<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1997
REGISTRATION NO. 33-80647
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 7
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NORTH ATLANTIC ACQUISITION CORP.
(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, NORTH ATLANTIC ACQUISITION CORP., 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 Class A Common Stock, $.01 par value, and one Class A
Warrant to purchase one share of Class A Common Stock (2)(3)......................... 920,000 $ 10.00
Class A Common Stock, $.01 par value (4).............................................. 920,000 $ 9.00
Class B Exchangeable Common Stock, $.01 par value (5)................................. 202,500 $ 10.00
Units, issuable upon exchange of the Class B Exchangeable Common Stock, consisting of
one share of Class A Common Stock, $.01 par value, and one Class A Warrant to
purchase one share of Class A Common Stock (3)(6)(9)................................. 405,000
Class A Common Stock, $.01 par value (4).............................................. 405,000 $ 9.00
Representative's Warrants to purchase Units........................................... 80,000
Units, issuable upon exercise of the Representative's Warrants, consisting of one
share of Class A Common Stock, $.01 par value, and one Class A Warrant to purchase
one share of Class A Common Stock (8)................................................ 80,000 $ 11.00
Class A Common Stock, $.01 par value (4).............................................. 80,000 $ 9.00
Representative's Warrants to purchase Class B Exchangeable Common Stock............... 15,000 $ .001
Class B Exchangeable Common Stock, $.01 par value issuable upon exercise of the
Representative's Warrants (8)........................................................ 15,000 $ 11.00
Units, issuable upon exchange of the Class B Exchangeable Common Stock, consisting of
one share of Class A Common Stock, $.01 par value, and one Class A Warrant to
purchase one share of Class A Common Stock (8)....................................... 30,000
Class A Common Stock, $.01 par value (4).............................................. 30,000 $ 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 Class A Common Stock, $.01 par value, and one Class A
Warrant to purchase one share of Class A Common Stock (2)(3)......................... $ 9,200,000 $ 3,172.41*
Class A Common Stock, $.01 par value (4).............................................. $ 8,280,000 $ 2,855.17*
Class B Exchangeable Common Stock, $.01 par value (5)................................. $ 2,025,000 $ 613.64
Units, issuable upon exchange of the Class B Exchangeable Common Stock, consisting of
one share of Class A Common Stock, $.01 par value, and one Class A Warrant to
purchase one share of Class A Common Stock (3)(6)(9).................................
Class A Common Stock, $.01 par value (4).............................................. $ 3,645,000 $ 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 Class A Common Stock, $.01 par value, and one Class A Warrant to purchase
one share of Class A Common Stock (8)................................................ $ 880,000 $ 303.45*
Class A Common Stock, $.01 par value (4).............................................. $ 720,000 $ 248.28*
Representative's Warrants to purchase Class B Exchangeable Common Stock............... $ 15 (7)
Class B Exchangeable Common Stock, $.01 par value issuable upon exercise of the
Representative's Warrants (8)........................................................ $ 165,000 $ 50.00
Units, issuable upon exchange of the Class B Exchangeable Common Stock, consisting of
one share of Class A Common Stock, $.01 par value, and one Class A Warrant to
purchase one share of Class A Common Stock (8).......................................
Class A Common Stock, $.01 par value (4).............................................. $ 270,000 $ 81.81*
Total................................................................................. $ 8,466.73*
</TABLE>
* A fee of $8,632.69 has previously been paid for the securities listed on
each line marked with an asterisk (*) and for other securities which are no
longer being registered. A fee of $663.64 is being paid with the filing of
Amendment No. 7 with respect to the Class B Exchangeable Common Stock, which
is added to the Registration Statement with this filing.
(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 Exchangeable Common Stock pursuant to Rule 416(a).
(4) Issuable upon exercise of the Class A Warrants.
(5) Includes 22,500 shares of Class B Exchangeable Common Stock which the
Underwriters have the option to purchase to cover over-allotments.
(6) Issuable upon exchange of the Class B Exchangeable Common Stock.
(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).
(9) No registration fee required pursuant to Rule 457(i).
----------------------------------
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 MAY 15, 1997
NORTH ATLANTIC ACQUISITION CORP.
800,000 UNITS, AT $10.00 PER UNIT, EACH UNIT CONSISTING OF ONE SHARE OF CLASS A
COMMON STOCK
AND ONE REDEEMABLE CLASS A WARRANT ENTITLING THE HOLDER THEREOF TO PURCHASE,
UPON CONSUMMATION
OF A BUSINESS COMBINATION, ONE SHARE OF CLASS A COMMON STOCK AT A PRICE OF $9.00
180,000 SHARES OF CLASS B EXCHANGEABLE COMMON STOCK, AT $10.00 PER SHARE,
EACH SHARE ENTITLING THE HOLDER THEREOF TO RECEIVE, 90 DAYS FOLLOWING THE
CONSUMMATION OF A BUSINESS COMBINATION, TWO UNITS IN EXCHANGE THEREFOR
North Atlantic Acquisition Corp., a Delaware corporation (the "Company"),
hereby offers in a Specialized Merger and Acquisition Allocated Risk
Transaction-SM- ("SMA(2)RT-SM-") 800,000 Units (the "Units"), each consisting of
one share of Class A Common Stock, par value $.01 per share (the "Class A
Stock"), and one Redeemable Class A Common Stock Purchase Warrant (the "Class A
Warrants"), and 180,000 shares of Class B Exchangeable Common Stock, par value
$.01 per share (the "Class B Stock"), each entitling the holder thereof to
receive two Units in exchange therefor at the time of a Business Combination, as
defined. The Units and the Class B Stock, which are being offered in the same
offering, will be sold and traded separately. The Class A 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 Class A 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 share of Class B Stock will
entitle the holder thereof to receive two Units in exchange therefor 90 days
following the consummation of a Business Combination, subject to the
Representative's right to shorten such period. Of the 180,000 shares of Class B
Stock offered hereby, 30,000 are reserved for issuance to two directors of the
Company, who have agreed to contribute up to $300,000 to the Company to finance
certain costs associated with a Business Combination. See "The Company--Capital
Commitment." (The Class A Stock and the Class B Stock are sometimes hereinafter
collectively referred to as the "Common Stock.") Furthermore, the Class A
Warrants are redeemable, 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 Class A Stock, if the Class A 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 Class A Stock, if the Class A 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 Class A 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 Stock and the
exercise prices and terms of the Class A Warrants have been arbitrarily
determined by the Company and the Representative, 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 Stock and the
exercise prices and the terms of the Class A Warrants, see "Risk Factors" and
"Underwriting." The Company anticipates that the Units, the Class A Stock, the
Class A Warrants and the Class B Stock 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 Share........................................... $10.00 $1.00 $9.00
Total (4)(5)................................................ $9,800,000 $630,000 $9,170,000
</TABLE>
(FOOTNOTES ON NEXT PAGE)
The Units and the Class B Stock 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 May , 1997.
H.J. MEYERS & CO., INC.
------------------
THE DATE OF THIS PROSPECTUS IS MAY , 1997.
<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 $294,000 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 Stock
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 22,500 additional shares of Class B Stock
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 $11,225,000, $724,500, and $10,500,500, respectively. See
"Underwriting."
(5) Includes the proceeds from the sale of up to 30,000 shares of Class B Stock
to two directors of the Company, who have committed to contribute up to
$300,000 to the Company to finance certain costs associated with a Business
Combination. No underwriting discount will be paid with respect to the sale
of such shares. See "The Company--Capital Commitment."
"SMA(2)RT-SM-" AND "SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK
TRANSACTION-SM-" 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)RT-SM- AND SPECIALIZED MERGER AND ACQUISITION ALLOCATED RISK
TRANSACTION-SM- SERVICEMARKS.
THE SMA(2)RT-SM- 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)RT-SM- 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)RT-SM-, OR SPECIALIZED MERGER AND
ACQUISITION ALLOCATED RISK TRANSACTION-SM-, IS IN NO WAY RELATED OR SIMILAR TO A
SPAC-SM-, OR SPECIFIED PURPOSE ACQUISITION COMPANY-SM- (WHICH ARE SERVICEMARKS
OF GKN SECURITIES CORP.), AND INVESTORS SHOULD NOT CONSTRUE A SMA(2)RT-SM- AS
BEING SIMILAR TO A SPAC-SM- OR A SPECIFIED PURPOSE ACQUISITION COMPANY-SM-. 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 SPAC-SM- AND SPECIFIED PURPOSE
ACQUISITION COMPANY-SM- 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
ii
<PAGE>
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 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 STOCK WILL BE UNABLE TO EXCHANGE THIS
STOCK FOR UNITS UNLESS AND UNTIL THE UNITS ISSUABLE UPON EXCHANGE OF THE CLASS B
STOCK 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 "EXCHANGE PRICE" OF CLASS B STOCK IS NIL, THE "OFFERING
PRICE" OF THE UNITS ISSUABLE UPON EXCHANGE OF THE CLASS B STOCK COULD BE
CONSIDERED NOT GREATER THAN $5.00. FOR THIS REASON, NO PERMIT TO SELL THE UNITS
ISSUABLE UPON EXCHANGE OF THE CLASS B STOCK IN FLORIDA HAS BEEN OBTAINED. THERE
CAN BE NO ASSURANCE THAT THE UNITS ISSUABLE UPON EXCHANGE OF THE CLASS B STOCK
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.
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, (with each share of Class B Stock entitled to two votes) as
required by this Prospectus, and that the holders of more than 20% of the Class
A Stock of the Company have not elected to redeem their Class A 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
to the holders of Class A Stock purchased as part of the Units sold in this
offering or in the open market thereafter in redemption of the Class A Stock, or
(iii) receipt by the Proceeds Escrow Agent of written notification to distribute
part of the escrow proceeds to the holders of record of Class A 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 Stock 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 Stock 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 Class A 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 Class A 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
2
<PAGE>
consummated unless approved by a vote of two-thirds of the shares of Common
Stock voted by the stockholders (in person or by proxy). Each share of Class B
Stock is entitled to two votes, representing the two shares of Class A Stock
into which each share of Class B stock is exchangeable. 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 Class A 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 holders of Class A Stock the right, for a specified period
of time of not less than 20 calendar days, to redeem his shares of Class A 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
Class A 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 of Class
A Stock held by non-affiliated public stockholders; however, in no event will
the Liquidation Value of each share of Class A 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 Class A
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 Class A 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 Class A 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 Class A Stock in this offering or on the open market
thereafter, and only as to any shares of Class A Stock so purchased.
ESCROW OF OUTSTANDING SHARES
All of the shares of Class A 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 Class A Stock, subject to their agreement to vote all of
their shares in accordance with the vote of a majority of the non-affiliated
public holders of Class A Stock 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
3
<PAGE>
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.
Each of the executive officers and the other directors of the Company has
agreed to surrender his shares of Class A Stock 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 Class A Stock outstanding prior to the date of this
Prospectus other than 20,000 shares of Class A Stock issued in a private
placement by the Company in November 1995 (the "Placement Shares") and the
shares of Class A 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 Class A Stock on the basis of one thousand shares
of Class A 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 Class A 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."
REDEMPTION OF CLASS A STOCK 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 distribute to the then holders of Class
A Stock acquired as part of the Units sold in this offering or in the open
market
4
<PAGE>
thereafter, in redemption of such shares, the amounts in the interest bearing
escrow account. Following such a redemption of Class A Stock, each outstanding
share of Class B Stock will be exchanged for two shares of Class A Stock. The
assets of the Company (other than the escrowed assets) will be used to pay the
Company's liabilities and to redeem the Company's outstanding Series A Preferred
Stock at its liquidation value, $9,400. The amount per share for distribution,
to the holders of Class A 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 Class A 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 Class A
Stock in accordance with the vote of the majority of all non-affiliated public
holders of Common Stock with respect to any redemption proposal. See "The
Company -- Escrow of Outstanding Shares." Holders of Class A Warrants, however,
will only be entitled to vote on any redemption proposal, and allowed to
participate in any redemption 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 redemption
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 180,000 shares of
Class B Exchangeable Common Stock, at $10.00 per share
of Class B Stock. 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 commencing 90 days after the date of a
Business Combination or any earlier date on or after the
date of a Business Combination that the Representative,
in its sole discretion, so elects. Each share of Class B
Stock will entitle the holder thereof to receive two
Units in exchange therefor 90 days after the date of a
Business Combination. Of the 180,000 shares of Class B
Stock offered hereby, 30,000 are reserved for issuance
to two directors of the Company, who have agreed to
contribute up to $300,000 to the Company to finance
certain costs associated with a Business Combination.
See "The Company--Capital Commitment." The Units and the
Class B Stock, 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
Class A Stock -- ORIO
Class A Warrants -- ORIOW
Class B Stock -- ORIOL
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Class A Stock outstanding prior to
the offering...................... 106,000 shares.
Class A Stock to be outstanding
after the offering (1)............ 906,000 shares.
Class B Stock outstanding prior to
the Offering...................... None
Class B Stock outstanding after
the Offering(2)................... 180,000 shares
Warrants:
Number of Class A Warrants to be
outstanding after the offer-
ing (3)......................... 800,000 Class A Warrants.
Exercise price of Class A War-
rants........................... The exercise price of each Class A Warrant is $9.00 per
share of Common Stock, subject to adjustment in certain
circumstances. See "Description of Securities."
Exercise period................. The exercise period of the Class A Warrants will
commence 90 days after the consummation of a Business
Combination or any earlier date on or after the date of
a Business Combination that the Representative, in its
sole discretion so elects, and will expire at 5:00 p.m.,
New York City time, on the fifth anniversary of the date
of this Prospectus.
Redemption...................... The Class A 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 Class A 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 Class A Stock, if the
Class A 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 Class A Stock, if the Class A 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 2,430,666.6 shares of Class A Stock, consisting of: (i)
800,000 shares of Class A Stock reserved for issuance upon the exercise of
the Class A Warrants, (ii) 360,000 shares of Class A Stock reserved for
issuance upon exercise of the Units underlying the Class B Stock, (iii)
360,000 shares of Class A Stock reserved for issuance upon exercise of the
Class A Warrants comprising a part of the Units underlying the Class B
Stock, (iv) 120,000 shares of Class A Stock included in the Units subject to
the Underwriters' over-allotment option, (v) 120,000 shares of Class A Stock
reserved for issuance upon the exercise of the Class A Warrants included in
the Units subject to the Underwriters' over-allotment option, (vi) 45,000
shares of Class A Stock reserved for issuance upon exercise of the Units
underlying the Class B Stock subject to the Underwriters' over-allotment
option, (vii) 45,000 shares of Class A Stock reserved for issuance as part
of the Class A Warrants comprising a part of the Units underlying the Class
B Stock subject to the Underwriters' over-allotment option, (viii) 266,666.6
shares of Class A Stock reserved for issuance upon exercise of options to
purchase Units granted to executive officers and directors of
6
<PAGE>
the Company, (ix) 94,000 shares of Class A Stock reserved for issuance upon
conversion of the Company's outstanding Series A Preferred Stock, (x) 80,000
shares of Class A 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 Class A 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) 30,000 shares
of Class A Stock included in the Units reserved for issuance upon exercise
of a warrant to purchase 15,000 shares of Class B Stock, 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) 30,000 shares of Class A 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) 22,500 shares of Class B Stock subject to the Underwriters'
over-allotment option, (ii) 30,000 shares of Class B Stock to be issued to
two directors of the Company for $300,000, and (iii) 15,000 shares of Class
B Stock issuable upon exercise of the Representative's Class B Warrants. See
"The Company--Capital Commitment," "Certain Transactions" and
"Underwriting."
(3) 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 included in the
Units subject to the Underwriters' over-allotment option, (iii) an
additional 45,000 Class A Warrants comprising a part of the Units underlying
the Class B Stock 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 and (v) 30,000 Class
A Warrants underlying the Units underlying the Representative's Class B
Warrants. See "Management" and "Underwriting."
THE SMA(2)RT-SM- STRUCTURE
Essentially, a Specialized Merger and Acquisition Allocated Risk
Transaction-SM- (SMA(2)RT-SM-) 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 Stock (which are
exchangeable into Units) for $10.00 each, 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, when the Class B Stock is exchanged, holders of Class
B Stock would pay substantially less for the Units issuable upon exchange of
such Class B Stock than holders of Units and, accordingly, may realize a higher
return on their investment. Holders of Class B Stock, however, risk the loss of
their investment if the Company fails to effect a Business Combination, while
holders of shares of Class A 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 Transaction-SM-(SMA(2)RT-SM-) 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 Class A Stock, the Class A Warrants or the
Class B Stock and there can be no assurance that such a market will develop
after completion of this offering.
7
<PAGE>
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 Class A Warrants and Class B Stock;
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."
USE OF PROCEEDS
The Company intends to use substantially all of the net proceeds of the
offering, including $300,000 from the sale of Class B Stock to two directors
(see "The Company--Capital Commitment") 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 82% 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 redemption of the Company's Class A
Stock, to the then holders of the Class A 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 Stock 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
Stock 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 Class A
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 Stock 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.
8
<PAGE>
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.
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>
DECEMBER 31, 1996
---------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------
<S> <C> <C>
(UNAUDITED)
Balance Sheet Data:
Total assets............................................................. $ 203,526 $ 8,488,364
Total liabilities........................................................ 183,442 --
Deficit accumulated during development stage............................. (33,516) (56,844)
Series A preferred stock................................................. 1 1
Stockholders' equity and common stock subject to redemption.............. 20,084 8,488,364(2)
</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 Stock at the initial public
offering price of $10.00 per share of Class B Stock, including 30,000 shares
to two directors of the Company, 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
$8,681,000 therefrom. See "Use of Proceeds" and "The Company--Capital
Commitment." 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 holders of Class A Stock 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 holders of Class A Stock, 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. David J. Mitchell, the
Company's Chairman and Chief Executive Officer has been previously involved with
two Specified Purpose Acquisition Companies ("SPAC"). A SPAC is a company
organized for the purpose of acquiring or merging with an operating business in
a specified area. 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."
ESCROW OF OFFERING PROCEEDS
Upon completion of the offering by the Company, approximately 82% 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 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
10
<PAGE>
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, with each
share of Class B Stock entitled to 2 votes, as required by this Prospectus, and
that the holders of more than 20% of the Class A Stock have not elected to
redeem their Class A 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 to the holders of Class A 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 Class A 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 Stock 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 Stock 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 Class A 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 Stock, including 30,000 shares to be sold to two directors
of the Company, 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" and
"The Company--Capital Commitment."
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 Class A Stock in accordance with the vote of the majority
of the shares voted by all non-affiliated
11
<PAGE>
public holders of Common Stock 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), with each share of Class B
Stock entitled to 2 votes. 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 Class A Warrants who
otherwise do not own any shares of Common Stock will not be entitled to vote on
any Business Combination.
CAPITAL COMMITMENT
Mr. David Mitchell and Mr. Thomas McMillen, directors of the Company, have
each agreed to purchase up to 15,000 shares, or up to 30,000 in the aggregate,
of the Company's Class B Stock at a purchase price of $10.00 per share, or an
aggregate purchase price of up to $300,000. The Company shall require the
purchase of the 30,000 shares of Class B Stock, or any portion thereof, by
Messrs. Mitchell and McMillen at such time as the Company deems necessary to
fund certain expenses of the Company associated with a Business Combination by
the Company.
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 holders
of Class A Stock the right, for a specified period of time of not less than 20
days, to redeem his shares of Class A 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 Class A 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 of Class A Stock held by non-affiliated public stockholders; however, in
no event will the Liquidation Value of each share of Class A 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 Class A
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 Class A 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 Class A 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 Class A Stock in this offering or on the open market
thereafter, and only as to any shares of Class A 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 Class A 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,
12
<PAGE>
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.
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
Class A Stock on the basis of one thousand shares of Class A 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 Class A 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."
REDEMPTION OF CLASS A STOCK 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 distribute to the then holders of Class
A Stock acquired as part of the Units sold in this offering or in the open
market thereafter, in redemption of such shares, the amounts in the escrow
account. Following such a
13
<PAGE>
redemption of Class A Stock, each outstanding share of Class B Stock will be
exchanged for two shares of Class A Stock. The assets of the Company (other than
escrowed assets) will be used to pay the Company's liabilities and to redeem the
Company's outstanding Series A Preferred Stock at its liquidation value, $9,400.
The amount per share for distribution, to the holders of Class A 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 Class A 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 Class A 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 redemption proposal. Holders of Class A Warrants,
however, will only be entitled to vote on any redemption proposal, and allowed
to participate in any redemption 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 redemption distribution with
respect to the 106,000 shares of Class A 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 Stock offered hereby. See "Proposed Business."
Essentially, a Specialized Merger and Acquisition Allocated Risk
Transaction-SM- (SMA(2)RT-SM-) 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 Stock for $10.00
each, 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 Stock is exchanged, holders of Class B Stock would
pay substantially less for the Units issuable upon exercise of such Class B
Stock than holders of Units and, accordingly, may realize a higher return on
their investment. Holders of Class B Stock, however, risk the loss of their
investment if the Company fails to effect a Business Combination, while holders
of shares of Class A 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.
14
<PAGE>
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 Stock 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. However, David J.
Mitchell, the Company's Chairman and Chief Executive Officer, has been
previously involved with two Specified Purpose Acquisition Companies ("SPAC"). A
SPAC is a company organized for the purpose of acquiring or merging with an
operating business in a specified area. 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."
15
<PAGE>
"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 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 Stock 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
16
<PAGE>
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
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 CLASS B STOCK NOT PLACED IN ESCROW; CLASS B STOCK NOT
CURRENTLY EXCHANGEABLE; CLASS B STOCK EXCHANGEABLE 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 Stock 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 Stock
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 Class B Stock is
not exchangeable until the Company
17
<PAGE>
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 Class B Stock who do not own shares of
Class A Stock will not be allowed to participate in any redemption distribution
of the proceeds from the escrow account. Consequently, in the event 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, and the stockholders of the Company elect to
permit the Company to redeem the Class A Stock and the holders of Class B Stock
will not receive any distributions. As such, an investment in the Class B Stock
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 Stock would pay substantially less for the Units issuable upon exchange
of such Class B Stock 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 Stock in this offering will pay $5.00 per Unit, 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 Stock will not be placed in escrow for
the benefit of the holders of the Class B Stock 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
Stock, 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 Stock risk the loss of all of their investment if
the Company fails to effect a Business Combination, while holders of shares of
Class A 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; NO 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. However, David J.
Mitchell, the Company's Chairman and Chief Executive Officer has been previously
involved with two Specified Purpose Acquisition Companies ("SPAC"). A SPAC is a
company organized for the purpose of acquiring or merging with an operating
business in a specific area.
18
<PAGE>
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." 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. However, David J.
Mitchell, the Company's Chairman and Chief Executive Officer has been previously
involved with two Specified Purpose Acquisition Companies ("SPAC"). A SPAC is a
company organized for the purpose of acquiring or merging with an operating
business in a specified area. 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 Class A 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."
19
<PAGE>
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
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."
20
<PAGE>
ADDITIONAL FINANCING REQUIREMENTS
The Company has had no revenues to date and will be entirely dependent upon
the proceeds of this offering and the sale of up to 30,000 shares of Class B
Stock to two directors to implement its business objectives. See "The
Company--Capital Commitment." The Company will not achieve any revenues (other
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 and the sale of up to 30,000 shares of Class B Stock to two
directors 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 holders
of Class A Stock the right, for a specified period of time of not less than 20
calendar days, to redeem his shares of Class A 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 Class A 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 Class A Stock elect to redeem their shares, the Company will not proceed
with
21
<PAGE>
the proposed Business Combination and will not redeem any shares of Class A
Stock. As a result of the foregoing, the Company's ability to consummate a
particular Business Combination may be impaired. Moreover, holders of Class A
Stock prior to the date of this Prospectus and holders of Class A Warrants will
only be allowed to participate in a Redemption Offer if they purchase shares of
Class A Stock in this offering or on the open market thereafter, but only as to
any shares of Class A Stock so purchased.
REDEMPTION OF CLASS A STOCK 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 distribute to the then holders of Class
A Stock acquired as part of the Units sold in this offering or in the open
market thereafter, in redemption of such shares, the amounts in the interest
bearing escrow account. Following such a redemption of Class A Stock, each
outstanding share of Class B Stock will be exchanged for two shares of Class A
Stock. The assets of the Company (other than the escrowed assets) will be used
to pay the Company's liabilities and to redeem of the Company's outstanding
Series A Preferred Stock at its liquidation value, $9,400. The amount per share
for distribution of liquidation of the Company to the holders of Class A 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 Class A 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
redemption proposal. Holders of Class A Warrants, however, will only be entitled
to vote on any redemption proposal, and allowed to participate in any redemption
distribution, only if they purchase shares of Class A Stock in this offering or
on the open market thereafter, and only as to any shares of Class A Stock so
purchased. Present stockholders of the Company will not participate in any
redemption distribution with respect to the shares of Class A 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 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.
22
<PAGE>
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)RT-SM- and Specialized Merger and Acquisition
Allocated Risk Transaction-SM- 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)RT-SM- and Specialized Merger and Acquisition Allocated Risk
Transaction-SM- 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)RT-SM- or Specialized Merger and
Acquisition Allocated Risk Transaction-SM-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
10,250,000 shares of Common Stock, par value $.01 per share, of which 10,000,000
shares are designated Class A Stock and 250,000 shares are designated Class B
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 2,430,666.66 shares of Class A Stock are reserved for issuance,
consisting of the following: 800,000 shares of Class A Stock are reserved for
issuance upon the exercise of the Class A Warrants, 360,000 shares of Class A
Stock are reserved for issuance upon exercise of the Units underlying the Class
B Stock, 360,000 shares of Class A Stock are reserved for issuance upon exercise
of the Class A Warrants comprising a part of the Units underlying the Class B
Stock, 120,000 shares of Class A Stock are included in the Units subject to the
Underwriters' over-allotment option, 120,000 shares of Class A Stock are
reserved for issuance upon the exercise of the Class A Warrants included in the
Units subject to the Underwriters' over-allotment option, 45,000 shares of Class
A Stock are reserved for issuance upon exercise of the Units underlying the
Class B Stock subject to the Underwriters' over-allotment option, 45,000 shares
of Class A Stock are reserved for issuance upon exercise of the Class A Warrants
comprising a part of the Units underlying the Class B Stock subject to the
Underwriters' over-allotment option, 266,666.6 shares of Class A Stock are
reserved for issuance upon exercise of options to purchase Units granted to
executive officers of the Company, 94,000 shares of Class A Stock are reserved
for issuance upon conversion of the Company's outstanding Series A Preferred
Stock, 80,000 shares of Class A Stock are included in the Units reserved for
issuance upon exercise of Representative's Unit Purchase Warrants, 80,000 shares
of Class A 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, 30,000 shares of Class A Stock are
included in the Units reserved for issuance upon exercise of the
Representative's Class B Warrants, and 30,000 shares of Class A Stock reserved
for issuance upon exercise of Class A Warrants comprising a part of the Units
underlying the Representative's Class B Stock. 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
23
<PAGE>
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 Class A 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 Class A 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 Class A 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 8.8% 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."
24
<PAGE>
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 Class A Stock, the Class A Warrants or the Class B Stock. The initial
public offering prices of the Units and the Class B Stock and the respective
exercise prices and terms of the Class A 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 $3.30 per
share between the pro forma net tangible book value per share after the offering
of $6.70 and the initial public offering price of $10.00 per share allocable to
each share of Class A Stock included in the Units (assuming no value is
attributed to the Class A Warrants or Class B Stock included in the Units). The
existing stockholders of the Company, including its executive officers and
directors, acquired their shares of Class A 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
25
<PAGE>
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 Stock 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
The 106,000 shares of Class A 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"). Additionally, the
20,000 Placement Shares and the 94,000 shares of Class A 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 Class A Stock beneficially for at least one year 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 Class A Stock is quoted on an exchange or NASDAQ, the
average weekly trading volume during the four calendar weeks preceding
26
<PAGE>
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 Class A Stock to be sold for at least two 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 Class A Stock or the availability of such shares for sale will have on
the market prices for shares of Class A Stock or Class A Warrants prevailing
from time to time. Nevertheless, the sale of substantial amounts of Class A
Stock in the public market would likely adversely affect prevailing market
prices for the Class A 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 Class A 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 Class A 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 Stock 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 Stock will be unable to exchange
these shares to Units unless and until the Units issuable upon exchange of the
Class B Stock 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 "exchange price" of Class B Stock is nil,
the "offering price" of the Units issuable upon exchange of the Class B Stock
could be considered not greater than $5.00. For this reason, no permit to sell
the Units issuable upon exchange of the Class B Stock in Florida has been
obtained. There can be no assurance that the Units issuable upon exchange of the
Class B Stock 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, including $300,000 from the sale of Class B
Stock to two directors of the Company (See "The Company--Capital Commitment")
after deducting underwriting discounts and estimated expenses (including the
Representative's non-accountable expense allowance) are estimated to be
$8,681,000 ($10,011,500 if the Underwriters' over-allotment option is exercised
in full). The net proceeds to the Company, after deducting only underwriting
discounts, from the sale of the Class B Stock to the public and to two directors
of the Company are estimated to be $1,650,000. Approximately 82% 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 Class A 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 Stock (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
28
<PAGE>
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 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 Stock and from the sale to
two directors of the Company (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 29.0%
Non-accountable Expense Allowance (2).............................. 294,000 17.8
Repayment of Indebtedness.......................................... 100,000 6.1
License Fee........................................................ 90,000 5.5
Expenses of Offering............................................... 195,000 11.8
Evaluation of Potential Business Combinations...................... 491,000 29.8
------------- -----
$ 1,650,000 100.0%
------------- -----
------------- -----
</TABLE>
- ------------------------
(1) Represents the amount of the proceeds from the sale of the Class B Stock 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 Stock (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, 1998, whichever is earlier.
Following receipt of the net proceeds from the sale of the Class B Stock 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
29
<PAGE>
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.
The net proceeds from the sale of Class B Stock 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 Stock 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 Stock 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 Stock 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 Class A
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 Class A 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 Class A 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 Class A Stock of the
Company after this offering constitutes the dilution to investors in this
offering. Net tangible book value per share of Class A Stock 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 Class A Stock. Because
the proceeds from the sale of the Class A Stock will be in escrow until the time
of a Business Combination and the Class B Stock will be exchanged for Class A
Stock within 90 days following a Business Combination the number of outstanding
shares of Class A Stock includes the number of shares of Class A Stock (360,000)
issuable upon exchange of the Class B Stock
At December 31, 1996, net tangible book value of the Company was $(157,708)
or $(1.49) per share of Class A Stock. After giving effect to the sale of
800,000 shares of Class A Stock included in the Units offered hereby (and
assuming no value is attributed to the Class A Warrants included in such Units)
and 180,000 shares of Class B Stock offered hereby and the initial application
of the estimated net proceeds therefrom, the pro forma net tangible book value
of the Company at December 31, 1996, would be $8,488,364 or $6.70 per share,
representing an immediate increase in net tangible book value of $8.19 per share
to existing holders of Class A Stock and an immediate dilution of $3.30 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 Class A Stock (1)(2)............ $ 10.00
<S> <C> <C>
---------
Net tangible book value per share of Class A Stock before this
offering.......................................................... $ (1.49)
Increase attributable to this offering............................. $ 8.19
---------
Pro forma net tangible book value per share of Class A Stock after
this offering (3)................................................. 6.70
---------
Dilution to New Investors.......................................... $ 3.30
---------
---------
</TABLE>
The following table sets forth, with respect to existing stockholders and
investors in this offering, a comparison of the number shares of Class A 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 Class A Stockholders.................... 106,000 8.4% $ 53,600 0.5% $ .51
New Investors.................................... 1,160,000 91.6 9,800,000(2) 99.5 $ 10.00
----------- ----- ------------- ----- -----------
1,266,000 100.0% $ 9,853,600 100.0%
----------- ----- ------------- -----
----------- ----- ------------- -----
</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
Class A Stock, representing 99.8% of the total consideration for
approximately 89.7% of the total number of shares of Class A Stock then
outstanding (excluding any exchange of shares of Class B Stock for this
purpose). 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.
(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 $294,000. See "Use of Proceeds."
31
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996, and as adjusted to give effect to the sale of the Units and
the Class B Stock being offered hereby:
<TABLE>
<CAPTION>
HISTORICAL AS ADJUSTED(1)
---------- --------------
<S> <C> <C>
Note Payable................................................................ $ 85,343 --
---------- --------------
Class A 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) --
Class A 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
Class B Common Stock, $.01 par value, none authorized; 250,000 authorized,
180,000 shares issued and outstanding, as adjusted (2)..................... -- 1,800
Additional paid in capital.................................................. 61,939 6,934,347
Deficit accumulated during the development stage............................ (33,516) (56,844)
---------- --------------
Total capitalization...................................................... $ 105,427 $ 8,488,364
---------- --------------
---------- --------------
</TABLE>
- --------------------------
(1) Adjusted to give effect to the sale of 800,000 Units and the 180,000 shares
of Class B Stock offered hereby at the public offering price of $10.00 per
Unit and $10.00 per share of Class B Stock, 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 $8,681,000. See "Use of Proceeds."
(2) Excludes a total of 2,430,666.6 shares of Common Stock, consisting of: (i)
800,000 shares of Class A Stock reserved for issuance upon the exercise of
the Class A Warrants, (ii) 360,000 shares of Class A Stock reserved for
issuance upon exercise of the Units underlying the Class B Stock, (iii)
360,000 shares of Class A Stock reserved for issuance upon exercise of the
Class A Warrants comprising a part of the Units underlying the Class B
Stock, (iv) 120,000 shares of Class A Stock included in the Units subject to
the Underwriters' over-allotment option, (v) 120,000 shares of Class A Stock
reserved for issuance upon the exercise of the Class A Warrants included in
the Units subject to the Underwriters' over-allotment option, (vi) 45,000
shares of Class A Stock reserved for issuance upon exercise of the Units
underlying the Class B Stock subject to the Underwriters' over-allotment
option, (vii) 45,000 shares of Common Stock reserved for issuance upon
exercise of the Class A Warrants comprising a part of the Units underlying
the Class B Stock subject to the Underwriters' over-allotment option, (viii)
266,666.6 shares of Class A Stock reserved for issuance upon exercise of
options for Units granted to executive officers of the Company, (ix) 94,000
shares of Class A Stock reserved for issuance upon conversion of the
Company's outstanding Series A Preferred Stock, which shares of Class A
Stock will be offered for sale by this Prospectus at the time of a Business
Combination, (x) 80,000 shares of Class A Stock included in the Units
reserved for issuance upon exercise of the Representative's Unit Purchase
Warrants, (xi) 80,000 shares of Class A 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) 30,000
shares of Class A Stock included in the Units reserved for issuance upon
exercise of the Representative's Class B Warrants, and (xiii) 30,000 shares
of Class A 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 of Class
A Stock 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 of Class A
Stock 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 redemption of Class A Stock by 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 Stock and the sale of 30,000 shares of Class B
Stock to two directors (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 Stock, 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 Stock in this
offering and the sale of 30,000 shares of Class B Stock to two directors, 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 Stock 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 distribute to the then
holders of Class A Stock acquired as part of the Units sold in this offering or
in the open market
33
<PAGE>
thereafter, the amount held in the escrow account. The assets of the Company
(other than the escrowed assets) will be used to pay the Company's liabilities
and also to pay 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
permit the Company to redeem the Class A Stock, 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 Stock in this offering and the sale of 30,000 shares of
Class B Stock to two directors, 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 Stock 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 Class A
Stock have agreed to waive their respective rights to participate in a
redemption 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 redemption would
be distributed to the owners of the Class A Stock issued as part of the Units in
this offering or in the open market thereafter, after payment of a redemption
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
34
<PAGE>
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 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
35
<PAGE>
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 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) with each share of Class B Stock entitled to 2 votes. 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
36
<PAGE>
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; (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
37
<PAGE>
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."
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.
38
<PAGE>
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 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.
REDEMPTION OF CLASS A STOCK
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 distribute to the then
holders of Class A Stock acquired as part of the Units sold in this offering or
in the open market thereafter, in redemption of such shares the amounts in the
interest bearing escrow account. Following such a redemption of Class A Stock,
each outstanding share of Class B Stock will be exchanged for two shares of
Class A Stock. The assets of the Company (other than the escrowed assets) will
be used to pay the Company's liabilities and to pay a liquidation distribution
of $9,400 to the Holders of the Series A Preferred Stock. The amount per share
for distribution, to the holders of the Class A 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 Class A 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 Class A Stock in
accordance with the vote of the majority of all non-affiliated public
stockholders of the Company with respect to any redemption proposal. Holders of
Class A Warrants, however, will only be entitled to vote on any redemption
proposal, and allowed to participate in any redemption distribution, if they
purchase shares of Class A Stock in this offering or on the open market
thereafter, but only as to any shares of Class A Stock so purchased. Present
stockholders including officers, directors and their affiliates will not
participate in any redemption distribution with respect to the shares of Class A
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 Class A Stock, the Class A Warrants and the Class B Stock 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 will require the Company to comply with periodic reporting, proxy
solicitation and certain other
39
<PAGE>
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)RT-SM- and Specialized Merger and Acquisition
Allocated Risk Transaction-SM- 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)RT-SM- and Specialized Merger and Acquisition Allocated Risk
Transaction-SM- 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)RT-SM- or Specialized Merger and
Acquisition Allocated Risk Transaction-SM- servicemarks. See "Certain
Transactions."
EMPLOYEES
As of the date of this Prospectus, the Company has no full time employees.
40
<PAGE>
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., Kellstrom, Inc., CHG, Inc. and UC Television Network Corp.
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.
41
<PAGE>
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)RT-SM- and Specialized Merger and Acquisition Allocated Risk
Transaction-SM-.
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 Class A Stock and
one Class A Warrant to purchase one share of Class A 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
42
<PAGE>
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 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 redemption of the Class A Stock 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 Class A 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. Bright's
experience is comprised of its corporate predecessor's licensing the
SMA(2)RT-SM- structure and servicemarks to Initial Acquisition Corp. and Bright
licensing the SMA(2)RT-SM- structure and servicemarks to Orion Acquisition Corp.
II. However, David J. Mitchell, the Company's Chairman and Chief Executive
Officer has been previously involved with two Specified Purpose Acquisition
Companies ("SPAC"). A SPAC is a company organized for the purpose of acquiring
or merging with an operating business in a specified area. From December 1993
until June 1995,
43
<PAGE>
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.
CERTAIN TRANSACTIONS
In August 1995, the Company issued an aggregate of 52,500 shares of Class A
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."
As of May, 1997, the Company redeemed 25,000 shares of Class A stock held by
Manhattan Associates LLC. Each of David J. Mitchell and Thomas McMillen
purchased 12,500 shares of Class A Stock for a purchase price of $.10 per share
or $2,500 in the aggregate from the Company. 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)RT-SM- and Specialized Merger and Acquisition Allocated Risk
Transaction-SM- 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)RT-SM- name and structure to Initial Acquisition
Corp. and Bright licensed the SMA(2)RT-SM- 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)RT-SM- 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)RT-SM-
structure by associating it with the previous SMA(2)RT-SM- transaction.
Mr. David Mitchell and Mr. Thomas McMillen, directors of the Company, have
each agreed to purchase up to 15,000 shares, or up to 30,000 in the aggregate,
of the Company's Class B Stock at a purchase price of $10.00 per share, or an
aggregate purchase price of up to $300,000. The Company shall require the
purchase of the 30,000 shares of Class B Stock, or any portion thereof, by
Messrs. Mitchell and McMillen at such time as the Company deems necessary to
fund certain expenses of the Company associated with a Business Combination by
the Company.
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 Class A Stock, which it
44
<PAGE>
purchased for $.10 per share. CDIJ paid cash for the Class A 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 Class A 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.
45
<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 Class A Stock offered by the
Company hereby, based on information obtained from the persons named below, with
respect to the beneficial ownership of shares of Class A Stock by (i) each
person known by the Company to be the owner of more than 5% of the outstanding
shares of Class A Stock, (ii) each director, and (iii) all executive officers
and directors as a group. None of such persons owns any Class B Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES OF CLASS A
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
Class A 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 Class A 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 Class A 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 Class A 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 Class A 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 Class A 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 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).
46
<PAGE>
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
Stock being sold in this offering. except the 30,000 shares reserved for
issuance to two directors. See "The Company--Capital Commitment."
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company will be authorized to issue 10,250,000 shares of Common Stock,
par value $.01 per share, of which 10,000,000 shares are designated Class A
Stock and 250,000 shares are designated Class B Stock. As of the date of this
Prospectus, 106,000 shares of Class A Stock are outstanding, held of record by
16 persons. The holders of Class A Stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. The holders of
Class B Stock are entitled two votes 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 redemption offer or
liquidation distribution prior to the consummation of the first Business
Combination. Each outstanding share of Class B Stock at the time of a Business
Combination will be exchanged for two Units (each consisting of one share of
Class A Stock and one Class A Warrant) 90 days following the consummation of the
Business Combination), or any earlier date on or after the date of a Business
Combination that the Representative in its sole discretion so elects. Otherwise,
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.
CLASS B STOCK
As of the date hereof, each share of Class B Stock will entitle the
registered holder thereof to receive two Units, each comprised of one share of
Class A Stock and one Class A Warrant to purchase one share of Class A Stock at
a price of $.125 per Unit, subject to adjustment in certain circumstances. The
Class B Stock will be initially exchangeable commencing ninety (90) days
following the consummation of a Business Combination or on any earlier date on
or after the date of a Business Combination that the Representative, in its sole
discretion so elects, 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. Each share
of Class B Stock will be exchanged for two shares of Class A Stock following a
redemption of the Class A Stock sold in this offering in the event a Business
Combination is not consummated within 18 months from the date of this
Prospectus, or 24 months if the Extension Criteria are satisfied. See "The
Company-Redemption of Class A Stock if No Business Combination."
The Units and the Class B Stock will be sold and traded separately. Florida
residents who purchase Class B Stocks will be unable to exchange these Shares to
receive Units unless and until the Units issuable upon exchange of the Class B
Stock 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 "exchange price" of Class B Stock is nil, the "offering
price" of the Units issuable upon exchange of the Class B Stock could be
considered not greater than $5.00. For this reason, no permit to sell the Units
issuable upon exchange
47
<PAGE>
of the Class B Stock in Florida has been obtained. There can be no assurance
that the Units issuable upon exchange of the Class B Stock will ever be
registered in Florida or established to be exempt from the requirement of such
registration.
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 1000 shares of Class A 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 Class A Stock issuable upon conversion of the
Series A Preferred Stock at the time of a Business Combination.
CLASS A WARRANTS
The statements under this caption relating to the Class A Warrants are
merely a summary and do not purport to be complete. However, such summary
contains all information with respect to such Class A 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 Class A Stock at a price of $9.00 per
share, subject to adjustment in certain circumstances. The Class A Warrants will
be initially exercisable commencing ninety (90) days following the consummation
of a Business Combination, or any earlier date on or after the date of a
business combination that the Representative in its sole discretion so elects,
and expire at 5:00 p.m., New York City time, on the fifth anniversary of the
date of this Prospectus.
The Class A 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 Class A Warrants for
redemption, in whole and not in part, at the option of the Company, at a price
of $.05 per Class A 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 Class A Stock, if the 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 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 holders of Class A Warrants shall have exercise rights until the close of
business on the date fixed for redemption.
48
<PAGE>
The exercise price and number of shares of Class A 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 Class A
Warrants are not subject to adjustment for issuances of Class A 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 Class A Warrants for a period of not less than 30 days on not less
than 30 days' prior written notice to the holders of Class A Warrants, 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 Class A Stock is then listed. In addition, the Company has the right,
in its sole discretion, to extend the expiration date of the Class A Warrants on
five business days' prior written notice to the holders of Class A Warrants.
The Class A Warrants may be exercised upon surrender of the warrant
certificate on or prior to the expiration date of the Class A Warrant, 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 Class A Warrants being exercised. The
holders of Class A Warrants do not have the rights or privileges of holders of
Class A 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 Class A Warrants prior
to the exercise of the Class A 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 Class A Warrants prior to the exercise or redemption of such
Class A 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 Class A 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 Class A
Warrants or effect a resale or other disposition of Class A Stock issued upon
such exercise.
No fractional shares will be issued upon exercise of the Class A Warrants.
However, if a warrantholder exercises all Class A 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 Class A 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, the Class A Stock, and the
Class B Stock and the transfer agent, registrar and warrant agent for the Class
A Warrants is American Stock Transfer & Trust Company.
49
<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 Class A 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 Class A Stock to be sold for at least one year 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 Class A 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 Class A Stock to be sold for at least two 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 Class A 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 Class A Stock, the
Units, the Class A Warrants or the Class B Stock and no prediction can be made
as to the effect, if any, that market sales of restricted shares of Class A
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 Class A Stock may be sold in the public market would likely adversely
affect prevailing market prices for the Class A Stock, the Units and the Class A
Warrants and Class B Stock and could impair the Company's ability to raise
capital through the sale of its equity securities.
50
<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 shares of Class B Stock set forth opposite their respective names
below.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF CLASS B
UNDERWRITER UNITS SHARES
- ---------------------------------------------------------------------- ----------- -----------
<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 Shares of Class B Stock 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 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 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 Stock 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 share of Class B Stock. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $. per Unit and $. per share of
Class B Stock 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 Stock underwritten (including the sale of any Units and Class B Stock 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 ($294,000 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.
The Company has agreed, in connection with the redemption of Warrants by the
Company 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
51
<PAGE>
prices, 8% of which will be reallowed to any selected dealer who is a member of
the NASD who solicited the redemption (which may also be the Representative) for
each Warrant redeemed by the Company, provided, however, that the
Representatives will not be entitled to receive such compensation in any Warrant
redemption transaction in which (i) the market price of the Common Stock of the
Company at the time of the redemption 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 redemption of the Warrants is unsolicited; and (v) the
solicitation of redemption 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 redemption 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 redemptions 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 Class A 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 22,500 shares of additional Class B Stock 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 Stock 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 Stock 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 $11.00 per
Unit and $11.00 per Class B Warrant for a period of four years, commencing one
year from the date of this Prospectus. The Units and Class B Stock issuable upon
exercise of the Representative's Warrants are the same as the Units and Class B
Stock being sold in
52
<PAGE>
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 Stock 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
Stock 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 Stock 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 Stock.
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 Stock 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 Representative 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, reference is made to the Registration Statement, including the
exhibits and schedules filed therewith,
53
<PAGE>
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.
54
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
Report of Independent Certified Public Accountants.................................................. F-2
Financial Statements:
Balance sheets as of December 31, 1996 (unaudited) and August 31, 1996.............................. F-3
Financial statements for the year ended August 31, 1996 and four months ended December 31, 1996 and
December 31, 1995 (unaudited)
Statements of operations........................................................................ F-4
Statements of stockholders' equity.............................................................. F-5
Statements of cash flows........................................................................ F-6
Notes to financial statements................................................................... F-7 - F-10
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
North Atlantic Acquisition Corp. (formerly Orion Acquisition Corp. I)
New York, NY
We have audited the accompanying balance sheet of North Atlantic Acquisition
Corp., (formerly Orion Acquisition Corp. I) (a corporation in the development
stage) as of August 31, 1996, and the related statements of operations,
stockholders' equity and cash flows for the period from September 1, 1995
(inception) to August 31, 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 North Atlantic Acquisition
Corp. (formerly Orion Acquisition Corp. I) as of August 31, 1996, and the
results of its operations and its cash flows for the period from September 1,
1995 (inception) to August 31, 1996, in conformity with generally accepted
accounting principles.
BDO Seidman, LLP
New York, New York
November 12, 1996
F-2
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31,
1996 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
(UNAUDITED)
Assets
Current:
Cash........................................................................ $ 25,734 $ 25,734
Deferred registration costs (Note 1)........................................ 177,792 177,792
-------------- -----------------
$ 203,526 $ 203,526
-------------- -----------------
-------------- -----------------
Liabilities and Stockholders' Equity
Current:
Accrued expenses (primarily license agreement) (Note 1)..................... $ 98,099 $ 98,099
Notes payable, net of discount (Note 5)..................................... 82,912 85,343
-------------- -----------------
Total current liabilities............................................... 181,011 183,442
-------------- -----------------
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 1
Subscription receivable..................................................... (9,400) (9,400)
Common stock, $.01 par value shares -- authorized 200,000; outstanding
106,000.................................................................... 1,060 1,060
Additional paid-in capital.................................................. 61,939 61,939
Deficit accumulated during the development stage............................ (31,085) (33,516)
-------------- -----------------
Total stockholders' equity.............................................. 22,515 20,084
-------------- -----------------
$ 203,526 $ 203,526
-------------- -----------------
-------------- -----------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
SEPTEMBER 1, SEPTEMBER 1,
1995 FOUR MONTHS FOUR MONTHS 1995
(INCEPTION) ENDED ENDED (INCEPTION)
TO AUGUST 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1996 1996 1995 1996
--------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
General and administrative expenses and debt
costs............................................ $ 31,085 $ 2,431 $ 6,561 $ 33,516
--------------- ------------ ------------ ---------------
Net loss.......................................... $ (31,085) $ (2,431) $ (6,561) $ (33,516)
--------------- ------------ ------------ ---------------
--------------- ------------ ------------ ---------------
Net loss per common share......................... $ (.29) $ (.02) (.06)
--------------- ------------ ------------
--------------- ------------ ------------
Weighted average common shares outstanding........ 106,000 106,000 106,000
--------------- ------------ ------------
--------------- ------------ ------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF STOCKHOLDERS' EQUITY
<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...................... -- -- -- -- -- -- (31,085)
--
--- ------------ --------- ----------- ----------- -----------
Balance, August 31, 1996...... 94 1 (9,400) 106,000 1,060 61,939 (31,085)
--
--- ------------ --------- ----------- ----------- -----------
Net loss (unaudited).......... -- -- -- -- -- -- (2,431)
--
--- ------------ --------- ----------- ----------- -----------
Balance, December 31, 1996
(unaudited).................. 94 $ 1 $ (9,400) 106,000 $ 1,060 $ 61,939 $ (33,516)
--
--
--- ------------ --------- ----------- ----------- -----------
--- ------------ --------- ----------- ----------- -----------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
------------
<S> <C>
Issuance of founders'
shares....................... $ 8,600
Sale of common stock.......... 45,000
Subscription receivable....... --
Net loss...................... (31,085)
------------
Balance, August 31, 1996...... 22,515
------------
Net loss (unaudited).......... (2,431)
------------
Balance, December 31, 1996
(unaudited).................. $ 20,084
------------
------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
SEPTEMBER 1, SEPTEMBER 1,
1995 FOUR MONTHS FOUR MONTHS 1995
(INCEPTION) ENDED ENDED (INCEPTION)
TO AUGUST 31, DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1996 1996 1995 1996
--------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net loss........................................ $ (31,085) $ (2,431) $ (6,561) $ (33,516)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Amortization of deferred debt costs........... 9,800 -- 2,450 9,800
Amortization of discount on notes payable..... 17,912 2,431 -- 20,343
Changes in assets and liabilities -- accrued
expenses..................................... 8,099 -- 980 8,099
--------------- ------------ ------------ ---------------
Net cash provided by (used in) operating
activities............................... 4,726 -- (3,131) 4,726
--------------- ------------ ------------ ---------------
Cash flows from financing activities:
Proceeds from sale of common stock.............. 53,600 -- 53,600 53,600
Deferred costs:
Registration.................................. (87,792) -- (67,791) (87,792)
Debt.......................................... (9,800) -- (9,800) (9,800)
Proceeds from issuance of notes payable......... 65,000 -- 65,000 65,000
--------------- ------------ ------------ ---------------
Net cash provided by financing
activities............................... 21,008 -- 41,009 21,008
--------------- ------------ ------------ ---------------
Net increase in cash.............................. 25,734 -- 37,878 25,734
Cash, beginning of period......................... -- 25,734 -- --
--------------- ------------ ------------ ---------------
Cash, end of period............................... $ 25,734 $ 25,734 $ 37,878 $ 25,734
--------------- ------------ ------------ ---------------
--------------- ------------ ------------ ---------------
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>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEFERRED REGISTRATION COSTS
North Atlantic Acquisition Corp. (formerly 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 (the estimated term of the debt)
using the straight-line method. Amortization expense is $9,800 for the period
from September 1, 1995 (inception) to August 31, 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 August 31, 1996, the Company has a net operating loss carryforward of
approximately $31,000 which results in a deferred tax asset of approximately
$12,000, 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. Operations did not occur until September; accordingly,
financal statements have been presented commencing on September 1, 1995. At
December 31, 1996, the Company had not yet commenced any formal business
operations and 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
F-7
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
2. ORGANIZATION AND BUSINESS OPERATIONS (CONTINUED)
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.
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.
F-8
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
2. ORGANIZATION AND BUSINESS OPERATIONS (CONTINUED)
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.
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 180,000 Class B exchangeable common stock at $10.00 per share of
Class B Stock ("Class B Stock"). 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 Stock entitles the holder to receive two Units in exchange
90 days after the date of a Business Combination of the 180,000 shares of Class
B Stock, 30,000 are reserved for issuance to two directors of the Company, who
have agreed to contribute up to $300,000 to the Company to finance certain costs
associated with a Business Combination. The Class A 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 $8,390,000 from the Proposed
Offering, which is net of underwriter discounts and related expenses.
The Units and the Class B Stock, 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 10,250,000 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 May 1998 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 September 1, 1995
(inception) to August 31, 1996 was approximately $18,000.
F-9
<PAGE>
NORTH ATLANTIC ACQUISITION CORP.
(FORMERLY ORION ACQUISITION CORP. I)
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
5. STOCKHOLDERS' EQUITY (CONTINUED)
(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 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.
NORTH ATLANTIC
ACQUISITION CORP.
800,000 UNITS,
EACH UNIT CONSISTING OF
ONE SHARE OF CLASS A 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)
180,000 CLASS B EXCHANGEABLE
COMMON STOCK
(EXCHANGEABLE TO
360,000 UNITS)
---------------------
PROSPECTUS
------------------------
H.J. MEYERS & CO., INC.
MAY , 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
North Atlantic Corp. (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>
<S> <C>
Filing Fee -- Securities and Exchange Commission.............. $ 9,291.78
Filing Fee -- National Association of Securities Dealers,
Inc.......................................................... 3,003.48
Fees and Expenses of Accountants.............................. 12,500.00
Fees and Expenses of Counsel.................................. 75,000.00
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........................................ 11,704.74
-----------
Total..................................................... $195,000.00
-----------
-----------
</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 Class A 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 Class A 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 Stock Certificate.
*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.
**4.8 -- Form of Exchange Agreement between the Company and American Stock Transfer
& Trust Company.
*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.
** To be filed by Amendment.
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-2
<PAGE>
(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;
(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. 7
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 13th day of May, 1997.
NORTH ATLANTIC ACQUISITION CORP.
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 May 13, 1997
(ATTORNEY-IN-FACT) (Principal Executive Officer)
* Secretary, Treasurer, Director
-------------------------------------- (Principal Financial and May 13, 1997
Thomas McMillen Accounting Officer)
*
-------------------------------------- Director May 13, 1997
A.J. Nassar
</TABLE>
*By: /s/ DAVID J. MITCHELL
---------------------------------
David J. Mitchell
(ATTORNEY-IN-FACT)
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- --------- --------------------------------------------------------------------------------------- ---------
<C> <C> <S> <C>
**1.1 -- Underwriting Agreement.
*3.1 -- Certificate of Incorporation of the Company, as amended.
*3.2 -- Form of Bylaws of the Company.
**4.1 -- Form of Class A 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 Stock Certificate.
*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.
**4.8 -- Form of Exchange Agreement between the Company and American Stock Transfer & Trust
Company
*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.
** To be filed by Amendment.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
North Atlantic Acquisition Corp.
New York, New York
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated November 12, 1996, relating to the
financial statements of North Atlantic Acquisition Corp., 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
May 12, 1997
