<PAGE> 1
Filed pursuant to Rule 424(b)(4)
Registration No. 333-3252
ORION ACQUISITION CORP. II
800,000 UNITS, AT $10.00 PER UNIT, EACH UNIT CONSISTING OF ONE SHARE OF
COMMON STOCK AND ONE REDEEMABLE CLASS A WARRANT ENTITLING THE HOLDER THEREOF TO
PURCHASE, UPON CONSUMMATION OF A BUSINESS COMBINATION, ONE SHARE OF COMMON
STOCK AT A PRICE OF $9.00
320,000 REDEEMABLE CLASS B UNIT PURCHASE WARRANTS, AT $5.625 PER CLASS
B WARRANT, EACH CLASS B WARRANT ENTITLING THE HOLDER THEREOF TO PURCHASE, UPON
THE CONSUMMATION OF A BUSINESS COMBINATION, ONE UNIT AT A PRICE OF $.125
Orion Acquisition Corp. II, 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
Common Stock, par value $.01 per share (the "Common Stock"), and one Redeemable
Class A Common Stock Purchase Warrant (the "Class A Warrants"), and 320,000
Redeemable Class B Unit Purchase Warrants (the "Class B Warrants"), each
entitling the holder thereof to purchase one Unit for $.125 at the time of a
Business Combination, as defined. The Units and the Class B Warrants, which are
being offered in the same offering, will be sold and traded separately. The
Common Stock and the Class A Warrants will become separable and transferable at
such time as H.J. Meyers & Co., Inc. ("H.J. Meyers") may determine, but in no
event will H.J. Meyers 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"). H.J. Meyers and Northeast Securities, Inc. ("Northeast") will act
severally but not jointly as representatives (the "Representatives") of the
several underwriters (the "Underwriters"). Each Class A Warrant will entitle the
holder thereof to purchase one share of Common Stock at a price per share of
$9.00, commencing upon the consummation of a Business Combination, as defined,
until the fifth anniversary of the date of this Prospectus. Each Class B Warrant
will entitle the holder thereof to purchase one Unit at a price per Unit of
$.125 commencing upon the consummation of a Business Combination until the first
anniversary of such date. (The Class A Warrants and the Class B Warrants are
sometimes hereinafter collectively referred to as the "Warrants.") Furthermore,
the Warrants are redeemable, each as a class, in whole and not in part, at the
option of the Company, at a price of $.05 per Warrant at any time, upon not less
than 30 days' prior written notice to the registered holders thereof, provided
that the Company has consummated a Business Combination, as defined, and that
the last sale price of the Common Stock, if the Common Stock is listed for
trading on an exchange or interdealer quotation system which provides last sale
prices, or, the average of the closing bid and asked quotes for the Common
Stock, if the Common Stock is listed for trading on an interdealer quotation
system which does not provide last sale prices, on all 10 of the trading days
ending on the day immediately prior to the day on which the Company gives notice
of redemption, has been $11.00 or higher.
Prior to this offering, there has been no public market for the Units, the
shares of Common Stock or the Warrants and there can be no assurance that such a
market will develop for any of such securities after the completion of this
offering. The offering prices of the Units and the Class B Warrants and the
exercise prices and terms of the Warrants have been arbitrarily determined by
the Company and the Representatives, and bear no relationship to the Company's
assets, book value, or other generally accepted criteria of value. For
additional information regarding the factors considered in determining the
initial public offering prices of the Units and the Class B Warrants and the
exercise prices and the terms of the Warrants, see "Risk Factors" and
"Underwriting." The Company anticipates that the Units, the Common Stock, the
Class A Warrants and the Class B Warrants will be quoted on the OTC Bulletin
Board under the symbols "MTMRU," "MTMR," "MTMRW" and "MTMRZ," 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 16)
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, ACCORDING TO THE SECURITIES AND EXCHANGE COMMISSION, 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 16)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS(1) COMPANY(2)(3)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit $10.00 $.600 $9.400
- ----------------------------------------------------------------------------------------------------------------------------
Per Class B Warrant $5.625 $.5625 $5.0625
- ----------------------------------------------------------------------------------------------------------------------------
Total(4) $9,800,000 $660,000 $9,140,000
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include additional compensation to the Representatives in the form
of a non-accountable expense allowance of 3% of the gross proceeds of the
sale of the Units and 1% of the gross proceeds of the sale of the Class B
Warrants. For indemnification arrangements with the Underwriters and
additional compensation payable to the Representatives, see "Underwriting."
(2) Before deducting estimated offering expenses, including the Representatives'
non-accountable expense allowance of $258,000 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
Warrants equal to the discounts and the Representatives' non-accountable
expense allowance attributable to the sale of the Units will be deposited
into escrow with the Proceeds Escrow Agent (as defined). See "The
Company -- Escrow of Offering Proceeds."
(4) The Company has granted the Underwriters a 30-day option to purchase up to
120,000 additional Units and/or 48,000 additional Class B Warrants upon the
same terms and conditions as set forth above, solely to cover
over-allotments, if any. If such over-allotment options are exercised in
full, the total Price to Public, Underwriting Discounts and Proceeds to
Company will be $11,270,000, $759,000, and $10,511,000, respectively. See
"Underwriting."
The Units and the Class B Warrants are being offered by the Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to its right to withdraw, cancel or modify this
offering and to reject any order in whole or in part. It is expected that
delivery of certificates will be made at the offices of H.J. Meyers & Co., Inc.,
1895 Mount Hope Avenue, Rochester, New York 14620, on or about July 9, 1996.
------------------------
H.J. MEYERS & CO., INC. NORTHEAST SECURITIES, INC.
The date of this Prospectus is July 2, 1996.
<PAGE> 2
"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 STATES") AND INITIAL SALES MAY ONLY BE MADE IN SUCH JURISDICTIONS.
MORE SPECIFICALLY, THE COMPANY HAS REGISTERED THE SECURITIES BY FILING IN
LOUISIANA, BY COORDINATION IN DELAWARE, ILLINOIS, MARYLAND, RHODE ISLAND AND
SOUTH CAROLINA AND BY NOTIFICATION IN COLORADO, FLORIDA 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.
<PAGE> 3
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 options granted to the Underwriters are 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 October 19, 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 and other borrowings or a combination thereof in effecting
a Business Combination.
The Company will seek to acquire a Target Business without limiting itself
to a particular industry. Most likely, the Target Business will be primarily
located in the United States, although the Company reserves the right to acquire
a Target Business primarily located outside the United States. In seeking a
Target Business, the Company will consider, without limitation, businesses which
(i) offer or provide services or develop, manufacture or distribute goods in the
United States or abroad, including, without limitation, in the following areas:
health care and health products, educational services, environmental services,
consumer-related products and services (including amusement and/or recreational
services), personal care services, voice and data information processing and
transmission and related technology development or (ii) is engaged in wholesale
or retail distribution. The Company will not acquire a Target Business unless
the fair market value of such business, as determined by the Company based upon
standards generally accepted by the financial community, including revenues,
earnings, cash flow and book value (the "Fair Market Value"), is at least 80% of
the net assets of the Company at the time of the consummation of a Business
Combination (the "Fair Market Value Test"). If the Company determines that the
financial statements of a proposed Target Business do not clearly indicate that
the Fair Market Value Test has been satisfied, the Company will obtain an
opinion from an investment banking firm that is a member of the National
Association of Securities Dealers, Inc. (the "NASD") with respect to the
satisfaction of such criteria. The Company has not had any contact or
discussions with any entity or representatives of any entity regarding a
Business Combination. While the Company may, under certain circumstances, seek
to effect Business Combinations with more than one Target Business, in all
likelihood, as a result of its limited resources, the Company will have the
ability to effect only a single Business Combination with a Target Business. The
Company does not intend to register as a broker-dealer, merge with or acquire a
registered broker-dealer, or otherwise become a member of the NASD.
BUSINESS EXPERIENCE OF PRINCIPALS
The executive officers and the other directors of the Company have business
experience which has provided them with skills which the Company believes will
be helpful in evaluating potential Target Businesses and negotiating a Business
Combination.
RETENTION OF INDEPENDENT INVESTMENT BANKER
At some time following the completion of this offering, the Company may
engage an independent investment banking firm which is a member in good standing
of the NASD to assist the Company in identifying, evaluating, structuring and
negotiating potential Business Combinations.
3
<PAGE> 4
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 with respect to the Units is
exercised in full), representing an amount equal to the gross proceeds from the
sale of the Units, will be placed in an escrow account maintained by Chemical
Bank (the "Proceeds Escrow Agent"), subject to release upon the earlier of (1)
receipt by the Proceeds Escrow Agent of (i) written notice by the Company of the
Company's completion of a transaction or series of transactions in which at
least 50% of the gross proceeds from this offering are committed to a specific
line of business as a result of a Business Combination (including any redemption
payments), (ii) a written opinion of counsel of the Company, reasonably
acceptable to the Proceeds Escrow Agent, that a Business Combination was
approved by a vote of two-thirds of the shares of Common Stock of the Company,
as required by this Prospectus, that the holders of more than 20% of the Common
Stock of the Company have not elected to redeem their Common Stock, as required
by this Prospectus; and (iii) a written certification from the Company that the
fair market value of the Target as determined by the Company, based upon
standards generally accepted by the financial community (including revenues,
earnings, cash flow, and book value), exceeds 80% of the net value of the assets
of the Company, or (2) either (i) receipt by the Proceeds Escrow Agent of
written notification to distribute the escrow proceeds in connection with a
liquidation of the Company to the holders of Common Stock purchased as part of
the Units sold in this offering or in the open market thereafter, or (ii)
receipt by the Proceeds Escrow Agent of written notification to distribute part
of the escrow proceeds to the holders of record of Common Stock purchased as
part of the Units sold in this offering or in the open market thereafter who
elected to have their shares redeemed in accordance with the terms set forth in
this Prospectus. The Company will notify the Representatives and the NASD prior
to the release of funds from the escrow account. All proceeds held in the escrow
account will be invested, until released, in short-term United States government
securities, including treasury bills, cash and cash equivalents. Except as noted
below, the proceeds to the Company from the sale of the Class B Warrants will
not be placed in escrow. Rather, these proceeds will be used (i) to repay
indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, to
Bright pursuant to a license agreement executed by Bright and the Company, (iii)
to cover all the expenses incurred by the Company in this offering, including
the Underwriters' discounts and the Representatives' non-accountable expense
allowance, and (iv) to fund the Company's operating expenses, including possible
investment banking fees and the costs of business, legal and accounting due
diligence on prospective Target Businesses, until the consummation of a Business
Combination. In addition, a portion of the net proceeds from the sale of the
Class B Warrants equal to the Underwriters' discounts and the Representatives'
non-accountable expense allowance with respect to the Units, as noted in clause
(iii) above, will be placed in the above mentioned escrow account for the
benefit of purchasers of Common Stock as part of the Units sold in this offering
and in the open market thereafter. Management is unaware of any circumstance
under which this policy, through management's own initiative, may be changed.
STOCKHOLDER APPROVAL OF BUSINESS COMBINATIONS
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the Business Combination is such as would not ordinarily
require stockholder approval under applicable state law. In connection with such
request, the Company intends to provide stockholders with disclosure
documentation in accordance with the proxy solicitation regulations under the
Securities Exchange Act of 1934 (the "Proxy Rules"), including audited financial
statements, concerning a Target Business. All of the Company's present
stockholders, including all directors and the Company's executive officers, have
agreed to vote all of their respective shares of Common Stock in accordance with
the vote of the majority of the shares voted by all other stockholders of the
Company ("non-affiliated public stockholders") with respect to any such Business
Combination. A Business Combination will not be consummated unless approved by a
vote of two-thirds of the shares of Common Stock voted by the stockholders (in
person or by proxy). In addition, the Delaware General Corporation Law requires
approval of certain mergers and consolidations by a majority of the outstanding
stock entitled to vote. Holders of Warrants who otherwise do not own any shares
of Common Stock will not be entitled to vote on any Business Combination.
4
<PAGE> 5
REDEMPTION RIGHTS
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer (the "Redemption Offer") to each of
the non-affiliated public stockholders of the Company the right, for a specified
period of time of not less than 20 calendar days, to redeem his shares of Common
Stock at a price equal to the Liquidation Value (as defined below) of such
shares as of the record date established for determining the stockholders
entitled to vote with respect to the approval of a Business Combination (the
"Record Date"). The Redemption Offer will be described in the disclosure
documentation relating to the proposed Business Combination. The "Liquidation
Value" for each share of Common Stock will be determined as of the Record Date
by dividing (A) the greater of (i) the Company's net worth as reflected in the
Company's then current financial statements as audited by the Company's
independent accountants, or (ii) the amount of the proceeds of the Company in
the escrow account (including interest earned thereon) by (B) the number of
shares held by non-affiliated public stockholders. In connection with the
Redemption Offer, if non-affiliated public stockholders holding 20% or less of
the shares of Common Stock elect to redeem their shares, the Company may, but
will not be required to, proceed with such Business Combination and, if the
Company elects to so proceed, will redeem such shares at their Liquidation Value
as of the Record Date. In any case, if non-affiliated public stockholders
holding more than 20% of the Common Stock elect to redeem their shares, the
Company will not proceed with such potential Business Combination and will not
redeem such shares. All existing stockholders of the Company and holders of
Warrants will be allowed to participate in a Redemption Offer only if they
purchase shares of Common Stock in this offering or on the open market
thereafter, and only as to any shares of Common Stock so purchased.
ESCROW OF OUTSTANDING SHARES
All of the shares of Common Stock and Series A Preferred Stock of the
Company outstanding immediately prior to the date of this Prospectus (the
"Escrowed Stock") have been placed in escrow with Campbell & Fleming, P.C. (the
"Share Escrow Agent"), until the earlier of (i) the occurrence of the
consummation of the first Business Combination or (ii) 18 months from the date
of this Prospectus provided that such 18-month period will be extended by six
months to 24 months from the date of this Prospectus if, prior to the expiration
of the 18-month period, the Company has become a party to a letter of intent or
a definitive agreement to effect a Business Combination (the "Extension
Criteria"). During the escrow period, the holders of the Escrowed Stock will not
be able to sell or otherwise transfer their respective shares of Escrowed Stock
(with the exceptions described below), but will retain all other rights as
stockholders of the Company, including, without limitation, the right to vote
escrowed shares of Common Stock, subject to their agreement to vote all of their
shares in accordance with the vote of a majority of the non-affiliated public
stockholders with respect to a consummation of a Business Combination or
liquidation proposal, but excluding the right to request the redemption of
Escrowed Stock pursuant to a Redemption Offer. Subject to compliance with
applicable securities laws, any such holder may transfer his, her or its
Escrowed Stock to a family member or to a trust established for the benefit of
himself, herself, or a family member or to another affiliated entity (with the
consent of the Representative which will not be unreasonably withheld) or, in
the event of the holder's death, by will or operation of law, or in the case of
its dissolution or merger, provided that any such transferee or successor must
agree as a condition to such transfer or succession to be bound by the
restrictions on transfer and succession applicable to the original holder and,
in the case of present stockholders other than the holders of 15,000 shares of
common stock sold in a private placement in January, 1996 (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 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 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.
5
<PAGE> 6
RESTRICTIONS ON SALE OF OUTSTANDING SHARES
All of the shares of Common Stock outstanding prior to the date of this
Prospectus other than the Placement Shares and the shares of Common Stock
issuable upon the exercise of options to purchase Units granted to entities
affiliated with the Company's officers and directors and the exercise of
warrants included in the units issuable upon exercise of such options
(collectively, 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 (October 25, 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 its
dissolution or merger, provided that any such transferee or successor must agree
as a condition to such transfer or succession 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 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 (January
31, 1996) or 60 days following the consummation of the first Business
Combination.
The Company has outstanding 110 shares of Series A Preferred Stock which
are held by CDIJ Capital Partners, L.P. ("CDIJ"), an indirect affiliate of
Bright. The shares are convertible to Common Stock on the basis of one thousand
shares of Common Stock for each share of Series A Preferred Stock for a one year
period commencing upon the consummation of a Business Combination. The 110,000
shares of Common Stock issuable upon conversion of the Company's outstanding
Series A Preferred Stock will be offered by a Prospectus at the time of a
Business Combination and thereafter will be freely tradable under applicable
securities laws. However, the holders of such shares have agreed not to sell or
otherwise transfer such shares until 60 days following the consummation of the
first Business Combination and to limit the volume of such sales to the amount
that is permitted by Rule 144 ("Rule 144") promulgated under the Securities Act
of 1933, as amended. Subject to other conditions, Rule 144 permits sales, within
any three-month period, of a number of shares that does not exceed the greater
of 1% of the total number of outstanding shares of the same class or, if the
shares are quoted on an exchange or on NASDAQ, the average weekly trading volume
during the four calendar weeks preceding the sale. See "Risk Factors -- Shares
Eligible for Future Sale."
POSSIBLE LIQUIDATION OF THE COMPANY IF NO BUSINESS COMBINATION
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit for
stockholder consideration a proposal to liquidate the Company and distribute to
the then holders of Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, the amounts in the interest bearing
escrow account. Thereafter, all remaining assets available for distribution will
be distributed to the non-affiliated public stockholders of the Company after
payment of liabilities and after redemption of the Company's outstanding Series
A Preferred Stock at its liquidation value, $11,000. Since the proceeds to the
Company from the sale of the Class B Warrants will be used (i) to repay
indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, due
to Bright pursuant to a license agreement executed by Bright and the Company,
(iii) to cover all the expenses incurred by the Company in this offering,
including the Underwriters' discounts and the Representatives' non-accountable
expense allowance, and (iv) to fund the Company's operating expenses, including
possible investment banking fees and the costs of business, legal and accounting
due diligence on prospective Target Businesses, until the consummation of a
Business Combination, the amount per share remaining for distribution, in the
event of a
6
<PAGE> 7
liquidation of the Company, to the holders of Common Stock acquired as part of
the Units sold in this offering or in the open market thereafter, and exclusive
of any income earned on the proceeds held in the escrow account, will be
approximately equal to the initial public offering price per Unit in this
offering (assuming no value is attributed to the Warrants included in the Units
offered hereby). All of the present stockholders, including the Company's
executive officers and other directors and their affiliates, are required by the
escrow agreement to which their stock is subject to vote their shares of Common
Stock in accordance with the vote of the majority of all non-affiliated public
stockholders of the Company with respect to any liquidation proposal. See "The
Company -- Escrow of Outstanding Shares." Holders of Warrants, however, will
only be entitled to vote on any liquidation proposal, and allowed to participate
in any liquidation distribution, if they purchase shares of Common Stock in this
offering or on the open market thereafter, but only as to any shares of Common
Stock so purchased. Present stockholders, including officers, directors and
their affiliates, will not participate in any liquidation distribution with
respect to the shares of Common Stock owned by them as of the date of this
Prospectus.
7
<PAGE> 8
THE OFFERING
Securities offered to the
public........................... 800,000 Units, at $10.00 per Unit and
320,000 Class B Warrants, at $5.625 per
Class B Warrant. Each Unit consists of one
share of Common Stock and one Class A
Warrant entitling the holder thereof to
purchase one share of Common Stock at a
price of $9.00. Each Class B Warrant
entitles the holder thereof to purchase one
Unit for $.125 per Unit at the time of a
Business Combination. The Units and the
Class B Warrants, which are being offered
in the same offering, will be sold and
traded separately. The securities
comprising the Units will become separable
and transferable at such time as H.J.
Meyers may determine, but in no event will
H.J. Meyers 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."
Proposed OTC Bulletin Board
Symbols.......................... Units -- "MTMRU"
Common Stock -- "MTMR"
Class A Warrants -- "MTMRW"
Class B Warrants -- "MTMRZ"
Common Stock outstanding prior to
the offering..................... 90,000 shares.
Common Stock to be outstanding
after the offering(1)............ 890,000 shares.
Warrants:
Number of Class A and Class
B Warrants to be outstanding
after the offering(2)....... 800,000 Class A Warrants and 320,000 Class
B Warrants.
Exercise price of Class A
Warrants and Class B Warrants.... The exercise price of each Class A Warrant
is $9.00 per share
of Common Stock and the exercise price of
each Class B Warrant is $.125 per Unit,
each subject to adjustment in certain
circumstances. See "Description of
Securities."
Exercise period............. The exercise period of the Class A Warrants
will commence upon the consummation of a
Business Combination and will expire at
5:00 p.m., New York City time, on the fifth
anniversary of the date of this Prospectus.
The exercise period of the Class B Warrants
will commence upon the consummation of a
Business Combination and will expire at
5:00 p.m., New York City time, on the first
anniversary of the date of a Business
Combination.
Redemption.................. The Warrants are redeemable by the Company,
each as a class, in whole and not in part,
at the option of the Company, at a price of
$.05 per Warrant at any time, upon not less
than 30 days' prior written notice to the
registered holders thereof, provided that
the Company has consummated a Business
8
<PAGE> 9
Combination and that the last sale price of
the Common Stock, if the Common Stock is
listed for trading on an exchange or
interdealer quotation system which provides
last sale prices, or, the average of the
closing bid and asked quotes for the Common
Stock, if the Common Stock is listed for
trading on an interdealer quotation system
which does not provide last sale prices, on
all 10 of the trading days ending on the
day immediately prior to the day on which
the Company gives notice of redemption, has
been $11.00 or higher.
(1) Excludes a total of 2,310,000 shares of Common Stock, consisting of: (i)
800,000 shares of Common Stock reserved for issuance upon the exercise of
the Class A Warrants, (ii) 320,000 shares of Common Stock reserved for
issuance upon exercise of the Units underlying the Class B Warrants, (iii)
320,000 shares of Common Stock reserved for issuance upon exercise of the
Class A Warrants comprising a part of the Units underlying the Class B
Warrants, (iv) 120,000 shares of Common Stock included in the Units subject
to the Underwriters' over-allotment option, (v) 120,000 shares of Common
Stock reserved for issuance upon the exercise of the Class A Warrants
included in the Units subject to the Underwriters' over-allotment option,
(vi) 48,000 shares of Common Stock reserved for issuance upon exercise of
the Units underlying the Class B Warrants subject to the Underwriters'
over-allotment option, (vii) 48,000 shares of Common Stock reserved for
issuance upon exercise of the Class A Warrants comprising a part of the
Units underlying the Class B Warrants subject to the Underwriters'
over-allotment option, (viii) 100,000 shares of Common Stock reserved for
issuance upon exercise of options to purchase Units granted to an affiliate
of certain executive officers and directors of the Company and a further
100,000 shares of Common Stock issuable upon exercise of the Class A
Warrants included in such Units, (ix) 110,000 shares of Common Stock
reserved for issuance upon conversion of the Company's outstanding Series A
Preferred Stock, (x) 80,000 shares of Common Stock included in the Units
reserved for issuance upon exercise of warrants to purchase 80,000 Units,
exercisable over a period of four years commencing one year from the date of
this Prospectus, being sold to the Representatives (the "Representatives'
Unit Purchase Warrants"), (xi) 80,000 shares of Common Stock reserved for
issuance upon the exercise of the Class A Warrants included in the Units
reserved for issuance upon exercise of the Representatives' Unit Purchase
Warrants, (xii) 32,000 shares of Common Stock included in the Units reserved
for issuance upon exercise of a warrant to purchase 32,000 Class B Warrants,
exercisable over a period of four years commencing one year from the date of
this Prospectus, being sold to the Representatives (the "Representatives'
Class B Warrants"), and (xiii) 32,000 shares of Common Stock reserved for
issuance upon exercise of Class A Warrants comprising a part of the Units
underlying the Representatives' Class B Warrants. See "Management,"
"Underwriting" and "Certain Transactions."
(2) Excludes (i) 100,000 Class A Warrants comprising part of the Units issuable
upon exercise of options granted to an affiliate of certain of the executive
officers and directors of the Company; (ii) 120,000 Class A Warrants and
48,000 Class B Warrants included in the Units and Class B Warrants subject
to the Underwriters' over-allotment option, (iii) an additional 48,000 Class
A Warrants comprising a part of the Units underlying the Class B Warrants
subject to the Underwriters' over-allotment options, respectively, (iv)
80,000 Class A Warrants included in the Units reserved for issuance upon
exercise of the Representatives' Unit Purchase Warrants, (v) 32,000 Class B
Warrants underlying the Representatives' Class B Warrants and (vi) 32,000
Class A Warrants underlying the Units underlying the Representatives' 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 Warrants (which
are exercisable into Units) for $5.75 each (the $5.625 purchase price plus the
$.125 exercise price), the proceeds of which will not be placed in escrow, but
rather will be used (i) to repay indebtedness, (ii) to pay the balance of a
$100,000 license fee, or $90,000, due to Bright pursuant to a license agreement
executed by Bright and the Company, (iii) to cover all of the Company's expenses
incurred in this offering, including the Underwriters' discounts and the
Representatives' non-accountable expense allowance, and (iv) to fund the
Company's operating expenses, including possible investment banking fees and the
costs of business, legal and accounting due diligence on prospective Target
Businesses. Consequently, if the Class B Warrants were exercised, holders of
Class B Warrants would pay substantially less for the Units issuable upon
exercise of such Class B Warrants than holders of Units and, accordingly, may
realize a higher return on their investment. Holders of Class B Warrants,
however, risk the loss of their investment if the Company fails to effect a
Business Combination, while holders of shares of Common Stock comprising part of
the Units benefit from the Company's escrow of an amount equal to the gross
proceeds from the sale of the Units in this offering.
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<PAGE> 10
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 Common Stock, the Class A Warrants or the Class
B Warrants and there can be no assurance that such a market will develop after
completion of this offering. Such risk factors include, among others, the
following: the Company's lack of operating history and limited resources;
discretionary use of proceeds; no escrow security for the purchasers of the
Warrants; intense competition in selecting a Target Business and effecting a
Business Combination; and, because of the Company's limited resources, the
possibility that the Company's due diligence investigation of a potential
Business Combination will be restricted, especially in the case of a Target
Business outside the United States. Investors will incur immediate substantial
dilution. See "Risk Factors," "Dilution" and "Use of Proceeds."
USE OF PROCEEDS
The Company intends to use substantially all of the net proceeds of the
offering, together with the interest earned thereon, to attempt to effect a
Business Combination, including selecting and evaluating potential Target
Businesses and structuring, negotiating and consummating a Business Combination
(including possible payment of finder's fees or other compensation to persons or
entities which provide assistance or services to the Company). Approximately 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 liquidation of the Company, to the then holders of the Common Stock
purchased as part of the Units sold in this offering or acquired in the open
market thereafter. All proceeds held in the escrow account will be invested,
until released, in direct investments in short-term United States government
securities, including treasury bills, cash and cash equivalents.
Except as noted below, the proceeds to the Company from the sale of the
Class B Warrants will not be placed in escrow. Rather, these proceeds will be
used (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license
fee, or $90,000, due to Bright pursuant to a license agreement executed by
Bright and the Company, (iii) to cover all of the expenses incurred by the
Company in this offering, including the Underwriters' discounts and the
Representatives' non-accountable expense allowance, and (iv) to fund the
Company's operating expenses, including possible investment banking fees and the
costs of business, legal and accounting due diligence on prospective Target
Businesses, until the Company effects a Business Combination. See "Proposed
Business -- Servicemark License." However, in addition, a portion of the net
proceeds from the sale of the Class B Warrants equal to the Underwriters'
discounts and the Representatives' non-accountable expense allowance with
respect to the Units will be placed in the above-mentioned escrow account for
the benefit of purchasers of Common Stock as part of the Units sold in this
offering and in the open market thereafter. In addition, proceeds from the sale
of the Class B Warrants will be used for the general administrative expenses of
the Company, including legal and accounting fees and administrative support
expenses in connection with the Company's reporting obligations under the
Exchange Act. The Company may seek to issue additional securities if it requires
additional funds to meet its operating and administrative expenses. The Company
has agreed with the Representatives 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 Representatives 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
10
<PAGE> 11
the possible repayment of debt) of the Target Business. No cash compensation
will be paid to any officer or director in their capacities as such until after
the consummation of the first Business Combination. Since the role of the
Company's current directors and executive officers after a consummation of a
Business Combination is uncertain, the Company has no ability to determine what
remuneration, if any, will be paid to such persons after such consummation of a
Business Combination.
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>
MARCH 11, 1996
----------------------
AS
ACTUAL ADJUSTED(1)
-------- ----------
<S> <C> <C>
Balance Sheet Data:
Total assets....................................................... $265,359 $8,595,674
Total liabilities.................................................. 217,367 --
Series A preferred stock........................................... 1 1
Common stock and additional paid-in-capital(1)..................... 63,499 8,614,735
Subscription receivable on Series A preferred stock................ (11,000) --
Accumulated deficit during development stage....................... (4,508) (19,062 )
Total stockholders' equity including amount subject to
redemption(2)................................................... 47,992 8,595,674
</TABLE>
- ---------------
(1) Gives effect to the sale of the Units at the initial public offering price
of $10.00 per Unit, the sale of the Class B Warrants at the initial public
offering price of $5.625 per Class B Warrant and initial application of the
estimated net proceeds (after the payment of all estimated offering
expenses, including the Underwriters' nonaccountable expense allowance) of
$8,551,300 therefrom. See "Use of Proceeds". Assumes no exercise of the
Underwriters' over-allotment option or the Representatives' Warrants. See
"Underwriting".
(2) In the event the Company consummates a Business Combination, the redemption
rights afforded to the non-affiliated public stockholders may result in the
conversion into cash of up to 20% of the aggregate number of shares held by
the non-affiliated public stockholders, amounting to 160,000 shares, at a
per share redemption price equal to (A) the greater of (i) the Company's net
worth or (ii) the amount of proceeds of the Company in the escrow account
(including income earned thereon) divided by (B) the number of shares held
by non-affiliated public stockholders.
11
<PAGE> 12
THE COMPANY
BUSINESS OBJECTIVE
The Company, which is a "blank check" or "blind pool" company, was formed
in October 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 and other 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. See "Management."
POSSIBLE RETENTION OF INDEPENDENT INVESTMENT BANKER
The Company may retain an independent investment banking firm to aid in
identifying, evaluating, structuring, negotiating and consummating a Business
Combination.
ESCROW OF OFFERING PROCEEDS
Upon completion of the offering by the Company, approximately 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 notification by the Company of the Company's
completion of a transaction or series of transactions in which at least 50% of
the gross proceeds from this offering are committed to a specific line of
business as a result of a Business Combination (including any redemption
payments), (ii) a written opinion of counsel of the Company, reasonably
acceptable to the Proceeds Escrow Agent, that a Business Combination was
approved by a vote of two-thirds of the shares of Common Stock of the Company,
as required by this Prospectus, that the holders of more than 20% of the Common
Stock of the Company have not elected to redeem their Common Stock, as required
by this Prospectus, and (iii) a written certification from the Company that the
fair market value of the Target as determined by the Company, based upon
standards generally accepted by the financial community (including revenues,
earnings, cash flow, and book value), exceeds 80% of the net value of the assets
of the Company, or (2) either (i) receipt by the Proceeds Escrow Agent of
written notification to distribute the escrow proceeds in connection with a
liquidation of the Company to the holders of Common Stock purchased as part of
the Units sold in this offering or in the open market thereafter, or
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<PAGE> 13
(ii) receipt by the Proceeds Escrow Agent of written notification to distribute
part of the escrow proceeds to the holders of record of Common Stock purchased
as part of the Units sold in this offering or in the open market thereafter who
elected to have their shares redeemed in accordance with the terms set forth in
this Prospectus. All proceeds held in the escrow account will be invested, until
released, in short-term United States government securities, including treasury
bills, cash and cash equivalents. Except as noted below, the proceeds to the
Company from the sale of the Class B Warrants will not be placed in escrow.
Rather, these proceeds will be used (i) to repay indebtedness, (ii) to pay the
balance of a $100,000 license fee, or $90,000, due to Bright pursuant to a
license agreement executed by Bright and the Company, (iii) to cover all of the
expenses incurred by the Company in this offering, including the Underwriters'
discounts and the Representatives' non-accountable expense allowance, and (iv)
to fund the Company's operating expenses, including possible investment banking
fees and the costs of business, legal and accounting due diligence on
prospective Target Businesses until the Company effects a Business Combination.
In addition, a portion of the net proceeds from the sale of the Class B Warrants
equal to the Underwriters' discounts and the Representatives' non-accountable
expense allowance with respect to the Units will be placed in the
above-mentioned escrow account for the benefit of purchasers of Common Stock as
part of the Units sold in this offering and in the open market thereafter. 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' discounts and the
Representatives' non-accountable expense allowance out of such gross proceeds.
To the extent that the proceeds from the sales of the Class B Warrants are less
than the expenses the Company incurs seeking to effect a Business Combination,
the Company would need additional financing. There can be no assurance that the
Company would be able to arrange any such additional financing. Management is
unaware of any circumstances under which this policy, through management's own
initiative, may be changed. See "Use of Proceeds."
STOCKHOLDER APPROVAL OF BUSINESS COMBINATIONS
The Company, prior to the consummation of any Business Combination, will
submit such transaction to the Company's stockholders for their approval, even
if the nature of the Business Combination is such as would not ordinarily
require stockholder approval under applicable state law. In connection with such
approval, 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, executive officers and their affiliates,
have agreed as a part of 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 any consummation of such Business Combination. See "The
Company -- Escrow of Outstanding Shares." A Business Combination will not be
consummated unless approved by a vote of two-thirds of the shares of Common
Stock (in person or by proxy). In addition, the Delaware General Corporation Law
requires approval of certain mergers and consolidations by a majority of the
outstanding stock entitled to vote thereon. Holders of Warrants who otherwise do
not own any shares of Common Stock will not be entitled to vote on any Business
Combination.
REDEMPTION RIGHTS
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer to each of the non-affiliated
public stockholders of the Company the right, for a specified period of time of
not less than 20 days, to redeem his shares of Common Stock at a price equal to
the Liquidation Value of such shares as of the Record Date. The Redemption Offer
will be described in the disclosure documentation relating to the proposed
Business Combination. The Liquidation Value for each share of Common Stock will
be determined as of the Record Date by dividing (A) the greater of (i) the
Company's net worth as reflected in the Company's financial statements and
audited by the Company's independent accountants or (ii) the amount of the
proceeds of the Company in the escrow account (including all interest earned
thereon) by (B) the number of shares held by non-affiliated public stockholders.
In connection with the Redemption Offer, if non-affiliated public stockholders
holding 20% or less of the shares of Common Stock elect to redeem their shares,
the Company may, but will not be required to, proceed with such Business
Combination and, if the Company elects to so proceed, will redeem such shares at
their Liquidation Value as of the Record Date. In any case, if non-affiliated
public stockholders holding more than
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<PAGE> 14
20% of the Common Stock elect to redeem their shares, the Company will not
proceed with such potential Business Combination and will not redeem such
shares. All existing stockholders of the Company and holders of Warrants will be
allowed to participate in a Redemption Offer only if they purchase shares of
Common Stock in this offering or on the open market thereafter, and only as to
any shares of Common Stock so purchased.
ESCROW OF OUTSTANDING SHARES
All of the shares of Escrowed Stock outstanding immediately prior to the
date of this Prospectus have been placed in escrow with the Share 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 have been satisfied. During the escrow period, the
holders of the Escrowed Stock will not be able to sell or otherwise transfer
their respective shares of the Escrowed Stock (with certain exceptions), but
will retain all other rights as stockholders of the Company, including, without
limitation, the right to vote escrowed shares of Common Stock, subject to their
agreement to vote their shares in accordance with a vote of a majority of the
non-affiliated public stockholders with respect to a consummation of a Business
Combination or liquidation proposal, but excluding the right to request the
redemption of Escrowed Stock pursuant to a Redemption Offer.
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 (October 23, 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 its dissolution or
merger, provided that any such transferee or successor must agree as a condition
to such transfer and succession 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 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 (January 31, 1996) or 60 days
following the consummation of the first Business Combination.
The Company has outstanding 110 shares of Series A Preferred Stock which
are held by CDIJ, an indirect affiliate of Bright. The shares are convertible to
Common Stock on the basis of one thousand shares of Common Stock for each share
of Series A Preferred Stock during the one year period commencing upon the
consummation of a Business Combination. The 110,000 shares of Common Stock
issuable upon conversion of the Company's outstanding Series A Preferred Stock
will be offered by a prospectus at the time of a Business Combination and
therefore 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
14
<PAGE> 15
class or, if the shares are quoted on an exchange or on NASDAQ, the average
weekly trading volume during the four calendar weeks preceding the sale. See
"Risk Factors -- Shares Eligible for Future Sale."
POSSIBLE LIQUIDATION AFTER EIGHTEEN MONTHS IF NO BUSINESS COMBINATION
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit for
stockholder consideration a proposal to liquidate the Company and distribute to
the then holders of Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, the amounts in the escrow account.
Thereafter, all remaining assets available for distribution will be distributed
to the non-affiliated public stockholders of the Company after payment of
liabilities and after redemption of the Company's outstanding Series A Preferred
Stock at its liquidation value, $11,000. Since the proceeds to the Company from
the sale of the Class B Warrants will be used (i) to repay indebtedness, (ii) to
pay the balance of a $100,000 license fee, or $90,000, due to Bright pursuant to
a license agreement executed by Bright and the Company, (iii) to cover all the
expenses incurred by the Company in this offering, including the Underwriters'
discounts and the Representatives' non-accountable expense allowance, and (iv)
to fund the Company's operating expenses, including possible investment banking
fees and the costs of business, legal and accounting due diligence on
prospective Target Businesses, until the Company effects a Business Combination,
the amount per share remaining for distribution, in the event of a liquidation
of the Company, to the holders of Common Stock acquired as part of the Units
sold in this offering or in the open market thereafter, and exclusive of any
income earned on the proceeds held in the escrow account (which will be
distributed to the holders of Common Stock along with the funds in the escrow
account), will be approximately equal to the initial public offering price per
Unit in this offering of $10.00 per Unit (assuming no value is attributed to the
Warrants included in the Units offered hereby). All of the present stockholders,
including the Company's directors and executive officers and their affiliates,
are required by the escrow agreement to which their stock is subject, to vote
their shares of Common Stock in accordance with the vote of the majority of all
non-affiliated public stockholders of the Company with respect to any
liquidation proposal. Holders of Warrants, however, will only be entitled to
vote on any liquidation proposal, and allowed to participate in any liquidation
distribution, if they purchase shares of Common Stock in this offering or on the
open market thereafter, but only as to any shares of Common Stock so purchased.
All of the present stockholders, including the Company's directors, executive
officers and their affiliates, have agreed to waive their rights to participate
in any liquidation distribution with respect to the 90,000 shares of Common
Stock owned by them as of the date hereof. See "The Company -- Escrow of
Outstanding Shares."
To date, the Company's efforts have been limited to organizational
activities and this offering. The implementation of the Company's business
objectives is wholly contingent upon the successful sale of the Units and Class
B Warrants offered hereby. See "Proposed Business."
Essentially, a Specialized Merger and Acquisition Allocated Risk
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 Warrants (which
are exercisable into Units) for $5.75 each (the $5.625 purchase price plus the
$.125 exercise price), the proceeds of which will not be placed in escrow, but
rather will be used to repay indebtedness, to pay a license fee to Bright, and
to cover all of the Company's expenses incurred in this offering. See "Use of
Proceeds." Consequently, if the Class B Warrants were exercised holders of Class
B Warrants would pay substantially less for the Units issuable upon exercise of
such Class B Warrants than holders of Units and, accordingly, may realize a
higher return on their investment. Holders of Class B Warrants, however, risk
the loss of their investment if the Company fails to effect a Business
Combination, while holders of shares of Common Stock comprising part of the
Units benefit from the Company's escrow of an amount equal to the gross proceeds
from the sale of the Units in this offering.
The Company was organized under the laws of the State of Delaware on
October 19, 1995. The Company's office is located at 1430 Broadway, 13th Floor,
New York, New York 10018 and its telephone number is (212) 391-1392.
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RISK FACTORS
The securities offered hereby involve a high degree of risk, including, but
not limited to, the several factors described below. These securities should be
purchased only by persons who can afford a loss of their entire investment.
Investors should consider carefully the following risk factors inherent in and
affecting the business of the Company and this offering in evaluating an
investment in the securities offered hereby.
OFFERING NOT CONDUCTED IN ACCORDANCE WITH RULE 419
The Company's offering of Units and Class B Warrants is not being conducted
in accordance with Rule 419 promulgated by the Commission under the Securities
Act of 1933, as amended (the "Act"), which was adopted to strengthen the
regulation of securities offerings by "blank check" companies, which Congress
has found to have been common vehicles for fraud and manipulation in the penny
stock market. The Company is a "blank check" company not subject to Rule 419
under the Act because the Company's net tangible assets after its receipt of the
proceeds of this offering will exceed $5,000,000. Accordingly, investors in the
offering will not receive the substantive protections 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 October 19, 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, other than an indirect affiliate of Bright, has been
previously involved with any blank check offerings. To date, the Company's
efforts have been limited to organizational activities and this offering. The
Company has limited resources and has had no revenues to date. In addition, the
Company will not achieve any revenues (other than investment income) until, at
the earliest, the consummation of a Business Combination. Moreover, there can be
no assurance that any Target Business, at the time of the Company's consummation
of a Business Combination, or at any time thereafter, will derive any material
revenues from its operations or operate on a profitable basis. See "Proposed
Business" and "Management -- Prior Blank Check Offerings."
"BLIND POOL" OFFERING; BROAD DISCRETION OF MANAGEMENT
Prospective investors who invest in the Company will do so without an
opportunity to evaluate the specific merits or risks of any one or more Business
Combinations. As a result, investors will be entirely dependent on the broad
discretion and judgment of management in connection with the 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."
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ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO PROSPECTIVE BUSINESS COMBINATIONS;
INVESTMENT IN THE COMPANY VERSUS INVESTMENT IN A TARGET BUSINESS
"Blind pool" and "blank check" offerings are inherently characterized by
the absence of substantive disclosure, other than general descriptions, relating
to the intended application of the net proceeds of the offering. The Company has
not yet identified a prospective Target Business. Accordingly, investors will
have no substantive information concerning consummation of any specific Business
Combination in considering a purchase of Units and/or Class B Warrants in this
offering. The absence of disclosure can be contrasted with the disclosure which
would be necessary if the Company had already identified a Target Business as a
Business Combination candidate or if the Target Business were to effect an
offering of its securities directly to the public. There can be no assurance
that an investment in the securities offered hereby will not ultimately prove to
be less favorable to investors in this offering than a direct investment, if
such opportunity were available, in a Target Business. See "Proposed Business."
SEEKING TO ACHIEVE PUBLIC TRADING MARKET THROUGH BUSINESS COMBINATION
While a prospective Target Business may deem a consummation of a Business
Combination with the Company desirable for various reasons, a Business
Combination may involve the acquisition of, merger or consolidation with, a
company which does not need substantial additional capital, but which desires to
establish a public trading market for its shares, while avoiding what it may
deem to be adverse consequences of undertaking a public offering itself,
including time delays, significant expense, loss of voting control, the time and
expense incurred to comply and compliance 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."
LACK OF EXPERIENCE OF NORTHEAST SECURITIES, INC.
Northeast Securities, Inc. ("Northeast") was organized in December 1989 and
was first registered as a broker-dealer and became a member firm of the NASD in
April 1990. Northeast is principally engaged in retail brokerage and market
making activities and various corporate finance projects. Although Northeast has
acted as a placement agent in private offerings, has participated as a member of
the underwriting syndicate or as a selected dealer in 13 public offerings and
has acted as co-managing underwriter in one public offering, as it is doing
here, it has not acted as the lead underwriter in any public offerings of
securities. No assurance can be given that Northeast's lack of experience as a
lead underwriter of public offerings will not adversely affect this offering and
the subsequent development of a liquid public trading market in the Common
Stock. See "Risk Factors -- OTC Bulletin Board; No Assurance of Public Market;
Arbitrary Determination of Offering Price; Lack of Public Market for
Securities."
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 Target Business or
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industry 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 soliciting stockholder approval of consummation of a Business Combination,
the Company intends to provide stockholders with disclosure documentation in
accordance with the Proxy Rules, 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 WARRANTS NOT PLACED IN ESCROW; WARRANTS NOT CURRENTLY
EXERCISABLE; WARRANTS EXERCISABLE SUBJECT TO THE COMPANY'S COMPLIANCE WITH
SECURITIES LAWS
Except as noted below, the proceeds to the Company from the sale of the
Class B Warrants will not be placed in escrow. Rather, these proceeds will be
used (i) to repay indebtedness, (ii) to pay the balance of a $100,000 license
fee, or $90,000, to Bright pursuant to a license agreement executed by Bright
and the Company, (iii) to cover all of the expenses incurred by the Company in
this offering, including the Underwriters' discounts and the Representatives'
non-accountable expense allowance, and (iv) to fund the Company's operating
expenses, including possible 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
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Class B Warrants equal to the Underwriters' discounts and the Representatives'
non-accountable expense allowance with respect to the Units will be placed in
the escrow account with the Proceeds Escrow Agent for the benefit of purchasers
of Units in this offering and in the open market thereafter. Furthermore, the
Warrants are not exercisable until the Company effects a Business Combination,
of which there can be no assurance, provided the Company is then in compliance
with all filings required under the Federal and state securities laws, and
holders of Warrants who do not own shares of Common Stock will not be allowed to
participate in any liquidation distribution of the proceeds from the escrow
account. Consequently, in the event the Company does not effect a Business
Combination within 18 months from the date of this Prospectus, or 24 months from
the date of this Prospectus if the Extension Criteria have been satisfied, and
the stockholders of the Company elect to liquidate the Company, the holders of
Warrants will not receive any distributions and will lose their entire
investment in such Warrants. As such, an investment in the Warrants therefore
should be viewed as a highly speculative investment and should only be made by
an individual who can afford to lose his entire investment. Holders of Class B
Warrants would pay substantially less for the Units issuable upon exercise of
such Class B Warrants than holders of Units and, accordingly, may realize a
higher return on their investment than holders of Units. By way of illustration,
purchasers of Class B Warrants in this offering will pay $5.75 per Unit (the sum
of the $5.625 purchase price and the $.125 exercise price), while purchasers of
Units in this offering will pay $10.00 per Unit. The proceeds to the Company
from the sale of the Class B Warrants will not be placed in escrow for the
benefit of the holders of the Class B Warrants and will be used to repay
indebtedness and to cover all of the Company's expenses incurred in this
offering, including the Underwriters' discounts and the Representatives'
non-accountable expense allowance with respect to both the Units and the Class B
Warrants, to pay the Proceeds Escrow Agent and to pay the Company's costs of
evaluating potential Business Combinations and for administrative and operating
expenses, including possible investment banking fees. Holders of Class B
Warrants risk the loss of all of their investment if the Company fails to effect
a Business Combination, while holders of shares of Common Stock comprising part
of the Units are substantially 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.
REPRESENTATIVES' ABILITY TO MAINTAIN REQUIRED MINIMUM NET CAPITAL
As registered broker-dealers, both of the Representatives are required
under the Exchange Act and the rules promulgated thereunder to maintain minimum
net capital in order to conduct their broker-dealer operations. Currently, each
of the Representatives 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 any of the Representatives should be
unable to maintain their minimum net capital requirements, they will be required
to cease operations as a broker-dealer. Any such cessation of operations by any
of the Representatives 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. The Company will rely
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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. To avoid certain
conflicts of interest, the executive officers and directors of the Company, and
owners of five percent or more of the Company's Common Stock (before giving
effect to 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. In particular, Messrs. Kramer and Remley are between them Chairman of
the Board or the senior executive officer of each of Texfi Industries, a New
York Stock Exchange listed textile and apparel manufacturer; Weldotron
Corporation, an American Stock Exchange listed manufacturer of packaging
machinery and safety controls; CPT Holdings, a publicly-traded (OTC) steel
fabrication company; Sunderland Industrial Holdings Corporation, a private
holding company with various industrial manufacturing businesses engaged in
custom plastic injection molding; and Precise Technology, Inc., a plastic custom
injection molder. Mr. Kramer is also Chairman and principal owner of Republic
Properties Corporation, a major real estate developer. While neither Mr. Kramer
nor Mr. Remley are subject to any non-competition agreements or to any specific
contractual provisions requiring them to provide any of these named companies
(or any other businesses with which they may be affiliated) with rights of first
refusal as to any particular business opportunity, general corporate law
principles and fiduciary responsibilities make it highly likely that Target
Businesses in the same industries as the foregoing companies will be presented
first to such named businesses for their consideration as acquisition
opportunities. There can be no assurance that any of the foregoing conflicts
will be resolved in favor of the Company. See "Management."
LIMITED ABILITY TO EVALUATE TARGET BUSINESS MANAGEMENT; POSSIBILITY THAT
MANAGEMENT WILL CHANGE
The role of the present management in the operations of a Target Business
of the Company following a Business Combination cannot be stated with certainty.
Although the Company intends to scrutinize closely the management of a
prospective Target Business in connection with its evaluation of the
desirability of effecting a Business Combination with such Target Business, and
may retain an independent investment banking firm to assist the Company in this
regard, there can be no assurance that the Company's assessment of such
management will prove to be correct, especially in light of the possible
inexperience of current key personnel of the Company in evaluating certain types
of businesses. While it is possible that certain of the
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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."
IMMEDIATE SUBSTANTIAL DILUTION; DISPARITY OF CONSIDERATION
This offering involves an immediate and substantial dilution of $272,000
overall (3.4%) or $.34 per share between the pro forma net tangible book value
per share after the offering of $9.66 and the initial public offering price of
$10.00 per share allocable to each share of Common Stock included in the Units
(assuming no value is attributed to the Class A Warrants included in the Units).
The existing stockholders of the Company, including an affiliate of certain of
its executive officers and directors, acquired their shares of Common Stock at
prices substantially lower than the initial public offering price and,
accordingly, new investors will bear substantially all of the risks inherent in
an investment in the Company. Similarly, if and to the extent that the net
tangible book value per share of the securities of the Target Business being
acquired (when divided by the number of shares of the Common Stock to be issued)
is less per share than the Company's current net tangible book value per share,
the Company's public stockholders will suffer further dilution, since the
issuance of such shares would result in an immediate dilution of the net
tangible book value per share of the then consolidated financial position of the
Company and the business being acquired. See "Dilution."
POSSIBLE 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."
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UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS
In the event that the Company succeeds in effecting a Business Combination,
the Company will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly larger number of
competitors, including competitors with greater financial, marketing, technical,
human and other resources than the initial competitors in the industry. The
degree of competition characterizing the industry of any prospective Target
Business cannot presently be ascertained. There can be no assurance that,
subsequent to a consummation of a Business Combination, the Company will have
the resources to compete in the industry of the Target Business effectively,
especially to the extent that the Target Business is in a high-growth industry.
See "Proposed Business."
ADDITIONAL FINANCING REQUIREMENTS
The Company has had no revenues to date and will be entirely dependent upon
the proceeds of this offering to implement its business objectives. The Company
will not achieve any revenues (other than investment income) until, at the
earliest, the consummation of a Business Combination. Although the Company
anticipates that the net proceeds of this offering will be sufficient to effect
a Business Combination, inasmuch as the Company has not yet identified any
prospective Target Business candidates, the Company cannot ascertain with any
degree of certainty the capital requirements for any particular Business
Combination. In the event that the net proceeds of this offering prove to be
insufficient for purposes of effecting a Business Combination (because of the
size of the Business Combination or other reasons), the Company will be required
to seek additional financing. There can be no assurance that such financing will
be available on acceptable terms, or at all. To the extent that additional
financing proves to be unavailable when needed to consummate a particular
Business Combination, the Company would, in all likelihood, be compelled to
restructure the transaction or abandon that particular Business Combination and
seek an alternative Target Business candidate, if possible. In addition, in the
event of the consummation of a Business Combination, the Company may require
additional financing to fund the operations or growth of the Target Business.
The failure by the Company to secure additional financing could have a material
adverse effect on the continued development or growth of the Target Business.
The Company does not have any arrangements with any bank or financial
institution to secure additional financing and there can be no assurance that
any such arrangement, if required or otherwise sought, would be available on
terms deemed to be commercially acceptable and in the best interests of the
Company. See "Proposed Business."
POSSIBLE USE OF DEBT FINANCING; DEBT OF A TARGET BUSINESS
There currently are no limitations on the Company's ability to borrow funds
to increase the amount of capital available to the Company to effect a Business
Combination. However, the Company's limited resources and lack of operating
history will make it difficult to borrow funds. The amount and nature of any
borrowings by the Company will depend on numerous considerations, including the
Company's capital requirements, the Company's perceived ability to meet debt
service on any such borrowings and the then prevailing conditions in the
financial markets, as well as general economic conditions. There can be no
assurance that debt financing, if required or sought, would be available on
terms deemed to be commercially acceptable by and in the best interests of the
Company. The inability of the Company to borrow funds required to effect or
facilitate a Business Combination, or to provide funds for an additional
infusion of capital into a Target Business, may have a material adverse effect
on the Company's financial condition and future prospects. Additionally, to the
extent that debt financing ultimately proves to be available, any borrowings may
subject the Company to various risks traditionally associated with indebtedness,
including the risks of interest rate fluctuations and insufficiency of cash flow
to pay principal and interest. Furthermore, a Target Business may have already
incurred borrowings and, therefore, already be subject to all the risks inherent
thereto. See "Use of Proceeds" and "Proposed Business."
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REDEMPTION RIGHTS
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer to each of the non-affiliated
public stockholders of the Company the right, for a specified period of time of
not less than 20 calendar days, to redeem his shares of Common Stock at a price
equal to the Liquidation Value of such shares as of the Record Date. The
Redemption Offer will be described in the disclosure documentation relating to
the proposed Business Combination. In connection with the Redemption Offer,
should non-affiliated public stockholders holding 20% or less of the Common
Stock elect to redeem their shares, the Company may, but will not be required
to, proceed with the proposed Business Combination and, if the Company elects to
so proceed, will redeem such shares at their Liquidation Value as of the Record
Date. In any case, if non-affiliated public stockholders holding more than 20%
of such Common Stock elect to redeem their shares, the Company will not proceed
with the proposed Business Combination and will not redeem any shares of Common
Stock. As a result of the foregoing, the Company's ability to consummate a
particular Business Combination may be impaired. Moreover, holders of Common
Stock prior to the date of this Prospectus and holders of Warrants will only be
allowed to participate in a Redemption Offer if they purchase shares of Common
Stock in this offering or on the open market thereafter, but only as to any
shares of Common Stock so purchased.
POSSIBLE LIQUIDATION OF THE COMPANY IF NO BUSINESS COMBINATION
If the Company does not effect a Business Combination within 18 months from
the date of this Prospectus, or 24 months from the date of this Prospectus if
the Extension Criteria have been satisfied, the Company will submit for
stockholder consideration a proposal to liquidate the Company and distribute to
the then holders of Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, the amounts in the interest bearing
escrow account. Thereafter, all remaining assets available for distribution will
be distributed to the non-affiliated public stockholders of the Company after
payment of liabilities and after redemption of the Company's outstanding Series
A Preferred Stock at its liquidation value, $11,000. Since the proceeds to the
Company from the sale of the Class B Warrants will be used (i) to repay
indebtedness, (ii) to pay the balance of a $100,000 license fee, or $90,000, due
to Bright pursuant to a license agreement executed by Bright and the Company,
(iii) to cover all the expenses incurred by the Company in this offering,
including the Underwriters' discounts and the Representatives' non-accountable
expense allowance, and (iv) to fund the Company's operating expenses, including
possible investment banking fees and the costs of business, legal and accounting
due diligence on prospective Target Businesses, until the consummation of a
Business Combination, the amount per share remaining for distribution, in the
event of a liquidation of the Company, to the holders of Common Stock acquired
as part of the Units sold in this offering or in the open market thereafter, and
exclusive of any income earned on the proceeds held in the escrow account, will
be approximately equal to the initial public offering price per Unit in this
offering ($10.00 per Unit assuming no value is attributed to the Warrants
included in the Units offered hereby).
There can be no assurance that the Company will effect a Business
Combination within 18 months from the date of this Prospectus or within 24
months from the date of this Prospectus if the Extension Criteria have been
satisfied. All of the present stockholders, including the Company's executive
officers and other directors and their affiliates, are required to vote their
shares of Common Stock in accordance with the vote of the majority of all
non-affiliated public stockholders of the Company with respect to any
liquidation proposal. Holders of Warrants, however, will only be entitled to
vote on any liquidation proposal, and allowed to participate in any liquidation
distribution, if they purchase shares of Common Stock in this offering or on the
open market thereafter, but only as to any shares of Common Stock so purchased.
Present stockholders, including officers, directors and their affiliates, will
not participate in any liquidation distribution with respect to the shares of
Common Stock owned by them as of the date hereof.
INVESTMENT COMPANY ACT CONSIDERATIONS
The regulatory scope of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), which was enacted principally for the purpose of
regulating vehicles for pooled investments in securities, extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
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<PAGE> 24
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, record keeping, 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.
STATE BLUE SKY REGISTRATION; RESTRICTED RESALES OF THE SECURITIES
The ability to register or qualify for sale the Units, the shares of Common
Stock and Class A Warrants comprising the Units and the Class B Warrants for
both initial sale and secondary trading will be limited because a significant
number of states have enacted regulations pursuant to their securities or
so-called "blue sky" laws restricting or, in many instances, prohibiting, the
sale of securities of "blind pool" issuers such as the Company within that
state. In addition, many states, while not specifically prohibiting or
restricting "blind pool" companies, would not register the securities to be
offered in this offering for sale in their states. Because of these regulations,
the Company has registered the securities being offered in this offering, or an
exemption from registration has been obtained (or is otherwise available), only
in the states of Colorado, Delaware, Florida, 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 Louisiana, by coordination in Delaware, Illinois,
Maryland, Rhode Island and South Carolina and by notification in Colorado,
Florida and New York. Exemptions from registration have been obtained (or are
otherwise available) in 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 Oklahoma and 180
days after the date hereof in the state of Alabama, 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 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.
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."
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<PAGE> 25
POSSIBLE NEED TO SECURE NEW OFFICE SPACE
The Company, pursuant to an oral agreement, utilizes and will utilize the
offices of Mentmore Holdings Corporation ("Mentmore"), a Delaware corporation of
which Richard L. Kramer, the Company's Chairman of the Board, and William L.
Remley, the Company's President and Chief Executive Officer, are, respectively,
Chairman of the Board and President, until the Company effects a Business
Combination. The Company will pay Mentmore $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 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. Failure to maintain a business office could adversely affect
the Company's operations. See "Proposed Business -- Facilities."
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
10,000,000 shares of Common Stock. Upon completion of this offering (assuming no
exercise of the Underwriters' over-allotment option or any Warrants or other
options, or conversion of the outstanding Series A Preferred Stock), there will
be 9,110,000 authorized but unissued shares of Common Stock available for
issuance. However, a total of 2,310,000 shares of Common Stock are reserved for
issuance, consisting of the following: 800,000 shares of Common Stock are
reserved for issuance upon the exercise of the Class A Warrants, 320,000 shares
of Common Stock are reserved for issuance upon exercise of the Units underlying
the Class B Warrants, 320,000 shares of Common Stock are reserved for issuance
upon exercise of the Class A Warrants comprising a part of the Units underlying
the Class B Warrants, 120,000 shares of Common Stock are included in the Units
subject to the Underwriters' over-allotment option, 120,000 shares of Common
Stock are reserved for issuance upon the exercise of the Class A Warrants
included in the Units subject to the Underwriters' over-allotment option, 48,000
shares of Common Stock are reserved for issuance upon exercise of the Units
underlying the Class B Warrants subject to the Underwriters' over-allotment
option, 48,000 shares of Common Stock are reserved for issuance upon exercise of
the Class A Warrants comprising a part of the Units underlying the Class B
Warrants subject to the Underwriters' over-allotment option, 200,000 shares of
Common Stock are reserved for issuance upon exercise of options to purchase
Units granted to an affiliate of certain executive officers of the Company,
110,000 shares of Common Stock are reserved for issuance upon conversion of the
Company's outstanding Series A Preferred Stock, 80,000 shares of Common Stock
are included in the Units reserved for issuance upon exercise of
Representatives' Unit Purchase Warrants, 80,000 shares of Common Stock are
reserved for issuance upon the exercise of the Class A Warrants included in the
Units reserved for issuance upon exercise of the Representatives' Unit Purchase
Warrants, 32,000 shares of Common Stock are included in the Units reserved for
issuance upon exercise of the Representatives' Class B Warrants, and 32,000
shares of Common Stock reserved for issuance upon exercise of Class A Warrants
comprising a part of the Units underlying the Representatives' Class B Warrants.
See "Management," "Underwriting" and "Certain Transactions." Although the
Company's Board of Directors has the power to issue any or all of such shares
without stockholder approval, the Company has agreed with the Representatives
that for a period of 18 months from the date of this Prospectus, and for up to
six additional
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<PAGE> 26
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. 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 carry forwards, 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 and in such series as the Board of Directors, subject to the laws
of the State of Delaware, may determine from time to time. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
Preferred Stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
Common Stock and Warrants. The Company has agreed with the 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 additional shares of Preferred Stock without the consent
of the Representatives, 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 110 shares of Preferred Stock, designated as Series A Preferred
Stock, which shares are non-voting and convertible to 110,000 shares of Common
Stock following 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, an affiliate of certain of the
Company's directors and executive officers will own 50,000 shares of Common
Stock and an option to purchase 100,000 units, each unit being identical to the
Units issued in this offering, which together with 10,668 shares of Common Stock
owned by Mr. Robert D. Frankel, a director and 10,582 shares of Common Stock
owned by J. Thomas Chess, a director will represent approximately 8.0% of the
issued and outstanding shares of Common Stock (assuming no exercise of the
Underwriters' over-allotment option, the Representatives' Unit Purchase Warrants
or the Representatives' Class B Warrants or the conversion of the Series A
Preferred Stock) and approximately 8.0% 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, it is possible that management
will 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."
OTC BULLETIN BOARD; NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF
OFFERING PRICE; LACK OF PUBLIC MARKET FOR SECURITIES
Prior to this offering, there has been no public trading market for the
Units, the Common Stock or the Warrants. The initial public offering prices of
the Units and the Class B Warrants and the respective exercise prices and terms
of the Warrants have been arbitrarily determined by negotiations between the
Company and
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<PAGE> 27
the Representatives 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 Representatives are 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 and Northeast, the Representatives, intend to serve as market
makers 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 and
Northeast, 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.
COMPLIANCE WITH PENNY STOCK RULES
The Company's securities will not initially be considered "penny stock" as
defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act")
and the rules thereunder, since the price of each security is $5 or more. If the
price per security for any of the Company's Units, Common Stock, Class A
Warrants or Class B Warrants were to drop below $5, that particular security of
the Company may come within the definition of a "penny stock". Unless such
security is otherwise excluded from the definition of "penny stock," the penny
stock rules apply with respect to that particular security. One other 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 shortly after its Registration
Statement is declared effective with the Securities and Exchange Commission.
Once such audited financial statements have been obtained, all of the securities
of the Company will not 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
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<PAGE> 28
more difficult for investors to sell that particular security. No assurance can
be given that any security of the Company will continue not to be classified as
a penny stock.
SHARES ELIGIBLE FOR FUTURE SALE
None of the 90,000 shares of Common Stock outstanding as of the date of
this Prospectus are eligible for sale under Rule 144 ("Rule 144") promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). However,
the 15,000 Placement Shares and the 110,000 shares of Common Stock issuable upon
conversion of the Company's outstanding Series A Preferred Stock will be
registered under the Securities Act for sale at the time of a Business
Combination and will be freely tradable at that time, subject, however, to the
volume limitations of Rule 144 and to the Private Placement holders' 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 15,000 shares and 110,000 shares,
respectively. In general, under Rule 144, as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated), who has owned restricted
shares of Common Stock beneficially for at least two years is entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class or, if
the Common Stock is quoted on an exchange or NASDAQ, the average weekly trading
volume during the four calendar weeks preceding the sale. A person who has not
been an affiliate of the Company for at least three months immediately preceding
the sale and who has beneficially owned the shares of Common Stock to be sold
for at least three years is entitled to sell such shares under Rule 144 without
regard to any of the limitations described above. No prediction can be made as
to the effect, if any, that sales of such shares of Common Stock or the
availability of such shares for sale will have on the market prices for shares
of Common Stock or Warrants prevailing from time to time. Nevertheless, the sale
of substantial amounts of Common Stock in the public market would likely
adversely affect prevailing market prices for the Common Stock and Warrants and
could impair the Company's ability to raise capital through the sale of its
equity securities. See "Shares Eligible for Future Sale." The shares of Common
Stock owned immediately prior to the date hereof by all of the stockholders of
the Company, including the Placement Shares, have been 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 (January 31, 1996) or 60 days following
the consummation of the first Business Combination. Furthermore, all of the
holders of Founders' Shares have agreed not to, directly or indirectly, sell,
offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of their shares of Common Stock or options
to purchase Units (and the securities issuable upon the exercise thereof)
without the prior written consent of the Company until two years from the date
that the Founders' Shares were issued (October 23, 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 Representatives that it will not grant such consent without the
consent of the Representatives. See "Certain Transactions," "Shares Eligible for
Future Sale," "Description of Securities" and "Underwriting."
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<PAGE> 29
USE OF PROCEEDS
The net proceeds to the Company after deducting underwriting discounts and
estimated expenses (including the Representatives' non-accountable expense
allowance) are estimated to be $8,551,300 ($9,922,300 if the Underwriters'
over-allotment option is exercised in full). 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 Common Stock purchased as
part of the Units sold in this offering or in the open market thereafter. All
proceeds held in the escrow account will be invested, until released, in
short-term United States government securities, including treasury bills, cash
and equivalents.
The Company will use the net proceeds of this offering, together with the
income earned thereon, principally in connection with effecting a Business
Combination, including selecting and evaluating potential Target Businesses and
structuring and consummating a Business Combination (including possible payment
of finder's fees or other compensation to persons or entities which provide
assistance or services to the Company). The Company will not effect a Business
Combination with a Target Business unless the Fair Market Value of such business
is greater than 80% of the net assets of the Company at the time of such
consummation of a Business Combination. The Company has no present intention of
either loaning any of the proceeds of this offering to any Target Business or
purchasing a minority interest in any Target Business. Management is unaware of
any circumstances under which this policy, through management's own initiative,
may be changed. The Company does not have discretionary access to the monies in
the escrow account, including income earned on such amounts, and stockholders of
the Company will not receive any distribution of income (other than in
connection with the liquidation of the Company) or have any ability to direct
the use or distribution of such income. Thus, such income will cause the amount
in escrow to increase. The Company cannot use the escrowed amounts to pay the
costs of evaluating potential Business Combinations. The Company will use the
proceeds from the sale of the Class B Warrants (i) to repay indebtedness, (ii)
to pay the balance of a $100,000 license fee, or $90,000, to Bright pursuant to
a license agreement executed by Bright and the Company, (iii) to cover all the
expenses incurred by the Company in this offering, including the Underwriters'
discounts and the Representatives' non-accountable expense allowance, and (iv)
to pay the costs of evaluating potential Business Combinations, including
possible investment banking fees, the fees of the Proceeds Escrow Agent and the
costs of business, legal and accounting due diligence on prospective Target
Businesses. See "Proposed Business -- Servicemark License." Such funds also will
be used for the general and administrative expenses of the Company, including
legal and accounting fees and administrative support expenses in connection with
the Company's reporting obligations to the Commission. The Company does not
anticipate such fees and administrative expenses will exceed $100,000 per year.
The Company's anticipated uses of the net proceeds from the sale of the Class B
Warrants (assuming no exercise of the Underwriters' over-allotment option) are
quantified as follows:
<TABLE>
<CAPTION>
USE OF PROCEEDS AMOUNT PERCENTAGE
- ---------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Escrow Account(1)..................................................... $ 480,000 29.6%
Non-accountable Expense Allowance(2).................................. 258,000 15.9
Repayment of Indebtedness............................................. 100,000 6.2
License Fee........................................................... 90,000 5.5
Expenses of Offering.................................................. 195,000 12.0
Evaluation of Potential Business Combinations......................... 497,000 30.8
---------- -----
$1,620,000 100.0%
========== =====
</TABLE>
- ---------------
(1) Represents the amount of proceeds from the sale of Class B Warrants to be
added to the Escrow Account to be maintained by the Proceeds Escrow Agent,
which amount equals the Underwriters' discount with respect to the sale of
the Units (assuming no exercise of the Underwriters' over-allotment option).
See "The Company -- Escrow of Offering Proceeds."
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<PAGE> 30
(2) Represents the non-accountable expense allowance payable to the
Representatives in an amount equal to 3% of the gross proceeds from the sale
of Units and 1% of the gross proceeds from the sale of the Class B Warrants
(assuming no exercise of the Underwriters' over-allotment option). See
"Underwriting."
The Company may seek to issue additional securities if it requires
additional funds to meet its operating and administrative expenses. The Company
has agreed with the 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 securities or grant options or warrants to purchase any securities of the
Company without the consent of the Representatives.
The Company will use a portion of the net proceeds from the sale of the
Class B Warrants 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
January 31, 1996. The proceeds of the borrowings under the Investor Notes were
used to pay the costs of 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
July 31, 1997, whichever is earlier.
Following receipt of the net proceeds from the sale of the Class B Warrants
in this offering, the Company believes it will have sufficient available funds,
assuming that a Business Combination is not consummated, to operate for at least
the next 24 months. To the extent that Common Stock is used as consideration to
effect a Business Combination, the net proceeds of this offering not theretofore
expended will be used to finance the operations (including the possible
repayment of debt) of the Target Business. No cash compensation will be paid to
any officer or director in their capacities as such 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 Mentmore, an affiliate of the
Company's Chairman and Chief Executive Officer of $2,500 per month commencing
upon the closing of this offering. See "Proposed Business -- Facilities." Since
the role of present management after a Business Combination is uncertain, the
Company has no ability to determine what remuneration, if any, will be paid to
such persons after a Business Combination. No portion of the gross proceeds from
this offering will be paid to the Company's officers, directors, their
affiliates or associates for expenses of this offering. Management is not aware
of any circumstances under which the aforementioned policy may be changed.
The net proceeds from the sale of Class B Warrants in this offering, not
immediately required for the purposes set forth above, will be invested in
general debt obligations of the United States Government or other high-quality,
short-term interest-bearing investments, provided, however, that the Company
will attempt not to invest such net proceeds in a manner which may result in the
Company being deemed to be an investment company under the Investment Company
Act. The Company believes that, in the event a Business Combination is not
effected in the time allowed and to the extent that a significant portion of the
net proceeds from the sale of the Class B Warrants in this offering is not used
in evaluating various prospective Target Businesses, the interest income derived
from investment of the net proceeds from the sale of the Class B Warrants during
such period may be sufficient to defray continuing general and administrative
expenses, as well as costs relating to compliance with securities laws and
regulations (including associated professional fees). To the extent that a
Business Combination is not effected in the time allowed and the Company's
stockholders determine not to liquidate the Company, the Company believes that
such interest income, together with a small portion of the net proceeds from the
sale of the Class B Warrants in this offering, may be sufficient to defray
continuing expenses for a period of several additional years until the Company
consummates a Business Combination. If such remaining proceeds are insufficient
to maintain the operations of the Company, management will either attempt to
secure additional financing, or else will again recommend liquidation of the
Company to the stockholders. Since all of the present holders of the Company's
Common Stock have agreed to waive their respective rights to participate in a
liquidation distribution occurring prior to the first Business Combination, all
of the assets of the Company, including any interest and income earned on the
proceeds of this offering, which may be distributed upon such liquidation would
be distributed to the owners of the Common Stock other than the present
stockholders and to the holders of the Company's Series A Preferred Stock.
The Company will not pay or incur a liability for 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.
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<PAGE> 31
DILUTION
The difference between the public offering price per share of Common Stock
(assuming no value is attributed to the Class A Warrants included in the Units)
and the pro forma net tangible book value per share of Common Stock of the
Company after this offering constitutes the dilution to investors in this
offering. Net tangible book value per share is determined by dividing the net
tangible book value of the Company (total tangible assets less total
liabilities) by the number of outstanding shares of Common Stock.
At March 11, 1996, net tangible book value of the Company was $(102,084) or
$(1.13) per share of Common Stock. After giving effect to the sale of 800,000
shares of Common Stock included in the Units offered hereby (and assuming no
value is attributed to the Class A Warrants included in such Units) and 320,000
Class B Warrants offered hereby and the initial application of the estimated net
proceeds therefrom, the pro forma net tangible book value of the Company at
March 11, 1996, would be $8,595,674 or $9.66 per share, representing an
immediate increase in net tangible book value of $10.79 per share to existing
stockholders and an immediate dilution of $272,000 overall (3.4%) or $.34 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
Class A Warrants included in the Units):
<TABLE>
<S> <C> <C>
Public offering price per share of Common Stock(1)(2)............... $10.00
Net tangible book value per share of Common Stock before this
offering.......................................................... $(1.13)
Increase attributable to this offering.............................. 10.79
Pro forma net tangible book value per share of Common Stock after
this offering(3).................................................. 9.66
------
Dilution to New Investors........................................... $ .34
======
</TABLE>
The following table sets forth, with respect to existing stockholders and
investors in this offering, a comparison of the number of shares of Common Stock
acquired from the Company, the percentage ownership of such shares, the total
consideration paid, the percentage of total consideration paid and the average
price per share:
<TABLE>
<CAPTION>
AVERAGE TOTAL
SHARES PURCHASED(1) CONSIDERATION(1)
---------------------- -------------------------- PRICE
AMOUNT PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders......... 90,000 10.1 $ 52,500 0.007 $ 0.58
New Investors................. 800,000 89.9 8,000,000(2) 99.993 $ 10.00
------- ------ ---------- ------ ------
890,000 100.0% $ 8,052,500 100.0%
======= ====== ========== ======
</TABLE>
- ---------------
(1) If the Underwriters' over-allotment option is exercised in full, the
investors in this offering will have paid $9,200,000 for 920,000 shares of
Common Stock, representing 99.4% of the total consideration for
approximately 91.1% of the total number of shares of Common Stock then
outstanding. The foregoing tables also assume no exercise of the
Representatives' Unit Purchase Warrants, the Representatives' Class B
Warrants, warrants owned by an affiliate of certain of the Company's
directors and executive officers or the Warrants, or conversion of the
Series A Preferred Stock. See "Underwriting" and "Description of Capital
Stock -- Series A Preferred Stock."
(2) Assumes that no value is attributable to the Class A Warrants, and excludes
the consideration paid for the Class B Warrants.
(3) Pro forma net tangible book value after this offering assumes the initial
application of estimated net proceeds to the Company (after payment of all
offering expenses, including the Representatives' non-accountable expense
allowance) of $8,551,300. See "Use of Proceeds."
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<PAGE> 32
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of March 11, 1996, and as adjusted to give effect to the sale of the Units
and the Class B Warrants being offered hereby:
<TABLE>
<CAPTION>
AS
HISTORICAL ADJUSTED(1)
---------- ----------
<S> <C> <C>
Promissory Notes Payable, net of discount..................... $ 65,184 --
Common Stock, subject to possible redemption, 160,000 shares
at redemption value(3)...................................... $1,600,000
Preferred Stock, $.01 par value, 200 shares of Series A
authorized, 110 shares of Series A issued and outstanding;
1,000,000 shares authorized, 110 shares of Series A issued
and outstanding as adjusted................................. 1 1
Subscription receivable on preferred stock.................... (11,000) --
Common stock, $.01 par value, 200,000 shares authorized,
90,000 shares issued and outstanding; 10,000,000 shares
authorized, 890,000 shares issued and outstanding, as
adjusted(2)(3).............................................. 900 8,900
Additional paid in capital(3)................................. 62,599 7,005,835
Accumulated deficit during the development stage.............. (4,508) (19,062)
-------- ----------
Total capitalization........................................ $ 113,176 $8,595,674
======== ==========
</TABLE>
- ---------------
(1) Adjusted to give effect to the sale of 800,000 Units and the 320,000 Class B
Warrants offered hereby at the public offering price of $10.00 per Unit and
$5.625 Class B per Warrant, respectively, and the receipt by the Company of
the estimated net proceeds (after the payment of all offering expenses,
including the Representatives' non-accountable expense allowance) of
$8,551,300. See "Use of Proceeds."
(2) Excludes a total of 2,310,000 shares consisting of: (i) 800,000 shares of
Common Stock reserved for issuance upon the exercise of the Class A
Warrants, (ii) 320,000 shares of Common Stock reserved for issuance upon
exercise of the Units underlying the Class B Warrants, (iii) 320,000 shares
of Common Stock reserved for issuance upon exercise of the Class A Warrants
comprising a part of the Units underlying the Class B Warrants, (iv) 120,000
shares of Common Stock included in the Units subject to the Underwriters'
over-allotment option, (v) 120,000 shares of Common Stock reserved for
issuance upon the exercise of the Class A Warrants included in the Units
subject to the Underwriters' over-allotment option, (vi) 48,000 shares of
Common Stock reserved for issuance upon exercise of the Units underlying the
Class B Warrants subject to the Underwriters' over-allotment option, (vii)
48,000 shares of Common Stock reserved for issuance upon exercise of the
Class A Warrants comprising a part of the Units underlying the Class B
Warrants subject to the Underwriters' over-allotment option, (viii) 200,000
shares of Common Stock reserved for issuance upon exercise of options for
Units granted to an affiliate of certain of the executive officers of the
Company, (ix) 110,000 shares of Common Stock reserved for issuance upon
conversion of the Company's outstanding Series A Preferred Stock, which
shares of Common Stock will be offered for sale by a prospectus at the time
of a Business Combination, (x) 80,000 shares of Common Stock included in the
Units reserved for issuance upon exercise of the Representatives' Unit
Purchase Warrants, (xi) 80,000 shares of Common Stock reserved for issuance
upon the exercise of the Class A Warrants included in the Units reserved for
issuance upon exercise of the Representatives' Unit Purchase Warrants, (xii)
32,000 shares of Common Stock included in the Units reserved for issuance
upon exercise of the Representatives' Class B Warrants, and (xiii) 32,000
shares of Common Stock reserved for issuance upon exercise of Class A
Warrants comprising a part of the Units underlying the Representatives'
Class B Warrants. See "Management," "Underwriting" and "Certain
Transactions."
(3) In the event the Company consummates a Business Combination, the redemption
rights afforded to the non-affiliated public stockholders may result in the
conversion into cash of up to 20% of the aggregate number of shares held by
the non-affiliated public stockholders at a per share redemption price equal
to (A) the greater of (i) the Company's net worth or (ii) the amount of
proceeds of the Company in the escrow account (including interest earned
thereon) divided by (B) the number of shares held by non-affiliated public
stockholders.
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<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company is currently in the development stage and is in the process of
raising capital. All activity of the Company to date has been related to its
formation and proposed financing. The Company's ability to commence operations
is contingent upon obtaining adequate financial resources through this offering.
All of the Company's costs to date have been paid out of available cash. The
Company will use the net proceeds of this offering, together with the income and
interest earned thereon, principally in connection with effecting a Business
Combination, including selecting and evaluating potential Target Businesses and
structuring and consummating a Business Combination (including possible payment
of finder's fees or other compensation to persons or entities which provide
assistance or services to the Company). The Company does not have discretionary
access to the income on the monies in the escrow account and stockholders of the
Company will not receive any distribution of the income (except in connection
with a liquidation of the Company) or have any ability to direct the use or
distribution of such income. Thus, such income will cause the amount in escrow
to increase. The Company cannot use the escrowed amounts to pay the costs of
evaluating potential Business Combinations and will use the proceeds from the
sale of the Class B Warrants (i) to repay indebtedness, (ii) to pay the balance
of a $100,000 license fee, or $90,000, to Bright pursuant to a license agreement
executed by Bright and the Company, (iii) to cover all the expenses incurred by
the Company in this offering, including the Underwriters' discounts, the
Representatives' non-accountable expense allowance with respect to both the
Units and the Class B Warrants, and the fees of the Proceeds Escrow Agent, and
(iv) to pay the costs of evaluating potential Business Combinations, including
possible investment banking fees and the costs of business, legal and accounting
due diligence on prospective Target Businesses. In addition, such funds will be
used for the general and administrative expenses of the Company, including legal
and accounting fees and administrative support expenses in connection with the
Company's reporting obligations to the Commission. The Company does not
anticipate such fees and administrative expenses will exceed $100,000 per year.
Following receipt of the net proceeds from the sale of the Class B Warrants in
this offering, the Company will have sufficient available funds, assuming that a
Business Combination is not consummated, to operate for at least the next 24
months. To the extent that Common Stock is used as consideration to effect a
Business Combination, the balance of the net proceeds of this offering not
theretofore expended will be used to finance the operations of the Target
Business. See "Use of Proceeds." No cash compensation will be paid to any
officer or director in their capacities as such until after the consummation of
the first Business Combination. Since the role of present management after a
Business Combination is uncertain, the Company has no ability to determine what
remuneration, if any, will be paid to such persons after a Business Combination.
The net proceeds from the sale of the Class B Warrants in this offering not
immediately required for the purposes set forth above will be invested in
general debt obligations of the United States Government or other high-quality,
short-term interest-bearing investments, provided, however, that the Company
will attempt not to invest such net proceeds in a manner which may result in the
Company being deemed to be an investment company under the Investment Company
Act. The Company believes that, in the event a Business Combination is not
effected in the time allowed and to the extent that a significant portion of the
net proceeds of this offering is not used in evaluating various prospective
Target Businesses, the interest income derived from investment of such net
proceeds during such period may be sufficient to defray continuing general and
administrative expenses, as well as costs relating to compliance with securities
laws and regulations (including associated professional fees).
In the event that the Company does not effect a Business Combination within
18 months from the date of this Prospectus, or 24 months from the date of this
Prospectus if the Extension Criteria have been satisfied, the Company will
submit for stockholder consideration a proposal to liquidate the Company and
distribute to the then holders of Common Stock acquired as part of the Units
sold in this offering or in the open market thereafter, the amount held in the
escrow account. Thereafter, all remaining assets available for distribution will
be distributed to non-affiliated public stockholders of the Common Stock after
payment of liabilities and after payment of a liquidation distribution of
$11,000 to the holders of the Company's Series A Preferred Stock. To the extent
that a Business Combination is not effected in the time allowed and the
Company's stockholders determine not to liquidate the Company, the Company
believes that income from the escrow
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<PAGE> 34
account, together with a small portion of the net proceeds from the sale of the
Class B Warrants in this offering, may be sufficient to defray continuing
expenses for a period of several additional years until the Company consummates
a Business Combination. However, because the Company cannot estimate the amount
of the proceeds from the sale of the Class B Warrants that will be used to
pursue a potential Business Combination, it cannot estimate what amount of
funds, if any, might be available to defray expenses or for how long, if at all,
such funds might be sufficient for that purpose. Since all of the present
holders of the Company's Common Stock have agreed to waive their respective
rights to participate in a liquidation distribution occurring prior to the first
Business Combination, all of the assets of the Company including any income and
interest earned on the proceeds of the offering, which may be distributed upon
such liquidation would be distributed to the owners of the Common Stock issued
as part of the Units in this offering or in the open market thereafter, after
payment of a liquidation distribution of $11,000 to the holders of the Series A
Preferred Stock.
PROPOSED BUSINESS
INTRODUCTION
The Company, a development stage entity, was formed in October 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 and other borrowings or a combination
thereof in effecting a Business Combination with a Target Business which the
Company believes has significant growth potential. The Company's efforts in
identifying a prospective Target Business are expected to emphasize businesses
primarily located in the United States; however, the Company reserves the right
to acquire a Target Business located primarily elsewhere. While the Company may,
under certain circumstances, seek to effect Business Combinations with more than
one Target Business, as a result of its limited resources the Company will, in
all likelihood, have the ability to effect only a single Business Combination.
The Company may effect a Business Combination with a Target Business which may
be financially unstable or in its early stages of development or growth.
"BLIND POOL" OFFERING
BACKGROUND. As a result of management's broad discretion with respect to
the specific application of the net proceeds of this offering, this offering can
be characterized as a "blind pool" or "blank check" offering. Although
substantially all of the net proceeds of this offering are intended to be
utilized generally to effect a Business Combination, such proceeds are not
otherwise being designated for any more specific purposes. Accordingly,
prospective investors who invest in the Company will do so without an
opportunity to evaluate the specific merits or risks of any one or more Business
Combinations. Consummation of a Business Combination may involve the acquisition
of, or merger or consolidation with, a company that does not need substantial
additional capital but which desires to establish a public trading market for
its shares, while avoiding what it may deem to be the adverse consequences of
undertaking a public offering itself, such as the time delays and significant
expenses incurred to comply with the various Federal and state securities laws
that regulate initial public offerings.
UNSPECIFIED INDUSTRY AND TARGET BUSINESS. The Company will seek to acquire
a Target Business without limiting itself to a particular industry. Most likely,
the Target Business will be primarily located in the United States, although the
Company reserves the right to acquire a Target Business primarily located
outside the United States. In seeking a Target Business, the Company will
consider, without limitation, businesses which (i) offer or provide services or
develop, manufacture or distribute goods in the United States or abroad,
including, without limitation, in the following areas: health care and health
products, educational services, environmental services, consumer-related
products and services (including amusement and/or recreational services),
personal care services, voice and data 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
34
<PAGE> 35
satisfied, the Company will obtain an opinion from an independent 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 executive officers 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 disclosure documentation in accordance with the Proxy Rules, including
audited financial statements, concerning a Target Business. Accordingly, any
Target Business that is selected would need to have audited financial statements
or be audited in connection with the transaction. To the extent the Company
effects a Business Combination with a financially unstable company or an entity
in its early stage of development or growth (including entities without
established records of revenue or income), the Company will become subject to
numerous risks inherent in the business and operations of financially unstable
and early stage or potential emerging growth companies. In addition, to the
extent that the Company effects a Business Combination with an entity in an
industry characterized by a high level of risk, the Company will become subject
to the currently unascertainable risks of that industry. An extremely high level
of risk frequently characterizes certain industries which experience rapid
growth. Although management will endeavor to evaluate the risks inherent in a
particular industry or Target Business, there can be no assurance that the
Company will properly ascertain or assess all risks.
PROBABLE LACK OF BUSINESS DIVERSIFICATION. As a result of the limited
resources of the Company, the Company, in all likelihood, will have the ability
to effect only a single Business Combination. Accordingly, the prospects for the
Company's success will be entirely dependent upon the future performance of a
single business. Unlike certain entities that have the resources to consummate
several Business Combinations or entities operating in multiple industries or
multiple segments of a single industry, it is highly likely that the Company
will not have the resources to diversify its operations or benefit from the
possible spreading of risks or offsetting of losses. The Company's probable lack
of diversification may subject the Company to numerous economic, competitive and
regulatory developments, any or all of which may have a material adverse impact
upon the particular industry in which the Company may operate subsequent to
consummation of a Business Combination. The prospects for the Company's success
may become dependent upon the development or market acceptance of a single or
limited number of products, processes or services. Accordingly, notwithstanding
the possibility of capital investment in and management assistance to the Target
Business by the Company, there can be no assurance that the Target Business will
prove to be commercially viable. The Company has no present intention of either
loaning any of the proceeds of this offering to any Target Business or of
purchasing or acquiring a minority interest in any Target Business.
OPPORTUNITY FOR STOCKHOLDER EVALUATION OR APPROVAL OF BUSINESS
COMBINATIONS. The investors in this offering will, in all likelihood, neither
receive nor otherwise have the opportunity to evaluate any financial or other
information which will be made available to the Company in connection with
selecting a potential Target Business until after the Company has entered into a
definitive agreement to effectuate a Business Combination. As a result,
investors in this offering will be almost entirely dependent on the judgment of
management in connection with the selection of a Target Business and the terms
of any Business Combination.
Under the Delaware General Corporation Law, various forms of Business
Combinations can be effected without stockholder approval. In addition, the form
of Business Combination will have an impact upon the availability of dissenters'
rights (i.e., the right to receive fair payment with respect to the Common
Stock) to stockholders disapproving of the proposed Business Combination. Under
current Delaware law, only a merger or consolidation may give rise to a
stockholder vote and to 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 disclosure documentation in accordance with the
Proxy Rules, 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
35
<PAGE> 36
stockholders of the Company with respect to the consummation of any Business
Combination. Pursuant to the Company's certificate of incorporation, a Business
Combination will not be consummated unless approved by a vote of two-thirds of
the shares of Common Stock voted by non-affiliated public stockholders (in
person or by proxy). In addition, the Delaware General Corporation Law requires
approval of certain mergers and consolidations by a majority of the outstanding
stock entitled to vote. Even if investors are afforded the right to approve a
Business Combination under the Delaware General Corporation Law, no dissenters'
rights to receive fair payment will be available for stockholders if the Company
is to be the surviving corporation unless the Certificate of Incorporation of
the Company is amended and as a result thereof: (i) alters or abolishes any
preferential right of such stock; (ii) creates, alters or abolishes any
provision or right in respect of the redemption of such shares or any sinking
fund for the redemption or purchase of such shares; (iii) alters or abolishes
any preemptive right of such holder to acquire shares or other securities; or
(iv) excludes or limits the right of such holder to vote on any matter, except
as such right may be limited by the voting rights given to new shares then being
authorized of any existing or new class.
LIMITED ABILITY TO EVALUATE MANAGEMENT OF A TARGET BUSINESS. The role of
the present management of the Company, following a Business Combination, cannot
be stated with any certainty. Although the Company intends to scrutinize closely
the management of a prospective Target Business in connection with its
evaluation of the desirability of effecting a Business Combination with such
Target Business, there can be no assurance that the Company's assessment of such
management will prove to be correct. While it is possible that certain of the
Company's directors or its executive officers will remain associated in some
capacities with the Company following consummation of a Business Combination, it
is unlikely that any of them will devote a substantial portion of their time to
the affairs of the Company subsequent thereto. Moreover, there can be no
assurance that such personnel will have significant experience or knowledge
relating to the operations of the particular Target Business. The Company also
may seek to recruit additional personnel to supplement the incumbent management
of the Target Business. There can be no assurance that the Company will have the
ability to recruit additional personnel or that such additional personnel will
have the requisite skills, knowledge or experience necessary or desirable to
enhance the incumbent management. In addition, there can be no assurance that
the future management of the Company will have the necessary skills,
qualifications or abilities to manage a public company intending to embark on a
program of business development.
SELECTION OF A TARGET BUSINESS AND STRUCTURING OF A BUSINESS
COMBINATION. Management of the Company will have substantial flexibility in
identifying and selecting a prospective Target Business. 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 independent investment
banking firm that is a member of the NASD with respect to the satisfaction of
such criteria. As a result, investors in this offering will be almost entirely
dependent on the judgment of management in connection with the selection of a
Target Business. In evaluating a prospective Target Business, management will
consider, among other factors, the following: (i) costs associated with
effecting the Business Combination; (ii) equity interest in and opportunity for
control of the Target Business; (iii) growth potential of the Target Business;
(iv) experience and skill of management and availability of additional personnel
of the Target Business; (v) capital requirements of the Target Business; (vi)
competitive position of the Target Business; (vii) stage of development of the
Target Business; (viii) degree of current or potential market acceptance of the
Target Business, products or services; (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 has retained Ladenburg 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, with the possible
assistance of an independent investment banking firm, anticipates that it will
conduct a due diligence review which will encompass, among other things, meeting
with incumbent
36
<PAGE> 37
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 and documenting 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. The Company may also
engage the services of professional firms that specialize in finding business
acquisitions, 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 Representatives that any finder's
fee in connection with the Company's first Business Combination will require
approval by the Company's Board of Directors. The Representatives 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 or other 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 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 securities or grant options or
warrants to purchase any securities of the Company without
37
<PAGE> 38
the consent of the Representatives, 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 carry forwards, 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 will 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, subject the Company to all the risks inherent thereto.
COMPETITION
The Company expects to encounter intense competition from other entities
having business objectives similar to that of the Company. Many of these
entities are well established and have extensive experience in connection with
identifying and effecting business combinations directly or through affiliates.
Many of these competitors possess greater financial, technical, human and other
resources than the Company and there can be no assurance that the Company will
have the ability to compete successfully. The Company's financial resources will
be limited in comparison to those of many of its competitors. Further, such
competitors will generally not be required to seek the prior approval of their
own stockholders, which may enable them to close a Business Combination more
quickly than the Company. This inherent competitive limitation may compel the
Company to select certain less attractive Business Combination prospects. There
can be no assurance that such prospects will permit the Company to satisfy its
stated business objectives.
UNCERTAINTY OF COMPETITIVE ENVIRONMENT OF TARGET BUSINESS
In the event that the Company succeeds in effecting a Business Combination,
the Company will, in all likelihood, become subject to intense competition from
competitors of the Target Business. In particular, certain industries which
experience rapid growth frequently attract an increasingly large number of
competitors including competitors with increasingly greater financial,
marketing, technical, human and other resources than the initial competitors in
the industry. The degree of competition characterizing the industry of any
prospective Target Business cannot presently be ascertained. There can be no
assurance that, subsequent to a Business Combination, the Company will have the
resources to compete effectively, especially to the extent that the Target
Business is in a high-growth industry.
POSSIBLE LIQUIDATION OF THE COMPANY
In the event that the Company does not effect a Business Combination within
18 months from the date of this Prospectus, or 24 months from the date of this
Prospectus if the Extension Criteria have been satisfied, the Company will
submit for stockholder consideration a proposal to liquidate the Company and
distribute to
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<PAGE> 39
the then holders of Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, the amounts in the escrow account.
Thereafter, all remaining assets available for distribution will be distributed
to the non-affiliated public stockholders of the Company after payment of
liabilities and after the payment of a liquidation distribution of $11,000 to
the Holders of the Series A Preferred Stock. Since the proceeds to the Company
from the sale of the Class B Warrants will be used (i) to repay indebtedness,
(ii) to pay the balance of a $100,000 license fee, or $90,000, to Bright
pursuant to a license agreement executed by Bright and the Company, (iii) to
cover all the Company's expenses incurred in this offering, including the
Underwriters' discounts and non-accountable expense allowance, and (iv) to fund
the Company's operating expenses, including possible investment banking fees and
the costs of evaluating Target Businesses, the per share value of the residual
assets remaining for distribution, in the event of a liquidation of the Company,
to the holders of the Common Stock acquired as part of the Units sold in this
offering or in the open market thereafter, and exclusive of any income earned
from the escrow account, will be approximately equal to the initial public
offering price per Unit in this offering ($10.00 per Unit assuming no value is
attributed to the Class A Warrants included in the Units). There can be no
assurance that the Company will effect a Business Combination within such
period. All of the Company's present stockholders have agreed as part of 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 any
such liquidation proposal. Holders of Warrants, however, will only be entitled
to vote on any liquidation proposal, and allowed to participate in any
liquidation distribution, 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. In addition, the present stockholders have waived their
rights to share in any liquidating distribution with respect to the 90,000
shares of Common Stock owned by them as of the date hereof. The Company's
outstanding Series A Preferred Stock will not participate in any liquidation
distribution in excess of $11,000.
CERTAIN SECURITIES LAWS CONSIDERATIONS
The Company has filed an application with the Commission to register the
Units, the Common Stock, the Class A Warrants and the Class B Warrants under the
provisions of Section 12(g) of the Exchange Act, and it will use its best
efforts to continue to maintain such registration until there has been a
consummation of a Business Combination or a liquidation of the Company. Such
registration will require the Company to comply with periodic reporting, proxy
solicitation and certain other requirements of the Exchange Act, including the
requirement that it submit to the Commission, prior to its dissemination, any
proxy material to be furnished to stockholders in connection with a proposed
Business Combination.
Under the Federal securities laws, public companies must furnish
stockholders certain information about significant acquisitions, which
information may require audited financial statements for an acquired company
with respect to one or more fiscal years, depending upon the relative size of
the acquisition. Consequently, the Company will only be able to effect a
Business Combination with a prospective Target Business that has available
audited financial statements or has financial statements which can be audited.
FACILITIES
The Company, pursuant to an oral agreement, utilizes and will utilize the
offices of Mentmore Holdings Corporation, a Delaware corporation of which
Richard L. Kramer, the Company's Chairman of the Board, and William L. Remley,
the Company's President and Chief Executive Officer, are, respectively, Chairman
of the Board and President, until the acquisition of a Target Business.
Following completion of this offering, the Company will pay Mentmore $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
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<PAGE> 40
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 employs Mr. Kramer, Mr.
Remley and Mr. Richard C. Hoffman on a part time basis. Such persons will serve
as officers and director without compensation at least until completion of a
Business Combination. Mr. Hoffman may receive fees for legal services actually
rendered to the Company.
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<PAGE> 41
MANAGEMENT
DIRECTORS AND OFFICERS
The current directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---------------------------------------------------- --- -------------------------------
<S> <C> <C>
Richard L. Kramer................................... 46 Chairman of the Board
William L. Remley................................... 45 President, Treasurer, Director
Richard C. Hoffman.................................. 48 Secretary, Director
Robert D. Frankel................................... 47 Director
J. Thomas Chess..................................... 56 Director
</TABLE>
MANAGEMENT
Richard L. Kramer is an experienced investor and financial advisor who has
been closely involved with the acquisition, financing, and reorganization of
many public and private companies. He has been Chairman of the Board, cofounder,
and principal owner of Republic Properties Corporation, one of the nation's
largest commercial developers, since 1990. Mr. Kramer has also been Chairman of
the Board of each of Texfi Industries, a New York Stock Exchange listed textile
and apparel manufacturer since 1994; of Weldotron Corporation, an American Stock
Exchange listed manufacturer of packaging machinery and safety controls since
1994; of CPT Holdings, a publicly-traded (OTC) steel fabrication company since
1992; of Sunderland Industrial Holdings Corporation, a private holding company
with various industrial manufacturing businesses engaged in custom plastic
injection molding since 1989, of Precise Technology, Inc., a private plastic
custom injection molder since 1990, and of Mentmore Holdings, Inc., a private
management and financial services company since 1991. Mr. Kramer was also a
partner and principal of Western Development Corporation, a national shopping
center developer, from 1980 through 1992.
William L. Remley has been actively engaged in the analysis, acquisition
and management of a variety of industrial manufacturing companies for the past
five years. Since 1992, he has served as President and Director of CPT Holdings,
Inc., a publicly-traded steel fabrication company. Since 1989, Mr. Remley has
served as a director and President of Sunderland Industrial Holdings
Corporation, a private holding company with various industrial manufacturing
businesses engaged in custom plastic injection molding. Mr. Remley has also been
Vice Chairman and Chief Executive Officer of Weldotron Corporation, an American
Stock Exchange listed manufacturer of packaging machinery and safety controls
since 1994; Vice Chairman and Chief Executive Officer of Texfi Industries, Inc,
a New York Stock Exchange listed textile and apparel manufacturer since 1994, a
Director and Vice Chairman of Precise Technology, Inc., a plastic custom
injection molder since 1990, and a Director and President of Mentmore Holdings,
Inc. since 1991. Mr. Remley is also a principal in several private investment
funds.
Richard C. Hoffman has been Vice President and General Counsel of Mentmore
Holdings, Inc. since January 1995. He is also President of InterUrban
Management, Inc., a real estate brokerage and management company in Dallas,
Texas since September 1991. Mr. Hoffman was formerly a partner in the Dallas law
firm of Freytag, LaForce, Rubinstein & Teofan and its successor entities from
1985 to 1992, and served as Senior Real Estate Counsel for the Continental
Illinois National Bank in Chicago from 1978 to 1985. Mr. Hoffman has also been a
Director of Weldotron Corporation, an American Stock Exchange listed
manufacturer of packaging machinery and safety controls since 1994. Mr. Hoffman
is a Phi Beta Kappa graduate of the University of Wisconsin (Madison), and
received his law degree from Harvard Law School in 1972.
Robert D. Frankel is a senior research and development executive with more
than 15 years of experience. Dr. Frankel has been the Chairman of the Board and
Executive Vice President for Research and Development for SIOS, Inc. since 1994.
He was the Vice President for Development and a Project Manager at Hampshire
Instruments from 1983 to 1993. Dr. Frankel was also a scientist at the
University of Rochester Laboratory for Laser Energetics from 1979 to 1983. Dr.
Frankel is a graduate of the State University of New York at Buffalo
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<PAGE> 42
with a degree in Electrical Engineering, and received his Ph.D. in Physiology
from the State University of New York at Buffalo Medical School.
J. Thomas Chess has practiced dentistry since 1964, and has been actively
involved with dental implants for 26 years. He has acted as a consultant to
several companies specializing in lasers and dental implants. Dr. Chess has been
a director of the Southwest Products Company since 1991, and was formerly a
director of The Dentist Company, the "for profit" company of the California
Dental Association, serving for one year of his six year tenure as Chairman of
the Board. Dr. Chess is a graduate of Bowdoin College and received his D.D.S.
from the Southern California School of Dentistry.
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 in their capacities as such
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.
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.
Robert D. Frankel and J. Thomas Chess are designees of H.J. Meyers.
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
nonmanagement 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 "Conflicts 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, stockholders who are
affiliated with Management 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 or any affiliate of management's
shares of Common Stock or warrants.
OPTIONS TO PURCHASE UNITS
The Company has granted an option to purchase 100,000 Units to Cranbrooke
Corporation, a Delaware corporation which is affiliated with Mr. Kramer and Mr.
Remley. The Units are identical to those to be sold pursuant to this offering
and each consists of one share of Common Stock and one Class A Warrant to
purchase one share of Common Stock at a price of $9.00 per share. The option is
exercisable for a period of
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<PAGE> 43
three years from the date of a Business Combination at an exercise price of
$12.50 per Unit. The option is fully vested; however, the options will be
canceled if Messrs. Kramer and Remley cease to serve as directors or executive
officers of the Company prior to the first Business Combination. The shares
issuable upon exercise of the options and underlying warrants may not be sold or
otherwise transferred until 120 days after the first Business Combination.
CONFLICTS OF INTEREST
None of the Company's directors or officers is required to commit his full
time to the affairs of the Company and it is likely that such persons will not
devote a substantial amount of time to the affairs of the Company. Such
personnel will have conflicts of interest in allocating management time among
various business activities. As a result, the consummation of a Business
Combination may require a greater period of time than if the Company's
management devoted their full time to the Company's affairs. However, each
officer and director of the Company will devote such time as he deems reasonably
necessary to carry out the business and affairs of the Company, including the
evaluation of potential Target Businesses and the negotiation of a Business
Combination and, as a result, the amount of time devoted to the business and
affairs of the Company may vary significantly depending upon, among other
things, whether the Company has identified a Target Business or is engaged in
active negotiation of a Business Combination. Prior to their involvement with
the Company, none of the directors or officers of the Company has been involved
in any "blind pool" or "blank check" offerings. To avoid certain conflicts of
interest, the officers and directors of the Company and owners 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 an affiliate of certain of the
Company's directors and executive officers but without giving effect to the
exercise, if any, of the Representatives' Unit Purchase Warrants, the
Representatives' 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.
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<PAGE> 44
In connection with any stockholder vote relating either to approval of a
Business Combination or the liquidation of the Company due to the failure of the
Company to effect a Business Combination within the time allowed, all of the
Company's present stockholders, including all of its officers and directors (and
any stockholders who are affiliated with its officers and directors), have
agreed to vote all of their respective shares of Common Stock in accordance with
the vote of the majority of the shares voted by all non-affiliated public
stockholders of the Company (in person or by proxy) with respect to such
Business Combination or liquidation.
PRIOR BLANK CHECK OFFERINGS
None of the Company's officers, directors, promoters or other persons
engaged in management-type activities has been previously involved with any
blank check offerings with the exception of Bright. Bright's experience is
comprised of its corporate predecessor's licensing the SMA(2)RT(SM) structure
and service marks to Initial Acquisition Corp. and Orion Acquisition Corp. I.
CERTAIN TRANSACTIONS
In October 1995, the Company issued 40,000 shares of Common Stock to
Cranbrooke Corporation, a Delaware corporation which is affiliated with Richard
L. Kramer and William L. Remley, directors and officers of the Company, 5,000
shares of Common Stock to Robert D. Frankel, a director of the Company and 5,000
to J. Thomas Chess, a director of the Company, for a purchase price of $.10 per
share. In January 1996, the Company issued the 15,000 Placement Shares to three
accredited investors (including Messrs. Frankel and Chess) at a purchase price
of $0.50 per share (before deducting offering expenses). These three investors
also loaned $100,000 to the Company, which amount is to be repaid out of the
proceeds of this offering. See "Use of Proceeds." In June 1996, a founding
shareholder sold 10,000 shares of Common Stock to Cranbrooke Corporation at
their original cost of $0.10 per share.
The Company has entered into an oral agreement with Mentmore Holdings
Corporation, a Delaware corporation which is affiliated with Richard L. Kramer
and William L. Remley, 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 Mentmore for rent and such services. Management
believes that these terms compare favorably to any arrangement which might be
made with an unaffiliated party. See "Proposed Business -- Facilities."
In October 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 previously
licensed the SMA(2)RT(SM) name and structure to Initial Acquisition Corp., which
successfully completed an initial public offering in May 1995. The Company
believes that the value it is paying for the license to use the SMA(2)RT(SM)
structure and service marks 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.
CDIJ, an indirect affiliate of Bright, is the holder of the Company's
outstanding 110 shares of Series A Preferred Stock, which it purchased for
$11,000, and 1,000 shares of Common Stock, which it purchased for $.10 per
share. CDIJ paid cash for the Common Stock and issued a promissory note at an
interest rate of 8%, payable upon the earlier of one year from the date of the
note or the closing of this offering, for the Preferred Stock.
The purchase prices for all Common Stock and Preferred Stock sold by the
Company prior to the date of this Prospectus were established by negotiations
between the Board of Directors and the various investors.
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<PAGE> 45
Richard C. Hoffman, Secretary and a Director of the Company, acts as
general counsel to the Company. The Company expects to pay Richard C. Hoffman,
P.C., a law firm of which Mr. Hoffman is sole shareholder, fees for legal
services rendered in connection with this offering.
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. Kramer, Mr. Remley and the other directors of the Company and Bright
may be deemed to be "promoters" of the Company.
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<PAGE> 46
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of the date hereof, and as
adjusted to reflect the sale of the shares of Common Stock offered by the
Company hereby, based on information obtained from the persons named below, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known by the Company to be the owner of more than 5% of the outstanding shares
of Common Stock, (ii) each director, and (iii) all executive officers and
directors as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
AMOUNT AND SHARES OF COMMON STOCK
NATURE OF --------------------------
BENEFICIAL BEFORE AFTER
NAME OR GROUP(1) OWNERSHIP(2) OFFERING OFFERING(3)(4)
--------------------------------------------------- ------------ -------- --------------
<S> <C> <C> <C>
Cranbrooke Corporation(5).......................... 50,000(3) 55.5% 5.6%
Richard L. Kramer.................................. 0 0.0% 0.0%
William L. Remley(5)............................... 50,000(3) 55.5% 5.6%
Richard C. Hoffman................................. 0 0.0% 0.0%
Robert D. Frankel.................................. 10,668 11.8% 1.2%
J. Thomas Chess.................................... 10,582 11.8% 1.2%
All executive officers and directors as a group
(five persons)................................... 71,250(3) 79.2% 8.0%
</TABLE>
- ---------------
(1) Each individual listed has an address in care of the Company. The address
for Cranbrooke Corporation is 1430 Broadway, 13th Floor, New York, New York
10018, Attention: President.
(2) Unless otherwise noted, the Company believes that each person named in the
table has sole voting and investment power with respect to all shares of
Common Stock beneficially owned by him or it.
(3) Excludes options to purchase 100,000 Units, each unit to be identical to the
Units issued in this offering, held by Cranbrooke Corporation. See
"Management -- Options to Purchase Units."
(4) Assumes no exercise of (i) the Underwriters' over-allotment option; (ii) the
Representatives' Unit Purchase Warrants, (iii) the Representatives' Class B
Warrants, (iv) the Warrants included in the Units offered hereby or (v) 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) William Remley, a Director and President of the Company, is the President
and a Director of Cranbrooke, the owner of 40,000 shares of Common Stock of
the Company, as to which stock he disclaims beneficial ownership.
The shares of Common Stock and Series A Preferred Stock owned by the
Company's present stockholders, including the directors and executive officers
of the Company and their affiliates, including the Placement Shares, will be
placed in escrow until the earlier of (i) the consummation of the first Business
Combination, or (ii) 18 months from the date of this Prospectus, subject to
extension to 24 months from the date of this Prospectus if the Extension
Criteria have been satisfied. During such period, such stockholders will not be
able to sell or otherwise transfer their respective shares of Common Stock (with
certain exceptions), but will retain all other rights as stockholders of the
Company, including, without limitation, the right to vote such shares of Common
Stock (subject to their agreement, as discussed above, to vote their shares in
accordance with the vote of a majority of the shares voted by non-affiliated
public stockholders with respect to the consummation of a Business Combination
or liquidation proposal) but excluding the right to request the redemption of
escrowed shares pursuant to a Redemption Offer. Subject to compliance with
applicable securities laws, any such holder may transfer his, her or its Common
Stock held in escrow to a member of his family or to a trust established for the
benefit of himself, herself, or a family member or to another affiliated entity
(with the consent of the Representatives which will not be unreasonably
withheld) or in the event of his or her death, by will or operation of law, or
if any entity by its dissolution or merger, provided that any such transferee or
successor entity shall agree as a condition to such transfer or succession to be
bound by the restrictions on transfer or succession applicable to the original
holder and, in the case of present stockholders, 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).
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<PAGE> 47
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.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 10,000,000 shares of Common Stock, par
value $.01 per share. As of the date of this Prospectus, 90,000 shares of Common
Stock are outstanding, held of record by 12 persons. The holders of Common Stock
are entitled to one vote for each share held of record on all matters to be
voted on by stockholders. There is no cumulative voting with respect to the
election of directors, with the result that the holders of more than 50% of the
shares voting for the election of directors can elect all of the directors. The
holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of the funds legally available therefor.
In the event of the liquidation, dissolution or winding up of the Company, the
holders of Common Stock are entitled to share ratably in all assets remaining
available for distribution after payment of liabilities and after provision has
been made for each class of stock, if any, having preference over the Common
Stock. All of the present stockholders of the Company have agreed to waive their
respective rights to participate in a liquidation distribution prior to the
consummation of the first Business Combination. Holders of shares of Common
Stock, as such, have no conversion, preemptive or other subscription rights, and
there are no redemption provisions applicable to the Common Stock. All of the
outstanding shares of Common Stock are, and the shares of Common Stock to be
issued in this offering, when issued against payment therefor, will be, validly
authorized and issued, fully paid and nonassessable. The Company has agreed with
the Representatives that for a period of 18 months from the date of this
Prospectus, and for up to six additional months if the Extension Criteria have
been satisfied, it will not issue (other than pursuant to this offering) any
shares of Common Stock or grant Common Stock purchase options or warrants
without the consent of the Representatives, except in connection with effecting
a Business Combination.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of "blank check" preferred stock, par value $.01 per share (the
"Preferred Stock"), with such designations, powers, preferences, rights,
qualifications, limitations and restrictions and in 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. No shares of Preferred Stock other than 110
shares of Series A Preferred Stock are currently outstanding. 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 110 shares
of Series A Preferred Stock, owned by CDIJ. The purchase price for such shares,
$100.00 per share or $11,000 in the aggregate, is payable to the Company,
without interest, upon the earlier of January 31, 1997 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 Common Stock for a
period one year following the consummation of a Business Combination. In the
event that a Business Combination does not occur within 18 months of the date of
this Prospectus, or 24 months if the Extension Criteria are satisfied, the
Series A Preferred Stock will be redeemed by the Company for its liquidation
value.
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<PAGE> 48
The Company has agreed to register the Common Stock issuable upon conversion of
the Series A Preferred Stock at the time of a Business Combination.
WARRANTS
The statements under this caption relating to the Warrants are merely a
summary and do not purport to be complete. However, such summary contains all
information with respect to such Warrants which the Company believes to be
material to investors. Such summary is qualified in its entirety by express
reference to the warrant agreement ("Warrant Agreement") between the Company and
American Stock Transfer & Trust Company, copies of which have been filed with
the Securities and Exchange Commission. Copies of the Warrant Agreement are
available for inspection at the offices of the Company and at the Commission.
As of the date hereof, each Class A Warrant will entitle the registered
holder thereof to purchase one share of Common Stock at a price of $9.00 per
share, subject to adjustment in certain circumstances. The Class A Warrants will
be initially exercisable upon the consummation of a Business Combination and
expire at 5:00 p.m., New York City time, on the fifth anniversary of the date of
this Prospectus.
As of the date hereof, each Class B Warrant will entitle the registered
holder thereof to purchase one Unit, comprised of one share of Common Stock and
one Class A Warrant to purchase one share of Common Stock, at a price of $.125
per Unit, subject to adjustment in certain circumstances. The Class B Warrants
will be initially exercisable upon the consummation of a Business Combination
and expire at 5:00 p.m., New York City time, on the first anniversary of the
date of a consummation of a Business Combination.
The Units and the Class B Warrants will be sold and traded separately. The
Common Stock and the Class A Warrants will become separable and transferable at
such time as the Representatives may determine, but in no event before the
Separation Date. The Company may call the Warrants for redemption, each as a
class, in whole and not in part, at the option of the Company, at a price of
$.05 per Warrant at any time after the consummation of a Business Combination,
upon not less than 30 days' prior written notice, provided that the last sale
price of the Common Stock, if the Common Stock is listed for trading on an
exchange or interdealer quotation system which provides last sale prices, or,
the average of the closing bid and asked quotes, if the Common Stock is listed
for trading on an interdealer quotation system which does not provide last sale
prices, on all 10 of the trading days ending on the day immediately prior to the
day on which the Company gives notice of redemption, has been $11.00 or higher.
The warrant holders shall have exercise rights until the close of business on
the date fixed for redemption.
The exercise price and number of shares of Common Stock issuable on
exercise of the Class A Warrants are subject to adjustments under certain
circumstances, including in the event of a stock dividend, recapitalization,
reorganization, merger or consolidation of the Company. However, the Warrants
are not subject to adjustment for issuances of Common Stock at a price below
their respective exercise prices.
The Company has the right, in its sole discretion, to decrease the exercise
price of the Warrants for a period of not less than 30 days on not less than 30
days' prior written notice to the warrantholders, subject to compliance with
applicable laws such as, but not limited to, any prior notice provisions imposed
by the Commission, the NASD or any exchange on which the Company's Common Stock
is then listed. In addition, the Company has the right, in its sole discretion,
to extend the expiration date of the Warrants on five business days' prior
written notice to the warrantholders.
The Warrants may be exercised upon surrender of the warrant certificate on
or prior to the applicable expiration date of the Class A Warrant or Class B
Warrant, as the case may be, at the offices of the warrant agent, with the
exercise form on the reverse side of the warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (by
certified check or other good funds, payable to the Company) to the warrant
agent for the number of Warrants being exercised. The warrantholders do not have
the rights or privileges of holders of Common Stock, including, without
limitation, the right to vote on any matter presented to stockholders for
approval.
The Company is required either to maintain the effectiveness of the
Registration Statement of which this Prospectus is a part or to file a new
registration statement with the Commission, with respect to the securities
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<PAGE> 49
underlying the Warrants prior to the exercise of the Warrants and to deliver a
prospectus as required by Section 10(a)(3) of the Securities Act with respect to
such securities to the holders of all Warrants prior to the exercise or
redemption of such Warrants (except, if in the opinion of counsel to the
Company, such registration is not required under the federal securities laws or
if the Company receives a letter from the staff of the Commission stating that
it would not take any enforcement action if such registration is not effected).
In addition, and subject to the foregoing, the Company is required to have a
current Registration Statement on file with the Commission and to effect
appropriate qualifications under the laws and regulations of the states in which
the initial holders of the Warrants reside in order to comply with applicable
laws in connection with such exercise. There can be no assurance, however, that
the Company will be in a position to be able to keep its Registration Statement
current or to effect appropriate action under applicable state securities laws,
the failure of which may result in the inability to exercise the Warrants or
effect a resale or other disposition of Common Stock issued upon such exercise.
Florida residents who purchase Class B Warrants will be unable to exercise these
warrants to purchase Units unless and until the Units issuable upon exercise of
the Class B Warrants have been registered for sale in Florida or are established
to be exempt from the requirement of such registration. Florida law generally
precludes the registration of securities that are not listed on a securities
exchange or the NASDAQ System when the offering price of such securities is
$5.00 or less per share. Because the "exercise price" of Class B Warrants is
$.125, the "offering price" of the Units issuable upon exercise of the Class B
Warrants could be considered not greater than $5.00 if the offering price of the
Class B Warrants is not added to its exercise price in making that
determination. For this reason, no permit to sell the Units issuable upon
exercise of the Class B Warrants in Florida has been obtained. There can be no
assurance that the Units issuable upon exercise of the Class B Warrants will
ever be registered in Florida or established to be exempt from the requirement
of such registration.
No fractional shares will be issued upon exercise of the Warrants. However,
if a warrantholder exercises all Warrants then owned of record by him, the
Company will pay to such warrantholder, in lieu of the issuance of any
fractional share which is otherwise issuable to such warrantholder, an amount in
cash based on the market value of the Common Stock on the last trading day prior
to the exercise date.
DIVIDENDS
The Company does not expect to pay dividends prior to the consummation of a
Business Combination. Future dividends, if any, will be contingent upon the
Company's revenues and earnings, if any, capital requirements and general
financial condition subsequent to the consummation of a Business Combination.
The payment of dividends subsequent to the consummation of a Business
Combination will be within the discretion of the Company's then Board of
Directors. The Company presently intends to retain all earnings, if any, for use
in the Company's business operations and accordingly, the Board does not
anticipate declaring any dividends in the foreseeable future.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
The transfer and registrar agent for the Units and the Common Stock and the
transfer agent, registrar and warrant agent for the Warrants is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering (but prior to a Business
Combination), the Company will have 890,000 shares of Common Stock outstanding
(1,010,000 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 90,000 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
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<PAGE> 50
for sale under Rule 144. However, 15,000 of such shares (the Placement Shares)
along with the 110,000 shares issuable upon conversion of the outstanding Series
A Preferred Stock are expected to be registered under the Securities Act at the
time of the Business Combination.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated), who has beneficially owned
the restricted shares of Common Stock to be sold for at least two years is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if the Common Stock is quoted on an exchange or NASDAQ, the
average weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least the three
months immediately preceding the sale and who has beneficially owned the shares
of Common Stock to be sold for at least three years is entitled to sell such
shares under Rule 144 without regard to any of the limitations described above.
The holders of Founders' Shares have agreed not to, directly or indirectly,
sell, offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of their shares of Common Stock, 75,000
shares in the aggregate, until two years from the date the outstanding Founders'
Shares were issued (October 25, 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 (January 31, 1996) or
60 days following the consummation of the first Business Combination. The
Company has agreed with the Representatives that it will not grant such consents
without the consent of the Representatives.
Prior to this offering, there has been no market for the Common Stock, the
Units or the Warrants and no prediction can be made as to the effect, if any,
that market sales of restricted shares of Common Stock or the availability of
such shares for sale will have on the market prices prevailing from time to
time. Nevertheless, the possibility that substantial amounts of Common Stock may
be sold in the public market would likely adversely affect prevailing market
prices for the Common Stock, the Units and the Warrants and could impair the
Company's ability to raise capital through the sale of its equity securities.
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 Representatives are acting as representatives, and the
Underwriters have severally and not jointly agreed to purchase, the number of
Units and Class B Warrants set forth opposite their respective names below.
<TABLE>
<CAPTION>
NUMBER OF
NUMBER OF CLASS B
UNDERWRITER UNITS WARRANTS
---------------------------------------------------------------- --------- ---------
<S> <C> <C>
H.J. Meyers & Co., Inc. ........................................ 720,000 300,000
Northeast Securities, Inc. ..................................... 80,000 20,000
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel to
the Representatives and various other conditions. The nature of the
Underwriters' obligations are such that they are committed to purchase all of
the above Units and Class B Warrants if any are purchased.
As registered broker-dealers, each of the Representatives 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, each of
the Representatives has sufficient excess net capital to support their broker-
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<PAGE> 51
dealer operations, including their underwriting obligations to the Company. In
the event, however, that at any time any of the Representatives 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 any of the
Representatives 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 Representatives that the Underwriters
propose to offer the Units and the Class B Warrants directly to the public at
the public offering prices set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $.30 per Unit
and $.28 per Class B Warrant. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $.10 per Unit and $.10 per Class B
Warrant to certain other dealers. The Representatives have 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 Representatives a non-accountable expense allowance equal
to three percent of the gross proceeds derived from the sale of the Units and
Class B Warrants underwritten (including the sale of any Units and Class B
Warrants subject to the Underwriters' over-allotment option), $25,000 of which
has been paid to date.
The Company will reimburse the Representatives on a nonaccountable basis in
an amount equal to 3% of the gross proceeds of the sale of the Units and 1% of
the gross proceeds of the sale of the Class B Warrants of this offering
($258,000 if the Underwriters' over-allotment 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, 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 exercise of Warrants
pursuant to solicitation by the Representatives, commencing one year from the
date of this Prospectus, to pay to the Representatives an aggregate management
fee of 10% of the respective Warrant exercise prices, 8% of which will be
reallowed to any selected dealer who is a member of the NASD who solicited the
exercise (which may also be one of the Representatives) for each Warrant
exercised, provided, however, that the Representatives will not be entitled to
receive such compensation in any Warrant exercise transaction in which (i) the
market price of the Common Stock of the Company at the time of the exercise is
lower than the exercise price of the Warrants in question; (ii) the Warrants are
held in a discretionary account under the control of the selected dealer; (iii)
disclosure of compensation arrangements is not made, in addition to the
disclosure provided in this Prospectus, in documents provided to holders of the
Warrants at the time of exercise; (iv) if the Representatives are not designated
in writing by the warrantholder as having solicited the exercise of the Warrant;
or (v) the solicitation of exercise of the Warrants was in violation of Rule
10b-6 promulgated under the 1934 Act. In determining the management fee, the
calculation will exclude 10% of the respective Warrant exercise prices, any
underlying warrants, options or convertible securities. In addition, unless
granted an exemption by the Commission from Rule 10b-6, the Representatives 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 Representatives may have to
receive a fee for the exercise of the Warrants following such solicitations. As
a result, the Representatives may be unable to provide a market for the
Company's securities during certain periods while the Warrants are exercisable.
The Company has agreed not to solicit Warrant exercises other than through the
Representatives.
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<PAGE> 52
The holders of Founders' Shares have agreed not to, directly or indirectly,
sell, offer to sell, grant an option for the sale of, transfer, assign, pledge,
hypothecate or otherwise encumber any of their shares of Common Stock, 75,000
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, (October 25, 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 has been marked on the face of stock
certificates representing all such shares of Common Stock.
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 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 Representatives except in
connection with effecting a Business Combination.
The Company has granted to the Representatives an option exercisable during
the 30-day period commencing on the date of this Prospectus to purchase from the
Company at the offering price less underwriting discounts, up to an aggregate of
120,000 additional Units and 48,000 additional Class B Warrants for the sole
purpose of covering over-allotments, if any. To the extent that the
Representatives exercise such option, the Representatives have the right to
require each Underwriter to purchase on a firm commitment basis approximately
the same percentage thereof that the number of Units and Class B Warrants to be
purchased by it or the Underwriters shown in the above table bears to the total
shown. The Company will be obligated, pursuant to the option, to sell such Units
and Class B Warrants to the Representatives or the Underwriters, as the
Representatives direct.
In connection with this offering, the Company has agreed to sell to the
Representatives, for nominal consideration, the Representatives' Warrants. The
Representatives' Warrants are initially exercisable at a price of $11.00 per
Unit and $6.1875 per Class B Warrant for a period of four years, commencing one
year from the date of this Prospectus. The Units and Class B Warrants issuable
upon exercise of the Representatives' Warrants are the same as the Units and
Class B Warrants being sold in this offering. The Representatives' Warrants
contain anti-dilution provisions providing for adjustment of the number of
warrants and exercise price under certain circumstances. The Representatives'
Warrants grant to the holders thereof certain rights of registration of the
Units and Class B Warrants issuable upon exercise of the Representatives'
Warrants.
The Company has also agreed that, for a period of two years from the
closing of this Offering, if it participates in any merger, consolidation or
other transaction which H.J. Meyers 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 H.J. Meyers'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 H.J. Meyers brings such a
merger, consolidation or other transaction to the Company, and if the Company in
writing retains H.J. Meyers for consultation or other services in connection
therewith, then upon consummation of the transaction the Company will pay to
H.J. Meyers as a fee the appropriate amount as set forth above or as otherwise
agreed to between the Company and H.J. Meyers.
Prior to this offering there has been no public market for any of the
Company's securities. Accordingly, the offering prices of the Units and Class B
Warrants and terms of the Class A Warrants underlying the Units were determined
by negotiation between the Company and the Representatives. Factors considered
in determining such price and terms, in addition to prevailing market
conditions, include an assessment of the Company's prospects. The public
offering prices of the Units and Class B Warrants do not bear any relationship
to assets, earnings, book value, or other criteria of value applicable to the
Company and should not
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<PAGE> 53
be considered an indication of the actual value of the Units or Class B
Warrants. Such prices are subject to change as a result of market conditions and
other factors, and no assurance can be given that the Units or Class B Warrants
can be resold at their respective offering prices.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Nevertheless, it includes
all information concerning such agreements which the Company believes to be
material. Reference is made to copies of each such agreement which are filed as
exhibits to the Registration Statement.
LEGAL MATTERS
The legality of the securities being registered by the Registration
Statement of which this Prospectus is a part is being passed upon by Campbell &
Fleming, P.C., New York, New York. Harter, Secrest & Emery, Rochester, New York
has acted as counsel to the Representatives in connection with this offering.
EXPERTS
The financial statements included in this Prospectus have been audited by
BDO Seidman, LLP, independent certified public accountants, to the extent and
for the period set forth in their report appearing elsewhere herein, and is
included in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (the "Registration Statement") under the
Securities Act with respect to the securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and this
offering, reference is made to the Registration Statement, including the
exhibits and schedules filed therewith, copies of which may be obtained at
prescribed rates from the Commission at its principal office at 450 Fifth Street
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: 75 Park Place, New York 10007, and Northwestern Atrium Center, 500
West Madison Street, Suite 1400 Chicago, Illinois, 60604. Descriptions contained
in this Prospectus as to the contents of any agreement or other documents filed
as an exhibit to the Registration Statement are not necessarily complete and
each such description is qualified by reference to such agreement or document.
The Company intends to furnish to its stockholders annual reports
containing financial statements audited and reported upon by its independent
public accountants.
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<PAGE> 54
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
MARCH 11, 1996
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Financial Statements:
Balance sheet as of March 11, 1996.................................................. F-3
Statement of operations for the period from October 19, 1995 (inception) to March
11, 1996......................................................................... F-4
Statement of stockholders' equity for the period from October 19, 1995 (inception)
to
March 11, 1996................................................................... F-5
Statement of cash flows for the period from October 19, 1995 (inception) to
March 11, 1996................................................................... F-6
Notes to financial statements......................................................... F-7
</TABLE>
F-1
<PAGE> 55
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Orion Acquisition Corp. II
New York, NY
We have audited the accompanying balance sheet of Orion Acquisition Corp.
II (a corporation in the development stage) as of March 11, 1996, and the
related statements of operations, stockholders' equity and cash flows for the
period from October 19, 1995 (inception) to March 11, 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Orion Acquisition Corp. II
as of March 11, 1996, and the results of its operations and its cash flows for
the period from October 19, 1995 (inception) to March 11, 1996, in conformity
with generally accepted accounting principles.
BDO Seidman, LLP
March 15, 1996
New York, New York
F-2
<PAGE> 56
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
BALANCE SHEET
MARCH 11, 1996
<TABLE>
<S> <C>
ASSETS
Cash.............................................................................. $115,283
Deferred registration costs (Note 3).............................................. 135,522
Deferred financing costs, net (Note 3)............................................ 14,554
-------
Total assets............................................................ $265,359
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses (Notes 3 and 5).................................................. $152,183
Notes payable, net of discount (Note 5)........................................... 65,184
-------
Total liabilities............................................................ 217,367
-------
Commitments (Note 4)
Stockholders' equity (Notes 1 and 5):
Convertible preferred stock, $.01 par value, shares authorized 200; 110 shares
subscribed................................................................... 1
Subscription receivable......................................................... (11,000)
Common stock, $.01 par value, 200,000 shares authorized 90,000 shares issued and
outstanding.................................................................. 900
Additional paid-in capital...................................................... 62,599
Accumulated deficit during the development stage................................ (4,508)
-------
Total stockholders' equity................................................... 47,992
-------
Total liabilities and stockholders' equity.............................. $265,359
=======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 57
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF OPERATIONS
PERIOD FROM OCTOBER 19, 1995 (INCEPTION) TO MARCH 11, 1996
<TABLE>
<S> <C>
Interest income.................................................................... $ 283
Interest expense................................................................... 4,791
-------
Net loss........................................................................... $(4,508)
=======
Net loss per common share.......................................................... $ (.05)
=======
Weighted average common shares outstanding......................................... 90,000
=======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 58
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM OCTOBER 19, 1995 (INCEPTION) TO MARCH 11, 1996
<TABLE>
<CAPTION>
ACCUMULATED
PREFERRED STOCK PREFERRED DEFICIT
------------------ STOCK COMMON STOCK ADDITIONAL (DURING THE TOTAL
SHARES SUBSCRIPTION -------------- PAID-IN DEVELOPMENT STOCKHOLDERS'
SUBSCRIBED AMOUNT RECEIVABLE SHARES AMOUNT CAPITAL STAGE) EQUITY
---------- ------ ------------ ------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of founders'
shares.................... -- $ -- $ -- 75,000 $750 $ 6,750 $ -- $ 7,500
Sale of private placement
shares
(see Note 5).............. 15,000 150 44,850 -- 45,000
Subscription receivable for
preferred stock (see Note
5)...................... 110 1 (11,000) -- 10,999 -- --
Net loss.................... (4,508) (4,508)
--- ------ ------------ ------ ------ ---------- ----------- -------------
Balance, March 11,1996...... 110 $ 1 $(11,000) 90,000 $900 $ 62,599 $ (4,508) $47,992
========== ======= =========== ====== ======= ========= =========== ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 59
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM OCTOBER 19, 1995 (INCEPTION) TO MARCH 11, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................................ $ (4,508)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of deferred financing costs..................................... 1,196
Amortization of discount on notes payable.................................... 2,684
Changes in assets and liabilities -- accrued expenses........................ 911
--------
Net cash provided by operating activities.................................. 283
--------
Cash flows from financing activities:
Proceeds from sale of common stock.............................................. 52,500
Proceeds from issuance of notes payable......................................... 62,500
--------
Net cash provided by financing activities.................................... 115,000
--------
Net increase in cash.............................................................. 115,283
Cash, beginning of period......................................................... --
--------
Cash, end of period............................................................... $115,283
========
Supplemental disclosures of cash flow information:
The Company issued 110 shares of Series A preferred stock in exchange for a note
receivable totaling $11,000.
The Company has recorded $152,183 in accrued expenses relating to a license
agreement (Note 3) and other costs relating to the Proposed Offering.
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 60
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS OPERATIONS
The Company was incorporated in Delaware on October 19, 1995 for the
purpose of raising capital to fund the acquisition of an unspecified operating
business. All activity to date relates to the Company's formation and proposed
fund raising. To date, the Company has not elected a fiscal year end.
The Company's ability to commence operations is contingent upon obtaining
adequate financial resources through the Proposed Offering which is described in
detail in Note 2. The Company's management has broad discretion with respect to
the specific application of the net proceeds of the Proposed Offering, although
substantially all of the net proceeds of the Proposed 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). The remaining proceeds from the Proposed
Offering will be used to pay for business, legal and accounting, due diligence
on prospective acquisitions, costs relating to the Proposed 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 ("non-affiliated public stockholders") with respect to any such Business
Combination. A Business Combination will not be consummated unless approved by a
vote of two-thirds of the shares of common stock owned by non-affiliated public
stockholders.
At the time the Company seeks stockholder approval of any potential
Business Combination, the Company will offer ("Redemption Offer") each of the
non-affiliated 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 ("Liquidation Value") will also 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 non-affiliated public
stockholders. In connection with the Redemption Offer, if non-affiliated 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. The Company will
redeem such shares by applying the Liquidation Value to the number of shares to
be redeemed. In any case, if non-affiliated 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 Proposed Offering or (iii) 24-months from the effective date of the
Proposed 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 in accordance with a vote of a majority of the shares voted by
non-affiliated public stockholders with respect to a Business Combination or
liquidation proposal.
F-7
<PAGE> 61
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
2. PROPOSED PUBLIC OFFERING
The Proposed Offering calls for the Company to offer for public sale up to
800,000 units ("Units"). Each Unit consists of one share of the Company's common
stock and one Class A redeemable common stock purchase warrant ("Class A
Warrant"). The Proposed Offering also calls for the Company to offer for public
sale up to 320,000 Class B redeemable common stock purchase warrants ("Class B
Warrant"). Each Class A Warrant entitles the holder to purchase from the Company
one share of common stock at an exercise price of $9.00; each Class B Warrant
entitles the holder to purchase one Unit at an exercise price of $.125,
commencing on the date of a Business Combination, until the fifth anniversary of
such date for the Class B Warrants. The Class A Warrants and Class B Warrants
are redeemable, each as a class, in whole and not in part, at a price of $.05
per warrant upon 30 days' notice at any time provided that the Company has
consummated a Business Combination and the last sale price of the common stock
on all ten 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.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Deferred Registration Costs
The Company has deferred registration costs (primarily professional fees
and a license fee) relating to the Proposed Offering. In January 1996, the
Company entered into a license agreement with Bright Licensing Corp. for the
right to use certain service marks for the sole purpose of marketing such
offering at a cost of $100,000 which has been accrued for in total as of March
11, 1996. The license fee is payable in installments of $10,000 upon execution
of the license agreement and $90,000 at the earlier of eighteen months from the
date of execution of the license agreement or the closing of the Proposed
Offering. 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 Financing Costs
Net unamortized costs incurred in connection with the private placement of
unsecured promissory notes (see Note 5) totaling $15,750 are being amortized
over eighteen months using the straight-line method. Amortization expense
charged to interest expense was $1,196 for the period from October 19, 1995
(inception) to March 11, 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.
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
F-8
<PAGE> 62
ORION ACQUISITION CORP. II
(A CORPORATION IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
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, such
stockholder will be reimbursed by the Company for the costs of such office and
services on a monthly basis in the amount of $2,500.
5. STOCKHOLDERS' EQUITY
The Units and the Class B Warrants, which are being offered in the Proposed
Offering, will be sold and traded separately.
Concurrent with the Proposed Offering, the Company intends to amend and
restate its certificate of incorporation to increase its authorized common stock
and preferred stock to 10,000,000 and 1,000,000 shares, respectively.
(a) Private Placement
In January 1996, 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 eighteen months or the completion of an initial public offering.
In addition, the Company also issued to the private placement investors 15,000
shares of common stock for $7,500. The notes have been discounted $37,500 for
financial statement reporting purposes as a result of the additional fair value
attributed to the common stock issued to the private placement shareholders. The
effective rate on the notes is approximately 45%.
(b) Preferred Stock
The Company is authorized to issue 200 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 110 shares of Series A preferred stock, owned
by CDIJ Capital Partners, L.P., an indirect affiliate of Bright Licensing Corp.
The purchase price for such shares, $100.00 per share or $11,000 in the
aggregate, is payable to the Company, without interest, upon the earlier of
twelve months or on the closing of the Proposed Offering. The Series A preferred
stock is convertible into 1,000 shares of common stock for a period of 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 at its original cost
basis.
(C) Options
The Company has granted options to purchase 100,000 Units to Cranbrooke
Corporation, a Delaware corporation which is affiliated with two officers of the
Company. The option is exercisable for a period of three years from the date of
a Business Combination at an exercise price of $12.50 per Unit. The option is
fully vested; however, the options will be canceled if Mr. Kramer and Mr. Remley
cease to serve as directors or executive officers of the Company prior to the
Business Combination. The shares issuable upon exercise of the options and
underlying warrants may not be sold or otherwise transferred for 120 days
subsequent to the first Business Combination.
F-9
<PAGE> 63
------------------------------------------------------
------------------------------------------------------
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.................... 3
The Company........................... 12
Risk Factors.......................... 16
Use of Proceeds....................... 29
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................ 46
Description of Securities............. 47
Shares Eligible for Future Sale....... 49
Underwriting.......................... 50
Legal Matters......................... 53
Experts............................... 53
Additional Information................ 53
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
ORION ACQUISITION CORP. II
800,000 UNITS,
EACH UNIT CONSISTING OF
ONE SHARE OF COMMON STOCK AND
ONE CLASS A
COMMON STOCK PURCHASE WARRANT
(THE CLASS A WARRANTS ENTITLING THE HOLDERS
TO PURCHASE AN AGGREGATE OF 800,000 SHARES OF COMMON STOCK)
320,000 CLASS B
COMMON STOCK PURCHASE WARRANTS
(ENTITLING THE HOLDERS
TO PURCHASE 320,000 UNITS)
------------------------
PROSPECTUS
------------------------
H. J. MEYERS & CO., INC.
NORTHEAST SECURITIES, INC.
JULY 2, 1996
------------------------------------------------------
------------------------------------------------------
