CASULL ARMS CORP, SB-2/A, 1997-05-02

CASULL ARMS CORP
SB-2/A, 1997-05-02
ORDNANCE & ACCESSORIES, (NO VEHICLES/GUIDED MISSILES)

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2, 1997

REGISTRATION NO. 333-16911
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3
TO
FORM SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
------------------------

CASULL ARMS CORPORATION

(Name of Small Business Issuer in its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 3484 83-0317822
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
No.)
</TABLE>

456 FAIRVIEW ROAD
PO BOX 1629
AFTON, WYOMING 83110
(307) 886-0200
(Address and telephone number of principal executive offices
and principal place of business or intended principal place of business)

RICHARD J. CASULL
CHIEF EXECUTIVE OFFICER
CASULL ARMS CORPORATION
456 FAIRVIEW ROAD
PO BOX 1629
AFTON, WYOMING 83110
(307) 886-0200

(Name, address and telephone number of agent for service)
------------------------------

COPIES OF ALL COMMUNICATIONS TO:

ALAN I. ANNEX, ESQ. ARTHUR DON, ESQ.
WILLIAM N. HADDAD, ESQ. CHRISTINA E. WAHLIG, ESQ.
Camhy Karlinsky & Stein LLP D'ANCONA & PFLAUM
1740 Broadway, Sixteenth Floor 30 North LaSalle Street
New York, New York 10019-4315 Suite 2900
(212) 977-6600 Chicago, Illinois 60602
(312) 580-2000

------------------------

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.

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. / /

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,
please check the following box. /X/
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CALCULATION OF REGISTRATION FEE

(SEE FOLLOWING PAGE.)
------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT (1) OFFERING PRICE (1) FEE
<S> <C> <C> <C> <C>
Units, each consisting of
1 share of Common Stock and
1 Redeemable Common Stock
Purchase Warrant........................ 1,400,000 $6.10 $ 8,540,000 $2,588
Common Stock issuable upon exercise of
Redeemable
Warrants................................ 1,400,000 $6.00 $ 8,400,000 $2,545
Placement Agent's Warrants(2)............. 140,000 $.001 $ 140 --
Common Stock issuable upon exercise of
Placement Agent's Warrants(3)........... 140,000 $9.90 $ 1,386,000 $420
Warrants issuable upon exercise of
Placement Agent's Warrants(3)........... 140,000 $0.165 $ 23,100 $7
Common Stock issuable upon exercise of
warrants issuable upon exercise of
Placement Agent's Warrants(3)........... 140,000 $9.60 $ 1,344,000 $408
Total..................................... $ 19,693,240 $5,968(4)
</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act of 1933 (the "Act").

(2) No registration fee required pursuant to Rule 457 under the Act.

(3) Pursuant to Rule 416 under the Act there are also being registered such
additional securities as may become issuable pursuant to the antidilution
provisions of the Redeemable Common Stock Purchase Warrants or the Placement
Agent's Warrants.

(4) Previously paid.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

SUBJECT TO COMPLETION, DATED MAY 2, 1997

[LOGO]

MINIMUM OFFERING OF 400,000 AND MAXIMUM OFFERING OF
1,400,000 SHARES OF COMMON STOCK PAR VALUE $0.01 PER SHARE
AND REDEEMABLE COMMON STOCK PURCHASE WARRANTS
(AS UNITS, EACH CONSISTING OF ONE SHARE OF COMMON STOCK AND ONE WARRANT)

This Prospectus relates to an offering (this "Offering") of shares of common
stock, par value $0.01 per share ("Common Stock"), and Redeemable Common Stock
Purchase Warrants (the "Warrants") initially as units, consisting of one share
of Common Stock and one Warrant, of Casull Arms Corporation (the "Company").
Such shares of Common Stock and Warrants are sometimes hereinafter collectively
referred to as the "Securities." The shares of Common Stock and the Warrants
offered hereby may only be purchased in this Offering together as a unit, on the
basis of one share of Common Stock and one Warrant, but are separately
transferable immediately upon issuance. See "Description of Securities."
This Offering is on a minimum basis of 400,000 shares of Common Stock and
400,000 Warrants (the "Minimum Offering") and a maximum basis of 1,400,000
shares of Common Stock and 1,400,000 Warrants (the "Maximum Offering"). The
Common Stock and Warrants constituting the Minimum Offering are being offered on
a "best efforts, all or none" basis and the remaining shares of Common Stock and
Warrants are being offered on a "best efforts" basis.
All funds received from subscribers for the Common Stock will be held in an
escrow account for the benefit of the subscribers by Continental Stock Transfer
and Trust Company (the "Escrow Agent") until a closing (a "Closing") of the
Minimum Offering or earlier termination of the Offering. The Offering will
expire on the earlier to occur of (i) 60 days from the date of this Prospectus,
and (ii) the sale of all of the Common Stock being offered hereby, unless the
Company and National Securities Corporation ("National") agree to extend the
Offering for an additional 30-day period (the 'Termination Date"). In the event
that subscriptions for the Minimum Offering are not received by the Termination
Date, the Offering will terminate and all funds will be returned promptly by the
Escrow Agent without interest and without any deduction therefrom. Pending each
Closing, subscriptions to be accepted at such Closing may be revoked, provided
that written notice of revocation is sent by certified or registered mail,
return receipt requested, and is received by the Company or the Placement Agent,
as applicable, at least two (2) business days prior to such Closing. Refunds
shall then be promptly made without interest and without deduction. The Common
Stock will be delivered promptly to subscribers after each respective Closing.
Each Warrant entitles the registered holder thereof to purchase one share of
Common Stock at an initial exercise price of $6.00 per share (100% of the
initial public offering price per share of Common Stock), at any time over a
forty-eight month period commencing on the first day of the thirteenth calendar
month after the date of this Prospectus. The Warrant exercise price is subject
to adjustment under certain circumstances. Commencing on the first day of the
thirteenth calendar month after the date of this Prospectus, the Warrants are
subject to redemption by the Company at $0.05 per Warrant on thirty (30) days'
prior written notice to the warrantholders if the closing bid price of the
Common Stock averages an amount equal to or in excess of $9.00 per share (150%
of the initial public offering price per share of Common Stock), for any twenty
(20) trading days within a period of thirty (30) consecutive trading days ending
on the fifth trading day prior to the notice of redemption. Unexercised Warrants
expire on the fifth anniversary date of this Prospectus. See "Description of
Securities."
Prior to this Offering, there has been no public market for the Common Stock
or the Warrants, and there is no assurance that any such market will develop or
be maintained after the completion of this Offering or, if developed, that it
will be sustained. After completion of this Offering, there will be no public
market for the Securities as units. See Plan of Distribution for a description
of the factors considered in determining the public offering price. The Company
anticipates that the Common Stock and the Warrants will be quoted on the OTC
Electronic Bulletin Board under the symbol CASU and CASUW, respectively.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE AND
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" BEGINNING AT PAGE 8 AND
"DILUTION" AT PAGE 16. THESE ARE SPECULATIVE SECURITIES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE 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>
UNDERWRITING DISCOUNTS
PRICE TO PUBLIC AND COMMISSIONS(1) PROCEEDS TO COMPANY(2)
<S> <C> <C> <C>
Per Unit............................... $6.10 $ $
Per Share............................ $6.00 $ $
Per Warrant.......................... $0.10 $ $
Total Minimum.......................... $ $ $
Total Maximum..........................
</TABLE>

(1) Excludes (i) additional compensation payable to National Securities
Corporation, (the "Placement Agent") in the form of a non-accountable
expense allowance equal to 1.8% of the gross proceeds of this Offering, and
(ii) the value of five-year warrants (the "Placement Agent's Warrants") to
purchase up to an aggregate of 140,000 shares of Common Stock and/or 140,000
Warrants, at an exercise price of $9.90 per share (165% of the Price to
Public of the Common Stock), and $0.165 per warrant (165% of the Price to
Public of the Warrants), respectively, that will be sold to the Placement
Agent at a nominal price. In addition, the Company has agreed to indemnify
the Placement Agents against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting estimated expenses of $350,000 payable by the Company,
excluding the non-accountable expense allowance payable to the Placement
Agent.

The shares of Common Stock are being offered exclusively through the
Placement Agent, on a "best efforts" basis and on an all or none basis as to the
Minimum Offering. The Placement Agent reserves the right to reject any order in
whole or in part and to withdraw, cancel or modify this Offering without notice.

NATIONAL SECURITIES CORPORATION

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
[LOGO]

The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other periodic reports as the
Company deems appropriate or as may be required by law.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
AND/OR THE WARRANTS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION".

454 Casull is a registered trademark of Richard J. Casull, who has
exclusively licensed the use of such trademark to Freedom Arms, Inc. until
February 1, 1998. "Casull Arms" and the Company's bullet logo are trademarks of
the Company. All other marks are trademarks of their respective owners.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, 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.
SOLELY FOR THE PURPOSE OF CALCULATIONS IN THIS PROSPECTUS, THE NUMBER OF SHARES
OF COMMON STOCK AND WARRANTS ASSUMED TO BE OFFERED FOR THE MINIMUM OFFERING AND
THE MAXIMUM OFFERING IS 400,000 AND 1,400,000 SHARES OF COMMON STOCK AND
WARRANTS, RESPECTIVELY. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS
PROSPECTUS: (I) EXCLUDES SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANTS AND (II) EXCLUDES SECURITIES ISSUABLE UPON EXERCISE OF THE PLACEMENT
AGENT'S WARRANTS. SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION."

THE COMPANY

GENERAL

Casull Arms Corporation (the "Company"), a development stage company,
intends to design, manufacture and sell high quality firearms designed by
Richard J. Casull ("Casull"), a nationally known firearms designer with more
than 40 years of experience in the industry. The Company has entered into an
exclusive licensing agreement (the "License Agreement") with Casull for the
rights, with certain exceptions, to all of his present and future patents and
other intellectual property, which rights will serve as the basis for the
Company's products.

The Company's firearms, most of which will be sold under the Casull
trademark, will initially consist of 45 caliber, 32 caliber and 22 caliber
single-action revolvers and the newly designed Casull Rifle and Cartridge System
(the "Rifle") which will be manufactured in various calibers. The Company will
seek to position the majority of its products at the high end of their
respective markets because the Company believes that the expected superior power
and accuracy of the Company's products will fill a perceived void in the
firearms market for high quality firearms for use by gun enthusiasts and
hunters. In addition, the Company intends to pursue potential sales to military
and police organizations. The Company does not plan to manufacture any firearms
included on the Bureau of Alcohol Tobacco and Firearms' list of assault weapons.

The Company plans to construct a manufacturing facility which is expected to
have an annual production capacity of 10,000 -- 12,000 units of firearms. The
manufacturing facility is projected to begin operations within 18 months from
commencement of construction and is expected to be fully operational within two
years from the closing of this Offering. In addition to providing manufacturing
space, the facility will likely contain a retail showroom and custom shop in
which management plans to produce collectors editions and specially engraved
firearms. The manufacturing facility's initial output will be sold domestically,
although emphasis may also be placed on developing foreign markets.

The Company intends to order production equipment which will be computer
numerically controlled ("CNC") to ensure speed and repeatability of the
manufacturing process. The CNC milling centers, CNC lathes, and CNC barrel
forging machine are sophisticated machinery that will be installed by the
manufacturer and will be operated by machinists who will be trained by the
manufacturer.

The Company was incorporated under the laws of the State of Delaware on July
23, 1996. It maintains its principal executive offices at 456 Fairview Road,
P.O. Box 1629, Afton, Wyoming 83110 and its telephone number is 307-886-0200.

3
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Securities Offered.............. This Offering is on a minimum basis of 400,000 shares of
Common Stock and 400,000 Warrants to purchase one share of
Common Stock per Warrant and a maximum basis of 1,400,000
shares of Common Stock and 1,400,000 Warrants to purchase
one share of Common Stock. The Common Stock and Warrants
are being offered hereby as units but will be separately
tradeable immediately following this Offering. After
completion of this Offering there will be no public market
for the Securities as units.
Terms of Warrants............... Each Warrant entitles the holder to purchase one share of
Common Stock at an initial exercise price of $6.00 per
share (100% of the initial public offering price per share
of Common Stock). Commencing on the first day of the
thirteenth month from the date of this Prospectus, the
Warrants will be subject to redemption, subject to the
prior written consent of the Placement Agent, at a price
of $0.05 per Warrant upon written notice provided the
average closing bid price of the Common Stock equals or
exceeds $9.00 (150% of the initial public offering price
per share of Common Stock) for any 20 trading days within
a period of 30 consecutive trading days ending on the
fifth trading day prior to the date of the notice of
redemption. Unexercised Warrants expire on the fifth
anniversary date of this Prospectus. See "Description of
Securities."
Common Stock Outstanding Before
this Offering(1).............. 1,707,083 shares of Common Stock.
Securities to be Outstanding
After the Minimum
Offering(1)(2)................ 2,107,083 shares of Common Stock and 400,000 Warrants
Securities to be Outstanding
After the Maximum
Offering(1)(2)................ 3,107,083 shares of Common Stock and 1,400,000 Warrants.
Certain Terms................... The Minimum Offering is being offered by the Placement
Agent on a "best efforts, all or none" basis and the
remaining shares of Common Stock are being offered on a
"best efforts" basis, until the earlier of (i) 60 days
after the date of this Prospectus and (ii) the sale of all
the Common Stock being offered hereby, unless the Company
and the Placement Agent agree to extend this Offering for
an additional 30-day period.
</TABLE>

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(1) Includes 1,133,333 shares of Redeemable Common Stock which are subject to
redemption (the "Redeemable Common Stock") if an offering of at least
$5,000,000 is not consummated by May 31, 1997. (See "Description of
Securities--Common Stock"). Excludes 300,000 shares of Common Stock reserved
for issuance upon exercise of options available for future grant under the
Company's Stock Option Plan (the "Stock Option Plan"). See
"Management--Stock Option Plan."

(2) Does not include up to (i) 1,400,000 shares of Common Stock issuable upon
exercise of the Warrants sold in this Offering, (ii) 140,000 shares of
Common Stock issuable upon exercise of the Placement Agent's Warrants, (iii)
Warrants to purchase 140,000 shares of Common stock issuable upon exercise
of the Placement Agent's Warrants and (iv) 140,000 shares of Common Stock
issuable upon exercise of the Warrants underlying the Placement Agent's
Warrants assuming the sale of the Maximum Offering. The Placement Agent will
be issued one (1) Placement Agent's Warrant for every ten (10) shares of
Common Stock and ten (10) Warrants sold in connection with this Offering.

4
<PAGE>

<TABLE>
<S> <C>
Proposed OTC Electronic Bullen-
tin Board Symbols............. Common Stock: CASU
Redeemable Warrants: CASUW

Use of Proceeds................. For purchase of land; construction of manufacturing plant;
and acquisition of machinery and equipment. See "Use of
Proceeds."

Risk Factors and Dilution....... The purchase of the Securities offered hereby involves a
high degree of risk and immediate and substantial
dilution. Prospective investors should review carefully
and consider the information set forth under "Risk
Factors" and "Dilution."
</TABLE>

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND SHOULD NOT BE PURCHASED BY INVESTORS WHO CANNOT AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS."

5
<PAGE>
SUMMARY FINANCIAL INFORMATION

The summary financial information set forth below is derived from and should
be read in conjunction with the financial statements, including the notes
thereto, appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 23, 1996
(DATE OF INCORPORATION)
THROUGH FEBRUARY 28,
1997(1)
------------------------
<S> <C>
ACTUAL
------------------------
STATEMENT OF OPERATIONS DATA
Revenues............................................................ $ --
General and administrative expenses................................. (204,764)
Net loss............................................................ (173,731)
Net loss per common share........................................... $ (.11)
Weighted average number of common shares outstanding(2)............. 1,542,288
</TABLE>

<TABLE>
<CAPTION>
FEBRUARY 28, 1997(1)
---------------------------------------------------------
<S> <C> <C> <C>
AS ADJUSTED FOR AS ADJUSTED(4)(5)
ACTUAL MINIMUM OFFERING(3) FOR MAXIMUM OFFERING
------------ -------------------- ---------------------
BALANCE SHEET DATA
Working capital.................... $ (6,537) $ 1,766,263 $ 10,233,263
Total assets....................... 3,592,966 5,235,585 10,300,085
Total liabilities.................. 309,322 309,322 66,822
Redeemable Common Stock............ 3,400,000 3,400,000 --
Stockholders' equity (deficit)..... (116,356) 1,526,263 10,233,263
</TABLE>

- ------------------------

(1) The Company plans to adopt a fiscal year which begins on July 1 and ends on
June 30.

(2) See note 2 to the Company's financial statements.

(3) As adjusted to give effect to the issuance of the Minimum Securities offered
hereby at an assumed initial offering price of $6.00 per share of Common
Stock and $.10 per Warrant (after deducting estimated placement agent
discounts and commissions and all other expenses of the Minimum Offering).
Assumes no termination of the redemption feature of the Redeemable Common
Stock as the proceeds of the Minimum Offering are assumed to be less than
$5,000,000. If the Offering does not result in raising at least $5,000,000
on or before May 31, 1997, the Company will need to receive a waiver of the
$5,000,000 threshold and/or the May 31, 1997 deadline from the Redeemable
Common Stockholders, or the Redeemable Common Stockholders will have the
right to sell their shares back to the Company for at least 90% of the
amounts paid. There is no assurance that such waiver can be obtained.
Assumes no exercise of the Placement Agent's Warrants. See "Plan of
Distribution."

(4) As adjusted to give effect to the issuance of the Maximum Securities offered
hereby at an assumed initial public offering price of $6.00 per share of
Common Stock and $0.10 per Warrant (after deducting estimated placement
agent discounts and commissions and all other expenses of the Maximum
Offering). See "Use of Proceeds." Assumes no exercise of the Placement
Agent's Warrants. See "Plan of Distribution."

(5) As adjusted to give effect to the removal of restrictions on cash and
investments of $2,160,000 and $1,242,500, respectively, the repayment of a
$242,500 liability to a director, and the termination of the redemption
feature of the Redeemable Common Stock in conjunction with the issuance of
the Maximum Securities offered hereby assuming the proceeds from the Maximum
Offering exceed $5,000,000 and the Maximum Offering occurs on or before May
31, 1997. If the Closing of the Offering does not occur on or before May 31,
1997, the Company will need to obtain waivers of the May 31, 1997 deadline
from the Redeemable Common Stockholders, or the Redeemable Common
Stockholders will have the right to sell their shares back to the Company
for at least 90% of the amounts paid. See the financial statements of the
Company and notes thereto.

6
<PAGE>
TO CALIFORNIA RESIDENTS ONLY:

California residents can only purchase the Securities if they have a minimum
gross income of $65,000 during the last tax year and expect to have (based on a
good faith estimate) a minimum gross income of $65,000 during the current tax
year and have a net worth (at fair market value but excluding home equity, home
furnishings and automobile) of $100,000, or have a net worth of $250,000.

7
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE COMMON STOCK AND WARRANTS OFFERED HEREBY IS HIGHLY
SPECULATIVE IN NATURE AND INVOLVES A HIGH DEGREE OF RISK AND IMMEDIATE AND
SUBSTANTIAL DILUTION. AN INVESTMENT SHOULD ONLY BE MADE BY PERSONS WHO CAN
AFFORD TO LOSE THEIR ENTIRE INVESTMENT IN THE COMPANY. THEREFORE, EACH
PROSPECTIVE INVESTOR SHOULD, PRIOR TO MAKING AN INVESTMENT, CONSIDER VERY
CAREFULLY THE FOLLOWING RISK FACTORS, AS WELL AS OTHER INFORMATION SET FORTH
ELSEWHERE IN THIS PROSPECTUS.

ABSENCE OF OPERATING HISTORY; DEVELOPMENT STAGE ENTITY; GOING CONCERN
OPINION. The Company is in the development stage and does not currently have
facilities to manufacture firearms. There is no guarantee that the Company will
be able to commence firearms manufacturing within its projected timetable or
that its products will be readily accepted in the marketplace. None of the
products discussed throughout this Prospectus have been manufactured in quantity
and the discussion is based on the use of prototypes only. In the absence of an
operating history, the Company remains vulnerable to a variety of business risks
generally associated with young, rapidly growing companies. The likelihood of
success of the Company must be considered in light of the problems, expenses,
complications, and delays frequently encountered in connection with the
development of new businesses. The Company does not expect to have revenues for
at least approximately 18 months following the completion of this Offering.

The report of Price Waterhouse LLP on the Company's financial statements
included herein contains an explanatory paragraph stating that the Company's
financial statements have been prepared assuming that the Company will continue
as a going concern and that the Company's ability to commence operations is
dependent on obtaining adequate financial resources through a contemplated
public offering or other financing which raises substantial doubt about its
ability to continue as a going concern.

DEPENDENCE ON LICENSED PATENTS AND TRADEMARKS. The Company has entered into
a License Agreement with Casull for rights to his present and future patents and
other intellectual property, with the exception of (i) U.S. Pat. No. 5,048,216,
generally referred to as the "barrel forcing cone bushing," (ii) the "454
Casull" trademark, registered in connection with ammunition, licensed
exclusively to Freedom Arms Inc. until February 1, 1998 and licensed to Freedom
Arms, Inc. on a non-exclusive basis thereafter, and (iii) a black powder
mini-revolver manufactured by North American Arms. The Company's success will
depend in part on its ability to obtain and enforce patent protection for its
products, enforce patent rights which it presently licenses, and operate without
infringing the property rights of others. The Company presently holds an
exclusive license in three pending patent applications relating to the Company's
business as described in this Prospectus. The Company also holds an exclusive
license to eight utility patents relating to firearms and one design patent for
a belt buckle. There can be no assurance that patent applications to which the
Company holds rights will result in the issuance of patents, or that any issued
patents will provide commercially significant protection to the Company's
technology and products. In addition, there can be no assurance that others will
not independently develop substantially equivalent proprietary information not
covered by patents to which the Company holds rights or obtain access to the
Company's know-how, or that others will not claim to have or will not be issued
patents which may prevent the sale of one or more of the Company's products. The
Company intends to apply for the trademark rights to the "Casull" name, in
connection with the Company's products, but no assurance can be given that such
trademark rights will be obtained.

The Company will rely upon a combination of contractual arrangements and
patent, copyright and trademark laws to protect its proprietary rights and the
proprietary rights of third-parties from whom the Company licenses intellectual
property. There can be no assurance that the steps taken by the Company in this
regard will be adequate to deter misappropriation of proprietary information or
that the Company will be able to detect unauthorized use and take appropriate
steps to enforce its intellectual property rights.

DEPENDENCE ON KEY PERSONNEL. The success of the Company is dependent on the
efforts and abilities of Casull. If the Company were to lose the services of
Casull before a qualified replacement could be

8
<PAGE>
obtained, its business could be materially and adversely affected. In such
event, no assurance can be given that an adequate replacement could be obtained.
The Company is in the process of obtaining a $3,000,000 key-man life insurance
policy on Casull. No assurance can be given, however, that the Company will be
able to obtain a key-man life insurance policy on acceptable terms.

Casull can terminate the License Agreement if the Company fails to pay to
Casull the royalties due him, or if the Company fails to keep or perform any
other material provision thereof, or if the Company files for protection under
federal or state bankruptcy laws, or is placed in the hands of a receiver or
trustee in bankruptcy. The Company may cure such default within 60 days of the
receipt of written notice from Casull. In the event the License Agreement is
canceled by Casull with cause, the licenses granted to the Company under the
License Agreement will terminate. See "Business--License Agreement with Casull."

GOVERNMENTAL REGULATION. The Company will be subject to extensive federal,
state, local and foreign firearms regulations. Among the federal firearms laws
under which the Company will be regulated are THE GUN CONTROL ACT OF 1968 (the
"GCA"), THE NATIONAL FIREARMS ACT (the "NFA"), THE ARMS EXPORT CONTROL ACT (the
"AECA") and THE FEDERAL FIREARMS ACT (the "FFA"). The Company plans to be in
compliance with all regulatory and licensing requirements of the GCA, NFA and
FFA. The Company currently does not export any firearms, and thus is not subject
to the requirements of AECA. However, the Company intends to apply for all
licenses necessary to export firearms.

The purchase of firearms is subject to federal, state, and local
governmental regulations. The applicable federal laws are the GCA, NFA and FFA.
These laws generally prohibit the private ownership of fully automatic weapons
and place certain restrictions on the interstate sale of firearms unless certain
licenses are obtained. The Company does not currently intend to manufacture
fully automatic weapons, and is in the process of obtaining all necessary
licenses under these federal laws. From time to time, congressional committees
review proposed bills relating to the regulation of firearms. These proposed
bills generally seek either to restrict or to ban the sale, and in some cases
the ownership, of various types of firearms, or to impose a mandatory waiting
period prior to their purchase. Several states and many local municipalities
currently have laws in effect similar to the aforementioned legislation or other
laws which have the effect of discouraging the sale of ownership of firearms.

The Brady Law, mandating a nationwide 5-day waiting period prior to the
purchase of a handgun, was signed into law in November 1993, and became
effective February 28, 1994. The Company believes that, because its anticipated
customers will be sportsmen, hunters, gun collectors, and law enforcement
agencies, and since approximately 26 states already had enacted some form of a
waiting period prior to purchase, the Brady Law will not have a significant
effect on the Company's sales of firearms. The "Crime Bill" took effect on
September 13, 1994, but the Company believes that none of its products will be
banned as so-called "assault weapons" under the "Crime Bill". However, there can
be no assurance that the regulation of firearms will not become more restrictive
in the future and that any such restrictions would not have a material effect on
the business of the Company.

PROSPECT OF CIVIL LIABILITY; INADEQUATE INSURANCE COVERAGE. Personal
injuries and property damage allegedly resulting from use of products that have
been or may be developed and sold by the Company may expose the Company to
potential liability from claims. The Company is not currently a defendant in any
product liability or personal injury lawsuit; however, there can be no assurance
that such claims will not arise in the future based on past, present or future
services or products offered by the Company. The Company currently does not
maintain liability insurance coverage. Prior to the Company producing any
firearms the Company will attempt to obtain product liability insurance
coverage. There can be no assurance that the Company will be able to obtain
coverage on acceptable terms or that any such insurance will provide adequate
coverage against any potential claims. Moreover, even if the Company maintains
adequate insurance, any successful claims could materially and adversely affect
the reputation and prospects of the Company.

9
<PAGE>
COMPETITION. The markets in which the Company operates are highly
competitive. The Company believes that competition in the firearms industry is
based primarily on quality, product innovation, product image, price and
customer service and support. The Company's competitors will vary according to
product line. Certain of these competitors will be subsidiaries of large
corporations with substantially greater financial resources than those of the
Company. The Company believes that it is not prevented from selling a gun which
contains a 454 cartridge; however, the Company's ability to market such firearms
may be hindered by its inability to use the "454 Casull" trademark until the
expiration on February 1, 1998 of the exclusivity of the license granted by
Casull to Freedom Arms, Inc. The mini-revolvers to be manufactured by the
Company will compete against similar small firearms produced by North American
Arms and other manufacturers. These mini-revolvers will be subject to the same
high standard of quality to which the Company's other products will be subject.
Most of the companies that compete for this segment of the market manufacture
firearms that are sold at lower prices. The Company will manufacture the Rifle
(chambered for the Casull cartridge) as well as rifles chambered for
conventional cartridges. The rifles chambered for conventional cartridges will
compete with rifles produced by larger manufacturers, such as Weatherby and
Remington, and smaller manufacturers, such as Dakota Arms, and custom gunsmiths.
There can be no assurance that additional competitors will not enter the markets
in which the Company expects to compete.

NEW PRODUCT INTRODUCTIONS. The Company's success is dependent upon its
ability to design and deliver new products. As is typical with new products,
demand for and market acceptance of new products introduced by the Company are
subject to uncertainty. Achieving market acceptance for new products may require
substantial marketing and other efforts and the expenditure of significant funds
to create customer demand. There can be no assurance that the Company's efforts
will be successful. In addition, the failure of new products to gain sufficient
market acceptance could adversely affect the image of the Casull brand name and
demand for other Casull products.

RELIANCE ON CERTAIN SUPPLIERS AND DISTRIBUTORS. The Company expects to
utilize various raw materials, including steel, lead, plastics and wood in the
manufacture of its products for which the Company may rely on one or several
suppliers. The Company does not expect to have long-term purchase contracts with
any of these suppliers. Alternative sources, including foreign sources, exist
for each of these materials from which the Company could obtain such raw
materials. Nonetheless, the Company cannot give any assurance that supply
relationships with alternative sources can be established or that such
relationships could provide a timely and sufficient quantity or quality of
materials. In addition, the Company may incur additional costs in sourcing raw
materials from alternative suppliers.

The Company plans to distribute its products primarily through firearms
dealers. Federal law requires the licensing of firearms dealers. Because the
Company will only be permitted by applicable law to make retail firearm sales to
local Wyoming residents, the major method of distribution will be through
entities that possess federal firearms licenses ("FFL"). FFLs are issued by the
Bureau of Alcohol Tobacco and Firearms ("BATF"). The number of FFL holders has
decreased substantially in the past four years. This decrease in FFL holders is
believed to have been caused by an increase in licensing requirements by the
BATF. If BATF licensing requirements are further restricted or other laws are
enacted which otherwise hinder firearm sales, the number of FFL holders may
decrease, thus decreasing the Company's ability to distribute its products.

MANAGEMENT OF GROWTH AND ATTRACTION OF QUALIFIED PERSONNEL. The Company's
business may grow significantly over the next several years. To enable such
growth, the Company intends to add numerous new personnel in several areas. The
Company is currently planning the construction of its principal facility and, if
growth continues, the Company may need to further expand its facilities and
enhance its related systems and operations. The Company may not succeed in
attracting and retaining qualified personnel, particularly including management,
marketing and other skilled personnel, to its principal facility in the small
town of Afton, Wyoming. There can be no assurance that the Company will continue
to grow or be

10
<PAGE>
effective in managing its future growth or expanding its facilities and
operations. Any failure to manage growth, expand its operations or attract and
retain qualified personnel could have a material adverse effect on the Company's
business, operating results or financial condition.

WARRANTS; FUTURE FINANCINGS. The holders of the Warrants will have the
opportunity to profit from a rise in the price of the Common Stock. The
existence of the Warrants may adversely affect the terms on which the Company
can obtain additional equity financing in the future and the holders can be
expected to exercise them when the Company would, in all likelihood, be able to
obtain additional capital by offering additional shares of its unissued Common
Stock on terms more favorable to the Company than the terms provided by these
Warrants.

POTENTIAL ADVERSE EFFECT OF REDEMPTION OF THE WARRANTS. The Warrants are
redeemable by the Company at a price of $0.05 per Warrant commencing 13 months
from the date of this Prospectus, provided that (i) 30 days prior written notice
is given to the holders of the Warrants, and (ii) the closing bid price per
share of the Common Stock for any 20 trading days within a period of 30
consecutive trading days, ending on the fifth day prior to the date of the
notice of redemption, has been at least 150% of the initial public offering
price per share of Common Stock. The holders of the Warrants will automatically
forfeit their rights to purchase the shares of Common Stock issuable upon
exercise of such Warrants unless their Warrants are exercised before they are
redeemed. Notice of redemption of the Warrants could force the holders to
exercise their Warrants and pay the exercise price at a time when it may be
disadvantageous for them to do so, to sell the Warrants at the market price when
they might otherwise wish to hold the Warrants, or to 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--Redeemable
Warrants."

CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. Holders will have the right to exercise the Warrants and purchase
shares of Common Stock only if a current prospectus relating to such shares is
then in effect and only if the shares are qualified for sale under the
securities laws of the applicable state or states, or there is an exemption from
the applicable qualification requirements. The Company has undertaken and
intends to file and keep effective and current a prospectus which will permit
the purchase and sale of the Common Stock underlying the Warrants, but there can
be no assurance that the Company will be able to do so. Although the Company
intends to qualify for sale the shares of Common Stock underlying the Warrants
in those states in which the Securities are to be offered, no assurance can be
given that such qualification will occur. Holders of the Warrants may be
deprived of any value if a prospectus covering the shares issuable upon the
exercise thereof is not kept effective and current or if such underlying shares
are not, or cannot be, registered in the applicable states. Although the Company
does not presently intend to do so, the Company reserves the right to call the
Warrants for redemption whether or not a current prospectus is in effect or such
underlying shares are not, or cannot be, registered in the applicable states.
See "Description of Securities--Redeemable Warrants."

NO PRIOR PUBLIC TRADING MARKET; LISTING ON OTC ELECTRONIC BULLETIN BOARD;
ILLIQUIDITY OF TRADING MARKET

Prior to this Offering, there has been no public trading market for the
Common Stock or the Warrants and there can be no assurance that an active public
market for the Securities will be developed or sustained after this Offering.
The Common Stock and the Warrants will be quoted on the OTC Electronic Bulletin
Board, an NASD sponsored and operated inter-dealer automated quotation system
for equity securities not on NASDAQ, as well as in the NQB Pink Sheets published
by National Quotation Bureau Incorporated. The OTC Electronic Bulletin Board was
introduced two years ago as an alternative to "pink sheet" trading of
over-the-counter securities. There can be no assurance that the OTC Electronic
Bulletin Board will be recognized by the brokerage community as an acceptable
alternative to quotation on NASDAQ or in the NQB Pink Sheets. In the absence of
such recognition, the liquidity and stock price of the Securities in the
secondary market may be adversely affected, and there can be no assurance that a
public market for the Securities will develop or, if developed, that it will be
sustained. In addition, depending on several

11
<PAGE>
factors including the future market price of the Common Stock or Warrants, the
Securities could become subject to the so-called "penny stock" rules that impose
additional sales practice and market-making requirements on broker-dealers who
sell and/or make a market in such securities, which could affect the ability or
willingness of broker-dealers to sell and/or make a market in the Securities and
the ability of purchasers of the Securities to sell such Securities in the
secondary market.

LIMITS ON SECONDARY TRADING. Under the blue sky laws of most states, public
sales of Common Stock and Warrants after this Offering by persons other than the
Company in "non-issuer transactions" must either be qualified under applicable
blue sky laws, or exempt from such qualification requirements. By virtue of
conditions imposed by the Department of Corporations of the State of California
as a condition of qualifying the offer and sale of the Securities in this
Offering in California, purchasers of the Securities in this Offering in
California must meet certain investor suitability standards and will not be able
to resell Securities publicly (and there cannot be any public trading of the
Common Stock and Warrants in California) for at least 90 days after the closing
of this Offering. At that time, the Company intends to apply for an exemption
permitting secondary trading, and if the exemption is granted, secondary trading
in California may commence. Blue sky authorities in other states may impose
other restrictions on the secondary trading of Common Stock and Warrants in
those states. In many states, secondary trading of the Common Stock and Warrants
will be permitted only by virtue of an exemption so long as information about
the Company is published in a recognized manual such as manuals published by
Moody's Investor Service or Standard & Poor's Corporation. The Company intends
to apply for listing in a recognized manual and will attempt to be listed in a
recognized manual as soon after the closing of this Offering as practicable.
There will, however, be some period of time after the date of this Prospectus
during which purchasers of the Securities will not be able to resell shares of
Common Stock and Warrants in the states in which secondary trading is exempted
by virtue of a recognized manual exemption.

As a result of these or other restrictions that might be imposed, purchasers
in this Offering, existing stockholders and future stockholders may be
restricted or prohibited from selling the Common Stock or the Warrants in
particular states as a result of applicable blue sky laws. Purchasers of the
Securities should consult with their broker, counsel and other advisers to
determine whether there are any resale restrictions on public resale of the
Common Stock or the Warrants in the states in which they reside. These
restrictions may have the effect of reducing the liquidity of the Common Stock
or Warrants and could adversely affect the market price of the Common Stock or
the Warrants.

CONTROL BY CURRENT STOCKHOLDERS. If the Minimum Offering is completed,
current stockholders will beneficially own 573,750 shares or 59% of the Common
Stock outstanding. Of that number, Mr. Casull will beneficially own 71,875
shares or 12.5% of the Common Stock outstanding, and all officers and directors
as a class will beneficially own 375,084 shares or 39% of the Common Stock
outstanding. Such amounts and percentages do not include 1,133,333 shares of
Redeemable Common Stock which shares are subject to redemption for at least 90%
of the amount paid therefor by the holders of such shares if the Company does
not raise at least $5 million of additional equity capital on or before May 31,
1997. As a result, these stockholders acting in concert will have the ability to
elect or remove any or all of the Company's directors and to control
substantially all corporate activities involving the Company, including tender
offers, mergers, proxy contests and consolidations or other purchases of Common
Stock that could give stockholders of the Company the opportunity to realize a
premium over the then prevailing market price for their shares of Common Stock.

FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING. The Company will
only effect a closing of this Offering of less than $5,000,000 if the Company
obtains a waiver of the $5,000,000 threshold from the Redeemable Common
Stockholders. However, in the event the Company does obtain such waiver and does
close on the Minimum Offering the Company believes that the net proceeds from
the Minimum Offering, together with the Company's existing resources, will
satisfy its cash requirements for less than 12 months and the Company will then
need to obtain additional funds. There can be no assurance that the

12
<PAGE>
Company will be able to obtain the necessary additional funds on acceptable
terms. The Company believes that its existing resources, together with the
estimated net proceeds of the Maximum Offering, will satisfy its cash
requirements for the next 12 months. If the Company experiences unanticipated
cash requirements during the next 12 months, however, and in any event
thereafter, the Company may require substantial additional capital to fund its
operations. The Company may seek such additional funding through public or
private financing or collaborative or other arrangements with third parties.
There can be no assurance that additional funds will be available on acceptable
terms. If additional funds are raised by issuing equity securities, substantial
dilution to existing shareholders, including purchasers of the Securities
offered hereby, may result. If adequate funds are not available, the Company may
be required to delay, scale back or eliminate one or more of its strategies, or
to obtain funds through entering into arrangements with third parties that may
require the Company to relinquish certain exclusive rights that the Company
might not otherwise relinquish. See "Management's Discussion and Analysis or
Plan of Operation."

ANTI-TAKEOVER PROVISIONS. Certain provisions of the Company's Certificate
of Incorporation and Bylaws, as well as the Delaware General Corporation law,
could discourage a third party from attempting to acquire, or make it more
difficult for a third party to acquire, control of the Company without approval
of the Company's board of directors. Such provisions could also limit the price
that certain investors might be willing to pay in the future for shares of the
Common Stock. Such provisions also could delay, deter, or prevent a merger,
consolidation, proxy contest, tender offer, or other business combination or
change of control involving the Company that some or a majority of the Company's
stockholders might consider to be in their best interest, including offers or
attempted takeovers that might otherwise result in such stockholders receiving a
premium over the market price for the Common Stock.

POSSIBLE VOLATILITY OF STOCK OR WARRANT PRICE. The stock market has, from
time to time, experienced significant price and volume fluctuations that may be
unrelated to the operating performance of particular companies. In addition, the
market price of the Securities, like the stock prices of many publicly-traded
companies, may prove to be highly volatile. Announcements of innovations or new
commercial products by the Company or its competitors, developments or disputes
concerning proprietary rights, regulatory developments in the United States or
in foreign countries, as well as period-to-period fluctuations in financial
results, among other factors, may have a significant impact on the market price
of the Securities.

ARBITRARY OFFERING PRICE OF THE SECURITIES AND EXERCISE PRICE OF THE
WARRANTS. The offering price of the Securities and the exercise price of the
Warrants are completely arbitrary and are not based upon the Company's assets,
book value, cash flow, potential earnings or any other established criteria of
value. The initial public offering price for the Securities and the exercise
price of the Warrants were determined by negotiations between the Company and
the Placement Agent, and should not be regarded as indicative of any future
market price of the Common Stock or the Warrants. Among the factors considered
in determining the initial public offering price were the history and prospects
of the Company and the industry in which it will operate, the previous
experience of the Company's executive officers and the general condition of the
securities markets at the time of this Offering. See "Plan of Distribution". On
October 21, 1996, the Company completed a private placement (the "Private
Placement") and raised $3,400,000 from the sale of 1,133,333 shares of the
Redeemable Common Stock. The Company agreed that it would not use more than 10%
of the proceeds of the Private Placement to effect its business objectives
unless it raises an additional $5 million of equity capital. The Company agreed
that if it does not raise at least $5 million of additional equity capital on or
before May 31, 1997, it will offer the Private Placement investors the right to
sell their Common Stock back to the Company for at least 90% of the amount paid
therefor.

REPRESENTATIVE'S INFLUENCE ON THE MARKET. A significant amount of the
Securities offered hereby may be sold to customers of the Placement Agent. Such
customers may subsequently engage in transactions for the sale or purchase of
such Securities through or with the Placement Agent. If it participates in the
market, the Placement Agent may exert a dominating influence on the market, if
one develops, for the

13
<PAGE>
Securities described in this Prospectus. Such market making activity may be
discontinued at any time. The price and liquidity of the Common Stock and the
Warrants may be significantly affected by the degree, if any, of the
Representative's participation in such market. See "Description of Securities"
and "Underwriting."

SHARES ELIGIBLE FOR FUTURE SALES. Sales of shares of Common Stock by
existing shareholders, or by holders of the Warrants, under Rule 144 of the
Securities Act or otherwise could have an adverse effect on the trading price of
the Common Stock or the Warrants. The Company has agreed with the Placement
Agent to cause all holders of the shares of Common Stock outstanding prior to
this Offering to execute lock-up agreements with the Placement Agent that
restrict the sale or disposition of shares of Common Stock for 18 months from
the date of this Prospectus without the prior written consent of the Placement
Agent. The Placement Agent may consent to a waiver of this lock-up period
without prior public notice. Subject to this lock-up restriction, of the
2,107,083 shares of Common Stock that will be outstanding in the event of the
Minimum Offering or the 3,107,083 shares of Common Stock that will be
outstanding after the Maximum Offering, the 1,400,000 shares of Common Stock
sold in this Offering will be freely tradeable without restriction under the
Securities Act, 573,750 shares will be eligible for sale under Rule 144 on
August 7, 1997 and 1,133,333 shares will be eligible for sale under Rule 144 on
October 21, 1997. See "Description of Securities" and "Shares Eligible for
Future Sale."

ABSENCE OF DIVIDENDS. The Company has not paid any dividends on its Common
Stock and does not expect to do so in the foreseeable future.

IMMEDIATE SUBSTANTIAL DILUTION. The purchasers of the Securities will incur
immediate and substantial dilution of approximately $4.43 or approximately 74%
per share of Common Stock in the as adjusted net tangible book value of each
share of Common Stock from the Minimum Offering assuming no termination of the
redemption feature of the Redeemable Common Stock. The purchasers of securities
will incur immediate and substantial dilusion of approximately $2.71 or 45% in
the as adjusted net tangible book value of each share of Common Stock from the
Maximum Offering assuming termination of the redemption feature of the
Redeemable Common Stock. See "Dilution."

POSSIBLE ADVERSE EFFECTS OF AUTHORIZATION OF PREFERRED STOCK. The Company's
Certificate of Incorporation provides that up to 1,000,000 shares of Preferred
Stock may be issued by the Company from time to time in one or more series. The
Board of Directors is authorized to determine the rights, preferences,
privileges and restrictions granted to and imposed upon any wholly unissued
series of Preferred Stock and to fix the number of shares of any series of
Preferred Stock and the designation of any such series, without any vote or
action by the Company's stockholders. The Board of Directors may authorize and
issue Preferred Stock with voting or conversion rights that could adversely
affect the voting power or other rights of the holders of Common Stock. In
addition, the potential issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company, may
discourage bids for the Common Stock at a premium over the market price of the
Common Stock and may adversely affect the market price of the Common Stock. See
"Description of Securities--Preferred Stock."

14
<PAGE>
USE OF PROCEEDS

The gross proceeds from the sale of the Securities offered hereby if the
Minimum Offering is sold will be $2,440,000 and if the Maximum Offering is sold
will be $8,540,000, and the net proceeds to be received by the Company from the
sale of the Securities offered hereby, after deducting the Placement Agent's
discounts and commissions and all other applicable expenses, are estimated to be
between approximately $1,772,800 if the Minimum Offering is sold and
approximately $7,079,800 if the Maximum Offering is sold. The Company currently
anticipates applying such proceeds approximately as follows:

<TABLE>
<CAPTION>
MINIMUM OFFERING MAXIMUM OFFERING
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
APPROXIMATE APPROXIMATE
APPROXIMATE PECENTAGE APPROXIMATE PERCENTAGE
DOLLAR OF NET DOLLAR OF NET
APPLICATION OF PROCEEDS AMOUNT PROCEEDS AMOUNT PROCEEDS
- ---------------------------------------------------------- ------------ ------------- ------------ -------------
Purchase of Land.......................................... $ 120,000 6.8% $ 120,000 1.7%
Construction of Manufacturing Plant....................... 800,000 45.1% 800,000 11.3%
Acquisition of Machinery & Equipment...................... 852,800 48.1% 6,159,800 87.0%
------------ ----- ------------ -----
Total..................................................... $ 1,772,800 100.0% $ 7,079,800 100.0%
</TABLE>

The above figures represent the Company's best estimate based upon its
present plans and certain assumptions regarding general economic conditions and
the Company's future revenues and expenditures. The Company, therefore, reserves
the right to reallocate the net proceeds of this Offering among the various
categories set forth above as it, in its sole discretion, deems necessary or
advisable.

Any additional net proceeds realized from the exercise of the Over-allotment
Option or the Warrants will be added to the Company's working capital.

The Company will only effect a closing of this Offering of less than
$5,000,000 if the Company obtains a waiver of the $5,000,000 threshold from the
Redeemable Common Stockholders. However, in the event the Company does obtain
such waiver and does close on the Minimum Offering, the Company believes that
the net proceeds from the Minimum Offering, together with the Company's existing
resources (i) will only be sufficient to purchase the machinery and equipment
necessary to manufacture the major components of the Company's firearms products
and (ii) will satisfy its cash requirements for less than 12 months and the
Company will then need to obtain additional funds. In such event the Company
intends to engage sub-contractors to manufacture the other necessary components
of the Company's firearms products. There can be no assurance that the Company
will be able to obtain the necessary additional funding on acceptable terms.

The Company believes that the estimated net proceeds to be received by the
Company from the Maximum Offering, together with funds from the Private
Placement and from future operations, will be sufficient to meet the Company's
working capital requirements for a period of at least 12 months following the
date of this Prospectus. Thereafter, if the Company has insufficient funds for
its needs, there can be no assurance that additional funds can be obtained on
acceptable terms, if at all. If necessary funds are not available, the Company's
business would be materially and adversely affected.

Prior to expenditure, the net proceeds will be invested in short-term
interest-bearing securities or money market funds.

DIVIDEND POLICY

The Company currently anticipates that it will retain all available funds
for use in its business. The Company's future dividend policy will depend upon
the Company's earnings, capital requirements, financial condition and other
relevant factors.

15
<PAGE>
DILUTION

The Company had a deficit in net tangible book value of $(246,537) or $(.43)
per share as of February 28, 1997, based upon 573,750 shares of Common stock
outstanding. The deficit in net tangible book value per share is equal to the
Company's total tangible assets less its liabilities divided by the total number
of shares of its Common Stock outstanding prior to the Offering and termination
of the redemption feature of the Redeemable Common Stock. After giving effect to
the sale of 400,000 shares of Common Stock and 400,000 Warrants offered hereby
in the Minimum Offering at an initial public offering price per share of $6.00
per share of Common Stock and $.10 per Warrant and no termination of the
redemption feature of the Redeemable Common Stock, the as adjusted net tangible
book value of the Common Stock as of February 28, 1997 (after deducting
estimated placement agent discounts and commissions and all other expenses of
the Minimum Offering) would have been $1,526,263 or $1.57 per share. This would
represent an immediate increase in net tangible book value of $2.00 per share
and an immediate dilution of $4.43 or 74%. After giving effect to the sale of
1,400,000 shares of Common Stock and 1,400,000 Warrants offered hereby in the
Maximum Offering at an initial public offering price per share of $6.00 per
share of Common Stock and $.10 per Warrant and termination of the redemption
feature of the Redeemable Common Stock, the as adjusted net tangible book value
of the Common Stock as of February 28, 1997 (after deducting estimated placement
agent discounts and commissions and all other expenses of the Maximum Offering)
would have been $10,233,263 or $3.29 per share (including a $.17 per share
increase attributable to the termination of the redemption feature of the
Redeemable Common Stock). This would represent an immediate increase in as
adjusted net tangible book value of $3.72 per share and an immediate dilution of
$2.71 or 45%. The following tables illustrate this dilution on a per share basis
(assuming $.10 is attributed to the Warrants):

<TABLE>
<CAPTION>
MINIMUM
OFFERING
<S> <C> <C>
Assumed initial offering price per share..................................................... $ 6.00
Deficit in net tangible book value per share prior to the Minimum Offering(1).............. $ (.43)
Increase attributable to new investors..................................................... $ 2.00
As adjusted net tangible book value per share after the Minimum Offering and prior to the
termination of the redemption feature of the Redeemable Common Stock(2)(3)................. $ 1.57
-----

As adjusted dilution per share to new investors.............................................. $ 4.43
-----
-----

<CAPTION>
MAXIMUM
OFFERING
<S> <C> <C>
Assumed initial offering price per share..................................................... $ 6.00
Deficit in net tangible book value per share prior to the Maximum Offering(1).............. $ (.43)
Increase attributable to new investors..................................................... $ 3.89
As adjusted net tangible book value per share after the Maximum Offering and prior to
termination of the redemption feature of the Redeemable Common Stock(2).................... $ 3.46
-----

As adjusted dilution per share to new investors prior to termination of the redemption
feature of the Redeemable Common Stock..................................................... $ 2.54
Termination of the redemption feature of the Redeemable Common Stock(4)...................... $ .17
-----

As adjusted dilution per share to new investors.............................................. $ 2.71
-----
-----
</TABLE>

16
<PAGE>
The following tables summarize the number of shares of Common Stock
purchased, the percentage of total consideration paid, and the average price per
share paid by the existing stockholders and the new investors in the Minimum and
Maximum Offering made by this Prospectus. The Calculation below is based on an
initial public offering price of $6.00 per share of Common Stock (before
deducting placement agent discounts and commissions and all other estimated
expenses of the offering payable by the Company).
<TABLE>
<CAPTION>
MINIMUM OFFERING
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVERAGE
PRICE PER
SHARES PURCHASED TOTAL CONSIDERATION SHARE
--------------------- ------------------------ -----------

<CAPTION>
NUMBER % NUMBER %
---------- --- ------------- ---
<S> <C> <C> <C> <C> <C>
Existing Stockholders(3).................................. 573,750 59% $ 57,375 2% $ 0.10
New Investors............................................. 400,000 41% 2,400,000 98% $ 6.00
---------- --- ------------- --- -----
973,750 100% $ 2,457,375 100%
<CAPTION>

MAXIMUM OFFERING
------------------------------------------------------------
AVERAGE
PRICE PER
SHARES PURCHASED TOTAL CONSIDERATION SHARE
--------------------- ------------------------ -----------
NUMBER % NUMBER %
---------- --- ------------- ---
<S> <C> <C> <C> <C> <C>
Existing Stockholders(2)(4)(5)............................ 1,707,083 55% $ 3,457,375 29% $ 2.03
New Investors............................................. 1,400,000 45% 8,400,000 71% $ 6.00
---------- --- ------------- --- -----
3,107,083 100% $ 11,857,375 100%
</TABLE>

- ------------------------

(1) Deficit in net tangible book value per share excludes deferred registration
costs of $130,181. See the financial statements of the Company and the notes
thereto.

(2) As adjusted net tangible book value per share after the Minimum Offering and
Maximum Offering (after deducting estimated placement agent discounts and
commissions and all other expenses of the Minimum Offering and Maximum
Offering).

(3) Assumes no termination of the redemption feature of the Redeemable Common
Stock as the proceeds of the Minimum Offering are assumed to be less than
$5,000,000.

(4) Assumes termination of the redemption feature of the Redeemable Common Stock
as the proceeds of the Maximum Offering are assumed to be in excess of
$5,000,000 and the Maximum Offering is assumed to have occurred on or before
May 31, 1997.

(5) Assumes that securities received in exchange for 333,333 shares of Common
Stock at a subscribed price of $1,000,000 are sold for cash. The estimated
fair market value of such securities on February 28, 1997 was $1,242,500.

17
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
February 28, 1997 on an actual basis, and the capitalization on such date as
adjusted to give effect to the issuance and sale of an assumed 400,000 shares of
Common Stock and 400,000 Warrants in the Minimum Offering, and an assumed
1,400,000 shares of Common Stock and 1,400,000 Warrants in the Maximum Offering,
respectively, by the Company (after deducting estimated placement agent
discounts and commissions and all other expenses of the Minimum Offering and
Maximum Offering, respectively), assuming an initial public offering price of
$6.00 per share of Common Stock and $0.10 per Warrant:

<TABLE>
<CAPTION>
FEBRUARY 28, 1997(1)
-------------------------------------------
<S> <C> <C> <C>
AS ADJUSTED AS ADJUSTED
FOR MINIMUM FOR MAXIMUM
ACTUAL OFFERING(2) OFFERING(3)(4)
------------ -------------- -------------
Redeemable Common Stock, 1,133,333 shares of Common Stock designated
with redemption feature issued and outstanding at February 28, 1997
and as adjusted for the Minimum Offering; none isued and
outstanding, as adjusted for the Maximum Offering.................. $ 3,400,000 $ 3,400,000 $ --
Stockholders' Equity (Deficit):
Preferred Stock, par value $0.01 share; 1,000,000 shares
authorized, no shares issued and outstanding..................... -- -- --
Common Stock, par value $0.01 per share; 10,000,000 shares
authorized; 573,750 shares (excluding 1,133,333 shares of
Redeemable Common Stock) issued and outstanding actual; 973,750
and 3,107,083 shares outstanding (as adjusted), respectively..... 5,738 9,738 31,071
Additional paid-in capital......................................... 51,637 1,690,256 10,375,923
Accumulated deficit................................................ (173,731) (173,731) (173,731)
------------ -------------- -------------
Total stockholders' (deficit) equity............................... (116,356) 1,526,263 10,233,263
------------ -------------- -------------
Total capitalization............................................. $ 3,283,644 $ 4,926,263 $ 10,233,263
------------ -------------- -------------
------------ -------------- -------------
</TABLE>

- ------------------------
(1) The Company plans to adopt a fiscal year which begins on July 1 and ends on
June 30.

(2) As adjusted to give effect to the issuance of the Minimum Securities offered
hereby at an assumed initial offering price of $6.00 per share of Common
Stock and $.10 per Warrant (after deducting estimated placement agent
discounts and commissions and all other expenses of the Minimum Offering).
Assumes no termination of the redemption feature of the Redeemable Common
Stock as the proceeds of the Minimum Offering are assumed to be less than
$5,000,000. If the Offering does not result in raising at least $5,000,000
on or before May 31, 1997, the Company will need to receive a waiver of the
$5,000,000 threshold and/or the May 31, 1997 deadline from the Redeemable
Common Stockholders, or the Redeemable Common Stockholders will have the
right to sell their shares back to the Company for at least 90% of the
amounts paid. There is no assurance that such waiver can be obtained.
Assumes no exercise of the Placement Agent's Warrants. See "Plan of
Distribution."

(3) As adjusted to give effect to the issuance of the Maximum Securities offered
hereby at an assumed initial public offering price of $6.00 per share of
Common Stock and $0.10 per Warrant (after deducting estimated placement
agent discounts and commissions and all other expenses of the Maximum
Offering). See "Use of Proceeds." Assumes no exercise of the Placement
Agent's Warrants. See "Plan of Distribution."

(4) As adjusted to give effect to the removal of restrictions on cash and
investments of $2,160,000 and $1,242,500, respectively, the repayment of a
$242,500 liability to a director, and the termination of the redemption
feature of the Redeemable Common Stock in conjunction with the issuance of
the Maximum Securities offered hereby assuming the proceeds from the Maximum
Offering exceed $5,000,000 and the Maximum Offering occurs on or before May
31, 1997. If the Closing of the Offering does not occur on or before May 31,
1997, the Company will need to obtain waivers of the May 31, 1997 deadline
from the Redeemable Common Stockholders, or the Redeemable Common
Stockholders will have the right to sell their shares back to the Company
for at least 90% of the amounts paid. See the financial statements of the
Company and notes thereto.

18
<PAGE>
SELECTED FINANCIAL DATA

The selected financial data presented below for the Company's statement of
operations for the period July 23, 1996, the Company's date of incorporation,
through February 28, 1997, and the balance sheet as of February 28, 1997, are
derived from the Company's financial statements audited by Price Waterhouse LLP
which appear elsewhere in this Prospectus. The information set forth below
should be read in conjunction with the Company's financial statements and the
"Plan of Operations" included herein.

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JULY 23, 1996
(DATE OF INCORPORATION)
THROUGH FEBRUARY 28,
1997(1)
--------------------------
<S> <C>
STATEMENTS OF OPERATIONS DATA
Revenues.............................................................................. $ --
Expenses:
General and administrative expenses................................................. 204,764
Other income:
Interest and dividend income........................................................ 31,033
-----------
Net loss.............................................................................. $ (173,731)
-----------
-----------
Net loss per common share............................................................. $ (.11)
-----------
-----------
Weighted average number of common shares outstanding(2)............................... 1,542,288
-----------
-----------
</TABLE>

<TABLE>
<CAPTION>
FEBRUARY 28, 1997(1)
----------------------------------------------------------
<S> <C> <C> <C>
AS ASJUSTED FOR AS ADJUSTED FOR
ACTUAL MINIMUM OFFERING(3) MAXIMUM OFFERING(4)(5)
------------ -------------------- ----------------------
BALANCE SHEET DATA
Cash................................................. $ 52,285 $ 1,825,085 $ 9,292,085
Working capital...................................... (6,537) 1,766,263 10,233,263
Total assets......................................... 3,592,966 5,235,585 10,300,085
Total liabilities.................................... 309,322 309,322 66,822
Redeemable Common Stock.............................. 3,400,000 3,400,000 --
Stockholders' equity (deficit)....................... (116,356) 1,526,263 10,233,263
</TABLE>

- ------------------------

(1) The Company plans to adopt a fiscal year which begins on July 1 and ends on
June 30.

(2) See note 2 to the Company's financial statements.

19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION

OVERVIEW

On July 23, 1996 the Company was created and on October 14, 1996 it acquired
the rights to manufacture and sell high quality firearms designed by Casull. At
that time, the Company began to assemble a management team and develop a
strategic marketing plan focusing on the introduction of the Company's products
to a variety of consumers. The Company anticipates distributing its products
domestically through a network of wholesalers and retail dealers who have
federal firearms licenses. On October 14, 1996, the Company entered into an
exclusive license agreement with Casull for all of the rights, with certain
exceptions, to his present and future patents and other intellectual property.

The Company has several of its management team in place. The management team
includes a Chief Executive Officer and President. It is anticipated that a Chief
Financial Officer, Vice President of Sales, Vice President of Administration and
Marketing and a Vice President of Manufacturing will be hired within 18 months
of the date of this Prospectus. The Company's marketing plan was developed by an
outside consultant and will be implemented by the President and Vice President
of Sales.

Although the Company is in the development stage and does not expect any
revenues for 18 months, the Company believes there will be significant interest
in the Company's prototypes.

PLAN OF OPERATION

Since the Company was formed on July 23, 1996 it has focused primarily on
raising capital, producing prototypes, hiring the management team, marketing its
future products in industry trade magazines and preparing for the shooting,
hunting, outdoor trade show and conference (the "SHOT" show) which will be held
in January, 1997. The Company's cost for appearing at the SHOT show will be
approximately $100,000.

During the 18 months following this Offering, the Company expects to
purchase land currently identified, construct a manufacturing facility, acquire
and install machine tool equipment, tool the equipment for manufacturing, hire
and train production employees and produce test products. The Company will only
effect a closing of this Offering of less than $5,000,000 if the Company obtains
a waiver of the $5,000,000 threshold from the Redeemable Common Stockholders,
however, in the event the Company does obtain such a waiver and does close on
the Minimum Offering, the Company would modify its plans for the 18 months
following this Offering such that it would purchase land currently identified,
construct a manufacturing facility, acquire and install a more limited amount of
machine test equipment, tool such equipment for manufacturing, employ
sub-contractors to handle certain manufacturing, hire and train a more limited
number of production employees while using such sub-contractors and produce a
more limited number of test products. In either instance design and construction
of the facility will begin as soon thereafter as possible.

Once the Company has engaged a general contractor, the Company will focus
upon the acquisition and tooling of appropriate machine tools. The Company has
solicited proposals from several machine tool suppliers requesting
recommendations for specific machine tools and suggesting manufacturing
procedures best suited for the recommended equipment. Following the completion
of this Offering, the Company will order a barrel forging machine which will
produce hammer forged rifle and handgun barrels, CNC machining centers, CNC
turning centers and CNC screw machines. These machines are the major pieces of
equipment involved in the manufacturing process and allow for the longest lead
time between order and delivery. From month 3 to month 6 additional
manufacturing equipment will be ordered. Lead time between ordering and delivery
is important to insure that equipment is delivered to avoid production delays.
Equipment ordered as provided above will be ready for delivery beginning in the
tenth month. Delivery, assembly and testing of the machine tools will take
approximately two months.

20
<PAGE>
Beginning in month 2 after the date of this Prospectus, the Company will
begin to hire employees and secure the management team previously described. The
first employee to be hired will be a machinist who will assist Casull with
research and development, assist in evaluating equipment and tooling, and assist
in producing detailed working drawings of various firearm parts. Once hired, the
Vice President of Manufacturing will be responsible for the manufacturing
process. This person's responsibilities will include the scheduling of product
flow and the planning of raw material acquisitions. Production workers will be
hired as equipment is installed and becomes ready for operation. These
individuals will receive on-the-job training from the machine tool
representatives and their supervisors.

Between month 6 and month 9 the Company will submit a proposal to Afton,
Wyoming to obtain an economic development grant for job training. If obtained,
this grant may reimburse up to $100,000 of expenses incurred by the Company for
job training. There can be no assurances, however, that the Company will be able
to attract and retain employees with the necessary skills. See "Risk Factors--
Management of Growth and Attraction of Qualified Personnel."

Beginning in month 14 and proceeding through month 18, the Company will
finish tooling the equipment and produce pre-production test firearms. These
firearms will be subjected to rigorous performance testing and quality control.
This procedure is necessary to insure quality firearms.

RESULTS OF OPERATIONS

NET LOSS. The Company reported a net loss of $173,731 or $0.11 per common
share for its initial period of operations from inception (July 23, 1996) to
February 28, 1997. The loss is primarily the result of having no sales generated
for that period as compared to costs and expenses incurred pertaining primarily
to the organizational and developmental activities of the Company to date.

REVENUES. Revenues from July 23, 1996 through February 28, 1997 were $0.

COSTS AND EXPENSES. Costs and expenses from July 23, 1996 through February
28, 1997 totalled $204,764.

LIQUIDITY AND CAPITAL RESOURCES

Capital for the operations of the Company to date has been provided by sale
of Common Stock to the founders of the Company and to purchasers in the private
placement completed on October 21, 1996 (the "Private Placement"). On August 7,
1996, the Company sold 573,750 shares of Common Stock, at a purchase price of
$0.10 per share, to 14 investors. These funds have been or will be used to fund
the organizational activities of the Company.

The Company raised $3,400,000 from the Private Placement with the sale of
1,133,333 shares of Common Stock. The Company agreed that it would not use more
than 10% of the proceeds of the Private Placement to effect its business
objectives unless it raises an additional $5 million of equity capital. The
Company agreed with the purchasers of the Common Stock in the Private Placement
that if it does not raise at least $5 million of additional equity capital on or
before May 31, 1997 it will offer such purchasers the right to sell their Common
Stock back to the Company for at least 90% of the amount paid therefor. Assuming
the completion of this Offering, the Company expects to use the net proceeds of
the Private Placement for working capital and general corporate purposes.

The Company will only effect a closing of this Offering of less than
$5,000,000 if the Company obtains a waiver of the $5,000,000 threshold or a
waiver of the May 31, 1997 deadline from the Redeemable Common Stockholders;
however, in the event the Company does obtain such waiver and does close on the
Minimum Offering, the Company believes the net proceeds from the Minimum
Offering, together with the Company's existing resources, will satisfy its cash
requirements for less than 12 months and the Company will then need to obtain
additional Funds. There can be no assurance that the Company will be able to
obtain the necessary additional funding on acceptable terms.

21
<PAGE>
The Company believes that the estimated net proceeds to be received by the
Company from this Offering, together with funds from the Private Placement and
from future operations, will be sufficient to meet the Company's working capital
requirements for a period of at least 12 months following the date of this
Prospectus. Thereafter, if the Company has insufficient funds for its needs,
there can be no assurance that additional funds can be obtained on acceptable
terms, if at all.

22
<PAGE>
BUSINESS

GENERAL

The Company plans to construct a manufacturing facility which is expected to
have an annual production capacity of 10,000 -- 12,000 units of firearms. The
manufacturing facility is projected to begin operations within 18 months from
commencement of construction and is expected to be fully operational within two
years from the closing of this Offering. In addition to providing manufacturing
space, the facility will likely contain a retail showroom and custom shop in
which management plans to produce collectors editions and specially engraved
firearms in the custom shop. The manufacturing facility's initial output will be
sold domestically, emphasis may also be placed on developing foreign markets.

The Company intends to order production equipment which will be computer
numerically controlled ("CNC") to ensure speed and repeatability of the
manufacturing process. The CNC milling centers, CNC lathes and CNC barrel
forging machine are sophisticated machines that will be installed by the
manufacturer and will be operated by machinists who will be trained by the
manufacturer.

INDUSTRY OVERVIEW

According to a 1995 survey conducted by the National Sporting Goods
Association, the U.S. market for the firearms and hunting industry was
approximately $3.0 billion. A National Rifle Association study conducted in 1995
indicated that there were approximately 230 million firearms owned by
approximately 60-65 million people. According to American Sports Data
Incorporated, in 1994 approximately 20 million people participated in hunting,
approximately 20 million participated in target shooting and approximately 5
million participated in trap and skeet shooting. The Bureau of Alcohol Tobacco
and Firearms estimates that total U.S. production of firearms was approximately
5.2 million units in 1994.

In May 1996, the Company commissioned the preparation of a marketing plan by
Professor Michael Darling, a marketing professor at the Leonard Stern School of
Business of New York University. This marketing plan included a situation
analysis consisting of market data, consumer behavior information, retail
structure and a detailed competitive analysis. The results of the situation
analysis indicated the following: (i) the market for firearms in the United
States is large and growing; (ii) shooting sports are popular, evidenced by the
20 million Americans who hunt and the 20 million who target shoot; (iii) market
interest among women is growing; and (iv) gun owners typically own several guns.

The markets for handguns and rifles and hunting-related products are large,
mature markets that the Company believes have historically been relatively
stable and have exhibited modest growth over the past three years. Although
firearms may be used for decades with proper maintenance, the Company feels that

23
<PAGE>
the used firearms after-market has traditionally not undercut the new firearms
market significantly. The reason for this is in part because of demand by
collectors for used firearms and in part because of continuing demand for
improved products. The Company believes that much of the demand in the new
firearms market comes from repeat buyers who are motivated by new calibers and
technological advancements.

From 1985 to 1994 the U.S. production of rifles increased slightly while
sales of revolvers decreased slightly. However, the U.S. production of
semi-automatic pistols has increased substantially. In 1994 U.S. rifle
production was approximately 1.3 million units and revolver production exceeded
550,000 units.

The firearms industry has witnessed few innovative improvements in rifle
design since the turn of the century. Different rifle features have been
introduced, but, in general, cartridges, calibers, and mechanisms have remained
unchanged. As a result, the Company believes that consumer interest in rifles
have stagnated.

RICHARD J. CASULL

Casull enjoys a reputation within the firearms industry as a talented and
innovative firearms designer. In the Shootist Newsletter (May 1993), Alan
Taylor, a noted firearms expert, describes Casull as "the [firearms] design
genius of today". Casull has more than 40 years of experience in the firearms
industry and has been featured in numerous articles in U.S. magazines and also
in magazines published in Germany and Japan. For this reason Casull's reputation
in the firearms industry will be beneficial to the Company.

In the early 1950's Casull set out to build a high powered handgun. His
experiments began with loading "hot" ammunition for the 45 long Colt. The
pressures generated by these loads were generally too high for the quality of
existing handguns. In 1957, Casull developed a handgun chambered for a 454
cartridge while attempting to engineer and design a revolver to exceed the
strength requirements associated with the expected pressures. The strength and
design of this revolver allowed Casull to experiment with triplex loads which
generated over 50,000 pounds of pressure per square inch and still maintained a
safety factor. With the energy and velocity generated by the 454 cartridge,
Casull elevated the handgun to a level equal to high powered hunting rifles. A
handgun chambered for a 454 cartridge is capable of taking all big game animals
including "Africa's big five." The 454 Casull is currently produced by Freedom
Arms, Inc. under an exclusive license from Casull.

Casull also designed a mini-revolver that is accurate and easily fits into
the palm of the hand. The mini-revolver is currently manufactured and sold by
North American Arms. The Company expects to sell a mini-revolver of similar or
better design.

LICENSE AGREEMENT WITH RICHARD J. CASULL

On October 14, 1996, the Company entered into the License Agreement with
Casull, the Company's Chief Executive Officer, whereby Casull granted to the
Company the exclusive worldwide right to utilize any of the present or future
intellectual property developed by Casull not already licensed under prior
agreement. Products which other entities have the right to build include (i) a
design for a revolver chambered in a 454 cartridge and manufactured by Freedom
Arms and (ii) a black powder mini-revolver manufactured by North American Arms.
All other Casull products will be available for the Company to manufacture on an
exclusive basis. The License Agreement provides that the Company will pay Casull
a salary of $100,000 per year and 5% of the Company's revenues from products
utilizing the intellectual property or bearing the "Casull" name; provided that
Casull will be paid a minimum annual royalty of $40,000 and a maximum annual
royalty of $400,000 per calendar year. This fee is payable to Casull for the
remainder of his life. The royalty payments due under the License Agreement will
cease upon the death of Casull; however, if Casull's wife, Mrs. Geraldine
Casull, should survive Casull, the royalty payments will continue until the
earlier of ten years from the date the first royalty payment is made to Casull
pursuant to

24
<PAGE>
the License Agreement or the death of Mrs. Casull. In the event that Casull's
employment with the Company is terminated, the Company will cease payment of the
salary to Casull; however, the minimum annual royalty and the maximum annual
royalty will increase from $40,000 to $120,000 and from $400,000 to $500,000,
respectively. Casull may terminate the License Agreement if the Company fails to
pay to Casull the royalties due him, or if the Company fails to keep or perform
any other material provision of the License Agreement, or if the Company files
for protection under Federal or state bankruptcy laws, or is placed in the hands
of a receiver or trustee in bankruptcy. The Company may cure such default within
60 days of the receipt of written notice from Casull. In the event the License
Agreement is canceled by Casull with cause, the licenses granted to the Company
under the License Agreement will terminate.

PRODUCTS

The Company plans initially to manufacture four different types of firearm
products in two industry categories: revolvers (large frame, small frame and
mini-revolvers) and rifles. It is contemplated that these firearms will be made
available in several styles based upon caliber, barrel length and other
features.

REVOLVERS

A revolver is a handgun which has a cylinder that holds the ammunition in a
series of chambers which are successively aligned with the barrel of the gun
during each firing cycle. A cartridge is the casing that holds the bullet and
gun powder in place within the rifle.

LARGE FRAME

The Company expects to produce large frame revolvers primarily chambered for
a 454 cartridge. The 454 cartridge is a 45 caliber magnum revolver cartridge
that is approximately 60% more powerful than the 44 magnum. In addition to being
chambered in the 454 cartridge, other 45 caliber ammunition can be fired by
interchanging cylinders. The Company expects that cylinders for the large frame
revolver will be chambered to fire 45 ACP, 45 Winchester magnum and 45 long Colt
cartridges. The Company plans to sell interchangeable cylinders which will be
sold as accessories to the large frame revolver. Although the 45 caliber will be
the backbone of manufacturing and marketing for the large frame revolver, it can
be successfully chambered in any caliber, from 22 long rifle up to 50 AE (Action
Express). The Company believes that it is not prevented from selling a gun which
contains a 454 cartridge; however, the Company's ability to market such firearms
may be hindered by its inability to use the "454 Casull" trademark until the
expiration on February 1, 1998 of the exclusivity of the license granted by
Casull to Freedom Arms, Inc.

SMALL FRAME

Casull has designed a small frame revolver that is approximately 80% of the
size of the large frame revolver. The prototype small frame revolver is
currently chambered in 32 H&R magnum and is believed to be an ideal size for 22
long rifle and 22 magnum. When chambered in 22 caliber, the small frame revolver
can be sold with a 22 long rifle cylinder and 22 magnum cylinder which allow
either cartridge to be fired.

MINI-REVOLVER

Casull has two mini-revolver designs that the Company intends to produce.
The designs include a double action revolver with an enclosed hammer, a fold up
trigger and a manual safety. The other mini-revolver is a single action firearm.
These revolvers are designed to chamber either the 22 long rifle or the 22
Winchester magnum cartridge.

25
<PAGE>
RIFLES

A rifle is a long gun with spiral grooves cut into the interior of the
barrel to give the bullet a stabilizing spin after it leaves the barrel.

THE CASULL RIFLE.

The Rifle will differ from the conventional rifle, providing, management
believes, a more powerful and more accurate weapon. It has been engineered to
propel a bullet at greater velocities than conventional rifles without
significantly increasing pressures. This increase in efficient utilization of
energy is achieved by using a short fat cartridge.

The short fat cartridge system has advantages over current cartridges. The
short fat cartridge effectuates powder burning in the cartridge rather than
burning as it is pushed down the barrel. The result is that energy is focused
solely on propelling the bullet rather than propelling the bullet and the
powder.

In contrast, long narrow cartridges promote powder burning to occur both in
the cartridge and in the barrel, consequently reducing the amount of energy
applied to the bullet, thereby negatively affecting the velocity of a given
load.

Perhaps one of the most significant problems in developing a short fat
cartridge is the required bolt size. Traditionally, the bolt's diameter had to
be substantially greater than the diameter of the cartridge head. This was
necessary so that the extractor could connect to the case head exterior notch
and extract the shell. Casull believes he has solved this problem by designing a
case which is based on an interior extraction. The Casull bolt inserts into a
recessed area of the cartridge head and connects to an interior extraction ring.
This inside extraction method allows the bolt to be the same size as the case.
Thus a short fat cartridge may be used without having a prohibitively large
bolt.

CHARACTERISTICS OF THE CASULL RIFLE

SUPERIOR VELOCITIES. The efficient use of energy generated by the Rifle
creates superior velocities. In test firings of the 30 caliber Rifle
prototype conducted by Casull, superior velocities of 3,450 feet per second
were obtained using a 200 grain bullet.

BARREL LIFE. In addition to superior velocities, it is believed that the
Casull system increases barrel life. In conventional rifles, barrel wear
occurs because much of the powder is burned in the barrel, resulting in high
temperatures generated from the burning gun powder. The Rifle has been
designed to minimize the amount of powder burned in the barrel, increasing
the useful life of the barrel.

SAFETY CONSIDERATIONS. Conventional cartridges are designed to protrude
from the chamber allowing the extractor to attach to the cartridge rim. The
area where the cartridge extends beyond the chamber is vulnerable to
cracking, which can result in blow-backs. The Rifle, however, is designed so
that the cartridge is entirely inserted into the chamber. This design tends
to seal all gases in the chamber and thereby reduces the possibility of a
blow-back.

THE FLASH TUBE. It is believed that the Rifle can be further enhanced by
the use of a flash tube to achieve front ignition just behind the bullet. A
flash tube is a small cylindrical tube that fits in the interior of the case
and over the primer flash hole. As the primer detonates, the powder column
is ignited from just behind the bullet, and the powder column burns from the
bullet backwards. The advantage to this is that no powder burns in the
barrel, which eliminates the added weight of unburned and burning powder
being pushed down the barrel along with the bullet. The result is higher
velocities because less mass is being propelled.

The use of a flash tube also appears to improve the efficiency of the
Rifle. Without a flash tube, the powder at the bottom of the case (or by the
flash tube hole above the primer) is ignited first. Because the powder
column is narrow and the burning powder causes increased pressure, a slow

26
<PAGE>
burning powder should be used. Consequently, this powder is pushed down the
barrel, weighing on the bullet and negatively affecting its velocity. The
use of a flash tube, then, enhances the ability of the Rifle to use energy
efficiently.

RELOADING SIMPLICITY. The Rifle allows for simplicity and precision in
reloading. Casull has designed the Casull Cartridge System and flash tube
with manufacturing and reloading in mind. The case will be made of brass
with a stainless steel head. The stainless steel head not only provides
great strength around the primer pocket but is also conducive to increased
case life. Cases and ammunition will be manufactured for a flash tube and
will also be configured without the flash tube. Those cases designed to be
used with a flash tube will have a deep primer pocket. The flash tube will
be inserted through the primer pocket and held in place by the primer.

HAMMER FORGED BARRELS

In addition to manufacturing firearms, the Company intends to manufacture
hammer forged barrels to be sold as replacement barrels in used rifles. The
Company will acquire a precision hammer forging machine designed specifically to
produce hammer forged firearm barrels. In the opinion of some firearms experts,
hammer forging creates one of the highest quality rifle barrels available today.
Many of the high quality rifles available on the market today come with hammer
forged barrels.

It is management's belief that there is no current source for consumers to
acquire hammer forged barrels to be used in replacing the barrels on used
rifles. The Company will manufacture and sell hammer forged barrels to satisfy
this market. In addition to supplying hammer forged barrels to consumers, the
Company will use these barrels in producing revolvers and the Rifle.

The barrels produced by the Company will be marketed under the "Casull"
name, which is well-known as a result of Casull's affiliation with other noted
barrel makers. The Casull barrels will be for all types of calibers from 22 up
to 45. In addition, the barrels could be chambered at the plant for a specific
cartridge. Thus, for example, a barrel can be made to shoot a 22 caliber bullet
yet it can be chambered for one of several cartridges such as a 222
Remington-TM-, 223 Remington-TM-, 22 PPC-TM-, 225 Winchester-TM-, 22-250
Remington-TM- and various other cartridges. The Company will have the capability
of supplying barrels for most of the common calibers and chambers for most
cartridges.

PRODUCT DEVELOPMENT

The Company intends to introduce other products. Casull has also designed
reloading equipment, dies, presses and shell holders for certain cartridges.
Moreover, the Company will seek to manufacture or license a clothing-line under
the Casull name. These and other paraphernalia may be manufactured by or for the
Company with the intent to increase the awareness of the Casull brand in the
marketplace. The License Agreement provides that Casull will bear the costs
associated with developing prototypes. Once a prototype has been created, the
Company will incur research and development costs to develop manufacturing
procedures and methods for each product.

MANUFACTURING

The primary raw material which will be used in the manufacturing of the
Company's products is stainless steel. Aluminum, other steels and wood will be
used in the process. The stainless steel and the other metal products will be
available from various steel mills and steel distributors throughout the
country. Wood and other materials used in handgun grips and rifle stocks are
also available from various mills and distributors. The Company will purchase
raw materials from the suppliers that offer both favorable pricing and quality
materials.

The raw materials will then be developed with state of the art equipment.
The majority of the production equipment will be computer-operated and capable
of performing many functions at high

27
<PAGE>
speeds. The machinery to be acquired by the Company will have the ability to
manufacture 10,000 to 12,000 units per year. Although computer-controlled, the
equipment will still require constant monitoring by machinists for tool wear and
quality.

Prior to final finishing, firearms will be assembled and test-fired in order
to insure that the firearms function properly and operate safely. Much of the
final assembly and finishing of the firearms will be performed by craftsmen who
will insure that the firearm functions properly and that the aesthetics are of
fine quality.

MARKETING STRATEGY

The Company's management has identified several potential candidates for the
position of Vice President of Marketing. This individual will be responsible for
product packaging, advertising, customer relations and customer service. In
addition to the Vice President of Marketing, the Company expects to engage
manufacturers' representatives to sell the products. The Company is negotiating
with Star Valley Marketing, Inc. to provide for the marketing of the Company's
products in North America. Star Valley Marketing, Inc. is associated with 51
independent manufacturers' representatives who presently represent companies
such as Beretta-TM- and Swarovski Optics-TM-. These representatives deal
directly with over 2,500 licensed firearms dealers nationwide.

DOMESTIC DISTRIBUTION. Manufacturers' representatives will be instrumental
in the promotion of the Company's products. They will introduce the new products
to the dealer and will serve as liaison between the dealers and the Company. As
representatives of the product, they will also play a very important part in
trade shows such as the Shot Show, the Safari Club Show and the Nuremberg Gun
Show. Manufacturers' representatives will provide a medium for the efficient
dissemination of information and the introduction of new products, such as the
Rifle, to the market.

INTERNATIONAL DISTRIBUTION. In addition to addressing the demands of the
U.S. market, the Company will seek to export products to foreign markets. Prior
to exporting any product, the Company must obtain an exportation license from
the Bureau of Alcohol Tobacco and Firearms, and must get approval from the State
Department. The Company will apply for these licenses and approvals during the
period that the manufacturing facility is being built. This will permit the
exporting of products and the development of foreign markets during the early
stages of production.

The Company expects that its products will be marketable for use in the
following markets:

RECREATIONAL SHOOTING. Recreational shooting, which includes target
shooting, silhouette shooting, action shooting and plinking is on the increase
in the U.S. Action shooting such as "cowboy shooting" has become popular. Cowboy
shooting requires the use of a single action revolver and a lever action rifle
over a predetermined course. The Company believes that the large and small frame
revolvers are ideal for these types of shooting activities.

HUNTING. The Company expects that the revolvers and the Rifle will be
popular hunting firearms. A handgun chambered in a 454 cartridge has taken
"Africa's big five." The Company believes that the combination of high velocity,
flat trajectory, increased accuracy, and impact energy contributes to an
outstanding hunting firearm. Both the Rifle and the revolvers are believed to
possess these qualities.

COMPETITIVE SHOOTING. The Company anticipates that the Rifle and the
revolvers will be favorably received by silhouette shooters. In the
International Handgun Metallic Silhouette Association's 1995 World Championship,
a majority of the shooters used guns designed by Casull. In the Centerfire
Revolver International Class, 43 of the top 47 shooters used a firearm designed
by Casull and manufactured by Freedom Arms, Inc. In the Rimfire Revolver
International Class, 17 of the top 20 shooters used a firearm designed by Casull
and manufactured by Freedom Arms, Inc. The Company plans on selling some, but
not all, of the firearms used by the top shooters in those competitions.

28
<PAGE>
Management believes the Rifle will improve competitive shooting, especially
in the long distance accuracy shooting arena which includes events such as the
Camp Perry competition. Long distance events are those which involve shooting
distances of 1,000 yards or more. It is expected that the Rifle will be in high
demand in these events because of the "flat" trajectory and high velocity. These
factors improve accuracy by decreasing the effect of wind and gravity on the
bullet over a specified distance.

COLLECTORS. In order to attract the gun collectors market, the Company
plans to open a custom shop. The custom shop will provide customers with the
ability to customize the Company's products with such items as exotic grips,
woods and engraving. Additionally, the custom shop will produce limited edition
runs of each new product introduced and commemorative special editions.

MILITARY & POLICE. The Company believes that the velocity, trajectory, and
terminal energy of a bullet fired from the Rifle will make it useful in military
and/or police service.

INTELLECTUAL PROPERTY

The Company has entered into a License Agreement with Casull for rights to
his present and future patents and other intellectual property, with the
exception of (i) the U.S. Pat. No. 5,048,216, generally referred to as the
"barrel forcing cone bushing", (ii) the "454 Casull" trademark, registered in
connection with ammunition, which the Company has exclusively licensed to
Freedom Arms, Inc. through February 1, 1998 and which the Company has licensed
to Freedom Arms, Inc. on a non-exclusive basis thereafter and (iii) a black
powder mini-revolver manufactured by North American Arms.

The Company will rely upon a combination of contractual arrangements,
patent, copyright and trademark laws to protect its proprietary rights and the
proprietary rights of third parties from whom the Company licenses intellectual
property. There can be no assurance that the steps taken by the Company in this
regard will be adequate to deter misappropriation of proprietary information or
that the Company will be able to detect unauthorized use and take appropriate
steps to enforce its intellectual property rights. All intellectual property
developed by Casull will be assigned to the Company.

COMPETITION

The markets in which the Company will operate are highly competitive. The
Company believes that competition in the firearms industry is based primarily on
quality, product innovation, product image, price, customer service and support.

The Company's competitors will vary according to product line. Certain of
these competitors are subsidiaries of large corporations with substantially
greater financial resources than the Company.

The Company believes that it is not prevented from selling a gun which
contains a 454 cartridge; however, the Companys' ability to market such firearms
may be hindered by its inability to use the "454 Casull" trademark until the
expiration on February 1, 1998 of the exclusivity of the license granted by
Casull to Freedom Arms, Inc.

The Company will manufacture the Rifle (chambered for the Casull cartridge)
and rifles chambered for conventional cartridges. Management believes that the
technology of the Rifle will place it in the high end of the market. The rifles
chambered for conventional cartridges will compete with rifles produced by large
manufacturers, such as Weatherby and Remington, smaller manufacturers such as
Dakota Arms, Lazzeroni Arms Company and custom gunsmiths.

The Company's large frame revolver will compete directly with Freedom Arms'
single action revolver. The primary difference between the Company's revolver
and Freedom Arms' revolver is the action. Casull has designed a new action that
prevents the firing pin from resting on the cartridge when the hammer is down.
The new action may prevent accidental discharge of the gun, if dropped or if the
hammer is mistakenly hit. Such accidental discharges have occurred in other
revolvers that do not have this feature.

29
<PAGE>
The Company's revolvers are expected to have distinctive cosmetic features such
as the grips, barrel design and other such variations.

GOVERNMENT REGULATION

The Company will be subject to extensive federal, state, local and foreign
firearms regulations. Among the Federal firearms laws to which the Company will
be subject are THE GUN CONTROL ACT OF 1968 (the "GCA"), THE NATIONAL FIREARMS
ACT (the "NFA"), THE ARMS EXPORT CONTROL ACT (the "AECA") and THE FEDERAL
FIREARMS ACT (the "FAA"). The Company plans to be in compliance with all
regulatory and licensing requirements of the GCA, NFA and FAA. The Company
currently does not export any firearms, and consequently is not subject to the
requirements of AECA. However, it is the Company's intention to obtain all
licenses necessary to export firearms.

The purchase of firearms is subject to federal, state, and local
governmental regulations. The applicable federal laws are the NFA and the FFA.
These laws generally prohibit the private ownership of fully automatic weapons
and place certain restrictions on the interstate sale of firearms unless certain
licenses are obtained. Currently, the Company does not intend to manufacture
fully automatic weapons, and is in the process of obtaining all necessary
licenses under these federal laws. From time to time, congressional committees
review proposed bills relating to the regulation of firearms. These proposed
bills generally seek either to restrict or to ban the sale, and in some cases
the ownership, of various types of firearms, or to impose a mandatory waiting
period prior to their purchase. Several states and many local municipalities
currently have laws in effect similar to the aforementioned legislation or other
laws which have the effect of discouraging the sale or ownership of firearms.

The Brady Law, mandating a nationwide 5-day waiting period prior to the
purchase of a handgun, was signed into law in November 1993, and became
effective February 28, 1994. The Company believes that, because its customers
are expected to be sportsmen, hunters, gun collectors, and law enforcement
agencies, and since approximately 26 states already have enacted some form of a
waiting period prior to purchase, the Brady Law will not have a significant
effect on the Company's sales of firearms. The "Crime Bill" took effect on
September 13, 1994, but the Company believes that none of its products appear to
qualify as "assault weapons" under the "Crime Bill." However, there can be no
assurance that the regulation of firearms will not become more restrictive in
the future and that any such restrictions would not have a material effect on
the business of the Company.

INSURANCE

The Company currently does not maintain liability insurance coverage. Prior
to producing any firearms, the Company will attempt to obtain product liability
insurance coverage. There can be no assurance that the Company will be able to
obtain adequate liability insurance coverage.

LEGAL PROCEEDINGS

The Company is currently not a party to any legal proceedings.

EMPLOYEES

As of the date of this Prospectus, the Company has no employees. However,
the Company anticipates that its operations over the next twelve months will
require approximately 8 employees, the majority of which will be members of the
management team.

PROPERTIES

Immediately upon the closing of this Offering, the Company intends to
purchase from International Financial Group of Wyoming, Inc. ("IFG"), an entity
controlled by Allan R. Tessler, land upon which the manufacturing facility will
be built. The land, located in Afton, Wyoming, consists of 10 acres and will be
purchased by the Company from IFG for $120,000. This amount approximates (i) the
price IFG paid for the land, (ii) IFG's transaction costs incurred for the
purchase and sale of the land and (iii) interest at the rate of 6% on the
purchase price of the land during the term of IFG's ownership of the land.

30
<PAGE>
MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

The executive officers, directors and other significant employees of the
Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>

Allan R. Tessler..................................... 60 Chairman of the Board

Richard J. Casull.................................... 64 Chief Executive Officer, Chief Operating Officer and
Director

David M. Myers....................................... 43 President and Director

David R. Markin...................................... 65 Director

Andrea L. Tessler.................................... 33 Director

Marshall Kiev........................................ 28 Director
</TABLE>

Directors hold office until the next annual meeting of stockholders and
until their respective successors have been elected and qualified. Executive
officers are chosen by and serve at the discretion of the Board of Directors.
Both Mr. Casull and Mr. Myers, the executive offices of the Company, intend to
devote their full time efforts to the Company.

ALLAN R. TESSLER, has served as Chairman of the Board of the Company since
its inception. Mr. Tessler also serves as Co-Chief Executive Officer and
Co-Chairman of the Board of Data Broadcasting Corporation ("DBC"), a distributor
of stock market and relevant information to individual investors, since June
1992 and has served as Chairman of the Board and CEO of International Financial
Group, Inc., an international merchant banking firm since 1987. He was Chairman
of the Board of Great Dane Holdings, Inc. ("Great Dane"), a diversified holding
company until December 1996, Enhance Financial Services Group Inc. ("Enhance), a
municipal bond reinsurer, and Jackpot Enterprises, Inc. ("Jackpot"), a gaming
machine route operator. From December 1991 through September 1993 Mr. Tessler
was Chairman of the Board and CEO of Ameriscribe Corporation, a national
provider of facilities management services. Mr. Tessler also serves on the
boards of The Limited, Inc., Allis-Chalmers Corporation and New T&T DBC Limited,
a joint-venture between DBC and New T&T Hong Kong Limited, a wholly-owned
subsidiary of Wharf Communications Investments, Ltd. Mr. Tessler was appointed
to serve on the restructuring team formed to address the financial problems of
Financial News Network Inc. ("FNN"), and in that capacity served as Co-Chief
Executive Officer of FNN from October 1990 until June 1992. On June 26, 1992,
the effective date of FNN's plan or reorganization under Federal bankruptcy
laws, DBC was spun off from FNN. Mr. Tessler currently serves as a director of
the FNN Estate, having been named to the board in June 1991. From October 1990
until September 1992, Mr. Tessler also served as a Co-Chief Executive Officer of
Infotechnology, Inc., an integrated information technology and communications
concern. Allan R. Tessler is the father of Andrea L. Tessler.

RICHARD J. CASULL has served as Chief Executive Officer, Chief Operating
Officer and a Director of the Company since its inception. Mr. Casull has over
forty years of experience in the firearms industry, and for the last five years
has been a self-employed firearms designer and consultant. He began his career
working with firearms experts such as P.O. Ackley, Bill Mayne and Jack Fulmer.
He has successfully introduced various handguns and rifles to companies such as
Freedom Arms, North American Arms, Rocky Mountain Arms and Western State Arms.

DAVID M. MYERS has served as President and a Director of the Company since
its inception. He is a Certified Public Accountant currently licensed to
practice in Wyoming, and from 1991 to the present, Mr. Myers has been a private
practicing accountant specializing in consulting and tax. From 1990 to 1991, he
was employed by Coopers & Lybrand as a Senior Tax Manager. Prior thereto, Mr.
Myers was a Senior

31
<PAGE>
Manager at KPMG Peat Marwick from 1978 to 1990. Mr. Myers has also served as an
accounting instructor at the University of Utah. Mr. Myers received his Master
of Professional Accountancy degree and his B.S. degree from the University of
Utah.

DAVID R. MARKIN has served as a Director of the Company since its inception.
Mr. Markin was the President and Chairman of the Board of Checker Motors
Corporation, a manufacturer, insurer, and operator of transportation equipment,
from 1970 until December 1996 and President of Great Dane from 1989 until
December 1996. Mr. Markin served as a director of FNN from July 1991 until June
1992, and as a director of Infotech from July 1991 until September 1992. Mr.
Markin also serves as a director of Jackpot, DBC and Enhance.

ANDREA L. TESSLER has served as a Director of the Company since its
inception. Ms. Tessler is a Managing Director of FH Capital Advisors, Inc., a
private merchant banking concern, and Senior Vice President of Family Management
Corporation, a registered investment advisory firm, located in New York City,
which provides financial counsel to high net worth individuals and families.
Since September of 1989, Ms. Tessler has been affiliated with Nathan & Lewis
Securities, Inc. (a "broker-dealer") as a registered representative. Prior to
her co-founding of Family Management, she was an independent financial services
representative licensed with Integrated Resources Equity Corporation (a
"broker-dealer") from 1987 to 1989. From 1985 to 1986 she was employed by E.F.
Hutton Corp. as a financial planner. Ms. Tessler received her B.A. degree in
Economics from Cornell University. Andrea L. Tessler is the daughter of Allan R.
Tessler.

MARSHALL KIEV has served as a Director of the Company since its inception.
Mr. Kiev is a Managing Director of FH Capital Advisors, Inc., a private merchant
banking concern and Vice President of Family Management Corporation, a
registered investment advisory firm, located in New York City, which provides
financial counsel to high net worth individuals and families. Since September of
1989, Mr. Kiev has been affiliated with Nathan & Lewis Securities, Inc. (a
"broker-dealer") as a registered representative. Mr. Kiev is a Director of The
Social Psychiatry Research Institute, serves on the Board of Trustees of the I.
Edward Kiev Library Foundation and serves on the Board of the National Council
for Arts and Science at George Washington University. He received his M.B.A.
degree in Finance and his B.A. degree in Sociology from New York University.

DIRECTOR COMPENSATION

Non-employee directors will receive a fee of $2,500 for each meeting of the
Board attended and $250 for each meeting of any committee of the Board attended,
and reimbursement of their actual expenses. The Company's cash compensation of
non-employee directors will not exceed $10,000 in any fiscal year, in addition
to reimbursement of their actual expenses. In addition, pursuant to the Stock
Option Plan, each non-employee director will receive an annual grant of options
to purchase 10,000 shares of Common Stock on the last trading day in January at
the average of the closing bid and ask price of the Common Stock as reported on
NASDAQ SCM. This grant of options will begin in February 1997.

EXECUTIVE COMPENSATION

The Company has not paid any compensation during 1996. The Company expects
that Mr. Myers, the Company's President, will be paid an annual salary of at
least $100,000 during 1997. The Company expects that Casull, the Company's Chief
Executive Officer, will be paid an annual salary of at least $100,000 during
1997. Casull will also receive royalties from the Company in accordance with the
License Agreement, dated October 14, 1996, entered into between Casull and the
Company. Casull will be paid 5% of the Company's revenues from products
utilizing the Intellectual Property or bearing the "Casull" name, provided that
Casull be paid a minimum annual royalty of $40,000 and a maximum annual royalty
of $400,000. In the event that Casull's employment with the Company terminates,
the minimum and

32
<PAGE>
maximum annual royalty will increase from $40,000 to $120,000 and from $400,000
to $500,000, respectively. See "Business--License Agreement with Richard J.
Casull."

MANAGEMENT AGREEMENT

FH Capital Advisors, Inc. (the "Advisor") and the Company entered into a
management agreement which term begins upon the closing of this Offering and
expires 30 days after either party gives written notice of termination to the
other. The agreement provides that the Advisor will provide to the Company such
reasonable advice, service, consultation and assistance as the Company will seek
from Advisor with respect to the Company's business affairs and will perform
such other services related to the business affairs of the Company as the Board
of Directors shall reasonably request. The services to be performed by the
Advisor will be performed by certain officers of the Advisor or such other
person designated by the Advisor and approved by the Board of Directors. The
agreement provides for a management fee of $5,000 per month. The Advisor will
bear the expense for rent, telephone, utilities, office furniture, equipment and
machinery and other office expenses of Advisor relating to the performance by
Advisor of its duties hereunder. The Company will be responsible for all other
expenses incurred by Advisor relating to the performance by Advisor of its
duties. See "Certain Transactions."

INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Company's by-laws require the Company to indemnify its officers and
directors to the fullest extent allowed by law. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company, the Company has been advised
that in the opinion of the 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 the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

STOCK OPTION PLAN

A total of 300,000 shares of Common Stock are reserved for issuance under
the Stock Option Plan (the "Plan"), and none of such options will be granted
prior to the closing of the Offering. The Plan provides for the award of
options, which may either be incentive stock options ("ISOs") within the meaning
of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code") or
non-qualified options ("NQOs") which are not subject to special tax treatment
under the Code. The Plan is administered by the Board or a committee appointed
by the Board (the "Administrator"). Officers, directors, employees of, and
consultants to, the Company or any parent or subsidiary corporation selected by
the Administrator are eligible to receive options under the Plan. Subject to
certain restrictions, the Administrator is authorized to designate the number of
shares to be covered by each award, the terms of the award, the dates on which
and the rates at which options or other awards may be exercised, the method of
payment and other terms.

The exercise price for ISOs cannot be less than the fair market value of the
stock subject to the option on the grant date (110% of such fair market value in
the case of ISOs granted to a stockholder who owns more than 10% of the
Company's Common Stock). The exercise price of a NQO shall be fixed by the
Administrator at whatever price the Administrator may determine in good faith.
Unless the Administrator determines otherwise, options generally have a 10-year
term (or five years in the case of ISOs granted to a participant owning more
than 10% of the total voting power of the Company's capital stock). Unless the
Administrator provides otherwise, options terminate upon the termination of a
participant's employment,

33
<PAGE>
except that the participant may exercise an option to the extent it was
exercisable on the date of termination for a period of time after termination.

Generally, awards must be exercised by cash payment to the Company of the
exercise price. However, the Administrator may allow a participant to pay all or
a portion of the exercise price by means of a promissory note, stock or other
lawful consideration. The Plan also allows the Administrator to provide for
withholding and employment taxes payable by a participant to the Company upon
exercise of the award. Additionally, the Company may make cash grants or loans
to participants relating to the participant's withholding and employment tax
obligations and the income tax liability incurred by a participant upon exercise
of an award.

In the event of any change in the outstanding shares of Common Stock by
reason of any reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, issuance of warrants, or rights or
debentures, stock dividend, stock split or reverse stock split, cash dividend,
property dividend or similar change in the corporate structure, the aggregate
number of shares of Common Stock underlying any outstanding options may be
equitably adjusted by the Administrator in its sole discretion.

The Administrator may, at any time, modify, amend or terminate the Plan as
is necessary to maintain compliance with applicable statutes, rules or
regulations; provided, however, that the Administrator may condition the
effectiveness of any such amendment on the receipt of stockholder approval as
may be required by applicable statute, rule or regulation. In addition, the Plan
may be terminated by the Board of Directors as it shall determine in its sole
discretion, in the absence of stockholder approval; provided, however, that any
such termination will not adversely alter or impair any option awarded under the
Plan prior to such termination without the consent of the holder thereof.

34
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth as of April 1, 1997, and as adjusted to
reflect the sale of shares offered hereby, certain information regarding the
ownership of shares of Common Stock by: (i) each person known to the Company to
be a beneficial owner of more than 5% of the outstanding shares of Common Stock;
(ii) each director, and (iii) all directors and executive officers as a group.

<TABLE>
<CAPTION>
PERCENTAGE TO PERCENTAGE TO
NUMBER OF PERCENT BE OWNED BE OWNED
SHARES OWNED AFTER AFTER
DIRECTORS, NAMED PERSONS, BENEFICIALLY BEFORE MINIMUM MAXIMUM
AND 5% STOCKHOLDERS(1) OWNED(2) OFFERING(3) OFFERING (4) OFFERING(5)
- ---------------------------- ----------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Allan R. Tessler(6)........................................ 383,333 22.5% 18.2% 12.3%
Richard J. Casull.......................................... 71,875 4.2% 3.4% 2.3%
David M. Myers............................................. 71,875 4.2% 3.4% 2.3%
David R. Markin............................................ 383,333 22.5% 18.2% 12.3%
Andrea L. Tessler.......................................... 82,334 4.8% 3.9% 2.6%
Marshall Kiev.............................................. 49,000 2.9% 2.3% 1.6%
All executive officers and directors as a group............ 1,041,750 61% 49.4% 33.5%
</TABLE>

- ------------------------

(1) All addresses are c/o Casull Arms Corporation, 3490 Clubhouse Drive, P.O.
Box 7443, Jackson, Wyoming 83001.

(2) Beneficial Ownership has been determined in accordance with Rule 13d-3 under
the Exchange Act and unless otherwise indicated, represents shares for which
the beneficial owner has sole voting and investment power. The percentage of
class is calculated in accordance with Rule 13d-3.

(3) Based upon a total number of shares of Common Stock outstanding of
1,707,083. Includes 1,133,333 shares of Redeemable Common Stock which shares
are subject to redemption for at least 90% of the amount paid therefor by
the holders of such shares if the Company does not raise at least $5 million
of additional equity capital on or before May 31, 1997.

(4) Based upon a total number of shares of Common Stock outstanding of
2,107,093. Includes 1,133,333 shares of Redeemable Common Stock which shares
are subject to redemption for at least 90% of the amount paid therefor by
the holders of such shares if the Company does not raise at least $5 million
of additional equity capital on or before May 31, 1997.

(5) Based upon a total number of shares of Common Stock outstanding of
3,107,083.

(6) Includes 50,000 shares of Common Stock owned by International Financial
Group of Wyoming, Inc. which is controlled by Allan R. Tessler.

CERTAIN TRANSACTIONS

Since the Company's inception there have not been any material transactions
between it and any of its affiliates, except as set forth herein.

In August 1996, the Company sold 573,750 shares of Common Stock to the
Company's founders for $0.10 per share. Of such shares, 71,875 shares were
purchased by Casull, 71,875 shares were purchased by David M. Myers, 50,000
shares were purchased by International Financial Group of Wyoming, Inc. which is
controlled by Allan R. Tessler, 50,000 shares were purchased by David R. Markin,
49,000 shares were purchased by Marshall Kiev and 82,334 shares were purchased
by Andrea L. Tessler.

In October 1996, the Company completed the Private Placement pursuant to
which it sold 34 units for $100,000 per unit to qualified investors. Each unit
consisted of 33,333 shares of Common Stock. Allan R. Tessler and David R.
Markin, directors of the Company, each purchased 10 units in the Private
Placement. Mr. Tessler paid for the units with common stock of a publicly traded
company which had a market value in

35
<PAGE>
excess of $1,000,000. The Company's ability to liquidate the shares is
contingent on the closing of this Offering. Mr. Tessler has agreed to pay the
amount by which the market value of such shares is below $1,000,000 at the time
the Company sells such shares.

On October 14, 1996, the Company entered into the License Agreement with
Casull, the Company's Chief Executive Officer, whereby Casull granted to the
Company the exclusive worldwide right to utilize any of the present or future
intellectual property developed by Casull not already licensed under a prior
agreement. The agreement provides that the Company will pay Casull a salary of
$100,000 per year and 5% of the Company's revenues from products utilizing the
intellectual property or bearing the "Casull" name; provided that Casull will be
paid a minimum annual royalty of $40,000 and a maximum annual royalty of
$400,000 per calendar year. This fee will be payable to Casull for the remainder
of his life. The royalty payments due hereunder will cease upon the death of
Casull, however, if Casull's wife, Mrs. Geraldine Casull, survives Casull, the
royalty payments will continue until the earlier of ten years from the date the
first royalty payment is made to Casull pursuant to the agreement or the death
of Mrs. Casull. In the event that Casull's employment with the Company is
terminated, the minimum annual royalty and the maximum annual royalty will
increase from $40,000 to $120,000 and from $400,000 to $500,000, respectively.

The Company has entered into a management agreement with FH Capital
Advisors, Inc. The management agreement provides that Marshall Kiev and Andrea
Tessler, directors of the Company, will provide advice, service, consultation
and assistance to the Company on behalf of FH Capital Advisors, Inc. The
agreement provides for a management fee of $5,000 per month. The Company will
also be responsible for certain expenses incurred by FH Capital Advisors
relating to the performance of its duties.

Immediately upon the closing of this Offering, the Company intends to
purchase from International Financial Group of Wyoming, Inc., an entity
controlled by Mr. Allan Tessler, the land upon which the manufacturing facility
will be built. The land located in Afton, Wyoming consists of 10 acres and will
be purchased by the Company from IFG for $120,000. This amount approximates (i)
the price IFG paid for the land, (ii) IFG's transaction costs incurred for the
purchase and sale of the land and (iii) interest at the rate of 6% on the
purchase price of the land during the term of IFG's ownership of the land.

All future transactions, including loans, between the Company and its
officers, directors, principal stockholders and affiliates will be approved by a
majority of the Board of Directors, including a majority of the independent and
disinterested outside directors on the Board of Directors, and will be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties.

36
<PAGE>
DESCRIPTION OF SECURITIES

The authorized capital stock of the Company consists of 10,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock.

COMMON STOCK

The Company's authorized common stock consists of 10,000,000 shares of
Common Stock. As of November 25, 1996, there were issued and outstanding
1,707,083 shares of Common Stock. The 1,133,333 shares of Redeemable Common
Stock sold in the Private Placement are subject to redemption for at least 90%
of the amount paid therefor by the holders of such shares if the Company does
not raise at least $5 million of additional equity capital on or before May 31,
1997. The holders of outstanding shares of Common Stock are entitled to receive
dividends out of assets available therefor at such time and in such amounts as
the Board may, from time to time, determine. Each stockholder is entitled to one
vote for each share of Common Stock held of record, on all matters submitted to
a vote of stockholders. As is permitted by Delaware law, there will not be
cumulative voting in connection with the election of directors. Holders of
Common Stock have no preemptive rights or rights to convert their Common Stock
into any other securities under the Company's charter documents. There are no
sinking fund provisions applicable to the Common Stock. Upon liquidation,
dissolution or winding up of the Company, the assets legally available for
distribution to stockholders are distributable ratably among the holders of the
Common Stock outstanding at that time. All outstanding shares of Common Stock
are, and the Common Stock to be outstanding upon completion of this Offering
will be, fully paid and nonassessable.

PREFERRED STOCK

The Company is authorized to issue up to 1,000,000 shares of undesignated
Preferred Stock. The Board of Directors has the authority to issue the
undesignated Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued shares of undesignated Preferred Stock, as well as to fix the number of
shares constituting any series and the designation of such series, without any
further vote or action by the stockholders. The Board of Directors, without
stockholder approval, may issue Preferred Stock with voting and conversion
rights which could materially adversely affect the voting power of the holders
of Common Stock. The issuance of Preferred Stock could also decrease the amount
of earnings and assets available for distribution to holders of Common Stock. In
addition, the issuance of Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company. At present, the
Company has no plans to issue any shares of Preferred Stock. See "Risk
Factors--Possible Adverse Effects of Authorized Preferred Stock."

REDEEMABLE WARRANTS

The following is a brief summary of certain provisions of the Warrants, but
such summary does not purport to be complete and is qualified in all respects by
reference to the actual text of the Warrant Agreement between the Company and
Continental Stock Transfer & Trust Company (the "Warrant Agreement"). A copy of
the Warrant Agreement has been filed as an exhibit to the Registration Statement
of which this Prospectus is a part. See "Additional Information."

EXERCISE PRICE AND TERMS. Each Warrant entitles the registered holder
thereof to purchase, at any time over a period of four years commencing thirteen
months after the date of this Prospectus, one share of Common Stock at a price
of $6.00 per share, exercised subject to adjustment in accordance with the
anti-dilution and other provisions referred to below. The holder of any Warrant
may exercise such Warrant by surrendering the certificate representing the
Warrant to the Warrant Agent, with the subscription form thereon properly
completed and executed, together with payment of the exercise price. Commencing
one year after the date of this Prospectus, the Warrants may be exercised at any
time in whole or in part at the

37
<PAGE>
applicable exercise price until expiration of the Warrants. No fractional shares
will be issued upon expiration of the Warrants.

The exercise price of the Warrants bears no relationship to any objective
criteria of value and should in no event be regarded as an indication of any
future market price of the securities offered hereby.

ADJUSTMENTS. The exercise price and the number of shares of Common Stock
purchasable upon the exercise of the Warrants are subject to adjustment upon the
occurrence of certain events, including stock dividends, stock splits,
combination or reclassifications of the Common Stock, or sale by the Company of
shares of its Common Stock or other securities convertible into Common Stock at
a price below the then applicable exercise price of the Warrants. Additionally,
an adjustment would be made in the case of a reclassification or exchange of
Common Stock, consolidation or merger of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation), or sale of all or substantially all of the assets of the
Company in order to enable Warrantholders to acquire the kind and number of
shares of stock or other securities or property receivable in such event by a
holder of the number of shares of Common Stock that might have been purchased
upon the exercise of the Warrant.

REDEMPTION PROVISIONS. Commencing on the first day of the thirteenth
calendar month after the date of this Prospectus, the Warrants are subject to
redemption at $0.05 per Warrant on 30 day's prior written notice to the warrant
holders if the average closing bid price of the Common Stock equals or exceeds
$9.00 per share (150% of the initial public offering price per share of Common
Stock), for any twenty (20) trading days within a period of thirty (30)
consecutive trading days ending on the fifth trading day prior to the date of
the notice of redemption. In the event the Company exercises the right to redeem
the Warrants, such Warrants will be exercisable until the close of business on
the business day immediately preceding the date for redemption fixed in such
notice. If any Warrant called for redemption is not exercised by such time, it
will cease to be exercisable and the holder will be entitled only to the
redemption price. If the Company gives notice of its intention to redeem, a
holder would be forced to exercise his or her Warrant before the date specified
in the redemption notice or accept the redemption price.

TRANSFER, EXCHANGE AND EXERCISE. The Warrants are in registered form and,
if not earlier redeemed, may be presented to the Warrant Agent for transfer,
exchange or exercise at any time on or prior to their expiration at the close of
business on the fifth anniversary date of this Prospectus, at which time the
Warrants become wholly void and of no value. If a market for the Warrants
develops, the holder may sell the Warrants instead of exercising them. There can
be no assurance, however, that a market for the Warrants will develop or
continue.

WARRANTHOLDER NOT A STOCKHOLDER. The Warrants do not confer upon holders
any voting, dividend or other rights as stockholders of the Company.

MODIFICATION OF WARRANT. The Company and the Warrant Agent may make such
modifications to the Warrant as they deem necessary or desirable that do not
adversely affect the interests of the Warrant holders. The Company may, in its
sole discretion, lower the exercise price of the Warrants for a period of not
less than thirty (30) days on not less than thirty (30) days prior written
notice to the Warrant holders and the Representatives. No other modification may
be made to the Warrants without the consent of two-thirds of the Warrant
holders.

CURRENT PROSPECTUS. The Warrants are not exercisable unless, at the time of
the exercise, the Company has a current prospectus covering the shares of Common
Stock issuable upon exercise of the Warrants, and such shares have been
registered, qualified or deemed to be exempt under the securities or "blue sky"
laws of the state of residence of the exercising holder of the Warrants.
Although the Company will use its best efforts to have all the shares of Common
Stock issuable upon exercise of the Warrants

38
<PAGE>
registered or qualified on or before the exercise date and to maintain a current
prospectus relating thereto until the expiration of the Warrants, there can be
no assurance that it will be able to do so.

SEPARATELY TRADEABLE. The Warrants will be separately tradeable immediately
upon issuance. Although the Securities will not knowingly be sold to purchasers
in jurisdictions in which the Securities are not registered or otherwise
qualified for sale, purchasers may buy Warrants in the aftermarket or may move
to jurisdictions in which the shares underlying the Warrants are not so
registered or qualified during the period that the Warrants are exercisable. In
such event, the Company would be unable to issue shares to those persons
desiring to exercise their Warrants, and holders of Warrants would have no
choice but to attempt to sell the Warrants in a jurisdiction where such sale is
permissible or allow them to expire unexercised. The Company has also agreed to
sell to the Placement Agent, for nominal consideration, warrants to purchase
from the Company up to 140,000 shares of Common Stock and/or 140,000 Warrants.
The Placement Agent will be issued one (1) Placement Agent's Warrant for every
ten (10) shares of Common Stock and ten (10) Warrants sold in connection with
this Offering. See "Plan of Distribution."

TRANSFER AGENT AND REGISTRAR

The Company's Transfer Agent, Warrant Agent and Registrar is Continental
Stock Transfer & Trust Company, 2 Broadway, New York, New York 10004.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this Offering, there has been no public market for the Common Stock
or Warrants. No prediction can be made of the effect, if any, that future market
sales of shares of Common Stock or Warrants, or the availability of such shares
or Warrants for sale, will have on the prevailing market price of the Common
Stock or Warrants following this offering. Nevertheless, sales of substantial
amounts of such shares or Warrants in the open market following this offering
could adversely affect the prevailing market price of the Common Stock or
Warrants.

The Company will have issued and outstanding following the completion of the
Minimum Offering and the Maximum Offering, 2,107,083 and 3,107,083 shares of
Common Stock, respectively. The shares of Common Stock sold in this Offering
and, commencing on the first day of the thirteenth calendar month after the date
of this Prospectus, up to 1,400,000 shares of Common Stock issuable upon
exercise of the Warrants, subject to any applicable state law registrations and
secondary trading (see "Risk Factors Limits on Secondary Trading; Possible
Illiquidity of Trading Market"), will be freely tradeable without restriction
under the Securities Act, except that any shares purchased by an "affiliate" of
the Company (as that term is defined in Rule 144 under the Securities Act) will
be subject to the resale limitations of Rule 144.

The remaining 1,707,083 shares of Common Stock outstanding upon completion
of this Offering are "restricted securities" as that term is defined in Rule
144. As described below, Rule 144 permits resales of restricted securities
subject to certain restrictions. On the date of this Prospectus, 573,750 of such
1,707,083 shares will be eligible for sale under Rule 144 on August 7, 1997 and
the remaining 1,333,333 shares will be eligible for sale under Rule 144 on
October 21, 1997.

In general, under Rule 144, a person (or persons whose shares are
aggregated), who has beneficially owned shares for at least one year, including
a person who may be deemed an Affiliate of the Company, may sell within any
three month period, a number of shares of Common Stock that does not exceed the
greater of (1) 1% of the then outstanding shares of Common Stock of the Company
(approximately 21,071 or 31,071 shares immediately after the Minimum Offering or
Maximum Offering, respectively) or (ii) the average weekly trading volume in the
Common Stock as reported through the Nasdaq during the four calendar weeks
preceding the sale. Sales under Rule 144 are also subject to certain
restrictions relating to manner of sale, notice and the availability of current
public information about the Company. In addition, under Rule 144(k), a person
who is not an Affiliate of the Company at any time (90) days preceding a sale,
and who has beneficially owned shares for at least two years, would be entitled
to sell such shares

39
<PAGE>
immediately following this offering without regard to the volume limitations,
manner of sale provisions or notice or other requirements of Rule 144.

Any employee, officer or director or consultant to the Company who purchased
his or her shares pursuant to a written compensatory plan or contract may be
entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell such shares in reliance on Rule 144 without having to
comply with the public information, volume limitation or notice provisions of
Rule 144. In both cases, a holder of Rule 701 shares is required to wait until
90 days after the date of this Prospectus before selling such shares.

Each of the Company's officers and directors and all of its existing
stockholders have agreed that for a period of 18 months from the date of this
Prospectus they will not sell any of the Company's securities without the prior
written consent of the Placement Agent.

40
<PAGE>
PLAN OF DISTRIBUTION

The Minimum Offering is being offered on a "best efforts" basis. The
proceeds from the sale of the Common Stock will be held in an escrow account for
the benefit of the subscribers by Continental Stock Transfer & Trust Company
(the "Escrow Agent") until the Minimum Offering has been sold or earlier
termination of the Offering. In the event that subscriptions for the Minimum
Offering are not received by the Termination Date, the Offering will terminate
and all funds will be returned promptly by the Escrow Agent without any
deductions therefrom or interest thereon. In any event, this Offering will
expire on the earlier to occur of (i) 60 days after the date of this Prospectus
and (ii) the sale of the Maximum Offering, unless the Company and National agree
to extend this Offering for an additional 30-day period.

The Placement Agent has advised the Company that they will propose to offer
the Securities to the public at the initial public offering price set forth on
the cover page of this Prospectus, and to selected dealers at such price less a
concession not in excess of $ per share and $ per Warrant. Such
dealers may reallow a concession not in excess of $ per share of Common
Stock and $ per Warrant to other dealers. After the initial public
offering of the Common Stock and Warrants, the public offering price, the
concessions to selected dealers and the reallowance to other dealers may be
changed by the Placement Agent.

Upon the exercise of any Warrants more than one year after the date of this
Prospectus, which exercise was solicited by the Placement Agent, and to the
extent not inconsistent with the guidelines of the National Association of
Securities Dealers, Inc. and the Rules and Regulations of the Commission, the
Company has agreed to pay the Placement Agent a commission which shall not
exceed 5% of the aggregate exercise price of such Warrants in connection with
bona fide services provided by the Placement Agent relating to any warrant
solicitation. In addition, the individual must designate in writing the firm
entitled to payment of such warrant solicitation fee. No compensation, however,
will be paid to the Placement Agent in connection with the exercise of the
Warrants if (a) the market price of the Common Stock is lower than the exercise
price, (b) the Warrants are held in a discretionary account, or (c) the Warrants
are exercised in an unsolicited transaction. Unless granted an exemption by the
Commission from Rule 10b-6 under the Exchange Act, the Placement Agent will be
prohibited from engaging in any market-making activities or solicited brokerage
activities with regard to the Company's securities for the period from nine
business days (or other such applicable periods as Rule 10b-6 may provide) prior
to any solicitation of the exercise of the Warrants until the later of the
termination of such solicitation activity (by waiver or otherwise) of any right
that the Placement Agent may have to receive a fee. As a result, the Placement
Agent may be unable to continue to provide a market for the Common Stock or
Warrants during certain periods while the Warrants are exercisable. If the
Placement Agent has engaged in any of the activities prohibited by Rule 10b-6
during the periods described above, the Placement Agent undertakes to waive
unconditionally its rights to receive a commission on the exercise of such
Warrants.

The Placement Agent may offer the shares through selected broker dealers and
may allow certain dealers who are members of the National Association of
Securities Dealers, Inc. ("NASD") concessions not in excess of $ per share of
Common Stock.

Neither the Company, the Company's affiliates, the Placement Agent nor any
other party involved in marketing the Securities have reserved the right to
purchase the Securities in order to sell the Minimum Offering.

The Placement Agent has informed the Company that it does not expect sales
to discretionary accounts by the Placement Agent to exceed five percent of the
Securities offered hereby.

The Placement Agent Agreement provides for reciprocal indemnification
between the Company and its controlling persons on the one hand, and the
Underwriters and their respective controlling persons on the other hand, against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.

41
<PAGE>

The Company has agreed to pay the Placement Agent a non-accountable expense
allowance equal to three percent (1.8%) of the gross proceeds received by the
Company from the sale of the Securities.

The Company and the holders of its Common Stock prior to this Offering have
entered into lock-up agreements. See "Shares Eligible For Future Sale."

In connection with this Offering the Company has agreed to sell to the
Placement Agent, for nominal consideration, warrants to purchase from the
Company up to 140,000 shares of Common Stock and/or 140,000 warrants (the
"Placement Agent's Warrants"). The Placement Agent will be issued one (1)
Placement Agent's Warrant for every ten (10) shares of Common Stock and ten (10)
Warrants sold in connection with this Offering. The Placement Agent's Warrants
are initially exercisable at a price of $9.90 per share of Common Stock (165% of
the initial public offering price per share of Common Stock), and $0.165 per
warrant (120% of the initial public offering price per Warrant) for a four-year
period commencing on the first anniversary of the issuance of such warrants. The
warrants issuable upon exercise of the Placement Agent's Warrants are the same
as the Warrants offered hereby, except that they are exercisable at a price of
$9.60 per share of Common Stock (160% of the exercise price of the Warrants
offered hereby). The Placement Agent's Warrants may not be sold, transferred,
assigned or hypothecated for a period of one year following the date of this
Prospectus, except to officers or directors of the Placement Agent, or members
of the selling group. The Placement Agent's Warrants provide for adjustments in
the number of shares of Common Stock and Warrants issuable upon the exercise
thereof and in the exercise price of the Placement Agent's Warrants as a result
of certain events, including subdivisions and combinations of the Common Stock.
The Placement Agent's Warrants grant to the holders thereof certain rights of
registration for the securities issuable upon exercise of the Placement Agent's
Warrants.

The Company has agreed that the Placement Agent may designate one person to
attend all board of directors' meetings as an observer. Such person shall be
entitled to attend all such meetings and to receive all notices and other
correspondence and communications sent by the Company to members of its board of
directors. The Company shall reimburse such designee of the Placement Agent for
their out-of-pocket expenses incurred in connection with their attendance at the
Company's board of directors' meetings.

Certain persons participating in this Offering may engage in transactions,
including stabilizing bids, syndicate covering transactions or the imposition of
penalty bids, which may involve the purchase of Common Stock and/or Warrants.
Such transactions may stabilize or maintain the market price of the Common Stock
and/or Warrants at a level above that which might otherwise prevail in the open
market and, if commenced, may be discontinued at any time.

Prior to this Offering, there has been no public market for the Common Stock
or the Warrants. Accordingly, the initial public offering price was determined
by negotiations between the Company and the Placement Agent and does not
necessarily bear any relationship to the Company's asset values, net worth, and
other established criteria of value. Among the factors considered in determining
the initial public offering price were the history and the prospects of the
Company and the industry in which it will compete, the past and present
operating results of the Company and the trends of such results, the Company's
plan of operation, an assessment of the Company's management, the Company's
capital structure, and the general condition of the securities markets at the
time of the offering.

The Common Stock and the Warrants will trade on the OTC Electronic Bulletin
Board under the symbols CASU and CASUW, respectively.

The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to copies
of each such agreement, which are filed as exhibits to the registration
statement of which this Prospectus is a part. See "Additional Information."

42
<PAGE>
LEGAL MATTERS

Certain legal matters in connection with the Securities offered hereby will
be passed upon for the Company by Camhy Karlinsky & Stein LLP, New York, New
York. Alan I. Annex, a partner of such firm, is the Secretary of the Company. In
addition, two partners of Camhy Karlinsky & Stein LLP may be deemed to be the
beneficial owners of 30,000 shares of the Company's Common Stock. Certain legal
matters in connection with this offering will be passed upon for the
Underwriters by D'Ancona & Pflaum, 30 North LaSalle Street, Suite 2900, Chicago,
Illinois 60602.

EXPERTS

The financial statements of the Company for the period July 23, 1996 (date
of incorporation) through February 28, 1997 included in this Prospectus have
been so included in reliance on the report (which contains an explanatory
paragraph relating to the Company's ability to continue as a going concern as
described in Notes 1 and 3 to such financial statements) of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
SB-2 (the "Registration Statement") under the Securities Act of 1933, as amended
with respect to the Common Stock and Warrants offered hereby. This Prospectus,
which constitutes a part of the Registration Statement, omits certain of the
information contained in the Registration Statement and the exhibits and
schedules thereto on file with the Commission pursuant to the Securities Act and
the rules and regulations of the Commission thereunder. For further information
with respect to the Company and the Common Stock and Warrants, reference is
hereby made to such Registration Statement, exhibits and schedules, which may be
obtained from the Commission upon payment of the fees prescribed by the
Commission by writing to the Securities and Exchange Commission, Public
Reference Section, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. Statements contained herein concerning the provisions of documents filed
with, or incorporated in, the Registration Statement as exhibits are necessarily
summaries of such provisions and documents and each such statement is qualified
in its entirety by reference to the copy of the applicable document filed with
the Commission.

43
<PAGE>
CASULL ARMS CORPORATION
(A DEVELOPMENT STAGE ENTITY)

INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT ACCOUNTANTS.......................................................................... F-2

FINANCIAL STATEMENTS

Balance Sheet--February 28, 1997......................................................................... F-3

Statement of Operations for the period July 23, 1996 (date of incorporation) through February 28, 1997... F-4

Statement of Redeemable Common Stock and Stockholders' Deficit for the period July 23, 1996 (date of
incorporation) through February 28, 1997............................................................... F-5

Statement of Cash Flows for the period July 23, 1996 (date of incorporation) through February 28, 1997... F-6

NOTES TO FINANCIAL STATEMENTS.............................................................................. F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Casull Arms Corporation

In our opinion, the accompanying balance sheet and the related statements of
operations, of redeemable common stock and stockholders' deficit and of cash
flows present fairly, in all material respects, the financial position of Casull
Arms Corporation (a development stage entity) at February 28, 1997, and the
results of its operations and its cash flows for the period July 23, 1996 (date
of incorporation) through February 28, 1997 in conformity with generally
accepted accounting principles. 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
of these statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 1 and 3 to the
financial statements, the Company's ability to commence operations is dependent
on obtaining adequate financial resources through a contemplated public offering
or other financing, which raises substantial doubt about its ability to continue
as a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

Price Waterhouse LLP
New York, New York
April 11, 1997

F-2
<PAGE>
CASULL ARMS CORPORATION
(A DEVELOPMENT STAGE ENTITY)

BALANCE SHEET

<TABLE>
<CAPTION>
FEBRUARY 28,
1997
------------
<S> <C>
ASSETS
ASSETS:
Cash and cash equivalents....................................................................... $ 52,285
Accrued dividend receivable..................................................................... 8,000
------------
Total current assets.......................................................................... 60,285
Restricted cash..................................................................................... 2,160,000
Restricted investments.............................................................................. 1,242,500
Deferred registration costs......................................................................... 130,181
------------
Total assets.................................................................................. $ 3,592,966
------------
------------

LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' DEFICIT
LIABILITIES:
Accrued expenses................................................................................ $ 66,822
------------
Total current liabilities..................................................................... 66,822
Payable to director................................................................................. 242,500
------------
REDEEMABLE COMMON STOCK, 1,133,333 shares of Common Stock designated with redemption feature issued
and outstanding................................................................................... 3,400,000

STOCKHOLDERS' DEFICIT:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued and
outstanding................................................................................... --
Common stock, $0.01 par value, 10,000,000 shares authorized, 573,750 (excluding 1,133,333 shares
of Redeemable Common Stock) shares issued and outstanding..................................... 5,738
Additional paid in capital...................................................................... 51,637
Deficit accumulated during the development stage................................................ (173,731)
------------
Stockholders' deficit........................................................................... (116,356)
Commitments and contingencies (Note 5).............................................................. --
------------
Total liabilities, redeemable common stock and stockholders' deficit.......................... $ 3,592,966
------------
------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>
CASULL ARMS CORPORATION
(A DEVELOPMENT STAGE ENTITY)

STATEMENT OF OPERATIONS

FOR THE PERIOD JULY 23, 1996 (DATE OF INCORPORATION)
THROUGH FEBRUARY 28, 1997

<TABLE>
<S> <C>
Revenues........................................................................ $ --
Expenses:
General and administrative expenses......................................... 204,764
---------
Other income:
Interest and dividend income................................................ 31,033
---------
Net loss........................................................................ $(173,731)
---------
---------
Net loss per common share....................................................... $ (.11)
---------
---------
Weighted average number of common shares outstanding............................ 1,542,288
---------
---------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>
CASULL ARMS CORPORATION
(A DEVELOPMENT STAGE ENTITY)

STATEMENT OF REDEEMABLE COMMON STOCK AND STOCKHOLDERS' DEFICIT

FOR THE PERIOD JULY 23, 1996 (DATE OF INCORPORATION)
THROUGH FEBRUARY 28, 1997

<TABLE>
<CAPTION>
STOCKHOLDERS' DEFICIT
---------------------------------------------------------------
DEFICIT
REDEEMABLE ACCUMULATED
COMMON STOCK COMMON STOCK ADDITIONAL DURING THE
------------------------- --------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
----------- ------------ ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of stock on August 7,
1996 to Initial Stockholders
for cash.................... -- -- 573,750 $ 5,738 $ 51,637 -- $ 57,375
Issuance of stock in October,
1996 to Private Placement
Stockholders for stock...... 333,333 $ 1,000,000 -- -- -- -- --
Issuance of stock in October,
1996 to Private Placement
Stockholders for cash....... 800,000 2,400,000 -- -- -- -- --
Net loss for the period July
23, 1996 (date of
incorporation) through
February 28, 1997........... -- -- -- -- -- $ (173,731) (173,731)
----------- ------------ ---------- --------- ------------ ------------ ------------
Balance at February 28,
1997........................ 1,133,333 $ 3,400,000 573,750 $ 5,738 $ 51,637 $ (173,731) $ (116,356)
----------- ------------ ---------- --------- ------------ ------------ ------------
----------- ------------ ---------- --------- ------------ ------------ ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>
CASULL ARMS CORPORATION
(A DEVELOPMENT STAGE ENTITY)

STATEMENT OF CASH FLOWS

FOR THE PERIOD JULY 23, 1996 (DATE OF INCORPORATION)
THROUGH FEBRUARY 28, 1997

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss...................................................................... $ (173,731)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in assets and liabilities:
Deferred registration costs............................................... (130,181)
Accrued dividend receivable............................................... (8,000)
Accrued expenses.......................................................... 66,822
----------
Net cash used in operating activities....................................... (245,090)
----------

Cash flows from financing activities:
Proceeds from issuance of common stock........................................ 2,457,375
Restriction on proceeds received from issuance of common stock................ (2,160,000)
----------
Net cash provided by financing activities................................... 297,375
----------
Net increase in cash and cash equivalents at end of period.................. $ 52,285
----------
----------
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES

During the period, Casull Arms Corporation issued Common Stock in exchange
for investment securities with an estimated fair market value of $1,242,500 at
February 28, 1997.

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>
CASULL ARMS CORPORATION
(A DEVELOPMENT STAGE ENTITY)

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND OPERATIONS

Casull Arms Corporation (the "Company") was incorporated in the State of
Delaware on July 23, 1996 for the purpose of manufacturing and selling unique,
high quality firearms. In August 1996, the Company issued an aggregate of
573,750 shares of Common Stock for an aggregate purchase price of $57,375 or
$0.10 per share. In October 1996, the Company issued an aggregate of 1,133,333
shares of Common Stock for an aggregate purchase price of $3,400,000 or $3.00
per share. Proceeds received from the October 1996 Common Stock issuance are
subject to certain restrictions (See Note 2). The Company is currently in the
development stage, and in the process of raising capital. All activity of the
Company to date relates to its formation and proposed financing.

The Company's ability to commence operations is contingent upon obtaining
adequate financial resources through a contemplated public offering (the
"Proposed Offering") or financing. Note 3 discusses the details of the Proposed
Offering.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS: The Company considers all highly liquid investments with
an original maturity of three months or less at the time of purchase to be cash
equivalents.

RESTRICTED CASH: Under the terms of the Company's October 1996 Common Stock
issuance, the Company has agreed that it will not use more than 10% of the
proceeds of such issuance to effect its business objectives until it raises an
additional $5 million of equity capital. Initially, the Company was required to
raise at least $5 million of additional equity capital on or before March 31,
1997, or the stockholders who purchased shares in October 1996 would have had
the right to sell their shares back to the Company for at least 90% of the
amounts paid. In March 1997, the Company received written waivers from these
stockholders extending the term to raise at least $5 million in additional
equity capital until May 31, 1997. The Company has reflected 90% of the proceeds
of the October 1996 Common Stock issuance as restricted cash.

RESTRICTED INVESTMENTS: Restricted investments represent marketable
securities (the "Securities") received in exchange for shares issued by the
Company in October 1996. Under the terms of its agreement with the stockholder,
the Company has agreed that it will not sell the Securities until the Company
raises an additional $5 million of equity capital. Initially, the Company was
required to raise at least $5 million of additional equity capital on or before
March 31, 1997, or the stockholder would have had the right to sell his shares
back to the Company for at least 90% of the amount subscribed. In March 1997,
the Company received a written waiver from the Stockholder extending the term to
raise at least $5 million in additional equity capital until May 31, 1997.
Restricted investments are carried at quoted market price (See Note 5).

NET LOSS PER COMMON SHARE: Net loss per common share is computed based upon
the weighted average number of shares outstanding for the period. Pursuant to
the requirements of the Securities and Exchange Commission, shares issued by the
Company within one year of the date of the initial public offering at prices
below the proposed offering price have been included in the calculation of
weighted average shares outstanding as if they were outstanding for all periods
using the treasury stock method.

USE 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

F-7
<PAGE>
CASULL ARMS CORPORATION
(A DEVELOPMENT STAGE ENTITY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
amounts of some assets and liabilities and, in some instances, the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying value of cash
equivalents, and accounts payable and accrued expenses approximates fair value
due to the relatively short maturity of these instruments.

3. PROPOSED PUBLIC OFFERING OF SECURITIES

The Proposed Public Offering of Securities (the "Proposed Offering") calls
for the Company to offer for public sale a minimum of 400,000 (the "Minimum
Offering") and a maximum of 1,400,000 (the "Maximum Offering") units (the
"Units"), each Unit consisting of one share of the Company's Common Stock, $0.01
par value, and one Redeemable Common Stock Purchase Warrant (the "Warrants"),
each Warrant entitling the holder to purchase from the Company one share of
Common Stock at an exercise price of 100% of the initial public offering price
commencing on the first day of the thirteenth calendar month after the date of
the Prospectus (the "Effective Date") and ending five years from the Effective
Date. Commencing one year after the Effective Date, the Warrants will be subject
to redemption by the Company upon 30 days notice, at a price of $0.05 per
Warrant, only in the event that the reported closing bid price of the Common
Stock is at least 150% of the initial public offering price per share of Common
Stock for any twenty trading days within a period of thirty consecutive trading
days ending on the fifth trading day prior to the notice of redemption.

In connection with the Proposed Offering, the Company intends to pay
additional compensation to the representatives (the "Representatives") of the
Placement Agent of the Proposed Offering, in the form of (i) a non-accountable
expense allowance of 3% of the gross proceeds of the Proposed Offering and (ii)
warrants to purchase up to 140,000 shares of Common stock and/or 140,000
warrants (the "Representative's Warrants"), at an exercise price of 120% of the
initial public offering price per share of Common Stock and per Warrant,
respectively. The Representative's Warrants will be exercisable for a period of
four years commencing on the first day of the thirteenth calendar month after
the Effective Date.

If the Proceeds of the Proposed Offering are less than $5 million or the
Proposed Offering does not close on or before May 31, 1997, the Company will
need to receive a waiver of the $5 million threshold and/or the May 31, 1997
deadline from the Redeemable Common Stockholders, or the Redeemable Common
Stockholders will have the right to sell their shares back to the Company for at
least 90% of the amounts paid.

As of February 28, 1997, the Company had incurred $130,181 of deferred
registration costs relating principally to professional fees and registration
expenses incurred in connection with the Proposed Offering. Upon consummation of
the Proposed Offering, these costs as well as additional expenses to be incurred
will be charged to equity. Should the Proposed Offering prove to be
unsuccessful, these costs will be charged to operations.

4. CAPITAL STOCK

The Company's Certificate of Incorporation authorizes the issuance of
10,000,000 shares of Common Stock. Upon completion of the Proposed Maximum
Offering (assuming no exercise of the Representative's Warrants), there will be
5,192,917 authorized but unissued shares of Common Stock available for issuance
(after reserving 1,700,000 shares for the issuance of Common Stock in connection
with the Warrants and

F-8
<PAGE>
CASULL ARMS CORPORATION
(A DEVELOPMENT STAGE ENTITY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. CAPITAL STOCK (CONTINUED)
for future grants under the Company's 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. 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 may occur.

Initially, stockholders who purchased shares in the October 1996 Common
Stock issuance had the right to sell their shares back to the Company for at
least 90% of the amount paid therefor if the Company did not raise at least $5
million of additional equity capital on or before March 31, 1997. In March 1997,
the Company received written waivers from these stockholders, extending the term
to raise at least $5 million in additional equity capital until May 31, 1997.
Shares issued in the October 1996 Common Stock issuance are reflected in the
February 28, 1997 balance sheet as Redeemable Common Stock.

The Board of Directors of the Company is empowered, without stockholder
approval, to issue up to 1,000,000 shares of 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.

5. RELATED PARTY TRANSACTIONS

In connection with its issuance of shares of Common Stock in October 1996,
the Company received payment from a director in the form of marketable
securities (the "restricted investments") for 333,333 shares of Common Stock at
a subscription price of $1,000,000. The market value of the restricted
investments received at that date approximated $1,090,000. The restricted
investments cannot be sold by the Company until the Effective Date of the
Proposed Offering. If the Proposed Offering is successful and results in at
least $5 million in additional equity capital on or before May 31, 1997, the
Company intends to sell the restricted investments in an open market. If the
Company does not raise at least $5 million in additional equity capital on or
before May 31, 1997 the Company will need to receive a waiver of the $5 million
threshold and/or the May 31, 1997 deadline or the Stockholder will have the
right to sell his shares back to the Company for at least 90% of the amount
paid.

If the Company is successful in raising at least $5 million in additional
equity capital on or before May 31, 1997 and sells the restricted investments in
an open market, any excess of proceeds received from the sale over $1,000,000
will be refunded to the director; any deficit between the proceeds and
$1,000,000 will be paid to the Company by the director in cash. If the Company
is not sucessful in raising at least $5 million in additonal equity capital on
or before May 31, 1997 or in obtaining the necessary waivers, the Stockholder
will have the right to sell his shares back to the Company for at least 90% of
the amount paid, plus receive any excess of proceeds from the sale of the
restricted investments over $1,000,000. At February 28, 1997 the Company had
recorded a liability to the director of $242,500 which represents the excess of
the market value of the restricted investments over $1,000,000.

Two of the Company's directors are officers and directors of FH Capital
Advisors, Inc. ("FH Capital"). On December 1, 1996, the Company and FH Capital
entered into a management agreement whereby FH Capital will receive $5,000 per
month, beginning upon the closing of the Proposed Offering, for financial
consulting services. The agreement with FH Capital is cancellable by the Company
on 30 days written notice.

The Company has entered into the License Agreement with the Chief Executive
Officer of the Company, for the rights to use certain intellectual property
developed by him. Under terms of the

F-9
<PAGE>
CASULL ARMS CORPORATION
(A DEVELOPMENT STAGE ENTITY)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. RELATED PARTY TRANSACTIONS (CONTINUED)
agreement, the Company will pay to the Chief Executive Officer a royalty,
beginning upon the closing of the Proposed Offering, of 5% of the Company's
revenues subject to an annual minimum of $40,000 and an annual maximum of
$400,000. This royalty is payable to the Chief Executive Officer for ten years
from the date of the first royalty payment or until his death, whichever is
later, however, if the Chief Executive Officer's wife should survive him,
royalty payments shall continue until the earlier of ten years from the date of
the first royalty payment or her death. In the event that the Chief Executive
Officer's employment with the Company is terminated, royalty payments will be
adjusted to a minimum of $120,000 and a maximum of $500,000.

Immediately upon closing of the Proposed Offering, the Company intends to
purchase land from a director which will serve as the site for the manufacturing
facility.

6. STOCK OPTION PLAN

The Company has reserved 300,000 shares of Common Stock for issuance under
its stock option plan (the "Plan"). Officers, directors, employees and
consultants to the Company are eligible to receive options (the "Options") under
the plan. There were no such Options issued or outstanding at February 28, 1997.

The Plan provides for Options that are intended to qualify either as
incentive stock options ("ISO") within the meaning of Section 422 of the
Internal Revenue Code of 1986 (the "Code"), as amended, or as non-qualified
stock options ("NQO") which are not subject to special tax treatment under the
Code.

The exercise price for ISO's granted under the Plan must be at least equal
to the fair market value of the stock subject to the option on the date of grant
or, in the case of ISO's 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 the grant. The exercise price of all NQO's granted under the Plan shall be
determined by the Plan Administrator. The maximum exercise period for which the
Options may be granted is ten years from the date of the grant (five years in
the case of ISO's granted to an individual owning more than 10% of the Company's
Common Stock).

F-10
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT
INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
Use of Proceeds........................................................... 15
Dividend Policy........................................................... 15
Dilution.................................................................. 16
Capitalization............................................................ 18
Selected Financial Data................................................... 19
Management's Discussion and Analysis or Plan of Operation................. 20
Business.................................................................. 22
Management................................................................ 30
Principal Stockholders.................................................... 34
Certain Transactions...................................................... 34
Description of Securities................................................. 36
Shares Eligible for Future Sale........................................... 38
Plan of Distribution...................................................... 39
Legal Matters............................................................. 41
Experts................................................................... 42
Additional Information.................................................... 42
Index to Financial Statements............................................. F-1
</TABLE>

------------------------

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

[LOGO]

MINIMUM OFFERING OF 400,000 AND
MAXIMUM OFFERING OF
1,400,000 SHARES OF COMMON STOCK
AND 1,400,000 REDEEMABLE
COMMON STOCK PURCHASE WARRANTS
(AS UNITS, EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE WARRANT)

---------------------

PROSPECTUS

---------------------

NATIONAL SECURITIES
CORPORATION
, 1997

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 102(b) of the Delaware General Corporations Law (the "DGCL") permits
a provision in the certificate of incorporation of each corporation organized
thereunder eliminating or limiting, with certain exceptions, the personal
liability of a director to the corporation or its stockholders for monetary
damages for certain breaches of fiduciary duty as a director. The Certificate of
Incorporation of the Registrant eliminates the personal liability of directors
to the fullest extent permitted by the DGCL.

Section 145 of the DGCL ("Section 145"), in summary, empowers a Delaware
corporation, within certain limitations, to indemnify its officers, directors,
employees and agents against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by them
in connection with any nonderivative suit or proceeding, if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interest of the corporation, and, with respect to a criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.

With respect to derivative actions, Section 145 permits a corporation to
indemnify its officers, directors, employees and agents against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of such action or suit, provided such person meets the
standard of conduct described in the preceding paragraph, except that no
indemnification is permitted in respect of any claim where such person has been
found liable to the corporation, unless the Court of Chancery or the court in
which such action or suit was brought approves such indemnification and
determines that such person is fairly and reasonably entitled to be indemnified.

Reference is made to Article Eight of the Certificate of Incorporation of
the Registrant for the provisions which the Registrant has adopted relating to
indemnification of officers, directors, employees and agents, which provides for
the indemnification of such persons to the full extent permitted by Delaware
law.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.

Reference is also made to Section 8(b) of the Underwriting Agreement filed
as Exhibit 1.1 to this Registration Statement which provides for the
indemnification of the Company, its controlling persons, directors and certain
of its officers by the Underwriters against certain liabilities, including
liabilities under the securities laws.

Prior to the close of this Offering, the Registrant will have purchased
directors' and officers' liability insurance.

II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses to be incurred in connection with the offering are as
follows:

<TABLE>
<S> <C>
SEC registration fee.............................................. $ 8,060
NASD filing fee................................................... $ 3,160
NASDAQ listing fee................................................ $ 8,107
Blue Sky expenses and legal fees.................................. $ 40,000
Printing and engraving expenses................................... $ 60,000
Registrar and transfer agent fees and expenses.................... $ 7,000
Accounting fees and expenses...................................... $ 40,000
Legal fees and expenses........................................... $ 150,000
Miscellaneous fees and expenses................................... $ 33,673
---------
TOTAL............................................................. $ 350,000
---------
---------
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

<TABLE>
<CAPTION>
AGGREGATE
CLASS OF DATE OF TITLE OF NUMBER PURCHASE FORM OF
PURCHASERS SALE SECURITIES OF SHARES PRICE CONSIDERATION
- ------------------- ----------- ----------------- ----------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
14 Founders 8/7/96 Common Stock 573,750 $ 57,375 Cash
10 Investors 10/21/96 Common Stock 800,000 2,400,000 Cash
1 Investor 10/21/96 Common Stock 333,333 1,000,000 Common Stock
</TABLE>

The sales of all of the aforementioned securities were made in reliance upon
the exemption from the registration provisions of the Act afforded by section
4(2) thereof and/or Regulation D promulgated thereunder, as transactions by an
issuer not involving a public offering. To the best of the Registrant's
knowledge, the purchasers of the securities described above acquired them for
their own account and not with the view to any distribution thereof to the
public. The Registrant did not engage a placement agent for sale of any of the
aforementioned securities.

II-2
<PAGE>
ITEM 27. EXHIBITS.

The following exhibits are filed as part of this Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>

1 Form of Placement Agent Agreement*

3.1 Certificate of Incorporation, as amended*

3.2 By-Laws of the Registrant*

4.1 Form of Redeemable Warrant Agreement to be entered into between Registrant and Continental Stock
Transfer & Trust Co., including form of Redeemable Warrant Certificate*

4.2 Form of Placement Agent's Warrant Agreement including Form of Placement Agent's Warrant*

4.3 Specimens of Registrant's Common Stock and Redeemable Warrant Certificate*

5 Opinion and Consent of Camhy Karlinsky & Stein LLP

10.1 1996 Stock Option Plan*

10.2 License Agreement between Registrant and Richard J. Casull*

10.3 Management Agreement between Registrant and FH Capital Advisors, Inc.*

11.1 Statement re: computation of per share earnings*

23.1 Consent of Camhy Karlinsky & Stein LLP--included in Exhibit 5

23.2 Consent of Price Waterhouse LLP

23.3 Consent of Professor Michael Darling*

24.1 Power of Attorney (contained on page II-5 of this Registration Statement)*

99.1 Escrow Agreement by and among the Registrant, the Placement Agent and the Escrow Agent.
</TABLE>

- ------------------------

* Previously filed

ITEM 28. UNDERTAKINGS.

The Registrant hereby undertakes to provide to the Placement Agent at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

The Registrant has agreed to indemnify the Placement Agent and its officers,
directors, partners, employees, agents and controlling persons as to any losses,
claims, damages, expenses or liabilities arising out of any untrue statement or
omission of a material fact contained in the registration statement. The
Placement Agent has agreed to indemnify the Registrant and its directors,
officers and controlling persons as to any losses, claims, damages, expenses or
liabilities arising out of any untrue statement or omission in the registration
statement based on information relating to the Placement Agent furnished by it
for use in connection with the registration statement.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.

II-3
<PAGE>
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the 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, the
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 public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

The Registrant hereby also undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any 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. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.

(2) That, for the purpose of determining liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(4) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this registration statement as of the time the
Commission declared it effective.

(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.

II-4
<PAGE>
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and has authorized this Registration
Statement to be signed on its behalf by the undersigned in the City of Jackson,
State of Wyoming on May 2, 1997.

CASULL ARMS CORPORATION

BY: /S/ ALLAN R. TESSLER
-----------------------------------------
Allan R. Tessler
CHAIRMAN OF THE BOARD

POWER OF ATTORNEY

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement on Form SB-2 has been signed below by the following
persons in the capacities and on the dates stated:

SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------

/s/ ALLAN R. TESSLER
- ------------------------------ Chairman of the Board May 2, 1997
Allan R. Tessler
Chief Executive Officer,
* Chief Operating
- ------------------------------ Officer and Director May 2, 1997
Richard J. Casull (Principal
Executive Officer)
President, Chief Financial
* Officer and
- ------------------------------ Director (Principal May 2, 1997
David M. Myers Financial and
Principal Accounting
Officer)
*
- ------------------------------ Director May 2, 1997
David R. Markin
*
- ------------------------------ Director May 2, 1997
Andrea L. Tessler
*
- ------------------------------ Director May 2, 1997
Marshall Kiev

* Attorney in fact

/s/ ALLAN R. TESSLER
- ------------------------------ May 2, 1997
Allan R. Tessler

II-5
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE NO.
- ----------- ---------------------------------------------------------------------------------------------- -------------
<C> <S> <C>

1 Form of Placement Agent Agreement*

3.1 Certificate of Incorporation, as amended*

3.2 By-Laws of the Registrant*

4.1 Form of Redeemable Warrant Agreement to be entered into between Registrant and Continental
Stock Transfer & Trust Co., including form of Redeemable Warrant Certificate*

4.2 Form of Placement Agent's Warrant Agreement including Form of Placement Agent's Warrant*

4.3 Specimens of Registrant's Common Stock and Redeemable Warrant Certificate*

5 Opinion and Consent of Camhy Karlinsky & Stein LLP

10.1 1996 Stock Option Plan*

10.2 License Agreement between Registrant and Richard J. Casull*

10.3 Management Agreement between Registrant and FH Capital Advisors, Inc.*

11.1 Statement re: computation of per share earnings*

23.1 Consent of Camhy Karlinsky & Stein LLP--included in Exhibit 5

23.2 Consent of Price Waterhouse LLP

23.3 Consent of Professor Michael Darling*

24.1 Power of Attorney (contained on page II-5 of this Registration Statement)*

99.1 Escrow Agreement by and among the Registrant, the Placement Agent and the Escrow Agent.
</TABLE>

- ------------------------

* Previously Filed.

<PAGE>

Exhibit 5

May 2, 1997

Casull Arms Corporation
456 Fairview Road
Afton, Wyoming 83110

Re: REGISTRATION STATEMENT ON FORM SB-2

Ladies and Gentlemen:

You have requested our opinion in connection with the above-captioned
Registration Statement on Form SB-2 to be filed by Casull Arms Corporation, a
Delaware corporation (the "Company"), with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations promulgated thereunder (the "Rules"). The
Registration Statement relates to the offering of up to 1,400,000 shares (the
"Shares") of common stock, par value $.01 per share (the "Common Stock")
1,400,000 warrants (the "Warrants"); 1,400,000 shares of Common Stock
underlying the Warrants; 140,000 Representative's Warrants; 140,000 shares
of Common Stock issuable upon exercise of Representative's Warrants; 140,000
Warrants issuable upon exercise of Representative's Warrants; and 140,000
shares of Common Stock issuable upon exercise of warrants issuable upon
exercise of Representative's Warrants.

We have examined such records and documents and have made such
examination of law as we considered necessary to form a basis for the
opinions set forth herein. In our examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals, and the conformity with the originals of all documents
submitted to us as copies thereof.

Based upon such examination, it is our opinion that when there has been
compliance with the Act and applicable state securities laws and when the
Placement Agent Agreement, a form of which will be filed as an exhibit to the
Registration Statement, is duly and validly executed and delivered, the
Common Stock and Warrants, when issued, delivered and paid for in the manner
described in such Placement Agent Agreement, will be validly issued, fully paid
and nonassessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Opinions" in the Registration Statement. In so doing, we do not admit that we
are in the category of persons whose consent is required under Section 7 of the
Act or under the Rules.

Very truly yours,

/s/ CAMHY KARLINSKY & STEIN LLP
Camhy Karlinsky & Stein LLP

<PAGE>
Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form SB-2 of our report dated April 11, 1997
relating to the financial statements of Casull Arms Corporation, which
appears in such Prospectus. We also consent to the references to us under
the headings "Experts" and "Selected Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Financial Data."

PRICE WATERHOUSE LLP

New York, New York
May 1, 1997

<PAGE>

Exhibit 99.1

ESCROW AGREEMENT (PUBLIC OFFERING)

AGREEMENT made this __ day of May, 1997 by and among the Issuer and the
Underwriter whose names and addresses appear on the Information Sheet (as
defined herein) attached to this Agreement and Continental Stock Transfer &
Trust Company (the "Escrow Agent").

W I T N E S S E T H:

WHEREAS, the Issuer has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (the "Registration Statement")
covering a proposed public offering of its securities as described on the
Information Sheet;

WHEREAS, the Underwriter proposes to offer the Securities, as agent for the
Issuer, for sale to the public on a "best efforts, all or none" basis with
respect to the Minimum Securities Amount and Minimum Dollar Amount and at the
price per share or other unit all as set forth on the Information Sheet;

WHEREAS, the Issuer and the Underwriter propose to establish an escrow
account (the "Escrow Account"), to which subscription monies which are received
by the Escrow Agent from the Underwriter in connection with such public offering
are to be credited, and the Escrow Agent is willing to establish the Escrow
Account on the terms and subject to the conditions hereinafter set forth; and

WHEREAS, the Escrow Agent has an agreement with Chemical Bank to establish
a special bank account (the "Bank Account") into which the subscription monies,
which are received by the Escrow Agent from the Underwriter and credited to the
Escrow Account, are to be deposited;

NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:

1. INFORMATION SHEET. Each capitalized term not otherwise defined in
this Agreement shall have the meaning set forth for such term on the information
sheet which is attached to this Agreement and is incorporation by reference
herein and made a part hereof (the "Information Sheet").

2. ESTABLISHMENT OF THE BANK ACCOUNT.

2.1 The Escrow Agent shall establish a non-interest-bearing bank account
at the

<PAGE>

branch of Chemical Bank selected by the Escrow Agent, and bearing the
designation set forth on the Information Sheet (heretofore defined as the "Bank
Account"). The purpose of the Bank Account is for (a) the deposit of all
subscription monies (checks, cash or wire transfers) which are received by the
Underwriter from prospective purchasers of the Securities and are delivered by
the Underwriter to the Escrow Agent, (b) the holding of amounts of subscription
monies which are collected through the banking system, and (c) the disbursement
of collected funds, all as described herein.

2.2 On or before the date of the initial deposit in the Bank Account
pursuant to this Agreement, the Underwriter shall notify the Escrow Agent in
writing of the effective date of the Registration Statement (the "Effective
Date"), and the Escrow Agent shall not be required to accept any amounts for
credit to the Escrow Account or for deposit in the Bank Account prior to its
receipt of such notification.

2.3 The Offering Period, which shall be deemed to commence on the
Effective Date, shall consist of the number of calendar days or business days
set forth on the Information Sheet. The Offering Period shall be extended by an
Extension Period only if the Escrow Agent shall have received written notice
thereof at least five (5) business days prior to the expiration of the Offering
Period. The Extension Period, which shall be deemed to commence on the next
calendar day following the expiration of the Offering Period, shall consist of
the number of calendar days or business days set forth on the Information Sheet.
The last day of the Offering Period, or the last day of the Extension Period (if
the Escrow Agent has received written notice thereof as hereinabove provided),
is referred to herein as the "Termination Date". Except as provided in Section
4.3 hereof, after the Escrow Agent shall not accept, any additional amounts
representing payments by prospective purchasers.

3. DEPOSITS TO THE BANK ACCOUNT.

3.1 The Underwriter shall promptly deliver to the Escrow Agent all monies
which it receives from prospective purchasers of the Securities, which monies
shall be in the form of checks, cash, or wire transfers. Upon the Escrow
Agent's receipt of such monies, they shall be credited to the Escrow Account.
All checks delivered to the Escrow Agent shall be made payable to "Continental
Stock Transfer & Trust Company, as Escrow Agent for the offering by [the
Issuer]". Any check payable other than to the Escrow Agent as required hereby
shall be returned to the prospective purchaser, or if the Escrow Agent has
insufficient information to do so, then to the Underwriter (together with any
Subscription Information, as defined below or other documents delivered
therewith) by noon of the next business day following receipt of such check by
the Escrow Agent, and such check shall be deemed not to have been delivered to
the Escrow Agent pursuant to the terms of this Agreement.

3.2 Promptly after receiving subscription monies as described in Section
3.1, the Escrow Agent shall deposit the same into the Bank Account. Amounts of
monies so deposited are hereinafter referred to as "Escrow Amounts". The
Escrow Agent shall cause Chemical Bank to process all Escrow Amounts for
collection through the banking system. Simultaneously with each deposit to the
Escrow Account, the Underwriter (or the Issuer, if such deposit is made by

<PAGE>

the Issuer) shall inform the Escrow Agent in writing of the name and address of
the prospective purchaser, the amount of Securities subscribed for by such
purchaser, and the aggregate dollar amount of such subscription (collectively,
the "Subscription Information").

3.3 The Escrow Agent shall not be required to accept for credit to the
Escrow Account or for deposit into the Bank Account checks which are not
accompanied by the appropriate Subscription Information. Wire transfers and
cash representing payments by prospective purchasers shall not be deemed
deposited in the Escrow Account until the Escrow Agent has received in writing
the Subscription Information required with respect to such payments.

3.4 The Escrow Agent shall not be required to accept in the Escrow Account
any amounts representing payments by prospective purchasers, whether by check,
cash or wire, except during the Escrow Agent's regular business hours.

3.5 Only those Escrow Amounts, which have been deposited in the Bank
Account and which have cleared the banking system and have been collected by the
Escrow Agent, are herein referred to as the "Fund".

3.6 If the proposed offering is terminated before the Termination Date,
the Escrow Agent shall refund any portion of the Fund prior to disbursement of
the Fund in accordance with Article 4 hereof upon instructions in writing signed
by both the Issuer and the Underwriter.

4. DISBURSEMENT FROM THE BANK ACCOUNT.

4.1 Subject to Section 4.3 below, if by the close of regular banking hours
on the Termination Date the Escrow Agent determines that the amount in the Fund
is less than the Minimum Dollar Amount or the Minimum Securities Amount, as
indicated by the Subscription Information submitted to the Escrow Agent, then in
either such case, the Escrow Agent shall promptly refund to each prospective
purchaser the amount of payment received from such purchaser which is then held
in the Fund or which thereafter clears the banking system, without interest
thereon or deduction therefrom, by drawing checks on the Bank Account for the
amounts of such payments and transmitting them to the purchasers. In such
event, the Escrow Agent shall promptly notify the Issuer and the Underwriter of
its distribution of the Fund.

4.2 Subject to Section 4.3 below, if at any time up to the close of
regular banking hours on the Termination Date, the Escrow Agent determines that
the amount in the Fund is at least equal to the Minimum Dollar Amount and
represents the sale of not less than the Minimum Securities Amount, the Escrow
Agent shall promptly notify the Issuer and the Underwriter of such fact in
writing. The Escrow Agent shall promptly disburse the Fund, by drawing checks
on the Bank Account in accordance with instructions in writing signed by both
the Issuer and the Underwriter as to the disbursement of the Fund, promptly
after it receives such instructions.

4.3 (This provision applies only if a Collection Period has been provided
for by the appropriate indication on the Information Sheet.) If the Escrow
Agent or the Underwriter has on

<PAGE>

hand at the close of business on the Termination Date any uncollected amounts
which when added to the Fund would raise the amount in the Fund to the Minimum
Dollar Amount, and result in the Fund representing the sale of the Minimum
Securities Amount, the Collection Period (consisting of the number of business
days set forth on the Information Sheet) shall be utilized to allow such
uncollected amounts to clear the banking system. During the Collection Period,
the Underwriter (and the Issuer) shall not deposit, and the Escrow Agent shall
not accept, any additional amounts; provided, however, that such amounts as were
received by the Underwriter (or the Issuer) by the close of business on the
Termination Date may be deposited with the Escrow Agent by noon of the next
business day following the Termination Date. If at the close of business on the
last day of the Collection Period an amount sufficient to raise the amount in
the Fund to the Minimum Dollar Amount and which would result in the Fund
representing the sale of the Minimum Securities Amount shall not have cleared
the banking system, the Escrow Agent shall promptly notify the Issuer and the
Underwriter in writing of such fact and shall promptly return all amounts then
in the Fund, and any amounts which thereafter clear the banking system, to the
prospective purchasers as provided in Section 4.2 hereof.

4.4 Upon disbursement of the Fund pursuant to the terms of this Article 4,
the Escrow Agent shall be relieved of all further obligations and released from
all liability under this Agreement. It is expressly agreed and understood that
in no event shall the aggregate amount of payments made by the Escrow Agent
exceed the amount of the Fund.

5. RIGHTS, DUTIES AND RESPONSIBILITIES OF ESCROW AGENT. It is understood
and agreed that the duties of the Escrow Agent are purely ministerial in nature,
and that:

5.1 The Escrow Agent shall notify the Underwriter, on a daily basis, of
the Escrow Amounts which have been deposited in the Bank Account and of the
amounts, constituting the Fund, which have cleared the banking system and have
been collected by the Escrow Agent.

5.2 The Escrow Agent shall not be responsible for or be required to
enforce any of the terms or conditions of the underwriting agreement or any
other agreement between the Underwriter and the Issuer nor shall the Escrow
Agent be responsible for the performance by the Underwriter or the Issuer of
their respective obligations under this Agreement.

5.3 The Escrow Agent shall not be required to accept from the Underwriter
(or the Issuer) any Subscription Information pertaining to prospective
purchasers unless such Subscription Information is accompanied by checks, cash,
or wire transfers meeting the requirements of Section 3.1, nor shall the Escrow
Agent be required to keep records of any information with respect to payments
deposited by the Underwriter (or the Issuer) except as to the amount of such
payments; however, the Escrow Agent shall notify the Underwriter within a
reasonable time of any discrepancy between the amount set forth in any
Subscription Information and the amount delivered to the Escrow Agent therewith.
Such amount need not be accepted for deposit in the Escrow Account until such
discrepancy has been resolved.

5.4 The Escrow Agent shall be under no duty or responsibility to enforce
collection of any check delivered to it hereunder. The Escrow Agent, within a
reasonable time, shall return to

<PAGE>

the Underwriter any check received which is dishonored, together with the
Subscription Information, if any, which accompanied such check.

5.5 The Escrow Agent shall be entitled to rely upon the accuracy, act in
reliance upon the contents, and assume the genuineness of any notice,
instruction, certificate, signature, instrument or other document which is given
to the Escrow Agent pursuant to this Agreement without the necessity of the
Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent shall
not be obligated to make any inquiry as to the authority, capacity, existence or
identity of any person purporting to give any such notice or instructions or to
execute any such certificate, instrument or other document.

5.6 If the Escrow Agent is uncertain as to its duties or rights hereunder
or shall receive instructions with respect to the Bank Account, the Escrow
Amounts or the Fund which, in its sole determination, are in conflict either
with other instructions received by it or with any provision of this Agreement,
it shall be entitled to hold the Escrow Amounts, the Fund, or a portion thereof,
in the Bank Account pending the resolution of such uncertainty to the Escrow
Agent's sole satisfaction, by final judgment of a court or courts of competent
jurisdiction or otherwise; or the Escrow Agent, at its sole option, may deposit
the Fund (and any other Escrow Amounts that thereafter become part of the Fund)
with the Clerk of a court of competent jurisdiction in a proceeding to which all
parties in interest are joined. Upon the deposit by the Escrow Agent of the
Fund with the Clerk of any court, the Escrow Agent shall be relieved of all
further obligations and released from all liability hereunder.

5.7 The Escrow Agent shall not be liable for any action taken or omitted
hereunder, or for the misconduct of any employee, agent or attorney appointed by
it, except in the case of willful misconduct or gross negligence. The Escrow
Agent shall be entitled to consult with counsel of its own choosing and shall
not be liable for any action taken, suffered or omitted by it in accordance with
the advice of such counsel.

5.8 The Escrow Agent shall have no responsibility at any time to ascertain
whether or not any security interest exists in the Escrow Amounts, the Fund or
any part thereof or to file any financing statement under the Uniform Commercial
Code with respect to the Fund or any part thereof.

6. AMENDMENT; RESIGNATION. This Agreement may be altered or amended only
with the written consent of the Issuer, the Underwriter and the Escrow Agent.
The Escrow Agent may resign for any reason upon three (3) business days' written
notice to the Issuer and the Underwriter. Should the Escrow Agent resign as
herein provided, it shall not be required to accept any deposit, make any
disbursement or otherwise dispose of the Escrow Amounts or the Fund, but its
only duty shall be to hold the Escrow Amounts until they clear the banking
system and the Fund for a period of not more than five (5) business days
following the effective date of such resignation, at which time (a) if a
successor escrow agent shall have been appointed and written notice thereof
(including the name and address of such successor escrow agent) shall have been
give to the resigning Escrow Agent by the Issuer, the Underwriter and such
successor escrow agent, then the resigning Escrow Agent shall pay over to the
successor escrow agent the

<PAGE>

Fund, less any portion thereof previously paid out in accordance with this
Agreement; or (b) if the resigning Escrow Agent shall not have received written
notice signed by the Issuer, the Underwriter and a successor escrow agent, then
the resigning Escrow Agent shall promptly refund the amount in the Fund to each
prospective purchaser, without interest thereon or deduction therefrom, and the
resigning Escrow Agent shall promptly notify the Issuer and the Underwriter in
writing of its liquidation and distribution of the Fund; whereupon, in either
case, the Escrow Agent shall be relieved of all further obligations and released
from all liability under this Agreement. Without limiting the provisions of
Section 8 hereof, the resigning Escrow Agent shall be entitled to be reimbursed
by the Issuer and the Underwriter for any expenses incurred in connection with
its resignation, transfer of the Fund to a successor escrow agent or
distribution of the Fund pursuant to this Section 6.

7. REPRESENTATIONS AND WARRANTIES. The Issuer and the Underwriter hereby
jointly and severally represent and warrant to the Escrow Agent that:

7.1 No party other than the parties hereto and the prospective purchasers
have, or shall have, any lien, claim or security interest in the Escrow Amounts
or the Fund or any part thereof.

7.2 No financing statement under the Uniform Commercial Code is on file in
any jurisdiction claiming a security interest in or describing (whether
specifically or generally) the Escrow Amounts or the Fund or any part thereof.

7.3 The Subscription Information submitted with each deposit shall, at the
time of submission and at the time of the disbursement of the Fund, be deemed a
representation and warranty that such deposit represents a bona fide payment by
the purchaser described therein for the amount of Securities set forth in such
Subscription Information.

7.4 All of the information contained in the Information Sheet is, as of
the date hereof, and will be, at the time of any disbursement of the Fund, true
and correct.

8. FEES AND EXPENSES. The Escrow Agent shall be entitled to the Escrow
Agent Fees set forth on the Information Sheet, payable as and when stated
therein. In addition, the Issuer and the Underwriter jointly and severally
agree to reimburse the Escrow Agent for any reasonable expenses incurred in
connection with this Agreement, including, but not limited to, reasonable
counsel fees. Upon receipt of the Minimum Dollar Amount, the Escrow Agent shall
have a lien upon the Fund to the extent of its fees for services as Escrow
Agent.

9. INDEMNIFICATION AND CONTRIBUTION.

9.1 The Issuer and the Underwriter (collectively referred to as the
"Indemnitors") jointly and severally agree to indemnify the Escrow Agent and its
officers, directors, employees, agents and shareholders (collectively referred
to as the "Indemnitees") against, and hold them harmless of and from, any and
all loss, liability, cost, damage and expense, including without limitation,
reasonable counsel fees, which the Indemnitees may suffer or incur by reason of
any

<PAGE>

action, claim or proceeding brought against the Indemnitees arising out of or
relating in any way to this Agreement or any transaction to which this Agreement
relates, unless such action, claim or proceeding is the result of the willful
misconduct or gross negligence of the Indemnitees.

9.2 If the indemnification provided for in Section 9.1 is applicable, but
for any reason is held to be unavailable, the Indemnitors shall contribute such
amounts as are just and equitable to pay, or to reimburse the Indemnitees for,
the aggregate of any and all losses, liabilities, costs, damages and expenses,
including counsel fees, actually incurred by the Indemnitees as a result of or
in connection with, and any amount paid in settlement of, any action, claim or
proceeding arising out of or relating in any way to any actions or omissions of
the Indemnitors.

9.3 The provisions of this Article 9 shall survive any termination of this
Agreement, whether by disbursement of the Fund, resignation of the Escrow Agent
or otherwise.

10. GOVERNING LAW AND ASSIGNMENT. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York and shall be
binding upon the parties hereto and their respective successors and assigns;
provided, however, that any assignment or transfer by any party of its rights
under this Agreement or with respect to the Escrow Amounts or the Fund shall be
void as against the Escrow Agent unless (a) written notice thereof shall be
given to the Escrow Agent; and (b) the Escrow Agent shall have consented in
writing to such assignment or transfer.

11. NOTICES. All notices required to be given in connection with this
Agreement shall be sent by registered or certified mail, return receipt
requested, or by hand delivery with receipt acknowledged, or by the Express Mail
service offered by the United States Post Office, and addressed, if to the
Issuer or the Underwriter, at their respective addresses set forth on the
Information Sheet, and if to the Escrow Agent, at its address set forth above,
to the attention of the Trust Department.

12. SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be determined to be invalid or
unenforceable, the remaining provisions of this Agreement or the application of
such provision to persons or circumstances other than those to which it is held
invalid or unenforceable shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law.

13. EXECUTION IN SEVERAL COUNTERPARTS. This Agreement may be executed in
several counterparts or by separate instruments, and all of such counterparts
and instruments shall constitute one agreement, binding on all of the parties
hereto.

14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings (written or oral) of the
parties in connection therewith.

<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.

CONTINENTAL STOCK
THE ISSUER TRANSFER & TRUST COMPANY

By: /s/ David Myers By: /s/ Steve Nelson
---------------- ----------------

THE UNDERWRITER

By: /s/ Steven A. Rothstein
------------------------

<PAGE>

ESCROW AGREEMENT INFORMATION SHEET

1. THE ISSUER
Name Casull Arms Corporation
---------------------------------------------------------------------
Address 456 Fairview Road, P.O. Box 1629, Afton, Wyoming 83110
------------------------------------------------------------------
State of incorporation of organization Delaware
-----------------------------------
2. THE UNDERWRITER
Name National Securities Corporation
----------------------------------------------------------------------
Address 1001 Fourth Avenue, Suite 2200, Seattle, Washington 98154-1100
-------------------------------------------------------------------
State of incorporation of organization Washington
------------------------------------

3. THE SECURITIES
Description of the Securities to be offered (e.g., shares of or warrants
for common stock, debentures, units consisting shares and warrants, etc.)
Units, each consisting of one share of Common Stock and one Warrant
---------------------------------------------------------------------------

Par value, if any $0.01 per share
---------------------------------------------------------
Offering price per share/unit/other Common Stock - $6.00 and Warrant $0.10
---------------------------------------

4. MINIMUM AMOUNTS REQUIRED FOR DISBURSEMENT OF THE ESCROW ACCOUNT
Aggregate dollar amount which must be collected before the Escrow Account
may be disbursed to the Issuer ("Minimum Dollar Amount") $2,440,000
----------
Total amount of securities which must be subscribed for before the Escrow
Account may be disbursed to the Issuer ("Minimum Securities Amount")
400,000 shares of Common Stock and 400,000 Warrants
---------------------------------------------------------------------------

5. PLAN OF DISTRIBUTION OF THE SECURITIES
Offering Period: 60 calendar days
--

Extension Period, if any; 30 calendar days
--

Collection Period, if any N/A
---

6. Title of Escrow Account: Continental Stock Transfer & Trust Company, Escrow
Agent for the offering by Casull Arms Corporation.
-----------------------

7. ESCROW AGENT FEES
Amount due on execution of the Escrow Agreement $1,000 and
------

$1,000 upon completion of the escrow
------

Fee for each check disbursed pursuant to the terms of the Escrow Agreement
$ 0
--

Fee each check returned pursuant to the terms of the Escrow Agreement:
$ 0
--

Amount due for any Closings - $500
----