is qualified by reference to such agreement or document.
The Company intends to furnish to its stockholders annual reports containing
financial statements audited and reported upon by its independent public
accountants.
53
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
ORION ACQUISITION CORP. I
(A CORPORATION IN THE DEVELOPMENT STAGE)
JUNE 30, 1996
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
Report of Independent Certified Public Accountants.................................................. F-2
Financial Statements:
Balance sheet as of June 30, 1996................................................................... F-3
Financial statements for the period from August 9, 1995 to June 30, 1996
Statement of operations......................................................................... F-4
Statement of stockholders' equity............................................................... F-5
Statement of cash flows......................................................................... F-6
Notes to financial statements................................................................... F-7 - F-10
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Orion Acquisition Corp. I
New York, NY
We have audited the accompanying balance sheet of Orion Acquisition Corp. I,
(a corporation in the development stage) as of June 30, 1996, and the related
statements of operations, stockholders' equity and cash flows for the period
from August 9, 1995 (inception) to June 30, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Orion Acquisition Corp. I as
of June 30, 1996, and the results of its operations and its cash flows for the
period from August 9, 1995 (inception) to June 30, 1996, in conformity with
generally accepted accounting principles.
BDO Seidman, LLP
New York, New York
August 1, 1996
(except as to Note 5d
which is as of October 16, 1996)
F-2
<PAGE>
ORION ACQUISITION CORP. I
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
JUNE 30, 1996
<TABLE>
<S> <C>
Assets
Current:
Cash........................................................................... $ 33,478
Deferred registration costs (Note 1)........................................... 177,792
---------
$ 211,270
---------
---------
Liabilities and Stockholders' Equity
Current:
Accrued expenses (Note 1)...................................................... $ 105,599
Notes payable, net of discount (Note 5)........................................ 79,424
---------
Total current liabilities.................................................. 185,023
---------
Commitments (Note 4)
Stockholders' equity (Notes 1 and 5):
Convertible preferred stock, $.01 par value shares -- authorized 100;
outstanding none; subscribed 94; liquidation value -- $9,400.................. 1
Subscription receivable........................................................ (9,400)
Common stock, $.01 par value shares -- authorized 200,000; outstanding
106,000....................................................................... 1,060
Additional paid-in capital..................................................... 61,939
Deficit accumulated during the development stage............................... (27,353)
---------
Total stockholders' equity................................................. 26,247
---------
$ 211,270
---------
---------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ORION ACQUISITION CORP. I
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
PERIOD FROM AUGUST 9, 1995 (INCEPTION) TO JUNE 30, 1996
<TABLE>
<S> <C>
General and administrative expenses and debt costs ($24,224)..................... $ 27,353
---------
Net loss......................................................................... $ (27,353)
---------
---------
Net loss per common share........................................................ $ (.26)
---------
---------
Weighted average common shares outstanding....................................... 106,000
---------
---------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ORION ACQUISITION CORP. I
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM AUGUST 9, 1995 (INCEPTION) TO JUNE 30, 1996
<TABLE>
<CAPTION>
DEFICIT
PREFERRED STOCK ACCUMULATED
---------------------------- COMMON STOCK ADDITIONAL DURING THE
SHARES SUBSCRIPTION ---------------------- PAID-IN DEVELOPMENT
SUBSCRIBED AMOUNT RECEIVABLE SHARES AMOUNT CAPITAL STAGE
--------------- ----------- ------------ --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of founders'
shares....................... -- $ -- $ -- 86,000 $ 860 $ 7,740 $ --
Sale of common stock.......... -- -- -- 20,000 200 44,800 --
Subscription receivable....... 94 1 (9,400) -- -- 9,399 --
Net loss...................... -- -- -- -- -- -- (27,353)
--
--- ------------ --------- ----------- ----------- -----------
Balance, June 30, 1996........ 94 $ 1 $ (9,400) 106,000 $ 1,060 $ 61,939 $ (27,353)
--
--
--- ------------ --------- ----------- ----------- -----------
--- ------------ --------- ----------- ----------- -----------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
------------
<S> <C>
Issuance of founders'
shares....................... $ 8,600
Sale of common stock.......... 45,000
Subscription receivable....... --
Net loss...................... (27,353)
------------
Balance, June 30, 1996........ $ 26,247
------------
------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ORION ACQUISITION CORP. I
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
PERIOD FROM AUGUST 9, 1995 (INCEPTION) TO JUNE 30, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss....................................................................... $ (27,353)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of deferred debt costs.......................................... 9,800
Amortization of discount on notes payable.................................... 14,424
Changes in assets and liabilities -- accrued expenses........................ 15,599
---------
Net cash used in operating activities.................................... 12,470
---------
Cash flows from financing activities:
Proceeds from sale of common stock............................................. 53,600
Deferred costs:
Registration................................................................. (87,792)
Debt......................................................................... (9,800)
Proceeds from issuance of notes payable........................................ 65,000
---------
Net cash provided by financing activities................................ 21,008
---------
Net increase in cash............................................................. 33,478
Cash, beginning of period........................................................ --
Cash, end of period.............................................................. $ 33,478
---------
---------
Supplemental disclosures of cash flow information:
The Company received a note for subscribed preferred stock amounting to $9,400,
which is a noncash financing activity.
The Company has recorded a $90,000 liability relating to a license agreement
(Note 1), which is a noncash financing activity.
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
ORION ACQUISITION CORP. I
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEFERRED REGISTRATION COSTS
Orion Acquisition Corp. I (the "Company") has deferred registration costs
(primarily professional fees and a license fee) relating to a public offering
(the "Proposed Offering"). In November 1995, the Company entered into a license
agreement with Bright Licensing Corp. for the right to use certain servicemarks
for the sole purpose of marketing such offering at a cost of $100,000. The
deferred registration costs will be charged to equity upon completion of the
Proposed Offering. Should the Proposed Offering prove to be unsuccessful, these
deferred costs, as well as additional expenses to be incurred, will be charged
to operations.
DEFERRED DEBT COSTS
Net unamortized costs incurred in connection with the notes payable (Note
5(a)) of $9,800 were amortized over six months using the straight-line method.
Amortization expense is $9,800 for the period from August 9, 1995 (inception) to
June 30, 1996.
INCOME TAXES
The Company follows the Financial Accounting Standards Board ("FASB")
Statement No. 109. This statement requires that deferred income taxes be
recorded following the liability method of accounting and be adjusted
periodically when income tax rates change.
As of June 30, 1996, the Company has a net operating loss carryforward of
approximately $27,000 which results in a deferred tax asset of approximately
$11,000, which has been offset by a valuation allowance.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ORGANIZATION AND BUSINESS OPERATIONS
The Company was incorporated in Delaware on August 9, 1995 to acquire an
operating business. All activity to date relates to the Company's formation and
proposed fund raising.
The Company's ability to commence operations is contingent upon obtaining
adequate financial resources through the Proposed Offering, which is discussed
in detail in Note 3. The Company's management has broad discretion with respect
to the specific application of the net proceeds of this offering, although
substantially all of the net proceeds of this offering are intended to be
generally applied toward consummating a business combination with an operating
business ("Business Combination"). Furthermore, there is no assurance that the
Company will be able to successfully effect a Business Combination. Upon the
closing of the Proposed Offering, an aggregate of $8,000,000 of the net proceeds
will be held in an escrow account which will be invested until released in
short-term United States Government Securities, including treasury bills and
cash and cash equivalents ("Proceeds Escrow Account"), subject to release at the
earlier of (i) consummation of its first Business Combination or (ii)
liquidation of the Company (see below). Therefore, the remaining proceeds from
the offering will be used to pay for business, legal and accounting, due
diligence on prospective acquisitions, costs relating to the public offering and
continuing general and administrative expenses in addition to other expenses.
F-7
<PAGE>
ORION ACQUISITION CORP. I
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
2. ORGANIZATION AND BUSINESS OPERATIONS (CONTINUED)
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the acquisition is such as would not ordinarily require
stockholder approval under applicable state law. All of the Company's present
stockholders, including all directors and the Company's executive officer, have
agreed to vote their respective shares of common stock in accordance with the
vote of the majority of the shares voted by all other stockholders of the
Company ("nonaffiliated public stockholders") with respect to any such Business
Combination. A Business Combination will not be consummated unless approved by a
vote of two-thirds of the shares of common stock owned by nonaffiliated public
stockholders.
At the time the Company seeks stockholder approval of any potential Business
Combination, the Company will offer ("Redemption Offer") each of the
nonaffiliated public stockholders of the Company the right, for a specified
period of time not less than 20 calendar days, to redeem his shares of common
stock. The per share redemption price will be determined by dividing the greater
of (i) the Company's net worth or (ii) the amount of assets of the Company in
the escrow account (including all interest earned thereon) by the number of
shares held by such nonaffiliated public stockholders. In connection with the
Redemption Offer, if nonaffiliated public stockholders holding less than 20% of
the common stock elect to redeem their shares, the Company may, but will not be
required to, proceed with such Business Combination and, if the Company elects
to so proceed, will redeem such shares by dividing (a) the greater of (i) the
Company's net worth as reflected in the Company's financial statements or (ii)
the amount of the proceeds of the Company in the escrow account by (b) the
number of shares held by nonaffiliated public stockholders ("Liquidation
Value"). In any case, if nonaffiliated public stockholders holding 20% or more
of the common stock elect to redeem their shares, the Company will not proceed
with such potential Business Combination and will not redeem such shares.
All shares of the common stock outstanding immediately prior to the date of
the Proposed Offering will be placed in escrow until the earlier of (i) the
occurrence of the first Business Combination, (ii) 18-months from the effective
date of the offering or (iii) 24 months from the effective date of the offering
if prior to the expiration of such 18 month period the Company has become a
party to a letter of intent or a definitive agreement to effect a Business
Combination, in which case such period shall be extended six months. During the
escrow period, the holders of escrowed shares of common stock will not be able
to sell or otherwise transfer their respective shares of common stock (with
certain exceptions), but will retain all other rights as stockholders of the
Company, including, without limitation, the right to vote escrowed shares of
common stock, subject to their agreement to vote their shares in accordance with
a vote of a majority of the shares voted by nonaffiliated public stockholders
with respect to a Business Combination or liquidation proposal.
If the Company does not effect a Business Combination within 18 months from
the effective date or 24 months from the effective date if the extension
criteria have been satisfied, the Company will submit for stockholder
consideration a proposal to liquidate the Company and, if approved, distribute
to the then holders of common stock (issued in the Proposed Offering or acquired
in the open market thereafter) all assets remaining available for distribution
after payment of liabilities and after having made appropriate provisions for
the payment of liquidating distributions upon each class of stock, if any,
having preference over the common stock.
In the event of liquidation, it is likely that the per share value of the
residual assets remaining available for distribution to the holders of common
stock purchased in the Proposed Offering (including escrow account assets) will
approximately equal the initial public offering price per Unit in the Proposed
Offering.
F-8
<PAGE>
ORION ACQUISITION CORP. I
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
3. PROPOSED PUBLIC OFFERING
The Proposed Offering calls for the Company to offer for public sale up to
800,000 units ("Units"). Each Unit consists of one share of the Company's common
stock and one Class A redeemable common stock purchase warrant ("Class A
Warrant"). The Proposed Offering also calls for the Company to offer for public
sale up to 320,000 Class B redeemable common stock purchase warrants ("Class B
Warrant"). Each Class A Warrant entitles the holder to purchase from the Company
one share of common stock at an exercise price of $9.00; each Class B Warrant
entitles the holder to purchase one Unit at an exercise price of $.125,
commencing on the date of a Business Combination, until the fifth anniversary of
such date for the Class A Warrants, and the first anniversary of such date for
the Class B Warrants. The Class A Warrants and Class B Warrants are redeemable,
each as a class, in whole and not in part, at a price of $.05 per warrant upon
30 days' notice at any time provided that the Company's stockholders have
approved a Business Combination and the last sale price of the common stock, if
the common stock is listed for trading on all 10 of the trading days prior to
the day on which the Company gives notice of redemption, has been $11.00 or
higher. The Company hopes to raise approximately $9,000,000 from the Proposed
Offering, which is net of underwriter discounts and related expenses.
The Units and the Class B Warrants, which are being offered in the same
offering, will be sold and traded separately.
Concurrent with the Proposed Offering, the Company intends to amend and
restate its certificate of incorporation to increase its authorized common stock
and preferred stock to 10,000,000 and 1,000,000 shares, respectively.
4. COMMITMENTS
The Company presently occupies office space provided by a stockholder. Such
stockholder has agreed that, until the acquisition of a target business by the
Company, it will make such office space, as well as certain office and
secretarial service, available to the Company, as may be required by the Company
from time to time at no charge. Upon completion of the Proposed Offering, the
monthly payment will be $2,500. Such stockholder will be reimbursed by the
Company for the costs of such office and services.
5. STOCKHOLDERS' EQUITY
(A) PRIVATE PLACEMENT
In November 1995, the Company completed a private offering to a limited
group of investors which consisted, in aggregate, of $100,000 in unsecured
promissory notes bearing interest at 8% per annum. The notes are payable upon
the earlier of 24 months or the completion of an initial public offering. In
addition, the Company also issued to the private placement investors 20,000
shares of common stock for $10,000. The notes have been discounted $35,000 for
financial reporting purposes as a result of additional fair value attributed to
the common stock issued to the Private Placement shareholders. The effective
rate on the notes is approximately 45%.
Interest expense charged to operations for the period August 9, 1995
(inception) to June 30, 1996 was approximately $14,000.
(B) PREFERRED STOCK
The Company is authorized to issue 100 shares of preferred stock with such
designations, voting and other rights and preferences as may be determined from
time to time by the Board of Directors.
The Company has outstanding 94 shares of Series A preferred stock, owned by
CDIJ Capital Partners, L.P. an indirect affiliate of Bright Licensing Corp.
(Note 1). The purchase price for such
F-9
<PAGE>
ORION ACQUISITION CORP. I
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
5. STOCKHOLDERS' EQUITY (CONTINUED)
shares, $100.00 per share or $9,400 in the aggregate, is payable to the Company,
without interest, upon the earlier of November 15, 1996 or the closing of the
Proposed Offering. The Series A preferred stock is nonvoting, does not bear a
dividend and has a liquidation value of $100.00 per share. Each share of Series
A preferred stock will be convertible into 1,000 shares of common stock for a
period one year following the consummation of a Business Combination. In the
event that a Business Combination does not occur within 18 months from the
effective date, or 24 months from the effective date if the extension criteria
are satisfied, the Series A preferred stock will be redeemed by the Company for
its liquidation value.
(C) OPTIONS
The Company granted options to purchase 100,000 Units to the founders, in
consideration for their service as directors, and officers of the Company. The
options are exercisable for a period of three years from the date of a Business
Combination at an exercise price of $12.50 per Unit. The options are fully
vested. The shares issuable upon exercise of the options and underlying warrants
may not be sold or otherwise transferred until 120 days after the first Business
Combination.
(D) In October 1996, the Company cancelled the 100,000 options (Note 5(c))
and granted additional options to purchase 133,333.3 units to the Company's two
new directors and to a founder. The options are exercisable for a period of
three (3) years from the date of a Business Combination at an exercise price of
$12.50 per Unit.
F-10
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT
BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF ANY OFFER TO
BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR ANY SUCH
PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY OFFER, SOLICITATION OR SALE MADE HEREUNDER, SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF THE PROSPECTUS.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 1
The Company.................................... 10
Risk Factors................................... 15
Use of Proceeds................................ 28
Dilution....................................... 31
Capitalization................................. 32
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 33
Proposed Business.............................. 34
Management..................................... 41
Certain Transactions........................... 44
Principal Stockholders......................... 45
Description of Securities...................... 46
Shares Eligible for Future Sale................ 49
Underwriting................................... 50
Legal Matters.................................. 52
Experts........................................ 52
Additional Information......................... 52
Index to Financial Statements.................. F-1
</TABLE>
------------------------
UNTIL 90 DAYS AFTER THE RELEASE OF THE REGISTERED SECURITIES FROM THE ESCROW
ACCOUNT, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
ORION ACQUISITION CORP. I
800,000 UNITS,
EACH UNIT CONSISTING OF
ONE SHARE OF COMMON
STOCK AND ONE CLASS A
COMMON STOCK
PURCHASE WARRANT
(THE CLASS A
WARRANT ENTITLING THE
HOLDERS TO PURCHASE AN
AGGREGATE OF 800,000
SHARES OF COMMON STOCK)
320,000 CLASS B
COMMON STOCK PURCHASE WARRANTS
(ENTITLING THE HOLDERS TO PURCHASE
320,000 UNITS)
---------------------
PROSPECTUS
------------------------
H.J. MEYERS & CO., INC.
OCTOBER , 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Orion Acquisition Corp. I (the "Company") is incorporated in Delaware. Under
Section 145 of the General Corporation Law of the State of Delaware, a Delaware
corporation has the power, under specified circumstances, to indemnify its
directors, officers, employees and agents in connection with actions, suits or
proceedings brought against them by a third party or in the right of the
corporation, by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses incurred in any action, suit or
proceeding. Article IX of the Certificate of Incorporation and Article III of
the Bylaws of the Company provide for indemnification of directors and officers
to the fullest extent permitted by the General Corporation Law of the State of
Delaware. Reference is made to the Certificate of Incorporation of the Company,
filed as Exhibit 3.1 hereto.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 (relating to liability for unauthorized acquisitions or redemptions
of, or dividends on, capital stock) of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. Article Ninth of the Company's Certificate of
Incorporation contains such a provision.
The Underwriting Agreement filed herewith as Exhibit 1.1 contains provisions
by which each Underwriter severally agrees to indemnify the Company, any person
controlling the Company within the meaning of Section 15 of the Securities Act
of 1933 or Section 20 of the Securities Exchange Act of 1934, each director of
the Company, and each officer of the Company who signs this Registration
Statement with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter expressly for use in the
Registration Statement.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with this
Registration Statement. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.
<TABLE>
<CAPTION>
Filing Fee -- Securities and Exchange Commission.............. $ 8,632.69
<S> <C>
Filing Fee -- National Association of Securities Dealers,
Inc.......................................................... 3,003.48
Fees and Expenses of Accountants.............................. 12,500.00
Fees and Expenses of Counsel.................................. 50,000.00
Printing and Engraving Expenses............................... 50,000.00
Blue Sky Fees and Expenses.................................... 30,000.00
Transfer and Warrant Agent fees............................... 3,500.00
Miscellaneous Expenses........................................ 13,163.83
-----------
Total..................................................... $170,800.00
-----------
-----------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In August 1995, the Company sold to CDIJ, an indirect affiliate of Bright,
1,000 shares of Common Stock for $100, which was paid in full at that time, and
94 shares of Series A Preferred Stock for $9,400, payable upon the closing of
this offering, in a transaction in which no commissions were paid. In August
1995, the Company sold an aggregate of 85,000 shares of Common Stock, par value
$.01 per share ("Common Stock"), to its then directors, officers and certain
other persons at a price of
II-1
<PAGE>
$.10 per share for aggregate consideration of $8,500. In November 1995, the
Company sold 20,000 shares of Common Stock at a price of $0.50 per share or
$10,000 in the aggregate and $100,000 in promissory notes (the "Placement
Securities") to five investors, all of whom represented to the Company that they
were "accredited investors" as such term is defined in Regulation D promulgated
by the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "Securities Act"). H.J. Meyers and Northeast Securities
acted as placement agents for 60% and 40% of such offering, respectively. The
persons who acquired the Placement Securities are Jude Spak, Burtt R. Ehrlich,
Elizabeth Lane, William Orfanos and George Orfanos. To the Company's knowledge,
none of these investors, nor any of their affiliates, was, at the time of their
investment in the Company, or currently is, affiliated or associated with any of
H.J. Meyers, Northeast, or any other broker-dealer, except that Mr. Ehrlich is
an affiliate of Emax Securities. The Company issued all such securities in
reliance upon the exemption from the registration requirements of the Securities
Act contained in Section 4(2) thereof.
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
*1.1 -- Underwriting Agreement.
<C> <C> <S>
*3.1 -- Certificate of Incorporation of the Company, as amended.
*3.2 -- Form of Bylaws of the Company.
*4.1 -- Form of Common Stock Certificate.
*4.2 -- Form of Warrant Agency Agreement between the Company and American Stock
Transfer & Trust Company.
*4.3 -- Form of Class A Common Stock Purchase Warrant.
*4.4 -- Form of Class B Unit Purchase Warrant.
*4.5 -- Form of Representative's Warrant Agreement.
*4.6 -- Form of Representative's Warrant (included in Exhibit 4.5).
*4.7 -- Form of Unit Certificate.
*5 -- Opinion of Greenbaum, Rowe, Smith, Ravin, Davis, & Himmel.
*10.1 -- Escrow Agreement for proceeds from sale of Units.
*10.2 -- Form of Escrow Agreement for outstanding Common Stock.
*10.3 -- License, dated August 25, 1995, between Bright and the Company.
*10.4 -- Form of Management Unit Option Plan.
23.1 -- Consent of BDO Seidman, LLP; Page II-6
*23.2 -- Consent of Greenbaum, Rowe, Smith, Ravin, Davis & Himmel (Included in
Exhibit 5).
24 -- Power of Attorney; Page II-5.
</TABLE>
- ------------------------
* Previously Filed.
ITEM 28. UNDERTAKINGS.
The undersigned small business issuer hereby undertakes:
(a)
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 facts 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;
II-2
<PAGE>
(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;
(b)
The undersigned small business issuer hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(c)
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer 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 small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(d)
The undersigned small business issuer hereby undertakes that:
(i)
For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the small business issuer pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(ii)
For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus 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-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Amendment No. 5
to its Registration Statement to be signed on its behalf by the undersigned, in
the City of New York, State of New York, on the 24th day of October, 1996.
ORION ACQUISITION CORP. I
By: /s/ DAVID J. MITCHELL
-----------------------------------
David J. Mitchell
CHAIRMAN, CHIEF EXECUTIVE OFFICER
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ ----------------------------------------- --------------------
<C> <S> <C>
/s/ DAVID J. MITCHELL
-------------------------------------- Chairman of the Board, Chief
David J. Mitchell Executive Officer October 24, 1996
(ATTORNEY-IN-FACT) (Principal Executive Officer)
/s/ THOMAS MCMILLEN Secretary, Treasurer, Director
-------------------------------------- (Principal Financial and October 24, 1996
Thomas McMillen Accounting Officer)
/s/ A.J. NASSAR
-------------------------------------- Director October 24, 1996
A.J. Nassar
</TABLE>
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of David J. Mitchell, Thomas
McMillen and A.J. Nassar constitutes and appoints David J. Mitchell, his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, to act, without the other, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as full to all
intents and purposes as he might or could be in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, their
substitute or substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
ORION ACQUISITION CORP. I
By: /s/ DAVID J. MITCHELL
-----------------------------------------
David J. Mitchell
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PRESIDENT
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ DAVID J.
MITCHELL Chairman of the Board,
- ------------------------------ Chief Executive Officer October 24, 1996
David J. Mitchell
/s/ THOMAS
MCMILLEN Secretary, Treasurer,
- ------------------------------ Director October 24, 1996
Thomas McMillen
/s/ A.J.
NASSAR
- ------------------------------ Director October 24, 1996
A.J. Nassar
II-5
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Orion Acquisition Corp. I
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated August 1, 1996, relating to the
financial statements of Orion Acquisition Corp. I, which is contained in that
Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
New York, New York
October 23, 1996
II-6
