As filed with the Securities and Exchange Commission on July 29, 1997
Registration No. 333-25797
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
COMMERCE GROUP CORP.
(Name of registrant as specified in its charter)
Delaware 39-6050862
(State or Jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6001 North 91st Street Edward L. Machulak
Milwaukee, Wisconsin 53225 6001 North 91st Street
(414) 462-5310 Milwaukee, Wisconsin 53225
Facsimile (414) 462-5312 (414) 462-5310
(Address, including zip code, and telephone number, including area code (Name,
address, including zip code, and of Registrant's principal executive offices)
telephone number, including area code, of
agent for service)
COPY TO:
Jehu Hand, Esq.
Hand & Hand
24901 Dana Point Harbor Drive, Suite 200
Dana Point, California 92629
(714) 489-2400
Facsimile (714) 489-0034
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the effective date of this registration
statement.
If the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933 other than securities offered only
in connection with dividend or
interest reinvestment plan, please check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box:
[ ]
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed MaximumProposed Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered Be Registered Per Share(1) Offering Price(2) Registration Fee
Common Stock offered by
<S> <C> <C> <C> <C>
selling shareholders................. 25,000 $2.4375 $ 60,937.50 $ 18.47
Common Stock issuable upon
exercise of options(2)............... 200,000 $2.4375(3) $ 487,500 $ 147.73
Common Stock issuable upon
exercise options(4).................. 200,000 $2.55 $ 510,000 $ 154.55
Common Stock issuable upon
exercise of options(5)............... 200,000 $2.80 $ 560,000 $ 169.20
Common Stock issuable upon
exercise of options(6)............... 200,000 $3.20 $ 640,000 $ 193.94
Common Stock issuable upon
exercise of options(7)............... 200,000 $4.00 $ 800,000 $ 242.42
Common Stock issuable upon
exercise of options(8)............... 100,000 $3.22 $ 322,000 $ 97.58
Common Stock issuable upon
exercise of options(8)............... 100,000 $4.22 $ 422,000 $ 127.88
Total(9)............................... 1,225,000 $ 3,802,437.50 $ 1,151.77
</TABLE>
(1) Estimated solely for the purposes of calculating the regulation fee. The
maximum offering price per share is based upon the average of the bid and
ask price of the Common Stock as of April 17, 1997, which was within 5
trading days of the date of original filing of this registration
statement.
(2) Represents 200,000 shares issuable upon exercise of options at $2.25 per
share. The option price has been revised from the original filing.
(3) Estimated solely for purposes of calculating the registration fee. The
maximum offering price per share is based upon the closing price of the
Common Stock on April 17, 1997, or $2.4375 since it is higher than the
exercise price per share (in accordance with Rule 457(g)).
(4) Represents 200,000 shares issuable upon exercise of options at $2.75 per
share. The option price has been revised from the original filing.
(5) Represents 200,000 shares issuable upon exercise of options at $3.25 per
share. The option price has been revised from the original filing.
(6) Represents 200,000 shares issuable upon exercise of options at $3.75 per
share. The option price has been revised from the original filing.
(7) Represents 200,000 shares issuable upon exercise of options at $4.25 per
share.The option price has been revised from the original filing.
(8) Represenst 100,000 and 100,00 shares issuable upon exercise of options at
$3.22 and $4.22 per share, respectively, until January 30, 1999.
(9) Filing fee of $926.31 paid on original filing and $225.46 on Amendment
No. 1.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION
PROSPECTUS
COMMERCE GROUP CORP.
1,225,000 Shares of Common Stock
($.10 par value)
The 1,225,000 shares (the "Shares") of Common Stock, par value $.10 per
share (the "Common Stock") of Commerce Group Corp., a Delaware corporation (the
"Company") are being offered by the selling stockholders (the "Selling
Stockholders"). The Company will not receive any proceeds from the sale of
Common Stock by the Selling Stockholders. See "Selling Stockholders." The
expenses of the offering, estimated at $28,000, will be paid by the Company.
The Common Stock currently trades on the Boston Stock Exchange under the
symbol CMG or CMG.BN and on NASDAQ under the symbol "CGCO." On July 14, 1997,
the last sale price of the Common Stock as reported on NASDAQ was $2.125 per
share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PURCHASE OF THESE SECURITIES INVOLVES RISKS.
See Risk Factors.
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.
The date of this Prospectus is ___________, 1997
1
<PAGE>
No person has been authorized in connection with this offering to give any
information or to make any representation other than as contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any
securities covered by this Prospectus in any state or other jurisdiction to any
person to whom it is unlawful to make such offer or solicitation in such state
or jurisdiction. Neither the delivery of this Prospectus nor any sales made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of the Company since the date hereof.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, as well as proxy statements and
other information filed by the Company with the Commission, can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its Regional
Offices located at 7 World Trade Center, New York, New York 10048, and at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission, Washington, D.C. 20549, during regular
business hours and from the Boston Stock Exchange. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding issuers such as the Company that file electronically with
the Commission at http.//www.sec.gov.
This Prospectus incorporates by reference the Company's Form 10-K for the
year ended March 31, 1996, the Company's Quarterly Reports on Form 10-Q for the
quarters ended June 30, 1996, September 30, 1996 and December 31, 1996, the
Company's Current Report on Form 8-K dated January 30, 1997, and the description
of securities included in the Company's Registration Statement on Form 10, File
No. 1-7375, and all other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c) or 14 of the Exchange Act prior to the termination of
the offering made hereby. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete, and in
each instance reference is made to the copy of such contract or document filed
as an exhibit to the Registration Statement, each such statement being qualified
in its entirety by such reference. The Company will provide, without charge upon
oral or written request of any person, a copy of any information incorporated by
reference herein. Such request should be directed to the Company at 6001 North
91st Street, Milwaukee, Wisconsin 53225-1795, telephone (414) 462-5310.
INDEMNIFICATION
Pursuant to the Company's Certificate of Incorporation, as amended, the
Company may indemnify each of its directors and officers with respect to all
liability and loss suffered and reasonable expense incurred by such person in
any action, suit or proceeding in which such person was or is made or threatened
to be made a party or is otherwise involved by reason of the fact that such
person is or was a director of the Company. In addition, the Company may pay the
reasonable expenses of indemnified directors and officers incurred in defending
such proceedings if the indemnified party agrees to repay all amounts advanced
should it be ultimately determined that such person is not entitled to
indemnification.
In addition, as permitted by the Delaware General Corporation Law, the
Company's Certificate of Incorporation provides that the Company's directors
will not be held personally liable to the Company or its stockholders for
monetary damages for a breach of fiduciary duty as a director except to the
extent such exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Law. This provision does not eliminate
the duty of care, and injunctive or other forms of non-monetary equitable relief
will remain available under Delaware law. In addition, each director continues
to be liable for monetary damages for (i) misappropriation of any corporate
opportunity in violation of the director's duties, (ii) acts or omissions in bad
faith or involving intentional misconduct, (iii) knowing violations of law, (iv)
any transaction from which a director derives an improper personal benefit and
(v) distributions (including payment of dividends or stock repurchase or
redemptions) that are not permitted under Delaware law. The provision does not
affect a director's responsibilities under any other law, such as the federal
securities laws of state or federal environmental laws.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant
2
<PAGE>
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.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the information
appearing elsewhere in this Prospectus. Each prospective investor is urged to
read this Prospectus in its entirety.
The Company
Commerce Group Corp., ("Commerce" or the "Company") is a Delaware
corporation based in Milwaukee, Wisconsin, primarily engaged in the business of
developing mines and producing gold in the Republic of El Salvador, Central
America, through its Commerce/Sanseb Joint Venture ("Joint Venture"). Commerce
holds a nearly 100% interest (detailed below) in the San Sebastian Gold Mine
("SSGM") and is exploring four other potential gold prospects located in El
Salvador. There are approximately 1.7 million ounces of proven gold ore reserves
at the SSGM, and at two of the other El Salvador gold mines. There are strong
initial indications of gold ore present at the other sites.
Commerce is currently producing gold at a facility referred to in this
report as the San Cristobal Mill and Plant ("SCMP") by processing tailings from
the SSGM. These tailings are waste material left as the by-product of past
mining operations at the SSGM. The SCMP is located approximately 13 miles from
the SSGM. Commerce acquired this facility on February 23, 1993, and thereafter
made substantial renovations and modifications to the plant and equipment before
and after placing this facility in operation. Production began on March 31,
1995, and during the fiscal year ending March 31, 1996, 5,993 ounces of bullion
containing 3,161 ounces of gold and 1,489 ounces of silver were produced at this
facility from these tailings. In the nine months ended December 31, 1996, 2728
ounces of bullion containing 1527 ounces of gold and 361 ounces of silver were
produced. Revenues from this production were used primarily to fund further
exploration of virgin ore reserves at the SSGM, to fund the development of the
four other mining prospects, and to fund improvements at the SCMP.
Commerce's current business plan is to secure sufficient capital to
substantially increase its production of gold to at least 40,000 ounces per year
and to develop additional gold ore reserves. The Company expects to increase
production by developing an open-pit mine and a heap-leach operation on site at
the SSGM and by acquiring additional mining equipment recently purchased which
will permit it to process virgin ore at the SCMP. The heap-leach operation will
have the capability of producing (through processing a higher volume of ore)
significantly more gold than could be produced at the SCMP, which has a present
maximum capacity of 400 tons per day. Commerce will also continue to drill test
holes at previously unexplored areas at the site of the SSGM and its four other
potential mining prospects.
Aside from its mining operations, Commerce independently and through
its partially and wholly-owned subsidiaries conducts other business activities,
which at present are substantially less significant than its gold production and
exploration in El Salvador: (1) land acquisition and real estate development
through its wholly-owned subsidiaries, San Luis Estates, Inc. ("SLE") and
Universal Developers, Inc. ("UDI"); (2) real estate sales, through its
wholly-owned subsidiary, Homespan Realty Co., Inc. ("Homespan"); (3) the
operation of a 331-acre campground known as Standing Rock Campground, which is
owned by Homespan and operated by the Company; and (4) advertising, through its
wholly-owned subsidiary, Piccadilly Advertising Agency, Inc. ("Piccadilly").
Commerce was incorporated in Wisconsin in September 1962, and it merged
into a Delaware corporation in 1971. Its common shares have been publicly traded
since 1968. Commerce acquired 82-1/2% of the authorized and issued shares of San
Sebastian Gold Mines, Inc. ("Sanseb"), a Nevada corporation. The balance of
Sanseb's shares are held by approximately 200 unrelated shareholders. From 1969
forward, Commerce has provided substantially all of the capital required to
develop a mining operation at the SSGM, to fund exploration, and to acquire and
refurbish the SCMP. On September 22, 1987, Commerce and Sanseb entered into a
joint venture agreement (named the "Commerce/Sanseb Joint Venture" and sometimes
referred to herein as the "Joint Venture" or "Comseb") to formalize the
relationship between Commerce and Sanseb with respect to the mining venture and
to divide profits commensurately with Commerce's substantial investment. The
terms of this agreement authorize Commerce to supervise and control all of the
business affairs of the Joint Venture. Under this agreement 90% of the net
pre-tax profits of the Joint Venture will be distributed to Commerce and 10% to
Sanseb, and because Commerce owns 82-1/2% of the authorized and issued shares of
Sanseb, Commerce in effect has an over 98% interest in the Activities of the
Joint Venture.
3
<PAGE>
The Joint Venture leases the SSGM from a 52% owned subsidiary, Mineral
San Sebastian, S.A. de C.V. ("Misanse"), an El Salvador corporation. Although
Misanse owns the real estate comprising the site of the SSGM, the lease
agreement grants Comseb the right to all gold produced in exchange for a 5%
royalty over a term of 25 years beginning on the first day gold is produced,
which Comseb may, at its option, extend for an additional 25 years. Because
Commerce owns 52% of Misanse, Comseb in effect pays a royalty amounting to less
than 2-1/2% of its gold production to parties other than its own shareholders.
As of March 31, 1996, the total investment in the El Salvador mining
projects by Commerce, three of Commerce's wholly-owned subsidiaries, Sanseb, and
the Joint Venture amounted to $36,318,848. The profitability and viability of
the Joint Venture is dependent upon, not only the price of gold in the world
market (which can be unstable), but also upon the political stability of El
Salvador and the availability of adequate funding for either the SCMP operation
or the SSGM open-pit, heap-leaching operation or for the four other exploration
projects.
The Company's principal executive offices are located at 6001 North
91st Street, Milwaukee, Wisconsin 53225-1795. Its telephone number is (414)
462-5310 and its fax number is (414) 462-5312. The Company's e-mail address is
[email protected] and its website is http://www.execpc.com/~comgroup/
The Offering
Securities Offered:......................................
1,225,000 shares of Common Stock, $.10 par value per
share, including 1,200,000 shares issuable upon exercise
of stock options.
Common Stock Outstanding(1) Before Offering:............. 8,323,415(1) shares
Common Stock Outstanding After Offering:................. ___________(1) shares
NASDAQ symbol............................................ CGCO
Boston Stock Exchange.................................... CMG or CMG.BN
(1) Based on shares outstanding as of December 31, 1996.
Risk Factors
Investment in the Shares offered hereby involves a high degree of risk,
including the limited operating history of the Company and competition.
Investors should carefully consider the various risk factors before investing in
the Shares. This Prospectus contains forward looking statements which may
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Risk Factors." See "Risk Factors."
4
<PAGE>
Summary Financial Information
Set forth below is selected financial data with respect to the Company
for the five fiscal years ended March 31, 1996.
<TABLE>
<CAPTION>
Consolidated Operating Statement Data:
Year Ended March 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Total revenue $ 1,630,211 $ 1,345,260 $ 823,181 $ 507,964 $ 403,242
Income from
continuing operations 1,007,598 787,802 274,747 66,852 41,970
Income (loss) from
from continuing operations
per share:
Primary .124 .11 .046 .01 .01
Fully diluted .104 .11 .045 .01 .01
Cash dividends
declared per common share 0 0 0 0 0
Consolidated Balance Sheet Data:
As of March 31,
1997 1996 1995 1994 1993
Total Assets $ 25,067,334 $ 20,513,115 $ 17,617,423 $ 14,204,563 $ 13,158,374
Long-term notes
payable 145,000 20,259 120,000 245,000 245,000
Shareholders'
Equity $ 19,208,219 $ 15,159,507 $ 13,024,911 $ 9,368,870 $ 8,928,591
</TABLE>
5
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree
of risk. Prospective investors should carefully consider the following risk
factors relating to the business of the Company and this offering, together with
the information and financial data set forth elsewhere in this Prospectus,
before investing in the Shares offered hereby.
Sufficiency of Funds
The acquisition, exploration, development, and exploitation of gold ore reserves
requires substantial capital expenditures. The Company estimates that it
requires an additional $15 million in order to carry out its business plan. The
Company has not entered into any agreement for debt or equity under which it
might raise such additional $15 million. The availability of such funding will
depend on the profitability of the Company, the condition of the market for
financing, the price of gold, the then current political climate of the country
of El Salvador, and other unknown factors, and there can be no assurance that
the Company will be able to obtain financing nor whether the terms of such
financing will not excessively dilute the existing shareholders.
Unforeseen Natural Occurrences
Mining and extraction of precious metals are subject to unforeseen natural
occurrences, including, but not limited to, earthquakes, volcanos, storms, and
droughts. Any one or more of such events could prevent or delay the operation of
the Joint Venture and adversely affect the operations of the Company.
Security Risks
The precious nature of gold gives rise to the risk of theft and other loss
involving violence, vandalism and unexplained disappearance. To reduce its risk
of loss, the Company has employed tight security at the site of its operations
and has retained professional security services to transport its gold from El
Salvador to the United States. The Company also controls security risks on site
by restricting employee access to the section of its plant where gold is
recovered from concentrated chemical solutions at the final stage of extraction.
Prior to that stage of the recovery process, the gold being recovered is
diffused in ore or other media, and consequently, is difficult to steal.
Availability of Water
Water is essential in most phases of the exploration for and development of
mineral properties. It is used in such processes as exploration, drilling,
leaching and testing and various forms of processing. While planned operations
will likely have ample water resources, there is no guarantee such resources
will be consistently adequate for the operation of the Joint Venture.
Environmental Regulations
The Company's operations are located in El Salvador, where up to this time there
have existed limited environmental regulations. The Company has designed its
facilities to avoid environmental hazards and is of the opinion that its designs
would comply with U.S. standards and that it complies with all current
requirements in El Salvador. El Salvador law was recently amended to require the
filing of an environmental impact statement by mining enterprises. The Company
accordingly prepared and filed the required statement earlier in 1997 and
believes its filing will be approved. The Company's mining operations have been
periodically inspected by the governmental environment agency. The Company
expects to expend financial and managerial resources to protect the environment
and comply with any environmental laws and regulations. Although such
expenditures have historically not been material to the Company, the fact that
environmental law and regulations change makes it impossible for the Company to
predict the cost or impact of such laws and regulations on its future
operations.
6
<PAGE>
Market Fluctuations
The market prices of mineral products, especially precious metals, are often
unstable and is a function of factors over which the Company will have no
control. The price of gold has fluctuated within a wide range during the recent
past. It is possible that the considerable resources presently being employed to
discover sources or methods of recovery of gold could, if successful,
substantially increase the supply and reduce the price of gold. Furthermore,
there could be adverse economic conditions such as worldwide inflation,
deflation and variable energy costs, all of which would affect the price of
precious metals in unpredictable ways, including making mining methods
contemplated hereunder not feasible. The price instability of precious metals
and the markets made in these commodities could adversely affect the results of
the Company's operations. In addition, in recent years the stock market has
experienced large price and volume fluctuations, which often have been unrelated
to the operating performance of specific companies or market sectors. These
broad market fluctuations may adversely affect the market price of the Common
stock.
Reliance on Management
The success of the Company will depend, to a large extent, on the experience and
quality of its management. Although the Company's management will devote as much
time as is necessary to the affairs of the Company, members of management may
devote their time to other business activities in which they are or may become
engaged. The Company has an employment agreement with its chairman, Edward L.
Machulak, pursuant to which Mr. Machulak is entitled to 2% of the pre-tax
profits of the Company's El Salvador mining operations for twenty years
commencing on the first production of gold from the SSGM. A shareholder does not
have the right to take significant part in the control or management of the
business of the Company. A shareholder who may be dissatisfied with the manner
in which the Company is managing the business may have no effective means of
compelling a change in management policies. Accordingly, no person should
purchase any of the Securities unless he has evaluated the Company's
capabilities to manage all aspects of the Company's business and is willing to
entrust such functions to the Company and its management.
Lack of High Volume Operating History
The Company has no history of operating the type of mineral extraction and
processing operation at the volume of production contemplated herein. The
results of operations of the Joint Venture will be largely dependent upon the
extent to which management will be able to commence and operate its mining
operations in accordance with its business plan.
Competition
The Joint Venture will be subject to various technological changes and will be
operating in a marketplace with organizations having established methods of
operations, active mining properties and operating experience as well as
financial resources substantially greater than those of the Company.
Numerous other companies and organizations are engaged in the gold mining
business worldwide. While the Company believes that the Joint Venture is
competitive primarily because of the quantity and grade of ore to be extracted,
there can be no assurance that such distinction can be maintained. Furthermore,
other companies and organizations may be more successful in producing gold than
the Company, whether or not said projects are superior to the Company's Project.
Many of the Company's actual and potential competitors are larger, have records
of successful operations, greater financial and other resources, more employees,
and more extensive facilities than the Company now has or will have in the
foreseeable future.
Key Employees
The management of the Company rests with its officers and directors. In the
event of death or disability of any or all of them, the Company's ability to
perform as contemplated herein would be severely impaired. The Company does not
maintain key-man life insurance on any of its officers and directors, and has no
present plans to maintain such insurance.
7
<PAGE>
Management of Growth
The Company's growth and success depends on the ability of its officers and key
employees to manage increased operations effectively, to attract and retain
skilled employees and to expand the mining and processing capabilities of the
Company. There can be no assurance that the Company will be successful in
managing its expansion, and the failure to do so would adversely affect the
Company's financial position and results of operations.
Dividends
The Company has not paid any cash dividends on the Common Stock and it is not
anticipated that it will do so in the foreseeable future.
Preferred Stock Provisions; Anti-Takeover Measures
The Board of Directors has authority to issue up to 247,500 additional shares of
preferred stock and to fix the rights, preferences, privileges and limitations,
including voting rights, of the preferred stock without further vote or action
by the Company's stockholders. The Company intends to issue additional preferred
shares convertible into Common Stock to finance its operations. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock that may be issued for
adequate consideration in the future. The Company may issue additional shares of
preferred stock to raise capital in the future, and preferred stock may be
issued in connection with possible acquisitions and for other corporate
purposes, and could also have the effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock of the Company or
obtain a change in control of the Board of Directors of the Company.
MARKET PRICE OF COMMON STOCK
The Company's Common Stock has been listed on the Boston Stock Exchange
under the symbol "CMG" or "CMG.BN" since November 29, 1974, and on the Automated
Quotation System of the National Association of Securities Dealers, Inc.
(NASDAQ) Small-Cap Market under the symbol "CGCO" since March 23, 1987. As of
July 14, 1997 the last sale price as reported on NASDAQ was $2.125.
The following table sets forth the high and low bid prices for the
Common Stock as reported on NASDAQ since April 1, 1994 for the periods
indicated. Such information reflects inter dealer prices without retail mark-up,
mark down or commissions and may not represent actual transactions.
Quarter Ended High Low
June 30, 1994 $ 2.75 $ 1.63
September 30, 1994 3.50 2.63
December 31, 1994 3.13 2.38
March 31, 1995 4.50 3.50
June 30, 1995 4.63 3.75
September 30, 1995 3.75 3.00
December 31, 1995 3.25 2.63
March 31, 1996 3.25 2.75
June 30, 1996 3.13 2.38
September 30, 1996 3.25 2.38
December 31, 1996 3.25 1.88
March 31, 1997 3.88 1.88
June 30, 1997 3.56 2.125
The Company has not paid any dividends on its Common Stock.
The Company currently intends to retain any earnings for use in its business,
and therefore does not anticipate paying cash dividends in the foreseeable
future.
8
<PAGE>
As of January 31, 1997, there were approximately 3,000 record
holders of Company Common
Stock.
SELLING STOCKHOLDERS
The shares of Common Stock of the Company offered by the Selling
Stockholders (the "Shares") will be offered at market prices, as reflected on
NASDAQ or the Boston Stock Exchange.
The Selling Stockholders do not own any Common Stock except as
registered hereby and will own no shares after the completion of the offering.
<TABLE>
<CAPTION>
Percentage of
Common Stock
Number of Before
Name Common Shares Offering
<S> <C> <C> <C>
World Capital Funding, Inc.(1) 225,000 2.6%
Corporate Relations Group, Inc.(2) 1,000,000 10.7%
</TABLE>
(1) Includes 100,000 shares issuable upon exercise of options at $3.22 per
share and 100,000 options exercisable
at $4.22 per share. All options expire January 30, 1999.
(2) Includes 200,000 shares issuable upon exercise of options at each of
the following prices per share and terms; at $2.25 until November 29,
1997; at $2.75 until November 29, 1998; at $3.25 until November
29, 1999; at $3.75 until November 29, 2000; and at $4.25
until November 29, 2001.
*less than 1%
DESCRIPTION OF SECURITIES
Common Stock
The Company's Certificate of Incorporation authorizes the issuance of
15,000,000 shares of Common Stock, $.10 par value per share, of which 8,323,415
shares were outstanding as of December 31, 1996. Holders of shares of Common
Stock are entitled to one vote for each share on all matters to be voted on by
the shareholders. Holders of Common Stock have no cumulative voting rights.
Holders of shares of Common Stock are entitled to share ratably in dividends, if
any, as may be declared, from time to time by the Board of Directors in its
discretion, from funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, the holders of shares of
Common Stock are entitled to share pro rata all assets remaining after payment
in full of all liabilities. Holders of Common Stock have no preemptive rights to
purchase the Company's Common Stock. There are no conversion rights or
redemption or sinking fund provisions with respect to the Common Stock. All of
the outstanding shares of Common Stock are validly issued, fully paid and
non-assessable.
The transfer agent for the Common Stock is Nevada Agency and Trust
Company, 50 West Liberty Street, Suite 880, Reno, Nevada 89501.
Preferred Stock
The Company's Certificate of Incorporation authorize the issuance of
250,000 shares of preferred stock, $.10 par value, of which 2,500 shares of
Series A Convertible Preferred Stock are outstanding. The Convertible Preferred
Stock is convertible into shares of common stock. The Company may issue
additional preferred stock in the future. The Company's Board of Directors has
authority, without action by the shareholders, to issue all or any portion of
the authorized but unissued preferred stock in one or more series and to
determine the voting rights, preferences as to dividends and liquidation,
conversion rights, and other rights of such series.
9
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The Company considers it desirable to have preferred stock available to
provide increased flexibility in structuring possible future acquisitions and
financings and in meeting corporate needs which may arise. If opportunities
arise that would make desirable the issuance of preferred stock through either
public offering or private placements, the provisions for preferred stock in the
Company's Articles of Incorporation would avoid the possible delay and expense
of a shareholder's meeting, except as may be required by law or regulatory
authorities. Issuance of the preferred stock could result, however, in a series
of securities outstanding that will have certain preferences with respect to
dividends and liquidation over the Common Stock which would result in dilution
of the income per share and net book value of the Common Stock. Issuance of
additional Common Stock pursuant to any conversion right which may be attached
to the terms of any series of preferred stock may also result in dilution of the
net income per share and the net book value of the Common Stock. The specific
terms of any series of preferred stock will depend primarily on market
conditions, terms of a proposed acquisition or financing, and other factors
existing at the time of issuance. Therefore, it is not possible at this time to
determine in what respect a particular series of preferred stock will be
superior to the Company's Common Stock or any other series of preferred stock
which the Company may issue. The Board of Directors may issue additional
preferred stock in future financings.
The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. Further, certain provisions of Delaware law could delay or
make more difficult a merger, tender offer or proxy contest involving the
Company. While such provisions are intended to enable the Board of Directors to
maximize stockholder value, they may have the effect of discouraging takeovers
which could be in the best interest of certain stockholders. There is no
assurance that such provisions will not have an adverse effect on the market
value of the Company's stock in the future.
LEGAL MATTERS
The legality of the Shares offered hereby will be passed upon for the
Company by Hand & Hand, a law corporation, Dana Point, California.
EXPERTS
The consolidated balance sheets as of March 31, 1997 and 1996 and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for the years ended March 31, 1997, 1996 and 1995 included in this
Prospectus have been so included in reliance on the report of Redlin and
Associates, independent accountants, given on the authority of that firm as
experts in accounting and auditing.
10
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No dealer, salesman or other person is authorized to give any
information or to make any representations not contained in this Prospectus in
connection with the offer made hereby, and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a solicitation
to an offer to buy the securities offered hereby to any person in any state or
other jurisdiction in which such offer or solicitation would be unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that the information contained herein
is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
Additional Information...................... 2
Prospectus Summary.......................... 3
Risk Factors................................ 6
Market Price of Common Stock................ 8
Selling Stockholders........................ 10
Description of Securities................... 10
Legal Matters............................... 11
Experts..................................... 11
1,225,000 SHARES
COMMERCE GROUP CORP.
PART II
Item 14. Other Expenses of Issuance and Distribution.
Filing fee under the Securities Act of 1933 $ 926.31
Blue Sky qualification fees and expenses(1) 1,000.00
Printing and engraving(1) 1,000.00
Legal Fees COMMERCE GROUP CORP. 1,000.00
Accounting Fees 1,000.00
Miscellaneous(1) 3,073.69
TOTAL $ 10,000.00
==========
(1) Estimates
Item 15. Indemnification of Directors and Officers.
Pursuant to the Company's Certificate of Incorporation, as amended,
the Company may indemnify each of its directors and officers with respect to all
liability and loss suffered and reasonable expense incurred by such person in
any action, suit or proceeding in which suchOpersonSwas or is made or threatened
to be made a party or is otherwise involved by reason of the fact that such
person is or was a director of the Company. In addition, the Company may pay the
reasonable expenses of indemnified directors and officers incurred in defending
such proceedings if the indemnified party agrees to repay all amounts advanced
should it be ultimately determined that such person is not entitled to
indemnification.
In addition, as permitted by the Delaware General Corporation Law,
the Company's Certificate of Incorporation provides that the Company's directors
will not be held personally liable to the Company or its stockholders for
monetary damages for a breach of fiduciary duty as a director except to the
extent such exemption from liability or limitation thereof is not permitted
under the Delaware General Corporation Law. This provision does not eliminate
the duty of care, and injunctive or other forms of non-monetary equitable relief
will remain available under Delaware law. In addition, each director continues
to be liable for monetary damages for (i) misappropriation of any corporate
opportunity in violation of the director's duties, (ii) acts or omissions in bad
faith or involving intentional misconduct, (iii) knowing violations of law, (iv)
any transaction from which a director derives an improper personal benefit and
(v) distributions (including payment of dividends or stock repurchase or
redemptions) that are not permitted under Delaware law. The provision does not
affect a director's responsibilities under any other law, such as the federal
securities laws of state or federal environmental laws.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that may result in a claim for indemnification by any director or
officer.
Item 16. Exhibits
3.1 Articles of Incorporation of the Company (Incorporated by reference
to the Company's Registration
Statement No. 2-66932 on Form S-1 filed on April 22, 1980.)
3.2 By-laws of the Company. (Incorporated by reference to Exhibit 3.2 to
the Company's Form 10-K for the
year ended March 31, 1993.)
3.3 Certificate of Designation for Series A Convertible Preferred Stock.
(Incorporated by reference to the
Company's Financial Report on Form 8-K dated January 30, 1997.)
4. Instruments defining the rights of security holders, including
indentures.
4.1 Subscription Agreement, and Two-Year Stock Option (10,000 shares),
Robert C. Skeen, both dated July 10, 1992 (Incorporated by reference
to Exhibit 4.10 of the Company's Form 10-K for the year ended March
31, 1993.) Option was exercised on July 10, 1995.
<PAGE>
4.2 Two-Year Stock Option, Machulak, Hutchinson, Robertson, Dwyer &
O'Dess, S.C., May 11, 1992 (Incorporated by reference to Exhibit
4.11 of the Company's Form 10-K for the year ended March 31, 1993.)
4.2(a) Agreement dated May 13, 1994, to extend the Machulak, Hutchinson,
Robertson, Dwyer & O'Dess, S.C. Stock Option expiration date to
expire November 11, 1995. (Incorporated by reference to Exhibit
4.11(a) of the Company's Form 10-K for the year ended March 31,
1994.)
4.2(b) Agreement dated March 14, 1995, to extend the Machulak, Hutchinson,
Robertson, Dwyer & O'Dess, S.C. Stock Option expiration date to
expire February 11, 1996. 50,000 partial option exercised, February
27, 1995 remaining option shares, 50,260 were exercised on February
8, 1996. (Incorporated by reference to Exhibit 4.8(b) of the
Company's Form 10-K for the year ended March 31, 1995.)
4.3 Three-Year Stock Option Agreement dated May 27, 1994, (30,000
Shares). (Incorporated by reference to Exhibit 10.14 of the
Company's Form 10-K for the year ended March 31, 1994.)
4.4 Three-Year Stock Option Agreement dated May 31, 1994 (30,000
Shares). (Incorporated by reference
to Exhibit 10.15 of the Company's Form 10-K for the year ended March
31, 1994.)
4.5 Two-Year Stock Option Agreement dated May 31, 1994 (10,880 Shares).
(Incorporated by reference to
Exhibit 10.16 of the Company's Form 10-K for the year ended March
31, 1994.)
4.6 Two-Year Stock Option Agreement dated June 2, 1994 (2,000 Shares).
(Incorporated by reference to
Exhibit 4.12 of the Company's Form 10-K for the year ended March 31,
1995.)
4.7 Two-Year Stock Option Agreement dated June 2, 1994 (1,000 Shares).
(Incorporated by reference to
Exhibit 4.13 of the Company's Form 10-K for the year ended March 31,
1995.)
4.8 30-Month Stock Option Agreement dated March 22, 1995 (20,710
Shares). (Incorporated by reference to Exhibit 4.14 of the Company's
Form 10-K for the year ended March 31, 1995.)
4.9 Two-Year Stock Option Agreement dated March 30, 1996 (1,375 Shares).
(Incorporated by reference to exhibit of same number filed with the
Company's Form 10-K for the year ended March 31, 1996.)
4.10 Two-Year Stock Option Agreement dated March 30, 1996 (1,875 Shares).
(Incorporated by reference to exhibit of same number filed with the
Company's Form 10-K for the year ended March 31, 1996.)
5.* Opinion of Hand & Hand as to legality of securities being registered.
9 Voting Trust Agreement--not applicable.
10 Material contracts regarding sale of assets and deferred compensation.
10.1 Bonus compensation, Edward L. Machulak, February 16, 1987
(Incorporated by reference to Exhibit 7
of the Company's Form 10-K for the year ended March 31, 1987.)
10.2 Loan Agreement and Promissory Note, Edward L. Machulak, June 20,
1988 (Incorporated by reference
to Exhibit 10.2 of the Company's Form 10-K for the year ended March
31, 1993.)
10.3 Loan Agreement and Promissory Note, Edward L. Machulak, October 14,
1988 (Incorporated by
reference to Exhibit 10.3 of the Company's Form 10-K for the year
ended March 31, 1993.)
10.4 Loan Agreement and Promissory Note, Edward L. Machulak, May 17, 1989
(Incorporated by reference
to Exhibit 10.4 of the Company's Form 10-K for the year ended March
31, 1993.)
10.5 Loan Agreement and Promissory Note, Edward L. Machulak, April 1,
1990 (Incorporated by reference
to Exhibit 10.5 of the Company's Form 10-K for the year ended March
31, 1993.)
II-2
<PAGE>
10.6 Letter Agreement, Edward L. Machulak, October 10, 1989 (Incorporated
by reference to Exhibit 10.6
of the Company's Form 10-K for the year ended March 31, 1993.)
10.7 Michael J. Dwyer: Subscription Agreement, February 18, 1993,
Security Agreement, February 23, 1993, Promissory Note, February 23,
1993, Two-Year Stock Option, March 26, 1993 (Incorporated by
reference to Exhibit 10.7 of the Company's Form 10-K for the year
ended March 31, 1993.) Option was exercised on December 12, 1994.
10.8 Edward L. Machulak: Subscription Agreement, February 18, 1993,
Security Agreement, February 23, 1993, Promissory Note, February 23,
1993, (Incorporated by reference to Exhibit 10.8 of the Company's
Form 10-K for the year ended March 31, 1993.) This promissory Note
was converted into restricted common shares on March 22, 1996.
10.9 John E. Machulak: Subscription Agreement, February 22, 1993,
Security Agreement, February 23, 1993, Promissory Note, February 23,
1993, Two-Year Stock Option, March 26, 1993 (Incorporated by
reference to Exhibit 10.9 of the Company's Form 10-K for the year
ended March 31, 1993.) Option was exercised on December 12, 1994.
This promissory Note was converted into restricted common shares on
March 22, 1996.
10.10 Loan Agreement and Promissory Note dated January 19, 1994.
(Incorporated by reference to Exhibit 10.10 of the Company's Form
10-K for the year ended March 31, 1995.)
10.11 Robert C. Skeen and Lillian M. Skeen: Loan Agreement and Promissory
Note dated February 23, 1994.
(Incorporated by reference to Exhibit 10.12 of the Company's Form
10-K for the year ended March 31,
1994.)
10.11(a) Robert C. Skeen and Lillian M. Skeen: February 23, 1994 Loan
Agreement Amendment #1 dated May
27, 1994. (Incorporated by reference to Exhibit 10.12(a) of the
Company's Form 10-K for the year ended
March 31, 1994.)
10.11(b) Robert C. Skeen and Lillian M. Skeen: February 23, 1994 Loan
Agreement Amendment #2 dated July
6, 1994. (Incorporated by reference to Exhibit 10.11(b) of the
Company's Form 10-K for the year ended
March 31, 1995.)
10.11(c) Robert C. Skeen and Lillian M. Skeen: February 23, 1994 Loan
Agreement Amendment #3 dated
August 11, 1994. (Incorporated by reference to Exhibit 10.11(c) of
the Company's Form 10-K for the
year ended March 31, 1995.)
10.11(d) Robert C. Skeen and Lillian M. Skeen: February 23, 1994 Loan
Agreement Amendment #4 dated March
16, 1995. (Incorporated by reference to Exhibit 10.11(d) of the
Company's Form 10-K for the year ended
March 31, 1995.)
10.11(e) Robert C. Skeen and Lillian M. Skeen: February 23, 1994 Loan
Agreement Amendment #5 dated March
22, 1995. (Incorporated by reference to Exhibit 10.11(e) of the
Company's Form 10-K for the year ended
March 31, 1995.)
10.12 John A. O'Brien, Loan Agreement and Promissory Note dated May 10,
1994. This exhibit was inadvertently omitted in the March 31, 1994,
U.S. Securities and Exchange Commission Form 10-K filing.
(Incorporated by reference to Exhibit 10.12 of the Company's Form
10-K for the year ended March 31, 1995.)
10.13 Paul E. Machulak, Loan Agreement and Promissory Note dated June 3,
1994. (Incorporated by reference
to Exhibit 10.13 of the Company's Form 10-K for the year ended March
31, 1995.)
10.13(a) Paul E. Machulak, June 3, 1994 Loan Agreement Amendment #1 dated
March 27, 1995. (Incorporated by reference to Exhibit 10.13(a) of
the Company's Form 10-K for the year ended March 31, 1995.)
II-3
<PAGE>
10.14 John E. Machulak and Susan R. Robertson, Loan Agreement, Loan
Agreement and Promissory Note
dated June 3, 1994. (Incorporated by reference to Exhibit 10.14 of
the Company's Form 10-K for the
year ended March 31, 1995.)
10.15 Anthony J. Strigenz, Loan Agreement and Promissory Note dated August
11, 1994. (Incorporated by
reference to Exhibit 10.15 of the Company's Form 10-K for the year
ended March 31, 1995.)
10.16 Elizabeth Ann Strigenz, Loan Agreement and Promissory Note dated
March 24, 1995. (Incorporated by reference to Exhibit 10.16 of the
Company's Form 10-K for the year ended March 31, 1995.)
11. Schedule of Computation of Net Income Per Share. (Incorporated by
reference to exhibit of same
number filed with the Company's Form 10-K for the year ended March
31, 1997.)
21. Subsidiaries of the Company. (Incorporated by reference to exhibit
of same number filed with the
Company's Form 10-K for the year ended March 31, 1997.)
23.* Consents of Accountants.
23.1 Consent of Accountants
23.2 Consent of Hand & Hand included in Exhibit 5 hereto
24. Powers of Attorney
24.1 Powers of Attorney are included on signature page filed
with original Form S-3
99. Additional Exhibits
99.1 Confirmation Agreement, General Lumber & Supply Co., Inc., April 5,
1996.
99.2 Confirmation Agreement, Edward L. Machulak, April 5, 1996.
99.3 Confirmation Agreement, Edward L. Machulak Rollover Individual
Retirement Account, April 5, 1996.
99.4 Confirmation Agreement, Sylvia Machulak Rollover
Individual Retirement Account, April 5, 1996.
99.5 Concession Agreement Assignment to the Company by Misanse
(Incorporated by reference to Exhibit 1 of the Company's Form 10-K
for the year ended March 31, 1988.)
99.6 Other Material Information: Restatement of prior period financial
statements (Incorporated by reference
to Item 7 of the Company's Form 10-K for the year ended March 31,
1989.)
99.7 The El Salvador Constitutional Supreme Court of Justice order issued
on May 12, 1994, suspending immediately any charges to the Joint
Venture for import duty taxes of any kind and dated May 18, 1994
(English and Spanish). (Incorporated by reference to Exhibit 28.6 of
the Company's Form 10-K for the year ended March 31, 1994.)
99.8 Form S-8 Registration Statement effective date April 4, 1994, File
NO. 33-77226, (Incorporated by
reference as this S-8 Registration has been filed.)
99.9(d)(1) Certified financial statements Commerce/Sanseb Joint Venture for the
fiscal year ending March 31, 1997. Incorporated by reference to the
1997 10-K.
99.10(d)(2) Individual financial statements of majority-owned companies have
been omitted because these companies do not constitute a significant
or material contribution to the Company.
II-4
<PAGE>
y
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Milwaukee,
State of Wisconsin on July 14, 1997.
COMMERCE GROUP CORP.
By: /s/ Edward L. Machulak
Edward L. Machulak
Chairman, President,
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on July 14, 1997.
By: /s/ Edward L. Machulak Chairman, President, Chief Executive Officer and
Edward L. Machulak Chief Financial Officer (principal executive officer
and principal accounting and financial officer) and
Director
By: /s/ Edward L. Machulak* Executive Vice President, Secretary
Edward L. Machulak and Director
By: /s/ Edward L. Machulak* Director
Edward L. Machulak*
* signed by Edward L. Machulak, attorney-in-fact
II-7
<PAGE>
July 18, 1997
Commerce Group Corp.
6001 North 91st Street
Milwaukee, Wisconsin 53225
Re: Registration Statement on
Form S-3 ("Registration Statement")
Gentlemen:
You have requested our opinion as to the legality of the
issuance by you (the "Corporation") of 1,225,000 shares of common stock, par
value $.10 ("Shares") including 25,000 Shares currently outstanding and
1,000,000 Shares issuable upon exercise of options, all as further described in
the Registration Statement in the form filed today with the U.S. Securities and
Exchange Commission.
As your counsel, we have reviewed and examined:
1. The Certificate of Incorporation of the Corporation;
2. The Bylaws of the Corporation;
3. A copy of certain resolutions of the corporation;
4. The Registration Statement;
5. Lead Generation/Corporate Relations Agreement between the
Company and
Corporate Relations Group Inc.; and
6. Such other matters as we have deemed relevant in order to form
our opinion.
In giving our opinion, we have assumed without investigation the
authenticity of any document or instrument submitted us as an original, the
conformity to the original of any document or instrument submitted to us as a
copy, and the genuineness of all signatures on such originals or copies.
<PAGE>
Commerce Group Corp.
July 18, 1997
Page -2-
Based upon the foregoing, we are of the opinion that the Shares to be
offered pursuant to the Registration Statement, if sold as described in the
Registration Statement (and as to Shares issuable upon exercise of options, if
the options are exercised in accordance with their terms), will be legally
issued, fully paid and nonassessable, provided that no less than par value is
paid for any Shares.
No opinion is expressed herein as to the application of state securities
or Blue Sky laws.
This opinion is furnished by us as counsel to you and is solely for your
benefit. Neither this opinion nor copies hereof may be relied upon by, delivered
to, or quoted in whole or in part to any governmental agency or other person
without our prior written consent.
Notwithstanding the above, we consent to the reference to our firm name
in the Prospectus filed as a part of the Registration Statement and the use of
our opinion in the Registration Statement. In giving these consents, we do not
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
HAND & HAND
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated April 28, 1997, which appear on page
51 of the annual report on Form 10-K of Commerce Group Corp. and consolidated
subsidiaries for the year ended March 31, 1997 and to the reference to our Firm
under the caption "Experts" in the Prospectus.
Redlin and Associates
Milwaukee, Wisconsin
July 18, 1997
<PAGE>
