<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 7, 1996
REGISTRATION NO. 333-11165
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
UNITY FIRST ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6770 13-3899021
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
245 FIFTH AVENUE--SUITE 1500
NEW YORK, NEW YORK 10016
(212) 696-4282
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
LAWRENCE BURSTEIN, PRESIDENT
UNITY FIRST ACQUISITION CORP.
245 FIFTH AVENUE--SUITE 1502
NEW YORK, NEW YORK 10016
(212) 696-4282
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
IRA I. ROXLAND, Esq. DAVID ALAN MILLER, Esq.
PARKER DURYEE ROSOFF & HAFT GRAUBARD MOLLEN & MILLER
529 Fifth Avenue 600 Third Avenue
New York, New York 10017 New York, New York 10016
(212) 599-0500 (212) 818-8661
Fax: (212) 972-9487 Fax: (212) 818-8881
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED NOVEMBER 7, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
UNITY FIRST ACQUISITION CORP.
1,250,000 UNITS
EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK,
ONE CLASS A COMMON STOCK PURCHASE WARRANT AND
ONE CLASS B COMMON STOCK PURCHASE WARRANT
Unity First Acquisition Corp. ("Company") is offering hereby 1,250,000 Units
("Units"), each consisting of one share of Common Stock, par value $0.0001 per
share ("Common Stock"), one Class A Redeemable Common Stock Purchase Warrant
("Class A Warrants") and one Class B Redeemable Common Stock Purchase Warrant
("Class B Warrants" and together with the Class A Warrants, the "Warrants"). One
Class A Warrant and one Class B Warrant each entitle the holder to purchase one
share of Common Stock at a price of $5.50 and $7.50, respectively, commencing on
the later of (i) the consummation of a Business Combination (as hereinafter
defined) or (ii) one year from the date of this Prospectus and ending six years
from the date of this Prospectus. The Class A Warrants and the Class B Warrants
are redeemable, each as a class, in whole and not in part, at the option of the
Company and with the consent of GKN Securities Corp. ("GKN"), at a price of $.05
per Warrant at any time after the Warrants become exercisable upon not less than
30 days' prior written notice, provided that the last reported bid price of the
Common Stock equals or exceeds $8.50 per share, with respect to the Class A
Warrants, and $10.50 per share, with respect to the Class B Warrants, for the 20
consecutive trading days ending on the third day prior to the notice of
redemption. Each of the Company's officers and directors has agreed with the
Underwriters that within the first ten days after separate trading of the
Warrants has commenced, such officers and directors and/or their affiliates,
collectively, will purchase $250,000 of each of the Class A Warrants and the
Class B Warrants at market prices not to exceed $.875 per Warrant. See
"Underwriting."
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 after the completion of this offering. For information
regarding the factors considered in determining the initial public offering
price of the Units and the exercise price of the Warrants, see "Underwriting."
The securities comprising the Units will not be separately transferable until 90
days after the date of this Prospectus unless GKN informs the Company of its
decision to allow earlier separate trading, but in no event will GKN 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. The Company anticipates that the Units will be quoted
on the OTC Bulletin Board under the symbol "UFACU" upon completion of this
offering and that, once the securities comprising the Units become separately
transferable, the Common Stock and Warrants will be quoted on the OTC Bulletin
Board under the symbols "UFAC," "UFACW" and "UFACZ," respectively.
--------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND ARE NOT SUBJECT
TO THE PROTECTIONS OF THE RULES UNDER THE SECURITIES ACT OF 1933 RELATING TO
"BLANK CHECK" OFFERINGS. SEE "RISK FACTORS" ON PAGE 10.
---------------------
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 UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
<S> <C> <C> <C>
Per Unit....................................................... $6.00 $0.48 $5.52
Total (3)...................................................... $7,500,000 $600,000 $6,900,000
</TABLE>
(1) Does not include a 3% non-accountable expense allowance which the Company
has agreed to pay to the Underwriters. The Company has also agreed to sell
to the Underwriters an option ("Unit Purchase Option") to purchase up to
125,000 Units and to indemnify the Underwriters against certain liabilities
under the Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting estimated expenses payable by the Company, including the
Underwriters' non-accountable expense allowance in the amount of $225,000
($258,750 if the Underwriters' over-allotment option is exercised in full),
estimated at $450,000.
(3) The Company has granted the Underwriters a 45-day option to purchase up to
187,500 additional Units upon the same terms and conditions as set forth
above, solely to cover over-allotments, if any. If such over-allotment
option is exercised in full, the total Price to Public, Underwriting
Discounts and Proceeds to Company will be $8,625,000, $690,000 and
$7,935,000, respectively. See "Underwriting."
The Units are offered, subject to prior sale, when, as and if delivered to and
accepted by the Underwriters and subject to approval of certain legal matters by
counsel and certain other conditions. The Underwriters reserve the 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 against payment
therefor on or about November , 1996, at the offices of GKN Securities Corp.
in New York City.
GKN SECURITIES GAINES, BERLAND INC.
NOVEMBER , 1996
<PAGE>
STATE BLUE SKY INFORMATION
The Units will only be offered and sold by the Company in the States of
Delaware, District of Columbia, Florida, Hawaii, Illinois, Maryland, New York
and Rhode Island (the "Primary Distribution States"). Additionally, the Company
believes that the Units, upon completion of this offering, and the Common Stock
and Warrants comprising the Units, once they become separately transferable,
will be eligible for sale on a secondary market basis in each of the Primary
Distribution States and in the States of Iowa and Pennsylvania. Purchasers of
such securities either in this offering or in any subsequent trading market
which may develop must be residents of such states. 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.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE UNITS, COMMON
STOCK AND WARRANTS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
FURTHER INFORMATION
The Company intends to furnish to its stockholders annual reports containing
financial statements audited and reported upon by its independent public
accounting firm and such other reports as the Company may determine to be
appropriate or as may be required by law.
2
<PAGE>
SUMMARY
THE FOLLOWING IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS
PROSPECTUS IN ITS ENTIRETY. UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS
PROSPECTUS DOES NOT GIVE EFFECT TO THE EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION, THE UNIT PURCHASE OPTION AND THE WARRANTS.
THE COMPANY
BUSINESS OBJECTIVE
Unity First Acquisition Corp. ("Company") was formed on May 30, 1996 to
serve as a vehicle to effect a merger, exchange of capital stock, asset
acquisition or other similar business combination (a "Business Combination")
with an operating business (a "Target Business") which the Company believes has
significant growth potential. The Company intends to utilize cash (to be derived
from the proceeds of this offering), equity, debt or a combination thereof in
effecting a Business Combination. The Company's efforts in identifying a
prospective Target Business will be limited to the following industries: (i) the
manufacture of analytical and controlling equipment, chemicals and allied
products, electronic equipment and medical instrumentation; (ii) health services
(including HMOs, laboratories and nursing homes); (iii) environmental services
and products; (iv) engineering and construction; (v) wholesale and retail
distribution (including discount operations) of home furnishings, office
supplies, computers and related products, medical equipment and supplies,
apparel and accessories, automotive parts and supplies and food and beverage
products; (vi) internet and other new media products and services; and (vii)
communications and entertainment ("Target Industries").
While the Company may, under certain circumstances, seek to effect Business
Combinations with more than one Target Business, its initial Business
Combination must be with a Target Business whose fair market value is at least
equal to 80% of the net assets of the Company at the time of such acquisition.
Consequently, it is likely that the Company will have the ability to effect only
a single Business Combination.
PRIOR INVOLVEMENT OF PRINCIPALS IN "BLANK CHECK" COMPANIES
The officers and directors of the Company (other than Mr. Norman Leben) have
held similar positions in seven other "blank check" companies (i.e., a
development stage company that has no specific business plan or has indicated
that its business plan is to engage in a merger or acquisition with an
unidentified company), each of which as of the date of this Prospectus has both
publicly sold its equity securities to finance a Business Combination with a
Target Business (an "IPO") and subsequently consummated a Business Combination.
Certain information with respect to each such "blank check" company, IPO and
Business Combination is set forth below:
<TABLE>
<CAPTION>
APPROXIMATE
DATE OF IPO AND DATE OF PERCENTAGE OF
NAME OF "BLANK CHECK" APPROXIMATE NET BUSINESS TARGET BUSINESS
COMPANY PROCEEDS COMBINATION NAME AND NATURE OF TARGET BUSINESS ACQUIRED
- ----------------------- ---------------- -------------- ----------------------------------------------- -----------------
<S> <C> <C> <C> <C>
RT Associates Inc. April 1987-- March 1988 Bloc Development Corp.--Software development 48%
$2,250,000
RT Acquisition September 1988-- April 1990 Polyvision Corporation--Manufacture and sale of 20%
Associates Inc. $1,525,000 vision projection systems, architectural
building panels, modular partitions and
office products
Trinity Acquisition August 1990-- August 1991 T-HQ Inc.--Design and marketing of Nintendo and 50%
Corp. $2,250,000 SEGA games
<CAPTION>
NAME OF "BLANK CHECK" TRADING MARKET
COMPANY (TICKER SYMBOL)
- ----------------------- ----------------
<S> <C>
RT Associates Inc. NYSE (GML)(1)
RT Acquisition AMEX (PLI)
Associates Inc.
Trinity Acquisition Nasdaq SmallCap
Corp. Market (TOYH)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
DATE OF IPO AND DATE OF PERCENTAGE OF
NAME OF "BLANK CHECK" APPROXIMATE NET BUSINESS TARGET BUSINESS
COMPANY PROCEEDS COMBINATION NAME AND NATURE OF TARGET BUSINESS ACQUIRED
- ----------------------- ---------------- -------------- ----------------------------------------------- -----------------
<S> <C> <C> <C> <C>
Trinity Capital September 1991-- August 1993 SubMicron Systems Corporation--Semi-conductor 37%
Enterprise Corp. $9,000,000 capital equipment manufacturer
Trinity Capital May 1992-- November 1993 Alliance Entertainment Corp.--Distributor of 20%
Opportunity Corp. $21,750,000 pre- recorded music, accessories and
entertainment related products
Trinity Six Inc. August 1993-- May 1995 USCI Inc.--Centralized automated computer-based 48%
$9,000,000 cellular telephone activation systems
Trinity Americas Inc. February 1994-- March 1996 Brazil Fast Food Corp.--Owner and operator of 43%
$9,000,000 hamburger fast food restaurants in Brazil
<CAPTION>
NAME OF "BLANK CHECK" TRADING MARKET
COMPANY (TICKER SYMBOL)
- ----------------------- ----------------
<S> <C>
Trinity Capital Nasdaq National
Enterprise Corp. Market (SUBM)
Trinity Capital NYSE (CDS)
Opportunity Corp.
Trinity Six Inc. Nasdaq National
Market (USCM)
Trinity Americas Inc. Nasdaq SmallCap
Market (BOBS)
</TABLE>
- ------------------------
(1) Bloc Development Corp. was acquired by Global Direct Mail Corp., now known
as Tiger Direct Inc. ("Tiger Direct"), in 1995. On November 30, 1995, Tiger
Direct ceased to be a reporting company under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
There can be no assurance that the Company will be able to effect a Business
Combination or that the type of business or the performance of the Target
Business, if any, will be similar to that of these other "blank check"
companies. See "Management."
OFFERING PROCEEDS HELD IN TRUST
The proceeds of this offering, after payment of underwriting discounts and
the Underwriters' non-accountable expense allowance, will be $6,675,000
($7,676,250 if the Underwriters' over-allotment option is exercised in full).
Ninety percent (90%) of such amount, or $6,007,500 ($6,908,625 if the
Underwriters' over-allotment option is exercised in full), will be placed in a
trust account (the "Trust Fund"), and invested in United States government
securities. The Trust Fund will not be released until the earlier of the
consummation of a Business Combination or the liquidation of the Company, which
may not occur until 24 months from the consummation of this offering. Therefore,
unless and until a Business Combination is consummated, the proceeds held in the
Trust Fund will not be available for use by the Company for any expenses related
to this offering or expenses which may be incurred by the Company related to the
investigation and selection of a Target Business and the negotiation of an
agreement to acquire a Target Business. Such expenses may be paid from the
proceeds not held in the Trust Fund (approximately $667,500 or $767,625 if the
Underwriters' over-allotment option is exercised in full). See "Use of
Proceeds."
FAIR MARKET VALUE OF TARGET BUSINESS
The Company will not acquire a Target Business unless the fair market value
of such business, as determined by the Board of Directors of the Company based
upon standards generally accepted by the financial community, such as actual and
potential sales, earnings and cash flow and book value ("Fair Market Value"), is
at least 80% of the net assets of the Company at the time of such acquisition.
If the Board of Directors is not able to independently determine that the Target
Business has a sufficient Fair Market Value, the Company will obtain an opinion
from an unaffiliated, independent investment banking firm which is a member of
the National Association of Securities Dealers, Inc. ("NASD") with respect to
the satisfaction of such criteria. Since any opinion, if obtained, would merely
state that Fair Market Value meets the 80% of net assets threshold, it is not
anticipated that copies of such opinion would be distributed to stockholders of
the Company, although copies will be provided to stockholders who request it.
The Company will not be required to obtain an opinion from an investment banking
firm as to Fair Market
4
<PAGE>
Value if the Board of Directors determines that the Target Business does have
sufficient Fair Market Value.
STOCKHOLDER APPROVAL OF BUSINESS COMBINATION
The Company, after signing a definitive agreement for the acquisition of a
Target Business, but 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
stockholders prior to this offering ("Initial Stockholders"), including all of
the officers and directors of the Company, have agreed to vote their respective
shares of Common Stock owned by them immediately prior to this offering in
accordance with the vote of the majority of all the other shares of Common Stock
("Public Shares") voted on any Business Combination. The holders of the Public
Shares will be referred to herein as the "Public Stockholders." The Initial
Stockholders shall be deemed to be Public Stockholders with respect to any
Public Shares they acquire. The Company will proceed with the Business
Combination only if the holders of at least a majority of the outstanding shares
of Common Stock vote in favor of the Business Combination and less than 20% in
interest of the Public Stockholders exercise their conversion rights described
below.
CONVERSION RIGHTS
At the time the Company seeks stockholder approval of any Business
Combination, the Company will offer each Public Stockholder the right to have
his shares of Common Stock converted to cash if such stockholder votes against
the Business Combination and the Business Combination is approved and
consummated. The per-share conversion price will be equal to the amount in the
Trust Fund (inclusive of any interest thereon) as of the record date for
determination of stockholders entitled to vote on such Business Combination,
divided by the number of Public Shares. Without taking into account interest, if
any, earned on the Trust Fund, the per-share conversion price would be $4.81, or
$1.19 less than the per-Unit offering price of $6.00. There will be no
distribution from the Trust Fund with respect to the Warrants included in the
Units. A Public Stockholder may request conversion of his shares at any time
prior to the vote taken with respect to a proposed Business Combination at a
meeting held for that purpose, but such request will not be granted unless such
stockholder votes against the Business Combination and the Business Combination
is approved and consummated. It is anticipated that the funds to be distributed
to the Public Stockholders who have their shares converted will be distributed
promptly after consummation of a Business Combination. The Initial Stockholders
will not have any conversion rights with respect to the shares of Common Stock
owned by them immediately prior to this offering. The Company will not
consummate any Business Combination if 20% or more in interest of the Public
Stockholders exercise their conversion rights.
ESCROW OF PRINCIPALS' SECURITIES
The shares of the Company's Common Stock owned as of the date hereof by all
of the executive officers and directors of the Company and their respective
affiliates (excluding, however, their respective spouses and adult children) and
by all persons owning 5% or more of the currently outstanding shares of Common
Stock (collectively, the "Affiliated Initial Stockholders"), representing in the
aggregate approximately 49.8% of the outstanding Common Stock immediately prior
to this offering, will be placed in escrow with American Stock Transfer & Trust
Company, as escrow agent (the "Escrow Agent"), until the earlier of (i) six
months following the consummation of a Business Combination or (ii) the
liquidation of the Company. During such escrow period, such persons will not be
able to sell their respective shares of Common Stock, but will retain all other
rights as stockholders of the Company, including, without limitation, the right
to vote such shares of Common Stock. In addition, the Directors' Warrants (as
hereinafter defined) will also be deposited with the Escrow Agent, to be
released only upon the
5
<PAGE>
consummation of a Business Combination. Upon liquidation of the Company, the
shares will be cancelled. All other Initial Stockholders ("Non-Affiliated
Initial Stockholders") have agreed not to sell their respective shares of Common
Stock until the consummation of a Business Combination.
LIQUIDATION IF NO BUSINESS COMBINATION
In the event that the Company does not consummate a Business Combination
within 18 months from the consummation of this offering, or 24 months from the
consummation of this offering if the "Extension Criteria" described below have
been satisfied, the Company will be dissolved and will distribute to all Public
Stockholders in proportion to their respective equity interests in the Company,
an aggregate sum equal to the amount in the Trust Fund, inclusive of any
interest thereon, plus any remaining net assets of the Company. The Initial
Stockholders have waived their respective rights to participate in any
liquidation distribution with respect to the shares of Common Stock owned by
them immediately prior to this offering. If the Company were to expend all of
the net proceeds of this offering, other than the proceeds deposited in the
Trust Fund, and without taking into account interest, if any, earned on the
Trust Fund, the per-share liquidation price would be $4.81 or $1.19 less than
the per-Unit offering price of $6.00. The proceeds deposited in the Trust Fund
could, however, become subject to the claims of creditors of the Company which
could be prior to the claims of stockholders of the Company. Accordingly, there
can be no assurance that the per-share liquidation price will not be less than
$4.81, plus interest. There will be no distribution from the Trust Fund with
respect to the Warrants included in the Units. Notwithstanding the Company's
commitment to liquidate if it is unable to effect a Business Combination within
18 months from the consummation of this offering, if the Company enters into
either a letter of intent, an agreement in principle or a definitive agreement
to effectuate a Business Combination prior to the expiration of such 18-month
period, but is unable to consummate such Business Combination within such
18-month period ("Extension Criteria"), then the Company will have an additional
six months in which to consummate that Business Combination contemplated by such
letter of intent or definitive agreement, as applicable. If the Company is
unable to do so by the expiration of the 24-month period from the consummation
of this offering, it will then liquidate. Upon notice from the Company, the
trustee of the Trust Fund will commence liquidating the investments constituting
the Trust Fund and will turn over the proceeds to the transfer agent for the
Common Stock for distribution to the Public Stockholders. The Company
anticipates that its instruction to the Trustee would be given promptly after
the expiration of the applicable 18-month or 24-month period.
A Public Stockholder shall be entitled to receive funds from the Trust Fund
only in the event of a liquidation of the Company or if he seeks to convert his
shares into cash in connection with a Business Combination which he voted
against and which is actually consummated by the Company. In no other
circumstances shall a Public Stockholder have any right or interest of any kind
to or in the Trust Fund.
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities offered................ 1,250,000 Units, at $6.00 per Unit, each Unit consisting
of one share of Common Stock, one Class A Warrant to
purchase one share of Common Stock, and one Class B
Warrant to purchase one share of Common Stock. The
securities comprising the Units will not be separately
transferable until 90 days after the date of this
Prospectus unless GKN informs the Company of its
decision to allow earlier separate trading, but in no
event will GKN 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. See
"Description of Securities" and "Underwriting."
Common Stock outstanding prior to
the offering.................... 625,000 shares
Common Stock to be outstanding
after the offering(1)........... 1,875,000 shares
Warrants:
Number to be outstanding after
the offering(2)................. 1,350,000 Class A Warrants
1,350,000 Class B Warrants
Exercise price.................... The exercise price of each Class A Warrant is $5.50 per
share and the exercise price of each Class B Warrant is
$7.50 per share, subject to adjustment in certain
circumstances. See "Description of Securities."
Exercise period................... The Warrants will become exercisable on the later of (i)
the consummation of a Business Combination or (ii) one
year from the date of this Prospectus and will expire at
5:00 p.m., New York City time, six years from the date
of this Prospectus.
Redemption........................ The Warrants are redeemable, each as a class, in whole
and not in part, at the option of the Company and with
GKN's consent, at a price of $.05 per Warrant at any
time after the Warrants become exercisable upon not less
than 30 days' prior written notice, provided that the
reported closing bid price of the Common Stock equals or
exceeds $8.50 per share, with respect to the Class A
Warrants, and $10.50 per share, with respect to the
Class B Warrants, for the 20 consecutive trading days
ending on the third day prior to the notice of
redemption.
Proposed OTC Bulletin Board
Symbols......................... Units: UFACU
Common Stock: UFAC
Class A Warrants: UFACW
Class B Warrants: UFACZ
</TABLE>
- ------------------------
(1) Does not include (i) 2,700,000 shares of Common Stock reserved for issuance
upon the exercise of currently outstanding Directors' Warrants (as
hereinafter defined) and the Warrants, (ii) 187,500 shares of Common Stock
included in the Units subject to the Underwriters' over-allotment option,
(iii) 375,000 shares of Common Stock reserved for issuance upon the exercise
of the Warrants
7
<PAGE>
included in the Units subject to the Underwriters' over-allotment option,
(iv) 125,000 shares of Common Stock included in the Units reserved for
issuance upon exercise of the Unit Purchase Options, (v) 250,000 shares of
Common Stock reserved for issuance upon the exercise of the Warrants
included in the Units reserved for issuance upon exercise of the Unit
Purchase Options, or (vi) 187,500 shares of Common Stock reserved for
issuance upon exercise of options available for grant under the Company's
1996 Stock Option Plan. See "Management--Stock Option Plan," "Certain
Transactions," and "Underwriting."
(2) Includes 100,000 Class A Warrants and 100,000 Class B Warrants heretofore
issued to the Company's officers and directors (collectively, the
"Directors' Warrants"). The Directors' Warrants are identical to the Class A
Warrants and the Class B Warrants, respectively, except that the Directors'
Warrants are not redeemable and cannot be transferred until the consummation
of a Business Combination. See "Certain Transactions."
USE OF PROCEEDS
The Company intends to apply substantially all of the net proceeds of this
offering, which are estimated to be approximately $6,450,000 ($7,451,250 if the
Underwriters' over-allotment option is exercised in full), to acquire a Target
Business, including identifying and evaluating prospective acquisition
candidates, selecting a Target Business and structuring, negotiating and
consummating the Business Combination. The proceeds of this offering, after
payment of underwriting discounts and the Underwriters' non-accountable expense
allowance, will be $6,675,000 ($7,676,250 if the Underwriters' over-allotment
option is exercised in full). Ninety percent (90%) of such amount, or $6,007,500
($6,908,625 if the Underwriters' over-allotment option is exercised in full),
will be held in a trust account established with The Bank of New York until the
earlier of (i) the consummation of a Business Combination or (ii) the
liquidation of the Company.
That portion of the net proceeds of this offering that will not be held in
the Trust Fund, approximately $442,500 ($542,625 if the Underwriters'
over-allotment option is exercised in full), will be used for (i) the
performance of "due diligence" investigations of prospective acquisition
candidates, (ii) legal, accounting and other expenses attendant to such "due
diligence" investigations and to structuring, negotiating and consummating a
Business Combination, (iii) legal and accounting fees to be incurred in
connection with the Company's obligation to file periodic reports, proxy
statements and other informational material with the Securities and Exchange
Commission and (iv) the Company's general and administrative expenses, including
$7,500 per month payable to Unity Venture Capital Associates Ltd., an affiliate
of the Company's directors. See "Use of Proceeds," "Proposed Business" and
"Certain Transactions."
RISK FACTORS
The securities offered hereby involve a high degree of risk and are not
subject to the protection of the Rules of the Securities Act of 1933 relating to
"blank check" offerings. See "Risk Factors."
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SUMMARY FINANCIAL INFORMATION
The following data have been derived from the financial statements of the
Company and should be read in conjunction with those statements, which are
included in this Prospectus. The "As Adjusted" financial information gives
effect to the issuance of the securities in this offering as if such offering
had occurred at July 31, 1996.
<TABLE>
<CAPTION>
JULY 31, 1996
------------------------------
ACTUAL AS ADJUSTED(1)
----------- -----------------
<S> <C> <C>
Balance Sheet Data:
Total assets..................................................................................... $ 250,563 $ 6,435,063(2)
Working capital (deficit)........................................................................ $ (14,937) $ 6,435,063(2)
Total liabilities................................................................................ $ 265,500 $ --
Common Stock subject to possible conversion...................................................... $ -- $ 1,201,899(3)
Total shareholders' equity (deficit)............................................................. $ (14,937) $ 6,435,063(3)
</TABLE>
- ------------------------
(1) Gives effect to the sale of the Units offered hereby and the application of
the estimated net proceeds therefrom. See "Underwriting."
(2) Includes $6,007,500 being held in the Trust Fund which will be available to
the Company only upon the consummation of a Business Combination within the
time period described in this Prospectus. If a Business Combination is not
so consummated, the Company will be dissolved and the proceeds held in the
Trust Fund will be distributed to the Public Stockholders. See "Use of
Proceeds."
(3) In the event the Company consummates a Business Combination, the conversion
rights to the Public Stockholders may result in the conversion into cash of
up to approximately 19.99% of the aggregate number of Public Shares at a
per-share conversion price equal to the amount in the Trust Fund as of the
record date for the determination of stockholders entitled to vote on the
Business Combination (inclusive of any interest thereon) divided by the
number of Public Shares.
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THE COMPANY
BUSINESS OBJECTIVE
The Company was formed to serve as a vehicle to effect a merger, exchange of
capital stock, asset acquisition or other similar business combination (a
"Business Combination") with an operating business (a "Target Business"). The
business objective of the Company is to seek to effect a Business Combination
with a Target Business which the Company believes has significant growth
potential. The Company intends to utilize cash (to be derived from the proceeds
of this offering), equity, debt or a combination thereof in effecting a Business
Combination. The Company's efforts in identifying a prospective Target Business
will be limited to the following industries: (i) the manufacture of analytical
and controlling equipment, chemicals and allied products, electronic equipment
and medical instrumentation; (ii) health services (including HMOs, laboratories
and nursing homes); (iii) environmental services and products; (iv) engineering
and construction; (v) wholesale and retail distribution (including discount
operations) of home furnishings, office supplies, computers and related
products, medical equipment and supplies, apparel and accessories, automotive
parts and supplies and food and beverage products; (vi) internet and other new
media products and services; and (vii) communications and entertainment (the
"Target Industries").
To date, the Company's efforts have been limited to organizational
activities. The implementation of the Company's business plans are wholly
contingent upon the successful sale of the Units offered hereby. See "Proposed
Business."
The Company was organized under the laws of the State of Delaware on May 30,
1996. The Company's office is located at 245 Fifth Avenue, Suite 1500, New York,
New York 10016, and its telephone number is (212) 696-4282.
RISK FACTORS
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, INCLUDING, BUT
NOT NECESSARILY LIMITED TO, THE SEVERAL FACTORS DESCRIBED BELOW. EACH
PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS
INHERENT IN AND AFFECTING THE BUSINESS OF THE COMPANY AND THIS OFFERING BEFORE
MAKING AN INVESTMENT DECISION.
INVESTOR DOES NOT RECEIVE PROTECTION OF CERTAIN RULES RELATING TO "BLANK CHECK"
COMPANIES
PROMULGATED UNDER THE SECURITIES ACT OF 1933
This offering is not being conducted in accordance with Rule 419,
promulgated by the Securities and Exchange Commission ("Commission") under the
Securities Act ("Rule 419"), which regulates securities offerings by "blank
check" companies. Since the Company's net tangible assets will be in excess of
$5,000,000 upon its receipt of the proceeds of this offering (as supported
through audited financial statements), the Company is not subject to Rule 419.
Rule 419 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 an
acquisition meeting specified criteria is completed. Before the acquisition can
be completed and before the funds and securities can be released, the blank
check company is required to update its registration statement with a
post-effective amendment and, after the effective date thereof, the blank check
company is required to furnish investors with a prospectus (which forms a part
of the post-effective amendment to its registration statement) containing
specified information, including a discussion of the business and the audited
financial statements of the proposed acquisition candidate. According to Rule
419, the investors must have no less than 20 and no more than 45 days from the
effective date of the post-effective amendment to decide whether to remain an
investor or require the return of their investment funds. Any investor not
making such decision within such 45-day period is automatically entitled to
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.
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Rule 419 further provides that if the blank check company does not complete an
acquisition meeting the specified criteria within 18 months, all of the
deposited funds must be returned to investors.
RECENTLY ORGANIZED "DEVELOPMENT STAGE" COMPANY; LIMITED RESOURCES; NO PRESENT
SOURCE OF REVENUES
The Company, which was organized on May 30, 1996 and is in the development
stage, has not as yet attempted to seek a Business Combination. Although the
Company's President and two of its three other directors have had prior
experience relating to the identification, evaluation and acquisition of a
Target Business, the Company has no such experience and, accordingly, there is
only a limited basis upon which to evaluate the Company's prospects for
achieving its intended business objectives. To date, the Company's efforts have
been limited primarily 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 interest income upon the
proceeds of this offering) 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 "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
AUDITORS' REPORT CONTAINS "GOING CONCERN" QUALIFICATION
The report of independent public accountants on the Company's financial
statements includes an explanatory paragraph with respect to the Company being
in its development stage, which raises substantial doubt about its ability to
continue as a going concern. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements of
the Company included elsewhere in this Prospectus.
POSSIBLE LIQUIDATION OF THE COMPANY; PER-SHARE LIQUIDATION PRICE LESS THAN
PUBLIC OFFERING PRICE; WARRANTS EXPIRE WORTHLESS IN EVENT OF LIQUIDATION
If the Company does not consummate a Business Combination within 18 months
from the consummation of this offering, or 24 months from the consummation of
this offering if the Extension Criteria have been satisfied, the Company will be
dissolved and will distribute to all Public Stockholders, in proportion to their
respective equity interests in the Company, an aggregate sum equal to the amount
in the Trust Fund, inclusive of any interest thereon, plus any remaining net
assets of the Company. It is likely that, in the event of any such liquidation,
the per-share liquidation distribution will be less than the initial per-share
public offering price (assuming no value is attributed to the Warrants included
in the Units offered hereby) as a consequence of the expenses of this offering
and the anticipated costs which will be incurred by the Company in seeking a
Business Combination. If the Company were to expend all of the net proceeds of
this offering not held in the Trust Fund prior to liquidation, and without
taking into account interest, if any, earned on the Trust Fund, the per-share
liquidation price would be $4.81, or $1.19 less than the per-Unit offering price
of $6.00. The proceeds deposited in the Trust Fund could, however, become
subject to the claims of creditors of the Company which could be prior to the
claims of stockholders of the Company. Accordingly, there can be no assurance
that the per-share liquidation price will not be less than $4.81, plus interest.
There will be no distribution from the Trust Fund with respect to the Warrants
included in the Units and, accordingly, the Warrants will expire worthless in
the event of a liquidation prior to the consummation of a Business Combination.
The Initial Stockholders have waived their respective rights to participate in
any liquidation distribution with respect to the shares of Common Stock owned by
them immediately prior to this offering.
A Public Stockholder shall be entitled to receive funds from the Trust Fund
only in the event of a liquidation or in the event he seeks to convert his
shares into cash in connection with a Business
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<PAGE>
Combination which he voted against and which is actually consummated by the
Company. In no other circumstances shall a Public Stockholder have any right or
interest of any kind to and in the Trust Fund.
UNSPECIFIED INDUSTRY AND TARGET BUSINESS; UNASCERTAINABLE RISKS
To date, the Company has not selected any particular industry from the
Target Industries or any Target Business on which to concentrate its search for
a Business Combination. Accordingly, there is no current 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. However, in
connection with seeking stockholder approval of a Business Combination, the
Company intends to furnish its stockholders with proxy solicitation materials
prepared in accordance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which, among other matters, will include a description of the
operations of the Target Business and audited historical financial statements
thereof. 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 sales or earnings),
the Company will become subject to numerous risks inherent in the business
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
significant risk factors. See "Proposed Business--'Blank Check' Offering."
DETERMINATION OF FAIR MARKET VALUE
The Fair Market Value of the Target Business will be determined by the Board
of Directors of the Company, unless the Board of Directors is not able to
independently determine that the Target Business has sufficient Fair Market
Value. Therefore, the Board of Directors has significant discretion in
determining whether a Target Business is suitable for a proposed Business
Combination and, since each of the directors of the Company owns shares of the
Company's Common Stock which will be released from escrow only if a Business
Combination is successfully consummated, the Board of Directors may have a
conflict of interest in determining the Fair Market Value of a Target Business.
The Board of Directors, however, has a fiduciary duty under the laws of Delaware
to act in the best interests of all of the Company's stockholders, particularly
when faced with a conflict of interest. See "Management--Conflicts of Interest."
UNCERTAIN STRUCTURE OF BUSINESS COMBINATION; REDUCTION IN STOCKHOLDER EQUITY
INTEREST
The structure of a Business Combination with a Target Business, which may
take the form of a merger, exchange of capital stock or asset acquisition,
cannot be presently determined since neither the Company's officers or directors
nor their respective affiliates have had any preliminary contacts, discussions
or understandings with representatives of any potential Target Business
regarding the possibility of a Business Combination. The Company may use the
funds held in the Trust Fund as part of the consideration for the Business
Combination or may issue additional Shares of Common Stock or shares of
Preferred Stock, or incur debt, or any combination thereof. In the event the
Company issues capital stock, the equity interest of the stockholders may be
significantly reduced. See "Proposed Business--'Blank Check' Offering--Selection
of a Target Business and Structuring a Business Combination."
DISCRETIONARY USE OF PROCEEDS
The Company's Management has broad discretion with respect to the specific
application of the net proceeds of this offering, although substantially all of
the net proceeds of this offering are intended to be
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<PAGE>
generally applied toward effecting a Business Combination in one of the Target
Industries discussed under "The Company--Business Objectives." See "Use of
Proceeds" and "Proposed Business--'Blank Check' Offering."
ABSENCE OF CURRENT SUBSTANTIVE DISCLOSURE RELATING TO BUSINESS COMBINATIONS
As of the date of this Prospectus, the Company has not identified a
prospective Target Business and, accordingly, investors in this offering do not
currently have any substantive information available for consideration of any
Business Combination. Notwithstanding the foregoing, in connection with seeking
stockholder approval of a Business Combination, the Company intends to furnish
its stockholders with proxy solicitation materials prepared in accordance with
the Exchange Act, which will include a description of the operations of the
Target Business and audited historical financial statements thereof. Such proxy
solicitation materials will be filed with, and be subject to the review of, the
Commission. See "Use of Proceeds" and "Proposed Business--'Blank Check'
Offering."
LIMITED ABILITY TO EVALUATE TARGET BUSINESS MANAGEMENT
While the Company's ability to successfully effect a Business Combination
will be dependent upon the efforts of its officers and directors, the future
role of such persons, if any, in the Target Business cannot presently be stated
with any certainty. While it is possible that one or more of these persons will
remain associated in some capacity with the Company following a Business
Combination, it is unlikely that any of them will devote their full efforts to
the affairs of the Company subsequent thereto. Moreover, there can be no
assurance that such persons will have significant experience or knowledge
relating to the operations of the particular Target Business. Furthermore,
although the Company intends to closely scrutinize the management of a
prospective Target Business in connection with evaluating the desirability of
effecting a Business Combination, 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 the Company's officers and directors in evaluating
certain types of businesses. In addition, there can be no assurance that such
future management will have the necessary skills, qualifications or abilities to
manage a public company intending to embark on a program of business
development. The Company may also seek to recruit additional managers to
supplement the incumbent management of the Target Business. There can be no
assurance that the Company will have the ability to recruit such additional
managers, or that such additional managers will have the requisite skills,
knowledge or experience necessary to enhance the incumbent management. See
"Proposed Business--'Blank Check' Offering."
TARGET BUSINESS' INTERESTS IN EFFECTING BUSINESS COMBINATION MAY BE ADVERSE TO
INVESTORS' INTERESTS
While a prospective Target Business may deem a Business Combination with the
Company desirable for diverse reasons, a Business Combination may involve the
acquisition of, or merger 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, such as time delays, significant expense,
loss of voting control and compliance with various Federal and state securities
laws. See the risk factors herein entitled "Unspecified Industry and Target
Business; Unascertainable Risks" and "No Assurance of Public Market; Arbitrary
Determination of Offering Price."
PROBABLE LACK OF BUSINESS DIVERSIFICATION
While the Company may, under certain circumstances, seek to effect Business
Combinations with more than one Target Business, its initial Business
Combination must be with a Target Business which satisfies the Fair Market Value
criteria at the time of such acquisition. Consequently, it is likely that the
Company 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 of entities
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<PAGE>
operating in multiple industries or multiple areas 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 substantial adverse impact upon the particular industry in
which the Company may operate subsequent to a Business Combination. In addition,
by consummating a Business Combination with only a single entity, 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.
Consequently, there can be no assurance that the Target Business will prove to
be commercially viable. See "Proposed Business--'Blank Check' Offering."
DEPENDENCE UPON KEY PERSONNEL
The ability of the Company to successfully effect a Business Combination
will be largely dependent upon the efforts of Lawrence Burstein, the Company's
President. The Company has not entered into an employment agreement with Mr.
Burstein or obtained any "key man" life insurance on his life. The loss of Mr.
Burstein's services could have a material adverse effect on the Company's
ability to successfully achieve its business objectives. None of the Company's
officers and directors are required to commit their full time to the affairs of
the Company. Accordingly, conflicts of interest may arise in the allocation of
management time among various business activities. In addition, the success of
the Company may be dependent upon its ability to retain additional personnel
with specific knowledge or skills who may be necessary to assist the Company in
evaluating a potential Business Combination. There can be no assurance that the
Company will be able to retain such necessary additional personnel. See
"Proposed Business--Employees" and "Management--Conflicts of Interest."
COMPETITION
The Company expects to encounter intense competition from other entities
having a business objective 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, personnel 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 relatively limited when contrasted with those of many of its
competitors. This inherent competitive limitation may compel the Company to
select certain less attractive Business Combination prospects. See "Proposed
Business--'Blank Check' Offering--Selection of a Target Business and Structuring
a Business Combination."
CONFLICTS OF INTEREST
None of the Company's officers and directors are required to commit their
full time to the affairs of the Company; therefore, such persons may have
conflicts of interest in allocating management time among various business
activities. Certain of these persons may in the future become affiliated with
entities, including other "blank check" companies, 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 order to reduce
potential conflicts of interest, the Company's officers and directors have
agreed that they will offer all suitable prospective Target Businesses to the
Company before any other company until the earlier of a Business Combination or
the liquidation of the Company. 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 officers and
directors may have similar legal obligations to present certain business
opportunities to multiple entities.
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Conflicts of interest may also arise between the Company and Unity Venture
Capital Associates Ltd. ("Unity"). Pursuant to a general and administrative
services agreement, the Company is obligated to pay Unity a monthly fee of
$7,500 for general and administrative services, including the use of
approximately 500 square feet of office space in premises occupied by Unity. Mr.
Burstein is the President and principal shareholder of Unity. Norman Leben, as
well as John Cattier and Barry Ridings, each a director of the Company, are also
shareholders of Unity. Dalessio, Millner & Leben ("DML"), an accounting firm of
which Mr. Leben is a partner, affords Unity the use of such space at a monthly
rental of $2,000. DML, which has performed bookkeeping, tax and accounting
services for certain of the "blank check" companies of which Messrs. Burstein,
Cattier and Ridings have been directors and shareholders from their inceptions
through the consummation of their respective Business Combinations, is expected
to perform similar services for the Company at an aggregate cost of
approximately $12,000 per annum. DML may also perform financial "due diligence"
services for the Company in connection with its evaluation of prospective Target
Businesses for a Business Combination. In addition, Unity has made non-interest
demand loans aggregating approximately $50,000 to the Company as of the date of
this Prospectus to cover expenses related to this offering. The Company intends
to repay these loans, as well as both those accrued general and administrative
expenses owed to Unity discussed above, out of the proceeds of this offering.
See "Management--Conflicts of Interest" and "Certain Transactions."
POSSIBLE NEED FOR ADDITIONAL FINANCING
The Company has had no revenues to date and is entirely dependent upon the
proceeds of this offering to commence operations relating to selection of a
prospective Target Business. The Company will not achieve any revenues (other
than interest income derived from investment of the net proceeds of this
offering) until, at the earliest, the consummation of a Business Combination.
Although the Company believes that the 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 transaction. 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 the depletion of the net
proceeds in search of a Target Business), the Company will be required to seek
additional financing. There can be no assurance that such financing would be
available on acceptable terms, if at all. To the extent that such 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. 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 such additional financing could have a material adverse
effect on the continued development or growth of the Target Business. See
"Proposed Business--'Blank Check' Offering--Selection of a Target Business and
Structuring of a Business Combination."
RISKS OF LEVERAGE
The Company may borrow money to consummate the Business Combination or
assume or refinance the indebtedness of the Target Business if the Company's
management deems it to be beneficial to the Company. There is no legal limit on
the amount of leverage that the Company may incur. Among the possible adverse
effects of any such leverage are: (i) if the Company's operating revenues after
the Business Combination were insufficient to pay debt services, there would be
a risk of default and foreclosure on the Company's assets; (ii) if a loan
agreement contains covenants that require the maintenance of certain financial
ratios or reserves, and any such covenant is breached without a waiver or
renegotiation of the terms of that covenant, then the lender could have the
right to accelerate the payment of the indebtedness even if the Company has made
all principal and interest payments when due; (iii) if the interest rate on a
loan fluctuated or the loan was payable on demand, the Company would bear the
risk of
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variations in the interest rate or demand for payment; and (iv) if the terms of
a loan did not provide for amortization prior to maturity of the full amount
borrowed and the "balloon" payment could not be refinanced at maturity on
acceptable terms, the Company might be required to seek additional financing
and, to the extent that additional financing were not available on acceptable
terms, to liquidate its assets. See "Proposed Business--'Blank Check'
Offering--Selection of a Target Business and Structuring of a Business
Combination" and "Description of Securities."
AUTHORIZATION OF ADDITIONAL SECURITIES
The Company's Certificate of Incorporation authorizes the issuance of
20,000,000 shares of Common Stock. Upon completion of this offering (assuming no
exercise of the Underwriters' over-allotment option), there will be 14,862,500
authorized but unissued shares of Common Stock available for issuance (after
appropriate reservation for the issuance of shares upon full exercise of the
Warrants, the Unit Purchase Option and the Directors' Warrants and for future
grants under the Company's 1996 Stock Option Plan). The Company's Board of
Directors has the power to issue any or all of such authorized but unissued
shares without stockholder approval. However, the Underwriting Agreement between
the Company and the Underwriters (the "Underwriting Agreement") prohibits the
Company from issuing shares of Common Stock prior to a Business Combination.
Although the Company has no commitments as of the date of this Prospectus to
issue any additional shares of Common Stock, the Company will, in all
likelihood, issue a substantial number of additional shares in connection with a
Business Combination. To the extent that additional shares of Common Stock are
issued, dilution to the interests of the Public Stockholders will occur.
Additionally, if a substantial number of shares of Common Stock are issued in
connection with a Business Combination, a change in control of the Company may
occur which may affect, among other things, the Company's ability to utilize its
net operating loss carryforwards, if any. Furthermore, the issuance of a
substantial number of shares of Common Stock may adversely affect prevailing
market prices, if any, for the Common Stock and could impair the Company's
ability to raise additional capital through the sale of its equity securities.
See "Proposed Business--'Blank Check' Offering-- Selection of a Target Business
and Structuring of a Business Combination" and "Description of Securities."
The Company's Certificate of Incorporation also authorizes the issuance of
5,000 shares of "blank check" preferred stock ("Preferred Stock") with such
designation, rights and preferences as may be determined from time to time by
the Board of Directors. 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 the Company's Common Stock,
although the Underwriting Agreement prohibits the Company, prior to a Business
Combination, from issuing Preferred Stock which participates in any manner in
the proceeds of the Trust Fund, or which votes as a class with the Common Stock
on a Business Combination. The Company may issue some or all of such shares in
connection with 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. See "Proposed
Business--'Blank Check' Offering--Selection of a Target Business and Structuring
of a Business Combination" and "Description of Securities."
REGULATORY STRICTURES OF "INVESTMENT COMPANY" STATUS
The regulatory scope of the Investment Company Act of 1940, as amended
("Investment Company Act"), which was enacted principally for the purpose of
regulating vehicles for pooled investments in securities, extends generally to
companies engaged primarily in the business of investing, reinvesting, owning,
holding or trading in securities. The Investment Company Act may, however, also
be deemed to be applicable to a company which does not intend to be
characterized as an investment company but which,
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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,
especially during the period prior to a Business Combination. In the event the
Company is deemed to be an investment company, the Company may become subject to
certain restrictions relating to the Company's activities, including
restrictions on the nature of its investments and the issuance of securities. In
addition, the Investment Company Act imposes certain requirements on companies
deemed to be within its regulatory scope, including registration as an
investment company, adoption of a specific form of corporate structure and
compliance with certain burdensome reporting, recordkeeping, voting, proxy,
disclosure and other rules and regulations. In the event of characterization of
the Company as an investment company, the failure by the Company to satisfy
regulatory requirements, whether on a timely basis or at all, would, under
certain circumstances, have a material adverse effect on the Company. See
"Proposed Business--Investment Company Act Considerations."
TAX CONSIDERATIONS
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 the 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, however, that the
Internal Revenue Service (the "IRS") or appropriate state tax authorities will
ultimately assent to the Company's tax treatment of a consummated Business
Combination. To the extent the IRS or 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. See "Proposed Business--'Blank Check' Offering--
Selection of a Target Business and Structuring of a Business Combination."
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED IN CONNECTION WITH
EXERCISE OF WARRANTS
Beginning on the later of the consummation of a Business Combination or one
year from the date of this Prospectus, the Company will be able to issue shares
of its Common Stock upon exercise of the Warrants only if there is then a
current prospectus relating to the Common Stock issuable upon the exercise of
the Warrants under an effective registration statement filed with the
Commission, and only if such Common Stock is qualified for sale or exempt from
qualification under applicable state securities laws of the jurisdictions in
which the various holders of Warrants reside. Although the Company has agreed to
maintain an effective Registration Statement, there can be no assurance that the
Company will be able to do so. The Warrants may be deprived of any value and the
market for the Warrants may be limited if a then current prospectus covering the
Common Stock issuable upon the exercise of the Warrants is not effective
pursuant to an effective registration statement or if such Common Stock is not
qualified or exempt from qualification in the jurisdictions in which the holders
of the Warrants reside. See "Description of Securities."
CONTROL BY PRESENT STOCKHOLDERS
Upon consummation of this offering, the Initial Stockholders, including the
present management of the Company, will collectively own approximately 33.3% of
the then-issued and outstanding shares of Common Stock (assuming no exercise of
the Underwriters' over-allotment option). In the election of directors,
stockholders are not entitled to cumulate their votes for nominees. Accordingly,
it is likely that the Initial Stockholders 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."
17
<PAGE>
NO ASSURANCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public trading market for the
Units, Common Stock, Class A Warrants or Class B Warrants. The initial public
offering price of the Units and the exercise prices of the Class A Warrants and
the Class B Warrants have been arbitrarily determined by negotiations between
the Company and the Underwriters, and bear no relationship to such established
valuation criteria as assets, book value or prospective earnings. There is no
assurance that a regular trading market will develop for the Company's
securities or that, if developed, that any such market will be sustained. The
Underwriters have advised the Company that they currently intend to serve as
market makers in the Company's securities but are not obligated to do so and any
market making may be discontinued at any time. See "Underwriting."
OTC BULLETIN BOARD
The Company's securities will be traded in the over-the-counter market. It
is anticipated that they will be quoted on the OTC Bulletin Board, an NASD
sponsored and operated inter-dealer automated quotation system for equity
securities not included in The Nasdaq Stock Market, as well as in the NQB Pink
Sheets published by National Quotation Bureau Incorporated. The OTC Bulletin
Board was introduced as an alternative to "pink sheet" trading of
over-the-counter securities. Although the Company believes that the OTC Bulletin
Board has been recognized by the brokerage community as an acceptable
alternative to the NQB Pink Sheets, there can be no assurance that the liquidity
and prices of the Units in the secondary market will not be adversely affected.
See "Underwriting."
IMMEDIATE DILUTION; DISPARITY OF CONSIDERATION
This offering involves an immediate and substantial dilution of $2.57 per
share (approximately 43.0% of the public offering price) between the pro forma
net tangible book value per share after the offering of $3.43 and the public
offering price of $6.00 per share allocable to the share of Common Stock
included in the Units (assuming no value is attributed to the Warrants included
in the Units). The Initial Stockholders acquired their shares of Common Stock at
a nominal price and, accordingly, new investors will bear virtually all of the
risks inherent in an investment in the Company. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
All of the 625,000 shares of Common Stock issued and outstanding as of the
date of this Prospectus are "restricted securities," as that term is defined
under Rule 144 ("Rule 144"), promulgated by the Commission under the Securities
Act. None of such shares will be eligible for sale under Rule 144 prior to May
30, 1998. Notwithstanding such eligibility, the Affiliated Initial Stockholders
have agreed not to sell their respective shares of Common Stock prior to six
months following the consummation of a Business Combination and the
Non-Affiliated Initial Stockholders have agreed not to sell their respective
shares of Common Stock, which were acquired prior to the date of this
Prospectus, prior to the occurrence of a Business Combination.
An additional 200,000 shares of Common Stock, which have been registered
pursuant to the Registration Statement of which this Prospectus forms a part,
are issuable upon the exercise of the Directors' Warrants. The Directors'
Warrants, however, will not be transferable until the consummation of a Business
Combination.
No prediction can be made as to the effect, if any, that sales of such
625,000 restricted shares of Common Stock and such 200,000 registered 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 may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities. See "Certain Transactions" and "Shares Eligible for Future Sale."
18
<PAGE>
DIVIDENDS UNLIKELY
The Company has not paid any dividends on its Common Stock to date and does
not intend to pay dividends prior to the consummation of a Business Combination.
The payment of dividends in the future 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. It is the present intention of the
Board of Directors 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."
OUTSTANDING WARRANTS
In connection with this offering, as part of the Units, the Company will be
issuing Warrants to purchase 2,500,000 shares of Common Stock (2,875,000 if the
Underwriters' over-allotment option is exercised in full). Additionally, the
Company issued Directors' Warrants to purchase 200,000 shares of Common Stock
and will issue the Unit Purchase Option entitling the Underwriter to purchase up
to 375,000 shares of Common Stock. To the extent shares of Common Stock are to
be issued by the Company to effect a Business Combination, the potential for the
issuance of substantial numbers of additional shares upon exercise of these
warrants could increase the cost to the Company of the Target Business (in terms
of number of shares required to be issued). See "Description of
Securities--Warrants."
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
The Warrants may be redeemed by the Company, at a price of $.05 per Warrant,
at any time they are exercisable, subject to not less than 30 days prior written
notice to the holders thereof, provided that the last sale price of the Common
Stock had been at least $8.50 per share for the redemption of the Class A
Warrants and at least $10.50 per share for the redemption of the Class B
Warrants, respectively, for the 20 consecutive trading days ending on the third
day prior to the day on which notice is given. Notice of the redemption of the
Warrants could force the holders thereof to exercise the Warrants and pay the
exercise price at a time when it may be disadvantageous for them to do so, to
sell the Warrants, or accept the redemption price which is likely to be
substantially less than the market value of the Warrants at the time of
redemption. See "Description of Securities--Warrants."
USE OF PROCEEDS
The net proceeds to the Company, after offering expenses and underwriting
discounts of approximately $1,050,000 ($1,173,750 if the Underwriters'
over-allotment option is exercised in full), from the sale of the Units offered
hereby are estimated to be $6,450,000 ($7,451,250 if the Underwriters'
over-allotment option is exercised in full). The Company will use substantially
all of the net proceeds of this offering to acquire a Target Business, including
identifying and evaluating prospective acquisition candidates, selecting the
Target Business, and structuring, negotiating and consummating the Business
Combination. The Company will not acquire a Target Business unless it satisfies
the Minimum Valuation Standard at the time of such acquisition. To the extent
that securities of the Company are used in whole or in part 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.
The proceeds of this offering, after payment of underwriting discounts and
the Underwriters' non-accountable expense allowance, will be $6,675,000
($7,676,250 if the Underwriters' over-allotment option is exercised in full).
Ninety percent (90%) of such amount, or $6,007,500 ($6,908,625 if the
Underwriters' over-allotment option is exercised in full), will be placed in the
Trust Fund to be maintained by The Bank of New York, 51 West 52nd Street, New
York, New York 10016, as trustee, until the earlier of (i) the consummation of a
Business Combination or (ii) the liquidation of the Company. Therefore, unless
and
19
<PAGE>
until a Business Combination is consummated, the proceeds held in the Trust Fund
will not be available for use by the Company for any expenses related to this
offering or expenses which may be incurred by the Company related to the
investigation and selection of a Target Business and the negotiation of an
agreement to acquire the Target Business. The trustee of the Trust Fund is only
authorized to invest the funds in certain government, quasi-government and
investment grade debt securities and to disburse the funds as indicated above;
it has no other duties or obligations.
Approximately $50,000 as of the date of this Prospectus has been advanced by
Unity on a non-interest bearing demand basis, for payment on the Company's
behalf of certain expenses of this offering. Such advances will be repaid out of
the gross proceeds of this offering.
The net proceeds not held in the Trust Fund, approximately $442,500
($542,625 if the Underwriters' over-allotment option is exercised in full), will
be used for, or in connection with (i) the performance of "due diligence"
investigations of prospective acquisition candidates, (ii) legal, accounting and
other expenses attendant to such "due diligence" investigations and to
structuring, negotiating and consummating a Business Combination, and (iii)
legal and accounting fees to be incurred in connection with the Company's
obligation to file periodic reports, proxy statements and other informational
material with the Securities and Exchange Commission. In addition, the Company
has been obligated to pay to Unity, since June 1, 1996, a monthly fee of $7,500
for general and administrative expenses. Such general and administrative
expenses have been accrued and will be paid to Unity out of that portion of the
net proceeds not held in the Trust Fund. See "Certain Transactions."
Proceeds of this offering not immediately required for the purposes set
forth above will be invested in United States Government securities or other
high-quality, short-term interest-bearing investments, provided, however, that
the Company will attempt to invest the net proceeds in a manner which does not
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 during the 18-month period from the date of the
consummation of this offering, unless extended to 24 months as discussed
elsewhere herein, and to the extent that a significant portion of the net
proceeds is not used in evaluating various prospective Target Businesses, the
interest income derived from investment of the net proceeds during such period
will 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).
A Public Stockholder shall be entitled to receive funds from the Trust Fund
only in the event of a liquidation or if he seeks to convert his shares into
cash in connection with a Business Combination which he voted against and which
is actually consummated by the Company. In no other circumstances shall a Public
Stockholder have any right or interest of any kind or in the Trust Fund.
20
<PAGE>
DILUTION
The difference between the public offering price per share of Common Stock
(assuming no value is attributed to the 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 July 31, 1996, the net tangible book value of the Company was $(264,937),
or $(.42) per share of Common Stock. After giving effect to the sale of
1,250,000 shares of Common Stock included in the Units offered hereby and the
application of the estimated net proceeds therefrom, the pro forma net tangible
book value of the Company at July 31, 1996 would have been $6,435,063, or $3.43
per share of Common Stock, representing an immediate increase in net tangible
book value of $3.85 per share to existing stockholders and an immediate dilution
of $2.57 (approximately 43%) per share to new investors. The following table
illustrates the foregoing information with respect to dilution to new investors
on a per-share basis (assuming no value is attributed to the Warrants included
in the Units):
<TABLE>
<S> <C> <C>
Public offering price per share of Common Stock.................... $ 6.00
Net tangible book value before this offering..................... $ (.42)
Increase attributable to new investors........................... 3.85
---------
Pro forma net tangible book value after this offering.............. 3.43
---------
Dilution to new investors.......................................... $ 2.57
---------
---------
</TABLE>
The following table sets forth, with respect to Initial Stockholders and new
investors, 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>
SHARES PURCHASED(1) TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------- PRICE PER
AMOUNT PERCENTAGE AMOUNT PERCENTAGE SHARE
---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial Stockholders............................... 625,000 33.3% $ 63 --% $ .0001
New Investors...................................... 1,250,000 66.7% $ 7,500,000 100.0% $ 6.00
---------- ----- ------------ -----
Total.......................................... 1,875,000 100.0% $ 7,500,063 100.0%
---------- ----- ------------ -----
---------- ----- ------------ -----
</TABLE>
- ------------------------
(1) The above table assumes no exercise of the Underwriters' over-allotment
option. If the Underwriters' over-allotment option is exercised in full, the
new investors will have paid $8,625,000 for 1,437,500 shares of Common
Stock, representing virtually 100.0% of the total consideration for
approximately 69.7% of the total number of shares of Common Stock then
outstanding. See "Underwriting."
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at July 31,
1996 and as adjusted to give effect to the sale of the Units being offered
hereby and the application of the estimated net proceeds therefrom:
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
---------- ------------
<S> <C> <C>
Shareholders' equity:
Common Stock, subject to possible conversion, 249,875 shares at conversion value... $ -- $ 1,201,899
Preferred Stock, $.01 par value, 5,000 shares authorized; none issued.............. -- --
Common Stock, $.0001 par value, 20,000,000 shares authorized; 625,000 shares issued
and outstanding; 1,625,125 shares issued and outstanding (excluding 249,875
shares subject to possible conversion), as adjusted.............................. 63 163
Capital in excess of par value..................................................... -- 5,248,001
Deficit accumulated during development stage....................................... (15,000) (15,000)
---------- ------------
Total shareholders' equity....................................................... $ (14,937) $ 6,435,063
---------- ------------
---------- ------------
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company, a development stage entity, was formed on May 30, 1996 to serve
as a vehicle to effect a merger, exchange of capital stock, asset acquisition or
other similar business combination (a "Business Combination") with an operating
business (a "Target Business") which the Company believes has significant growth
potential. The Company intends to utilize cash (to be derived from the proceeds
of this offering), equity, debt or a combination thereof in effecting a Business
Combination. The Company's efforts in identifying a prospective Target Business
will be limited to the following industries: (i) the manufacture of analytical
and controlling equipment, chemicals and allied products, electronic equipment
and medical instrumentation; (ii) health services (including HMOs, laboratories
and nursing homes); (iii) environmental services and products; (iv) engineering
and construction; (v) wholesale and retail distribution (including discount
operations) of home furnishings, office supplies, computers and related
products, medical equipment and supplies, apparel and accessories, automotive
parts and supplies and food and beverage products; (vi) internet and other new
media products and services; and (vii) communications and entertainment. It has
neither engaged in any operations nor generated any revenues to date. The
Company's entire activity since its inception has been to prepare for its
proposed fundraising through an offering of equity securities as contemplated by
this Prospectus.
The net proceeds to the Company, after offering expenses and underwriting
discounts of approximately $1,050,000 ($1,173,750 if the Underwriters'
over-allotment option is exercised in full), from the sale of the Units offered
hereby are estimated to be $6,450,000 ($7,451,250 if the Underwriters'
over-allotment option is exercised in full). The Company will use substantially
all of the net proceeds of this offering to acquire a Target Business, including
identifying and evaluating prospective acquisition candidates, selecting the
Target Business, and structuring, negotiating and consummating the Business
Combination. The Company will not acquire a Target Business unless it satisfies
the Fair Market Value criteria at the time of such acquisition. To the extent
that securities of the Company are used in whole or in part 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.
The net proceeds not held in the Trust Fund, approximately $442,500
($542,625 if the Underwriters' over-allotment option is exercised in full), will
be used for, or in connection with (i) the performance of "due diligence"
investigations of prospective acquisition candidates, (ii) legal, accounting and
other expenses attendant to such "due diligence" investigations and to
structuring, negotiating and consummating a Business Combination, and (iii)
legal and accounting fees to be incurred in connection with the Company's
obligation to file periodic reports, proxy statements and other informational
material with the Securities and Exchange Commission. In addition, the Company
has been obligated to pay to Unity, since June 1, 1996, a monthly fee of $7,500
for general and administrative expenses. Through July 31, 1996, $15,000 of such
general and administrative expenses have been accrued and will be paid to Unity
out of that portion of the net proceeds not held in the Trust Fund. In addition,
since May 1996, approximately $50,000 has been advanced by Unity, on a
non-interest bearing basis, for payment on the Company's behalf of certain
expenses of this offering. Such amounts will also be paid to Unity out of that
portion of the net proceeds not held in the Trust Fund. See "Certain
Transactions."
The report of independent public accountants on the Company's financial
statements includes an explanatory paragraph with respect to the Company being
in its development stage, which raises substantial doubt about its ability to
continue as a going concern.
23
<PAGE>
PROPOSED BUSINESS
INTRODUCTION
The Company was formed to serve as a vehicle for the acquisition of a Target
Business which the Company believes has significant growth potential. The
Company intends to utilize cash (derived from the proceeds of this offering),
equity, debt or a combination of these in effecting a Business Combination. The
Company's efforts in identifying a prospective Target Business will be limited
to the Target Industries. While the Company may, under certain circumstances,
seek to effect Business Combinations with more than one Target Business, the
Company will, in all likelihood, have the ability, as a result of its limited
resources, 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.
"BLANK CHECK" 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 "blank check" offering. Although substantially all of the
net proceeds of this offering are intended to be generally applied toward
effecting a Business Combination, subject to the limitation concerning Target
Industries discussed under "--Introduction", such proceeds are not otherwise
being designated for any more specific purposes. Accordingly, prospective
investors will invest in the Company without an opportunity to evaluate the
specific merits or risks of any one or more Business Combinations. A Business
Combination may involve the acquisition of, or merger 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, such as time delays,
significant expense, loss of voting control and compliance with various Federal
and state securities laws.
UNSPECIFIED INDUSTRY AND TARGET BUSINESS. To date, the Company has not
selected any particular industry from the Target Industries or any Target
Business on which to concentrate its search for a Business Combination.
Accordingly, there is no basis for investors in this offering to evaluate the
possible merits or risks of the Target Business or the particular industry in
which the Company may ultimately operate. 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 sales or earnings), 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.
In addition, 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 significant risk factors.
PROBABLE LACK OF BUSINESS DIVERSIFICATION. While the Company may, under
certain circumstances, seek to effect Business Combinations with more than one
Target Business, its initial Business Combination must be with a Target Business
which satisfies the Minimum Valuation Standard at the time of such acquisition.
Consequently, it is likely that the Company 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 of entities operating in multiple industries or multiple
areas 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 substantial adverse impact upon the
particular industry in which the
24
<PAGE>
Company may operate subsequent to a Business Combination. In addition, by
consummating a Business Combination with only a single entity, 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. Prior
to the consummation of a Business Combination, the Company has no intention of
either loaning any of the proceeds of this offering to any company or purchasing
a minority equity interest in any company.
OPPORTUNITY FOR STOCKHOLDER EVALUATION OR APPROVAL OF BUSINESS
COMBINATION. 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 Business Combination until after the Company has entered
into an 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 and ultimate consummation of a Business
Combination. Such agreement to effectuate a Business Combination, however, will
be subject to stockholder approval as discussed elsewhere herein. In connection
with seeking stockholder approval of a Business Combination, the Company intends
to furnish its stockholders with proxy solicitation materials prepared in
accordance with the Exchange Act, which, among other matters, will include a
description of the operations of the Target Business and audited historical
financial statements thereof.
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 Company's
Common Stock) to stockholders disapproving the proposed Business Combination.
Under current applicable laws, only a merger, consolidation or share exchange
may give rise to a stockholder vote and to dissenters' rights. Nevertheless, the
Company will afford to investors in this offering the right to approve any
Business Combination, irrespective of whether such approval would be required
under applicable Delaware law. In the event, however, that 20% or more in
interest of Public Stockholders vote against approval of any Business
Combination, the Company will not consummate such Business Combination. All of
the Initial Stockholders, including all of the officers and directors of the
Company, have agreed to vote their respective shares of Common Stock in
accordance with the vote of the majority in interest of all Public Stockholders
with respect to any Business Combination.
LIMITED ABILITY TO EVALUATE TARGET BUSINESS' MANAGEMENT. While the
Company's ability to successfully effect a Business Combination will be
dependent upon the efforts of its officers and directors, the future role of
such persons, if any, in the Target Business cannot presently be stated with any
certainty. While it is possible that one or more of these persons will remain
associated in some capacity with the Company following a Business Combination,
it is unlikely that any of them will devote their full efforts to the affairs of
the Company subsequent thereto. Moreover, there can be no assurance that such
persons will have significant experience or knowledge relating to the operations
of the particular Target Business. Furthermore, although the Company intends to
closely scrutinize the management of a prospective Target Business in connection
with evaluating the desirability of effecting a Business Combination, 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 the Company's
officers and directors in evaluating certain types of businesses. In addition,
there can be no assurance that such future management will have the necessary
skills, qualifications or abilities to manage a public company intending to
embark on a program of business development. The Company may also seek to
recruit additional managers to supplement the incumbent management of the Target
Business. There can be no assurance that the Company will have the ability to
recruit such additional managers, or that such additional managers will have the
requisite skills, knowledge or experience necessary to enhance the incumbent
management.
25
<PAGE>
SELECTION OF A TARGET BUSINESS AND STRUCTURING OF A BUSINESS
COMBINATION. Subject to the limitation that a Target Business be within the
Target Industries, Management of the Company will have virtually unrestricted
flexibility in identifying and selecting a prospective Target Business. In
evaluating a prospective Target Business, Management will consider, among other
factors, the following:
- financial condition and results of operation;
- growth potential;
- experience and skill of management and availability of additional
personnel;
- capital requirements;
- competitive position;
- stage of development of the products, processes or services;
- degree of current or potential market acceptance of the products,
processes or services;
- proprietary features and degree of intellectual property or other
protection of the products, processes or services;
- regulatory environment of the industry; and
- costs associated with effecting the Business Combination.
The foregoing criteria are not intended to be exhaustive; any evaluation
relating to the merits of a particular Business Combination 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 objective. In connection with its
evaluation of a prospective Target Business, Management anticipates that it will
conduct an extensive due diligence review which will encompass, among other
things, meetings with incumbent management and inspection of facilities, as well
as review of financial or other information which will be made available to the
Company.
The time and costs required to select and evaluate a Target Business
(including conducting a due diligence review) and to structure and consummate
the Business Combination (including negotiating relevant agreements and
preparing requisite documents for filing pursuant to applicable securities laws
and state corporation laws) cannot presently be ascertained with any degree of
certainty. Mr. Burstein, the Company's President and principal stockholder,
intends to devote approximately 30% of his time to the affairs of the Company
and, accordingly, consummation of a Business Combination may require a greater
period of time than if such persons devoted their full time to the Company's
affairs. 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.
SOURCES OF TARGET BUSINESSES
The Company anticipates that various Target Business candidates will be
brought to its attention from various unaffiliated sources, including securities
broker-dealers, investment bankers, venture capitalists, bankers, other members
of the financial community, and affiliated sources, including, possibly, the
Company's officers, directors and their affiliates, who may present solicited or
unsolicited proposals. While the Company does not presently anticipate engaging
the services of professional firms that specialize in business acquisitions on
any formal basis, the Company may engage such firms in the future, in which
event the Company may pay a finder's fee or other compensation. In no event,
however, will the Company pay a finder's fee or commission to officers or
directors of the Company or any entity with which they are affiliated for such
service. See "Management--Conflicts of Interest."
26
<PAGE>
PRIOR INVOLVEMENT OF PRINCIPALS IN "BLANK CHECK" COMPANIES
The officers and directors of the Company (other than Mr. Norman Leben) have
held similar positions in seven other 'blank check' companies, each of which as
of the date of this Prospectus has consummated both an IPO and a Business
Combination. Certain information with respect to each such "blank check"
company, IPO and Business Combination is set forth below:
<TABLE>
<CAPTION>
APPROXIMATE
DATE OF IPO AND DATE OF PERCENTAGE OF
NAME OF "BLANK CHECK" APPROXIMATE NET BUSINESS TARGET BUSINESS
COMPANY PROCEEDS COMBINATION NAME AND NATURE OF TARGET BUSINESS ACQUIRED
- ----------------------- ---------------- -------------- ----------------------------------------------- -----------------
<S> <C> <C> <C> <C>
RT Associates Inc. April 1987-- March 1988 Bloc Development Corp.--Software development 48%
$2,250,000
RT Acquisition September 1988-- April 1990 Polyvision Corporation--Manufacture and sale of 20%
Associates Inc. $1,525,000 vision projection systems, architectural
building panels, modular partitions and
office products
Trinity Acquisition August 1990-- August 1991 T-HQ Inc.--Design and marketing of Nintendo and 50%
Corp. $2,250,000 SEGA games
Trinity Capital September 1991-- August 1993 SubMicron Systems Corporation--Semi-conductor 37%
Enterprise Corp. $9,000,000 capital equipment manufacturer
Trinity Capital May 1992-- November 1993 Alliance Entertainment Corp.--Distributor of 20%
Opportunity Corp. $21,750,000 pre- recorded music, accessories and
entertainment related products
Trinity Six Inc. August 1993-- May 1995 USCI Inc.--Centralized automated computer-based 48%
$9,000,000 cellular telephone activation systems
Trinity Americas Inc. February 1994-- March 1996 Brazil Fast Food Corp.--Owner and operator of 43%
$9,000,000 hamburger fast food restaurants in Brazil
<CAPTION>
NAME OF "BLANK CHECK" TRADING MARKET
COMPANY (TICKER SYMBOL)
- ----------------------- ----------------
<S> <C>
RT Associates Inc. NYSE (GML)(1)
RT Acquisition AMEX (PLI)
Associates Inc.
Trinity Acquisition Nasdaq SmallCap
Corp. Market (TOYH)
Trinity Capital Nasdaq National
Enterprise Corp. Market (SUBM)
Trinity Capital NYSE (CDS)
Opportunity Corp.
Trinity Six Inc. Nasdaq National
Market (USCM)
Trinity Americas Inc. Nasdaq SmallCap
Market (BOBS)
</TABLE>
- ------------------------
(1) Bloc Development Corp. was acquired by Global Direct Mail Corp., now known
as Tiger Direct, in 1995. On November 30, 1995, Tiger Direct ceased to be a
reporting company under the Exchange Act.
COMPETITION
In identifying, evaluating and selecting a Target Business, the Company
expects to encounter intense competition from other entities having a business
objective 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 technical, human and/or other resources than the
Company and the Company's financial resources will be relatively limited when
contrasted with those of many of these competitors. This inherent competitive
limitation may give others an advantage in pursuing the acquisition of certain
Target Businesses. Further, the Company's obligation to seek stockholder
approval of a Business Combination may delay the consummation of a transaction;
and the Company's obligation in certain circumstances to convert into cash
shares of Common Stock held by Public Stockholders may reduce the resources
available to the Company for a Business Combination or for other corporate
purposes. Either of these obligations may place the Company at a competitive
disadvantage in successfully negotiating a Business Combination. Management
believes, however, that the Company's status as a public entity and its
potential access to the United States public equity markets may give the Company
a competitive advantage over privately-held entities having a similar business
objective to that of the Company in acquiring a Target Business with significant
growth potential on favorable terms.
27
<PAGE>
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 increasingly greater financial,
marketing, technical 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.
FACILITIES
The Company presently occupies approximately 500 square feet of office space
in premises occupied by Unity. The cost for such space is included in a
$7,500-per-month fee charged by Unity for general and administrative services.
The Company believes, based upon rents and fees for similar services in the New
York City metropolitan area, that the fee charged by Unity is at least as
favorable as it could have obtained from an unaffiliated person. See "Certain
Transactions."
EMPLOYEES
As of the date of this Prospectus, the Company, in addition to its two
officers, has one part-time employee who is employed in an administrative
capacity.
PERIODIC REPORTING AND AUDITED FINANCIAL STATEMENTS
The Company has registered its securities under the Exchange Act and
therefore has certain reporting obligations, including the requirement that it
file annual and quarterly reports with the Commission. In accordance with the
requirements of the Exchange Act, the Company intends to furnish to its
stockholders Annual Reports containing financial statements audited and reported
on by its independent accountants.
The Company will not acquire a Target Business if audited financial
statements cannot be obtained for such Target Business. Additionally, management
will provide the Public Stockholders with audited financial statements (prepared
in accordance with generally accepted accounting principles) of the prospective
Target Business as part of the proxy solicitation materials sent to the Public
Stockholders to assist them in assessing the Target Business. Management
believes that the requirement of having available audited financial statements
for the Target Business will not materially limit the pool of potential Target
Businesses available for acquisition.
28
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The current directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- ------------------------------------------
<S> <C> <C>
Lawrence Burstein 53 President, Treasurer and Director
John Cattier 64 Director
Barry Ridings 43 Director
Norman Leben 36 Secretary and Director
</TABLE>
LAWRENCE BURSTEIN has been President, Treasurer and a director of the
Company since its inception. For approximately ten years prior thereto, Mr.
Burnstein was the President, a director and principal stockholder of Trinity
Capital Corporation, a private investment banking concern ("Trinity"). Trinity
ceased operations upon the formation of Unity. Since March 1996, Mr. Burstein
has been Chairman of the Board and a principal shareholder of Unity. Mr.
Burstein is a director of five public companies, being, respectively, TOYH,
USCM, BOBS, CAS Medical Systems, Inc., engaged in the manufacture and marketing
of blood pressure monitors and other medical products principally for the
neonatal market, and The MNI Group Inc., engaged in the marketing of specially
formulated medical foods. Mr. Burstein received an L.L.B. from Columbia Law
School.
JOHN CATTIER has been a director of the Company since its inception. Since
May 1996, Mr. Cattier has been a director and a shareholder of Unity. Mr.
Cattier has been an independent consultant since January 1985. From 1957 to
December 1984, Mr. Cattier was associated with White Weld & Co., investment
bankers, serving as a general partner, and with Credit Suisse White Weld (which
subsequently became Credit Suisse First Boston), investment bankers, in various
capacities. Mr. Cattier, who was both a director and stockholder of Trinity for
at least five years prior to its cessation of operations, is a director of
Pacific Assets Trust PLC, a United Kingdom investment trust, and Chairman of the
Board of Directors of Heptagon Investments Limited, an investment company
("Heptagon"). Mr. Cattier received a B.A. from Yale University.
BARRY RIDINGS has been a director of the Company since its inception. Since
March 1990, Mr. Ridings has been a Managing Director of Alex. Brown & Sons,
investment bankers. From June 1986 to March 1990, Mr. Ridings was a Managing
Director of Drexel Burnham Lambert, investment bankers. Mr. Ridings was both a
director and stockholder of Trinity for at least five years prior to Trinity's
cessation of operations. Mr. Ridings is a director of SUBM, Transcor Waste
Services Corp., a waste management company, Leaseway Transportation Corp., a
trucking company, Rax Restaurants Inc., a restaurant chain and Norex America
Inc., a shipping company. Mr. Ridings received an M.B.A. from Cornell
University.
NORMAN LEBEN has been Secretary and a director of the Company since its
inception. Mr. Leben is, and since 1988 has been, a partner of DML, certified
public accountants. Prior thereto and from 1985, Mr. Leben was engaged in the
acquisition, management, syndication and operation of real estate and other
emerging marketing businesses. Prior to 1985, Mr. Leben was employed by
Laventhol & Horwath. Mr. Leben received a B.B.A. from George Washington
University.
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 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. Mr.
Burstein intends to devote approximately 30% of his time to the affairs of the
Company. The Company has not entered into employment agreements with any of its
officers.
29
<PAGE>
EXECUTIVE COMPENSATION
No officer has received any cash compensation from the Company since
inception for services rendered. Other than the $7,500 monthly administrative
fee, no compensation of any kind (including finders and consulting fees) will be
paid to any Initial Stockholder, or any affiliate thereof for services rendered
to the Company prior to or in connection with the Business Combination;
provided, however, that such persons shall be entitled to receive, upon
consummation of the Business Combination, commissions for monies raised by them
for the Company in connection with the Business Combination, at rates that are
no less favorable to the Company than those which the Company would pay to
unaffiliated third parties. In addition, the Affiliated Initial Stockholders
will receive reimbursement for any out-of-pocket expenses incurred in connection
with activities on behalf of the Company. There is no limit on the amount of
such reimbursable expenses and there will be no review of the reasonableness of
such expenses by anyone other than the Board of Directors which includes two
members who are officers and who may seek reimbursement.
STOCK OPTION PLAN
The Company's 1996 Stock Option Plan ("1996 Plan") was adopted by both the
Board of Directors and a majority in interest of the stockholders of the Company
on May 30, 1996. The 1996 Plan provides for the granting of options which are
intended to qualify either as incentive stock options ("Incentive Stock
Options") within the meaning of Section 422 of the Internal Revenue Code of 1986
or as options which are not intended to meet the requirements of such section
("Nonstatutory Stock Options"). The total number of shares of Common Stock
reserved for issuance under the 1996 Plan is 187,500. Options to purchase shares
may be granted under the 1996 Plan to persons who, in the case of Incentive
Stock Options, are employees (including officers) of the Company, or, in the
case of Nonstatutory Stock Options, are employees (including officers) or
non-employee directors of the Company.
The 1996 Plan provides for its administration by the Board of Directors or a
committee chosen by the Board of Directors, which has discretionary authority,
subject to certain restrictions, to determine the number of shares issued
pursuant to Incentive Stock Options and Nonstatutory Stock Options and the
individuals to whom, the times at which and the exercise price for which options
will be granted.
The exercise price of all Incentive Stock Options granted under the 1996
Plan must be at least equal to the fair market value of such shares on the date
of the grant or, in the case of Incentive Stock Options granted to the holder of
more than 10% of the Company's Common Stock, at least 110% of the fair market
value of such shares on the date of the grant. The maximum exercise period for
which Incentive Stock Options may be granted is ten years from the date of grant
(five years in the case of an individual owning more than 10% of the Company's
Common Stock). The aggregate fair market value (determined at the date of the
option grant) of shares with respect to which Incentive Stock Options are
exercisable for the first time by the holder of the option during any calendar
year shall not exceed $100,000.
No options may be granted under the 1996 Plan prior to the consummation of a
Business Combination.
CONFLICTS OF INTEREST
None of the Company's officers and directors are required to commit their
full time to the affairs of the Company and, accordingly, such persons may have
conflicts of interest in allocating management time among various business
activities. Certain of these persons may in the future become affiliated with
entities, including other "blank check" companies, engaged in business
activities similar to those intended to be conducted by the Company. Messrs.
Burstein, Leben and Cattier are each directors and, together with Mr. Ridings,
shareholders of Unity, which is engaged principally in making investments in
privately held companies. Mr. Burstein and each of the other directors of the
Company also serve as directors of various private companies and are engaged in
various other business activities. In the course of their other
30
<PAGE>
business activities, certain of the Company's officers and directors 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 order to reduce
potential conflicts of interest, the Company's officers and directors have
agreed that they will offer all suitable prospective Target Businesses to the
Company before any other company until the earlier of a Business Combination or
the liquidation of the Company. 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: such corporation could financially
undertake the opportunity; the opportunity is within the corporation's line of
business; and 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 officers and directors 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. See "Proposed Business--'Blank Check'
Offering--Selection of a Target Business and Structuring of a Business
Combination."
In order to minimize potential conflicts of interest which may arise from
multiple corporate affiliations, each of Messrs. Burstein, Leben and Cattier
have agreed in principle to present to the Company for its consideration, prior
to presentation to any other entity, any business opportunity which, under
Delaware law, may reasonably be required to be presented to the Company.
To further minimize potential conflicts of interest, the Company is
restricted from pursuing any transactions with entities affiliated with an
officer or director of the Company without the prior approval of a majority of
its disinterested directors.
In connection with any stockholder vote relating to approval of a Business
Combination, all of the Initial Stockholders, including all of the officers and
directors of the Company, have agreed to vote their respective shares of Common
Stock in accordance with the vote of the majority in interest of the Public
Stockholders. In addition, the Initial Stockholders have agreed to waive their
respective rights to participate in any liquidation distribution but only with
respect to those shares of Common Stock acquired by such persons prior to this
offering.
31
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of July 31, 1996 and as
adjusted to reflect the sale of the shares of Common Stock included in the Units
offered 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 of the Company and (iii) all officers and
directors of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE OF
OUTSTANDING SHARES
NATURE OF ------------------------
BENEFICIAL BEFORE AFTER
OWNERSHIP(1)(2) OFFERING OFFERING
---------------- ----------- -----------
<S> <C> <C> <C>
Lawrence Burstein .......................................................... 175,000(3) 28.0% 9.3%
245 Fifth Avenue
New York, NY 10016
John Cattier ............................................................... 140,500(3)(4) 22.5% 7.5%
Achlain Invermoriston
Invernesshire
IV3 6YN, United Kingdom
Barry Ridings .............................................................. 6,000 * *
16 Erwin Park
Montclair, NJ 07902
Norman Leben ............................................................... 40,000(3) 6.4% 2.1%
245 Fifth Avenue
New York, NY 10016
All officers and directors as a group (4 persons)........................... 311,500(3)(4) 49.8% 16.6%
</TABLE>
- ------------------------
* Less than 1% of the outstanding Common Stock.
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them.
(2) Does not include shares issuable upon exercise of the Directors' Warrants
which are beneficially owned by each of the persons named in the above table
but which are not exercisable until the consummation of a Business
Combination.
(3) Includes 25,000 shares of Common Stock owned by Unity, over which shares
Messrs. Burstein, Leben and Cattier share voting and investment power.
(4) Includes (i) 75,000 shares held by Heptagon and (ii) 1,500 shares held by an
affiliate of Heptagon. Mr. Cattier is Chairman of Heptagon's board of
directors and exercises voting and dispositive control over approximately
7.6% of Heptagon's shares of capital stock. Mr. Cattier disclaims any voting
or dispositive power over these shares. Also includes 39,000 shares owned by
Cricket Services, Ltd. ("Cricket"), over which shares Mr. Cattier exercises
voting and dispositive control. Both Heptagon and Cricket are private
investment companies.
The shares of the Company's Common Stock owned as of the date hereof by all
of the officers and directors of the Company and by all persons owning more than
5% of the currently outstanding shares of Common Stock will be placed in escrow
with American Stock Transfer & Trust Company, as escrow agent, until the earlier
of (i) six months following the consummation of a Business Combination or (ii)
the liquidation of the Company. During such escrow period, such persons will not
be able to sell their respective shares of Common Stock, but will retain all
other rights as stockholders of the Company,
32
<PAGE>
including, without limitation, the right to vote such shares of Common Stock. In
addition, the Directors' Warrants will also be deposited with the Escrow Agent,
to be released only upon the consummation of a Business Combination.
Messrs. Burstein, Leben and Cattier, as well as Unity, may be deemed to be
"parents" and "promoters" of the Company, as such terms are defined under the
Federal securities laws.
CERTAIN TRANSACTIONS
In June 1996, the Company issued an aggregate of 625,000 shares of Common
Stock at a purchase price of $.0001 per share, as follows: 25,000 shares to
Unity; 150,000 shares to Mr. Burstein; 15,000 shares to Mr. Leben; an aggregate
of 76,500 shares to Heptagon and its affiliate; 39,000 shares to Cricket; 6,000
shares to Barry Ridings; and 313,500 shares to 24 other persons.
In June 1996, the Company issued 58,334, 58,333, 58,333 and 25,000 Class A
and Class B Warrants to each of, respectively, Messrs. Burstein, Leben, Cattier
and Ridings (collectively, the "Directors' Warrants"), in consideration for
future services to be rendered by such persons on behalf of the Company. The
Directors' Warrants and the Common Stock underlying such warrants have been
registered pursuant to the Registration Statement of which this Prospectus forms
a part. The Directors' Warrants are identical to the Warrants offered hereby but
are not redeemable by the Company and may not be transferred until the
consummation of a Business Combination.
The Company has been obligated to pay Unity, since June 1, 1996, a monthly
fee of $7,500 for general and administrative services pursuant to an agreement
which may be canceled by either party upon 30 days' prior written notice. Such
fee includes the use of approximately 500 square feet of office space in
premises occupied by Unity. An accounting firm which is an affiliate of Mr.
Leben affords Unity the use of such space at a monthly rental of $2,000. Messrs.
Burstein, Leben and Cattier are each directors and shareholders of Unity.
Unity has made non-interest demand loans aggregating approximately $50,000
to the Company as of the date of this Prospectus to cover expenses related to
this offering. The Company intends to repay these loans, as well as those
accrued general and administrative expenses owed to Unity discussed above, out
of the proceeds of this offering not held in the Trust Fund.
DML has performed bookkeeping, tax and accounting services for certain of
the "blank check" companies of which Messrs. Burstein, Cattier and Ridings, have
been directors and shareholders from their dates of inceptions through the
consummation of their respective Business Combinations and is expected to
perform similar services for the Company at an aggregate cost of approximately
$12,000 per annum. DML may also be paid to engage in financial "due diligence"
activities for the Company in connection with its evaluation of prospective
Target Companies for a Business Combination.
Other than the $7,500 monthly administrative fee, no compensation of any
kind (including finders and consulting fees) will be paid to any Initial
Stockholder, or any affiliate thereof for services rendered to the Company prior
to or in connection with the Business Combination; provided, however, that such
persons shall be entitled to receive, upon consummation of the Business
Combination, commissions for monies raised by them for the Company in connection
with the Business Combination, at rates that are no less favorable to the
Company than those which the Company would pay to unaffiliated third parties.
Each of the Company's officers and directors has agreed with the
Underwriters that within the first ten days after separate trading of the
Warrants has commenced, such officers and directors and/or their affiliates will
purchase $250,000 of each of the Class A Warrants and the Class B Warrants.
All ongoing transactions between the Company and any of the Affiliated
Initial Stockholders or their respective affiliates, as well as any future
transactions, will be on terms believed by the Company to be no less favorable
than are available from unaffiliated third parties and will be subject to prior
approval in each instance by a majority of the members of the Company's Board of
Directors who do not have an interest in the transaction.
33
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 20,000,000 shares of Common Stock, par
value $.0001 per share, and 5,000 shares of Preferred Stock, par value $.01 per
share. As of the date of this Prospectus, 625,000 shares of Common Stock are
outstanding, held of record by 31 persons. No shares of Preferred Stock are
currently outstanding.
UNITS
Each Unit consists of one share of Common Stock, one Class A Warrant and one
Class B Warrant, each Warrant entitling the holder to purchase one share of
Common Stock. The securities comprising the Units will not be separately
transferable until 90 days after the date of this Prospectus unless GKN informs
the Company of its decision to allow earlier separate trading, but in no event
will GKN 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.
COMMON STOCK
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 voted 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 funds
legally available therefore. In the event of liquidation, dissolution or winding
up of the Company, the holders of Common Stock (except for the Affiliated
Initial Stockholders who have agreed to waive their rights and the
Non-Affiliated Initial Stockholders who have agreed to waive certain of their
rights to share in any distribution relating to a liquidation of the Company due
to the failure of the Company to effect a Business Combination within 18 or 24
months, as the case may be, from the date of consummation of this offering) are
entitled to share ratably in all assets remaining available for distribution to
them after payment of liabilities and after provision has been made for each
class of stock, if any, having preference over the Common Stock. Holders of
shares of Common Stock, as such, have no conversion, preemptive or other
subscription rights, and, except as noted below, 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 included in the Units, when
issued and paid for as set forth in this Prospectus, will be, fully paid and
nonassessable.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of 5,000
shares of a "blank check" preferred stock (the "Preferred Stock") with such
designation, rights and preferences as may be determined from time to time by
the Board of Directors. 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 the Company's Common Stock,
although the Underwriting Agreement prohibits the Company, prior to a Business
Combination, from issuing Preferred Stock which participates in any manner in
the proceeds of the Trust Fund, or which votes as a class with the Common Stock
on a Business Combination. The Company may issue some or all of such shares in
connection with a Business Combination. In addition, the Preferred Stock could
be utilized, under certain circumstances, as a method of discouraging, delaying
or
34
<PAGE>
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.
WARRANTS
Each Class A Warrant entitles the registered holder to purchase one share of
Common Stock of the Company at a price of $5.50 per share, subject to adjustment
in certain circumstances, at any time commencing on the later of (i) the
consummation of a Business Combination or (ii) one year from the date of this
Prospectus and ending at 5:00 p.m., New York City time, six years from the date
of this Prospectus, at which time the Class A Warrants will expire. Each Class B
Warrant entitles the registered holder to purchase one share of the Company's
Common Stock at a price of $7.50 per share, subject to adjustment in certain
circumstances, at any time commencing on the later of (i) the consummation of a
Business Combination or (ii) one year from the date of this Prospectus and
ending at 5:00 p.m., New York City time, six years from the date of this
Prospectus, at which time the Class B Warrants will expire.
The Company may call the Class A Warrants and the Class B Warrants for
redemption, each as a class, in whole and not in part, at the option of the
Company and with GKN's consent, at a price of $.05 per Warrant at any time after
the Warrants become exercisable upon not less than 30 days' prior written
notice, provided that the reported closing bid price of the Common Stock equals
or exceeds $8.50 per share, with respect to the Class A Warrants, and $10.50 per
share, with respect to the Class B Warrants, for the 20 consecutive trading days
ending on the third day prior to the notice of redemption to warrantholders. The
warrantholders shall have exercise rights until the close of business on the
date fixed for redemption.
The Warrants will be issued in registered form under a Warrant Agreement
between the Company and American Stock Transfer & Trust Company, as Warrant
Agent. Reference is made to said Warrant Agreement (which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part) for a
complete description of the terms and conditions applicable to the Warrants (the
description herein contained being qualified in its entirety by reference to
such Warrant Agreement).
The exercise price and number of shares of Common Stock issuable on exercise
of the Warrants are subject to adjustment in 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. 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 expiration date 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 payments of the exercise price (by
certified check, payable to the Company) to the Warrant Agent for the number of
Warrants being exercised. The warrantholders do not have the rights or
privileges of holders of Common Stock.
No Warrants will be exercisable unless at the time of exercise the Company
has filed with the Commission a current prospectus covering the shares of Common
Stock issuable upon exercise of such Warrants and such shares have been
registered or qualified or deemed to be exempt under the securities laws of the
state of residence of the holder of such Warrants. The Company will use its best
efforts to have all shares so registered or qualified on or before the exercise
date and has agreed to maintain a current prospectus relating thereto until the
expiration of the Warrants, subject to the terms of the Warrant Agreement,
however, there is no assurance that it will be able to do so. See "Risk
Factors--Current Prospectus and State Blue Sky Registration Required in
Connection with Exercise of Warrants."
35
<PAGE>
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 has not paid any dividends on its Common Stock to date and does
not intend to pay dividends prior to the consummation of a Business Combination.
The payment of dividends in the future 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. It is the present intention of the
Board of Directors 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
The transfer agent for the Company's securities is American Stock Transfer &
Trust Company, 40 Wall Street, New York, New York 10005.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the Company will have 1,875,000
shares of Common Stock outstanding (2,062,500 shares if the Underwriters'
over-allotment option is exercised in full). Of these shares, the 1,250,000
shares sold in this offering (1,437,500 shares in the event of the exercise of
the over-allotment option) will be freely tradeable without restriction or
further registration under the Securities Act, except for any shares purchased
by an "affiliate" of the Company (in general, a person who has a control
relationship with the Company) which will be subject to limitations of Rule 144.
All of the remaining 625,000 shares are deemed to be "restricted securities", as
that term is defined under Rule 144, in that such shares were issued in private
transactions not involving a public offering. None of such shares will be
eligible for sale under Rule 144 prior to May 30, 1998. Notwithstanding this,
the Affiliated Initial Stockholders have agreed not to sell their respective
shares of Common Stock prior to six months following the consummation of a
Business Combination and the Non-Affiliated Initial Stockholders have agreed not
to sell their respective shares of Common Stock, which were acquired prior to
the date of this Prospectus, prior to the occurrence of a 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 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 The Nasdaq Stock Market, 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 shares of Common
Stock for at least three years is entitled to sell such shares under Rule 144
without regard to any of the limitations described above.
An additional 200,000 shares of Common Stock, which have been registered
pursuant to the Registration Statement of which this Prospectus forms a part,
are issuable upon the exercise of the Directors' Warrants issued to Messrs.
Burstein, Leben, Cattier and Ridings. The Directors' Warrants are identical to
the Warrants offered hereby but are not redeemable by the Company and may not be
exercised until the consummation of a Business Combination.
36
<PAGE>
Prior to this offering, there has been no market for the Common Stock 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 may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities.
STATE BLUE SKY INFORMATION
The Units will only be offered and sold by the Company in the States of
Delaware, District of Columbia, Florida, Hawaii, Illinois, Maryland, New York
and Rhode Island (the "Primary Distribution States"). Additionally, the Company
believes that the Units, upon completion of this offering, and the Common Stock
and Warrants comprising the Units, once they become separately transferable,
will be eligible for sale on a secondary market basis in each of the Primary
Distribution States and in the States of Iowa and Pennsylvania. Purchasers of
such securities either in this offering or in any subsequent trading market
which may develop must be residents of such states. 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.
UNDERWRITING
GKN Securities Corp. ("GKN") and Gaines, Berland Inc. ("GBI," together with
GKN, the "Underwriters") have agreed, subject to the terms and conditions of the
Underwriting Agreement, to purchase from the Company a total of 1,250,000 Units.
It is anticipated that GKN and GBI will each underwrite 625,000 Units. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to approval of certain legal matters by counsel and various other
conditions precedent, and that the Underwriters are obligated to purchase all of
the Units offered by this Prospectus (other than the Units covered by the
over-allotment option described below), if any are purchased.
The Company has been advised by the Underwriters that they propose to offer
the Units to the public at the initial offering price set forth on the cover
page of this Prospectus and to certain dealers at that price less a concession
not in excess of $ per Unit. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per Unit to certain other
dealers. After the initial public offering, the offering price and other selling
terms may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable during
the 45-day period after the date of this Prospectus, to purchase from the
Company at the offering price, less underwriting discounts and the
non-accountable expense allowance, up to an aggregate of 187,500 additional
Units for the sole purpose of covering over-allotments, if any.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Underwriters an expense allowance on a non-accountable
basis equal to 3% of the gross proceeds derived from the sale of the Units
underwritten ($225,000 if the Underwriters' over-allotment option is not
exercised and $258,750 if the Underwriters' over-allotment option is exercised
in full), $25,000 of which has been paid to date.
The Company has granted GKN for a period of three years from the date hereof
the right to have GKN's designee present at all meetings of the Company's Board
of Directors. Such designee will be entitled to the same notices and
communications sent by the Company to its directors and to attend directors'
meetings, but will not be entitled to vote thereat. GKN has not named such
designee as of the date of this Prospectus.
The Company has engaged the Underwriters, on a non-exclusive basis, as its
agents for the solicitation of the exercise of the Warrants. To the extent not
inconsistent with the guidelines of the NASD and the rules and regulations of
the Commission, the Company has agreed to pay the Underwriters for bona fide
37
<PAGE>
services rendered a commission equal to 5% of the exercise price for each
Warrant exercised more than one year after the date of this Prospectus if the
exercise was solicited by the Underwriters. In addition to soliciting, either
orally or in writing, the exercise of the Warrants, such services may also
include disseminating information, either orally or in writing, to
warrantholders about the Company or the market for the Company's securities, and
assisting in the processing of the exercise of Warrants. No compensation will be
paid to the Underwriters in connection with the exercise of the Warrants if the
market price of the underlying shares of Common Stock is lower than the exercise
price, the holder of the Warrants has not confirmed in writing that the
Underwriters solicited such exercise, the Warrants are held in a discretionary
account, the Warrants are exercised in an unsolicited transaction or the
arrangement to pay the commission is not disclosed in the prospectus provided to
warrantholders at the time of exercise. In addition, unless granted an exemption
by the Commission from Rule 10b-6 under the Exchange Act, while soliciting
exercise of the Warrants, the Underwriters will be prohibited from engaging in
any market making activities or solicited brokerage activities with regard to
the Company's securities unless the Underwriters have waived their right to
receive a fee for the exercise of the Warrants.
In connection with this offering, the Company has agreed to sell to the
Underwriters, for nominal consideration, an option ("Unit Purchase Option") to
purchase up to an aggregate of 125,000 Units. The Units issuable upon exercise
of the Unit Purchase Option are identical to those offered hereby except that
the Warrants contained therein expire five years from the date hereof. The Unit
Purchase Option is exercisable initially at $6.60 per Unit for a period of four
years commencing one year from the date hereof. The Unit Purchase Option may not
be transferred, sold, assigned or hypothecated during the one-year period
following the date of this Prospectus, except to selected dealers and officers
and partners of the Underwriters or the selected dealers. The Unit Purchase
Option grants to the holders thereof certain demand and "piggy back" rights for
periods of five and seven years, respectively, from the date of this Prospectus
with respect to the registration under the Securities Act of the securities
directly and indirectly issuable upon exercise of the Unit Purchase Option.
Prior to this offering there has been no public market for any of the
Company's securities. Accordingly, the offering price of the Units offered
hereby and the terms of the Warrants were determined by negotiation between the
Company and the Underwriters and do not necessarily bear any relation to
established valuation criteria. Factors considered in determining such prices
and terms, in addition to prevailing market conditions, included the history of
and the prospects for the industry in which the Company competes, an assessment
of the Company's Management, the prospects of the Company, its capital structure
and such other factors as were deemed relevant.
Each of the Company's officers and directors has agreed with the
Underwriters that within the first ten days after separate trading of the
Warrants has commenced, such officers and directors and/or their affiliates,
collectively, will purchase $250,000 of each of the Class A Warrants and the
Class B Warrants at market prices not to exceed $.875 per Warrant. Such
purchases will be made to demonstrate the confidence held by the Company's
officers and directors of the ultimate ability of the Company to effect a
Business Combination. In the absence of a Business Combination and upon the
subsequent liquidation of the Company, such Warrants would be rendered
valueless.
Although it is not obligated to do so, the Underwriters may introduce the
Company to potential Target Businesses or assist the Company in raising
additional capital, as needs may arise in the future. The Company is not under
any contractual obligation to engage the Underwriters to provide any services
for the Company after consummation of this offering, but if it does, it may pay
the Underwriters a finder's fee or other compensation.
38
<PAGE>
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Parker Duryee Rosoff & Haft A Professional Corporation, New York, New
York. Graubard Mollen & Miller, New York, New York, has acted as counsel for the
Underwriter in connection with this offering. A member of Parker Duryee Rosoff &
Haft beneficially owns 6,000 shares of the Company's Common Stock.
EXPERTS
The financial statements included in this Prospectus have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report. Reference is made to said report which includes an explanatory paragraph
with regard to the Company being in its development stage, which raises
substantial doubt about its ability to continue as a going concern.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C., a
Registration Statement ("Registration Statement") under the Securities Act with
respect to the Units, the Common Stock and the Warrants offered by this
Prospectus. 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 filed therewith, copies of which may be
obtained at prescribed rates from the Commission at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street N.W.,
Washington, D.C. 20549, and at the following regional offices: 7 World Trade
Center, New York, New York 10048, and Suite 1400, Northwestern Atrium Center,
500 West Madison Street, Chicago, Illinois 60611. In addition, all reports filed
by the Company via the Commission's Electronic Data Gathering and Retrieval
System (EDGAR) can be obtained from the Commission's Internet website located at
www.sec.gov. Descriptions contained in this Prospectus as to the contents of any
contract or other document filed as an exhibit to the Registration Statement are
not necessarily complete and each such description is qualified by reference to
such contract or document.
39
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-------------
<S> <C>
Report of Independent Public Accountants........................................................... F-2
Financial Statements
Balance Sheet--July 31, 1996..................................................................... F-3
Statement of Operations for the period May 30, 1996 (Date of Inception) Through July 31, 1996.... F-4
Statement of Changes in Shareholders' Equity for the period May 30, 1996 (Date of Inception)
Through July 31, 1996.......................................................................... F-5
Statement of Cash Flows for the period May 30, 1996 (Date of Inception) Through July 31, 1996.... F-6
Notes to Financial Statements...................................................................... F-7 to F-12
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Unity First Acquisition Corp.:
We have audited the accompanying balance sheet of Unity First Acquisition
Corp. (a Delaware corporation in the development stage) as of July 31, 1996, and
the related statements of operations, changes in shareholders' equity (deficit)
and cash flows for the period from inception (May 30, 1996) to July 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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 Unity First Acquisition
Corp. as of July 31, 1996, and the results of its operations and its cash flows
for the period from inception (May 30, 1996) to July 31, 1996, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying financial
statements, the Company is a development stage enterprise with no significant
operating results to date. The factors discussed in Note 1 to the financial
statements raise a substantial doubt about the ability of the Company to
continue as a going concern. Management's plans in regards to those matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
New York, New York
August 16, 1996
F-2
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
BALANCE SHEET
JULY 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash............................................................................ $ 563
---------
DEFERRED REGISTRATION COSTS....................................................... 250,000
---------
TOTAL ASSETS.................................................................. $ 250,563
---------
---------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accrued registration costs...................................................... $ 225,000
Advances from affiliate......................................................... 40,500
---------
TOTAL CURRENT LIABILITIES..................................................... 265,500
---------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value, 5,000 shares authorized, no shares issued...... --
Common stock, $.0001 par value, 20,000,000 shares authorized, 625,000 shares
issued and outstanding........................................................ 63
Additional paid-in-capital...................................................... --
Deficit accumulated during the development stage................................ (15,000)
---------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT).......................................... (14,937)
---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT).......................... $ 250,563
---------
---------
</TABLE>
See Accompanying Notes to Financial Statements
F-3
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 30, 1996
(DATE OF INCEPTION) THROUGH JULY 31, 1996
<TABLE>
<S> <C>
REVENUES.......................................................................... $ --
---------
EXPENSES:
General and administrative...................................................... 15,000
---------
TOTAL EXPENSES................................................................ 15,000
---------
NET LOSS.......................................................................... $ (15,000)
---------
---------
NET LOSS PER COMMON SHARE......................................................... $ (.02)
---------
---------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING.............................. 625,000
---------
---------
</TABLE>
See Accompanying Notes to Financial Statements
F-4
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD MAY 30, 1996
(DATE OF INCEPTION) THROUGH JULY 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL DEFICIT ACCUMULATED
------------------------ PAID-IN DURING THE
SHARES PAR VALUE CAPITAL DEVELOPMENT STAGE TOTAL
--------- ------------- ------------- ------------------- ----------
<S> <C> <C> <C> <C> <C>
Issuance of stock to original founders for
cash, at par value........................... 625,000 $ 63 $ -- $ -- $ 63
Net loss for the period May 30, 1996 (date of
inception) through July 31, 1996............. -- -- -- (15,000) (15,000)
--------- --- ----- -------- ----------
Balance, July 31, 1996......................... 625,000 $ 63 $ -- $ (15,000) $ (14,937)
--------- --- ----- -------- ----------
--------- --- ----- -------- ----------
</TABLE>
See Accompanying Notes to Financial Statements
F-5
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD MAY 30, 1996
(DATE OF INCEPTION) THROUGH JULY 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................................ $ (15,000)
NET CASH USED IN OPERATING ACTIVITIES......................................... (15,000)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock.......................................... 63
Advance from affiliate.......................................................... 40,500
Deferred registration costs..................................................... (25,000)
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES..................................... 15,563
---------
NET INCREASE IN CASH.............................................................. 563
CASH, beginning of period......................................................... --
---------
CASH, end of period............................................................... $ 563
---------
---------
</TABLE>
See Accompanying Notes to Financial Statements
F-6
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND OPERATIONS
Unity First Acquisition Corp. (the "Company") was incorporated in the State
of Delaware on May 30, 1996, for the purpose of raising capital which is to be
used to effect a business combination (the "Business Combination"). The Company
is currently in the development stage. All activity of the Company to date
relates to its formation and proposed fund raising. Management has elected a
July 31 fiscal year-end for the Company.
The Company's ability to commence operations is contingent upon obtaining
financing through a public offering (the "Proposed Offering") of the Company's
common stock (the "Common Stock"). Note 2 discusses the details of the Proposed
Offering.
The Proposed Offering can be considered a "blind pool." Blind pool offerings
are inherently characterized by an absence of substantive disclosures relating
to the use of the net proceeds of the offering. Consequently, although
substantially all of the proceeds of the Proposed Offering are intended to be
utilized to effect a Business Combination, the proceeds are not specifically
designated for this purpose. Upon completion of this Proposed Offering, 90% of
the net proceeds, after payment of underwriting discounts and commissions and
the underwriters' non-accountable expense allowance, will be held in an
interest-bearing trust account ("Trust Account") until the earlier of (1)
written notification by the Company of its need for all or substantially all of
such net proceeds for the purpose of implementing a Business Combination, or (2)
the liquidation of the Company in the event that the Company does not effect a
Business Combination within 18 months from the consummation of the offering.
Notwithstanding the foregoing, if the Company enters into a letter of intent, an
agreement in principle or a definitive agreement to effectuate a Business
Combination prior to the expiration of such 18-month period, the Company's
Certificate of Incorporation provides that the Company will be afforded up to an
additional 6 months following the expiration of the initial 18-month period to
consummate such Business Transaction. Moreover, since the Company has not yet
identified an acquisition target (the "Target") investors in the Proposed
Offering will have virtually no substantive information available for advance
consideration of any specified Business Combination.
The Proposed Offering is not being conducted in accordance with Rule 419
which was adopted by the Securities and Exchange Commission (the "Commission")
to strengthen the regulation of securities offered by "blank check" companies. A
blank check company is defined as (a) a development stage company that has no
specific business plan or has indicated that its business plan is to engage in a
merger or acquisition with an unidentified company and (b) a company which
issues securities that, among other things, (i) are not quoted in the Nasdaq
system, or, (ii) in the case of a company which has been in continuous operation
for less than three years, has net tangible assets of less than $5,000,000.
Although the Company is a "blank check" company, it does not believe that Rule
419 will be applicable to it in view of the fact that upon its receipt of the
net proceeds of this offering, the Company's net tangible assets will exceed
$5,000,000. Accordingly, investors in this offering will not receive the
substantive protection provided by Rule 419. Additionally, there can be no
assurances that the United States Congress will not enact legislation which will
prohibit or restrict the sale of securities of "blank check" companies.
As a result of its limited resources, the Company will, in all likelihood,
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.
F-7
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. ORGANIZATION AND OPERATIONS (CONTINUED)
The Company will not effect a Business Combination unless the fair market
value of the Target, as determined by the Board of Directors of the Company in
its sole discretion, based upon valuation standards generally accepted by the
financial community including, among others, book value, cash flow, and both
actual and potential earnings, is at least equal to 80% of the net assets
(assets less liabilities) of the Company at the time of such acquisition.
Upon the completion of the Proposed Offering, the Company will not satisfy
the criteria for qualifying its securities in the Nasdaq system. The Company's
securities will be traded in the over-the-counter market. It is anticipated that
they will be quoted on the OTC Bulletin Board, an NASD sponsored and operated
inter-dealer automated quotation system for equity securities not included in
The Nasdaq Stock Market, as well as in the NQB Pink Sheets published by National
Quotation Bureau Incorporated. The OTC Bulletin Board was introduced as an
alternative to "pink sheet" trading of over-the-counter securities. Although the
Company believes that the OTC Bulletin Board has been recognized by the
brokerage community as an acceptable alternative to the NQB Pink Sheets, there
can be no assurance that the liquidity and prices of the Units in the secondary
market will not be adversely affected.
Furthermore, there is no assurance that the Company will be able to
successfully effect a Business Combination. As discussed previously, if the
Company is unable to effect a Business Combination within 24 months of the
consummation of the Proposed Offering, the Company's Certificate of
Incorporation provides for the Company's automatic liquidation. If the Company
were to expend all of the net proceeds of the Proposed Offering not held in the
Trust Account prior to liquidation, but recognizing that such net proceeds could
become subject to the claims of creditors of the Company which could be prior to
the claims of stockholders of the Company, it is possible that the Company's
liquidation value may be less than the amount in the Trust Account, inclusive of
any net interest income thereon.
Moreover, all of the Company's present stockholders have agreed to waive
their respective rights to participate in any such liquidation distribution on
shares owned prior to the Proposed Offering.
If the Company is unable to acquire control of an operating business or
businesses, it may be required to register as an investment company under the
Investment Company Act of 1940, as amended (the "Act"). The Company is unable to
predict what effect registration under such Act would have, but it believes that
its ability to pursue its current business plan could be adversely affected as a
result. The most significant difference with respect to financial statement
presentation and disclosure requirements for companies registered under the Act
would require the investments held by the Company to be adjusted to market value
at the balance sheet date. 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 Act.
NOTE 2. PROPOSED PUBLIC OFFERING OF SECURITIES
The Proposed Offering calls for the Company to offer for public sale up to
1,250,000 units (the "Units") at a price of $6.00 per Unit. Each Unit consists
of one share of the Company's Common Stock, $.0001 par value, one Class A
Redeemable Warrant and one Class B Redeemable Warrant. Each Class A Redeemable
Warrant and Class B Redeemable Warrant entitles the holder to purchase from the
Company one share of Common Stock at an exercise price of $5.50 and $7.50,
respectively, commencing on the later of (i) the consummation of a Business
Combination, or (ii) one year from the effective date of the
F-8
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. PROPOSED PUBLIC OFFERING OF SECURITIES (CONTINUED)
Prospectus and ending six years after the effective date of the Proposed
Offering (the "Effective Date"). The Class A Redeemable Warrants and Class B
Redeemable Warrants will be redeemable at the option of the Company, and with
the consent of the underwriters of the Proposed Offering (the "Underwriters")
each as a class, in whole and not in part, upon 30 days' notice at any time
after the Redeemable Warrants become exercisable, only in the event that the
closing bid price of the Common Stock is at least $8.50 per share with respect
to the Class A Redeemable Warrant(s), and $10.50 with respect to the Class B
Redeemable Warrants for 20 consecutive trading days immediately prior to notice
of redemption, at a price of $.05 per Class A Redeemable Warrant or Class B
Redeemable Warrant. The securities comprising the Units will not be separately
transferable until 90 days after the date of this Prospectus unless GKN
Securities Corp. ("GKN"), one of the Underwriters, informs the Company of its
decision to allow separate trading, but in no event will GKN 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.
The Company has granted the Underwriters an option, exercisable within 45
business days from the Effective Date, to purchase up to 187,500 additional
Units at $6.00 per Unit. This option is solely for the purpose of covering
over-allotments.
In connection with the Proposed Offering, the Company will sell to the
Underwriters and their designees, for nominal consideration, Unit Purchase
Option(s) (the "Underwriters' UPO") to purchase up to 125,000 Units at an
exercise price of $6.60 per Unit. The Underwriters' UPOs will be exercisable for
a period of four years commencing one year from the Effective Date.
The Company has granted its executive officers and directors 200,000
warrants (50% Class A Warrants and 50% Class B Warrants, collectively the
"Directors' Warrants") to purchase Common Stock at $5.50 and $7.50,
respectively, per share in consideration of future services to be rendered on
behalf of the Company. The Directors' Warrants are not exercisable until the
consummation by the Company of a Business Combination and are not redeemable by
the Company.
All of the Company's present stockholders have agreed to vote their
respective shares of Common Stock in accordance with the vote of the majority of
all nonaffiliated future stockholders of the Company with respect to a Business
Combination.
In addition, the Common Stock owned by all of the executive officers and
directors of the Company, their affiliates and by all persons owning 5% or more
of the currently outstanding shares of Common Stock has been placed in escrow
until the earlier of (i) the occurrence of a Business Combination, or (ii) the
Liquidation Date. During the escrow period, such stockholders will not be able
to sell or otherwise transfer their respective shares of Common Stock, but
retain all other rights as stockholders of the Company, including, without
limitation, the right to vote such shares of Common Stock.
As of July 31, 1996, the Company has recorded deferred registration costs of
$250,000 relating to various expenses incurred and accrued for in connection
with the Proposed Offering. Upon consummation of the Proposed Offering, these
costs will be charged to equity. Should the Proposed Offering prove to be
unsuccessful, these deferred costs, as well as any other additional expenses
that may be incurred, will be charged to operations.
F-9
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UTILIZATION OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed based on the weighted average
number of common shares outstanding and common stock equivalents, if not
anti-dilutive.
NOTE 4. CAPITAL STOCK
The Company's Certificate of Incorporation authorizes the issuance of
20,000,000 shares of Common Stock. Upon completion of the Proposed Offering
(assuming no exercise of the Underwriter's over-allotment option), there will be
14,862,500 authorized but unissued shares of Common Stock available for issuance
(after appropriate reserves for the issuance of Common Stock in connection with
the Class A Redeemable Warrants and Class B Redeemable Warrants, the
Underwriters' UPOs, the executive officers and director Class A Warrants and
Class B Warrants, and the future grants under the Company's 1996 Stock Option
Plan). The Company's Board of Directors has the power to issue any or all of the
future grants under the Company's 1996 Stock Option Plan. The Company's Board of
Directors has the power to issue any or all of the authorized but unissued
Common Stock without stockholder approval. The Company currently has no
commitments to issue any shares of Common Stock other than as described in the
Proposed Offering; however, the Company will, in all likelihood, issue a
substantial number of additional shares in connection with a Business
Combination. To the extent that additional shares of Common Stock are issued,
dilution to the interests of the Company's stockholders participating in the
Proposed Offering will occur.
The Board of Directors of the Company is empowered, without stockholder
approval, to issue up to 5,000 shares of "blank check" preferred stock (the
"Preferred Stock") with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of the
holders of the Company's Common Stock.
NOTE 5. RELATED PARTY TRANSACTIONS
The Chairman of the Board of Directors and the President of the Company are
principal shareholders, officers and directors of Unity Venture Capital
Associates Ltd. ("Unity") which owns shares in the Company. Beginning June 1,
1996, commensurate with the Company's activities primarily related to the
Proposed Offering, the Company will be obligated to pay Unity a monthly fee of
$7,500 for general and administrative services, including the use of office
space in premises occupied by Unity. At July 31, 1996, the Company owed $15,000
(included in advances from affiliate on the balance sheet) to Unity for
administrative services.
Through July 31, 1996, the Company has obtained advances totaling $25,500
from Unity to cover expenses related to the Proposed Offering which are included
in advances from affiliate on the balance
F-10
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. RELATED PARTY TRANSACTIONS (CONTINUED)
sheet. These advances are due on demand and are expected to be repaid out of the
proceeds of the Proposed Offering.
At July 31, 1996, a member of the Company's legal counsel owned 6,000 shares
of the Company's Common Stock.
NOTE 6. STOCK OPTION PLAN
On May 30, 1996, the Company's Board of Directors approved a stock option
plan (the "Plan"). The Plan, which is subject to shareholder approval, provides
for issuance of up to 187,500 options (the "Options") to acquire shares of the
Company's Common Stock.
The Options are intended to qualify either as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986 or as options which are not intended to meet the
requirements of such section ("Nonstatutory Stock Options"). The Options may be
granted under the Plan to persons who, in the case of Incentive Stock Options,
are key employees (including officers) of the Company, or, in the case of
Nonstatutory Stock Options, are key employees (including officers) and
nonemployee directors of the Company, except that Nonstatutory Stock Options may
not be granted to a holder of more than 10% of the total voting power of the
Company.
The exercise price of all Incentive Stock Options granted under the Plan
must be at least equal to the fair market value of such shares on the date of
grant or, in the case of Incentive Stock Options granted to the holder of 10% or
more of the Company's Common Stock, at least 110% of the fair market value of
such shares on the date of grant. The exercise price of all Nonstatutory Stock
Options granted under the Plan shall be determined by the Board of Directors of
the Company at the time of grant. The maximum exercise period for which the
Options may be granted is ten years from the date of grant (five years in the
case of Incentive Stock Options granted to an individual owning more than 10% of
the Company's Common Stock). The aggregate fair market value (determined at the
date of the option grant) of such shares with respect to which Incentive Stock
Options are exercisable for the first time by the holder of the option during
any calendar year shall not exceed $100,000.
The FASB issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("SFAS 123"), which will require
companies either to reflect in their financial statements or reflect as
supplemental disclosure the impact on earnings and earnings per share of the
fair value of stock based compensation using certain pricing models for the
option component of stock option plans. As of July 31, 1996, no options have
been granted under the Plan. Disclosure, as required by SFAS 123, will be made
upon the issuance of options.
NOTE 7. INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under this method,
deferred income taxes are determined based on differences between the tax bases
of assets and liabilities and their financial reporting amounts at each year
end, and are measured based on enacted tax rates and laws that will be in effect
when the differences are expected to reverse. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
F-11
<PAGE>
UNITY FIRST ACQUISITION CORP.
(A DEVELOPMENT STAGE ENTITY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. CONTINGENCY
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Company has
also agreed to pay to the Underwriters an expense allowance on a non-accountable
basis equal to 3% of the gross proceeds derived from the sale of the Units
underwritten (including the sale of any Units subject to the Underwriters'
over-allotment option).
F-12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON 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 MUST NOT
BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE UNITS OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IS UNLAWFUL. THE DELIVERY OF
THIS PROSPECTUS SHALL NOT, 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............................................................... 10
Risk Factors.............................................................. 10
Use of Proceeds........................................................... 19
Dilution.................................................................. 21
Capitalization............................................................ 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 23
Proposed Business......................................................... 24
Management................................................................ 29
Principal Stockholders.................................................... 32
Certain Transactions...................................................... 33
Description of Securities................................................. 34
Underwriting.............................................................. 38
Legal Matters............................................................. 39
Experts................................................................... 39
Additional Information.................................................... 39
Index to Financial Statements............................................. F-1
</TABLE>
------------------------
UNTIL DECEMBER , 1996, 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.
1,250,000 UNITS
UNITY FIRST
ACQUISITION CORP.
----------------
PROSPECTUS
----------------
GKN SECURITIES
GAINES, BERLAND INC.
NOVEMBER , 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth various expenses, other than underwriting
discounts, which will be incurred in connection with the offering. Other than
the SEC registration fee, NASD filing fee and the non-accountable expense
allowance of GKN Securities Corp. (the "Underwriter"), amounts set forth below
are estimates:
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 10,711
NASD filing fee................................................... 3,606
Underwriter's nonaccountable expense allowance.................... 225,000*
Blue sky fees and expenses........................................ 25,000
Printing and engraving expenses................................... 75,000
Legal fees and expenses........................................... 65,000
Accounting fees and expenses...................................... 42,000
Transfer and Warrant Agent fees................................... 3,500
Miscellaneous expenses............................................ 183
---------
$ 450,000
---------
---------
</TABLE>
- ------------------------
* Assumes no exercise of the Underwriter's over-allotment option.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article SEVENTH of the Certificate of Incorporation of Unity First
Acquisition Corp. ("Registrant") provides with respect to the indemnification of
directors and officers that Registrant shall indemnify to the fullest extent
permitted by Sections 102(b)(7) and 145 of the Delaware General Corporation Law,
as amended from time to time, each person that such Sections grant Registrant
the power to indemnify. Article SEVENTH of the Certificate of Incorporation of
Registrant also provides that no director shall be liable to the corporation or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director, except with respect to (1) a breach of the director's duty of loyalty
to the corporation or its stockholders, (2) acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of Delaware General Corporation Law, as
amended from time to time.
Reference is made to Section 5 of the Underwriting Agreement, which provides
for indemnification of the officers and directors of Registrant under certain
circumstances.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following sets forth information relating to all securities of
Registrant sold by it since May 30, 1996, the date of Registrant's inception:
<TABLE>
<CAPTION>
DATE OF NUMBER OF CONSIDERATION
NAME ISSUANCE SHARES PER SHARE
- ------------------------------------------------- --------------- ----------- -------------
<S> <C> <C> <C>
Lawrence Burstein................................ May 30, 1996 150,000 $ .0001
Unity Venture Capital Associates Ltd............. May 30, 1996 25,000 $ .0001
Cowen & Co., as Custodian for Stanley Hollander
IRA............................................ May 30, 1996 30,000 $ .0001
Jerome Baron..................................... May 30, 1996 12,000 $ .0001
Murdoch & Company................................ May 30, 1996 30,000 $ .0001
Cricket Services Ltd............................. May 30, 1996 39,000 $ .0001
Richard Kress & Cheryl Kress JTWROS.............. May 30, 1996 4,500 $ .0001
Stephen Verchick................................. May 30, 1996 31,000 $ .0001
Richard Braver................................... May 30, 1996 4,500 $ .0001
Dan Brecher IRA/RO............................... May 30, 1996 10,500 $ .0001
Barry Ridings.................................... May 30, 1996 6,000 $ .0001
Carl L. Norton................................... May 30, 1996 9,000 $ .0001
Financiera e Inversionista Salles, S.A........... May 30, 1996 12,000 $ .0001
Ian Barnett...................................... May 30, 1996 4,500 $ .0001
Henry Rothman.................................... May 30, 1996 6,000 $ .0001
Donald Rabinovitch............................... May 30, 1996 5,250 $ .0001
David Vozick..................................... May 30, 1996 5,250 $ .0001
Tarzana Associates............................... May 30, 1996 5,000 $ .0001
Jonathan Rothschild.............................. May 30, 1996 1,500 $ .0001
Equity Interest Inc.............................. May 30, 1996 1,500 $ .0001
Domaco Venture Capital Fund...................... May 30, 1996 1,500 $ .0001
KGM Associates................................... May 30, 1996 7,000 $ .0001
Sagres Group Ltd................................. May 30, 1996 6,000 $ .0001
Ronald Koenig.................................... May 30, 1996 30,000 $ .0001
Heptagon Investments Ltd......................... May 30, 1996 75,000 $ .0001
Jay M. Haft...................................... May 30, 1996 10,500 $ .0001
Ira Roxland...................................... May 30, 1996 6,000 $ .0001
Steven Millner................................... May 30, 1996 18,000 $ .0001
Norman Leben..................................... May 30, 1996 15,000 $ .0001
Heptagon Capital Management, Inc................. May 30, 1996 1,500 $ .0001
Michael Karfunkel................................ May 30, 1996 31,000 $ .0001
George Karfunkel................................. May 30, 1996 31,000 $ .0001
</TABLE>
On May 30, 1996, Registrant issued 58,334, 58,333, 58,333 and 25,000 Class A
and Class B Warrants to Lawrence Burstein, Norman Leben, John Cattier and Barry
Ridings, respectively, in consideration for future services to be rendered by
such persons on behalf of Registrant.
Exemption from registration under the Securities Act of 1933, as amended
(the "Securities Act"), is claimed for the sales of Common Stock referred to
above in reliance upon the exemption afforded by Section 4(2) of the Securities
Act for transactions not involving a public offering. Each certificate
evidencing such shares of Common Stock bears an appropriate restrictive legend
and "stop transfer" orders are maintained on Registrant's stock transfer records
thereagainst. None of these sales involved participation by an underwriter or a
broker-dealer.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of Exhibits filed herewith as part of the
Registration Statement:
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement between Registrant and the Underwriters
3.1 Certificate of Incorporation of Registrant
3.2 By-laws of Registrant
3.3 Proposed Restatement of Certificate of Incorporation of Registrant
4.1 Form of certificate evidencing shares of Common Stock
4.2 Form of certificate evidencing Class A Warrants
4.3 Form of certificate evidencing Class B Warrants
4.4 Form of Unit Purchase Option between Registrant and the Underwriters
4.5 Form of Warrant Agreement between Registrant and American Stock Transfer &
Trust Company, as escrow agent
5.1 Opinion of Parker Duryee Rosoff & Haft A Professional Corporation
10.1 1996 Stock Option Plan
10.2 Form of Trust Agreement by and between Registrant and The Bank of New York
10.3 Form of Insider's Letter
10.4 Form of Escrow Agreement by and among Registrant, Lawrence Burstein, John
Cattier, Cricket Services, Ltd., Barry Ridings, Norman Leben, Unity Venture
Capital Associates Ltd. ("Unity") and American Stock Transfer & Trust
Company
10.5 General and Administrative Services Agreement, dated as of May 30, 1996, by
and between Registrant and Unity
10.6 Form of Officer/Director Warrant Purchase Agreement with the Representative
of the Underwriters*
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Parker Duryee Rosoff & Haft (included in Exhibit 5.1)
24.1 Power of Attorney (included on the signature page of Part II of this
Registration Statement)
</TABLE>
*Filed herewith.
(b) Financial Statement Schedules. Financial statement schedules are omitted
because the conditions requiring their filing do not exist or the information
required thereby is included in the financial statements filed, including the
notes thereto.
ITEM 17. UNDERTAKINGS
Registrant hereby undertakes:
(1) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration
II-3
<PAGE>
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(a) To include any Prospectus required by Section 10(a)(3) of the
Securities Act;
(b) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(4) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(5) To provide to the Representative at the closing specified in the
Underwriting Agreement, certificates in such denominations and registered in
such names as required by the Representative to permit prompt delivery to
each purchaser.
(6) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of Registrant pursuant to Item 14 of this Part II to the
Registration Statement, or otherwise, Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer or controlling person of Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against the public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 6th day of November, 1996.
UNITY FIRST ACQUISITION CORP.
By: /s/ LAWERENCE BURSTEIN
-----------------------------------------
Lawrence Burstein
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ----------------------------------- --------------------
<C> <S> <C>
/s/ LAWRENCE BURSTEIN
------------------------------------------- President, Director, Principal November 6, 1996
Lawrence Burstein Executive Officer
/s/ *
------------------------------------------- Secretary, Director, Principal November 6, 1996
Norman Leben Financial and Accounting Officer
------------------------------------------- Director
John Cattier
/s/ *
------------------------------------------- Director November 6, 1996
Barry Ridings
</TABLE>
- ------------------------
* Lawrence Burstein, pursuant to Powers of Attorney (executed by each of the
officers and directors listed above and indicated as signing above, and
filed with the Securities and Exchange Commission), by signing his name
hereto does hereby sign and execute this Amendment to the Registration
Statement on behalf of the persons referenced above.
<TABLE>
<S> <C>
/s/ LAWRENCE BURSTEIN
-------------------------------------------
November 6, 1996 Lawrence Burstein
</TABLE>
II-5
<PAGE>
November , 1996
GKN Securities Corp.
61 Broadway
New York, NY 10006
Re: Unity First Acquisition Corp.
-----------------------------
Gentlemen:
This letter will confirm the agreement of the undersigned to purchase
warrants ("Warrants") of Unity First Acquisition Corp. ("Company") underlying
the units ("Units") being sold in the Company's initial public offering
("IPO") upon the terms and conditions set forth herein. Each Unit is
comprised of one share of Common Stock and one Class A Warrant and one Class
B Warrant (collectively, "Warrants"). The shares of Common Stock and Warrants
will not be separately tradeable until 90 days after the effective date of
the Company's IPO unless GKN Securities Corp. ("GKN") informs the Company of
its decision to allow earlier separate trading ("Separation Date").
The undersigned agrees that this letter agreement constitutes an
irrevocable order for GKN to purchase for his account during the ten-day
period commencing on the Separate Date up to $ of each of the Class A
Warrants and the Class B Warrants at market prices not to exceed $.875 per
Warrant ("Maximum Warrant Purchase"). GKN agrees to fill such order in such
amounts and at such times as it may determine, in its sole discretion, during
the ten-day period commencing on the Separation Date. The undersigned may
notify GKN that all or part of this Maximum Warrant Purchase will be made by
an affiliate who has an account at GKN and, in such event, GKN will make such
purchase on behalf of said affiliate; provided, however, that the
undersigned hereby agrees to make payment of the purchase price of such
purchase in the event that the affiliate fails to make such payment.
Very truly yours,
-----------------------------------
