As filed with the Securities and Exchange Commission on November 4, 1998
Registration No. 333- _________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under The Securities Act of 1933
NATIONAL TECHNICAL SYSTEMS, INC.
(Exact name of Registrant as specified in this charter)
California 95-4134955
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
-------------------------
24007 Ventura Boulevard, Suite 200
Calabasas, California 91302
(818) 591-0776
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
-------------------------
JACK LIN
Chief Executive Officer
National Technical Systems, Inc.
24007 Ventura Boulevard
Calabasas, California 91302
(818) 591-0776
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------------
With a Copy to:
JAMES J. SLABY, JR., ESQ.
Sheppard, Mullin, Richter & Hampton LLP
333 South Hope Street, 48th Floor
Los Angeles, California 900071
(213) 620-1780
----------------------------
Page 1 of 29
<PAGE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [__]
If the any of the securities being registered on this from 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 plans, 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 check the following box and
list the Securities Act registration statement number of 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. [__]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Maximum Maximum
Class of Offering Aggregate Amount of
Securities to be Amount to be Price Per Offering Registration
Registered Registered Share Price Fee
- --------------------------------------------------------------------------------
Common
Stock, no par 1,297,878 $5.625(1) $7,300,564 $2,154
value
- -----------
(1) Estimated solely for purposes of determining the registration fee
under Rule 457(c). The price indicated is the average of the high and low prices
on the Nasdaq National Market on October 30, 1998.
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 this Registration Statement
-2-
Page 2 of 29
<PAGE>
shall become effective on such date as the Securities and Exchange Commission
(the "Commission"), acting pursuant to said Section 8(a), may determine.
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 this Registration Statement shall become
effective on such date as the Securities and Exchange Commission (the
"Commission"), acting pursuant to said Section 8(a), may determine.
-3-
Page 3 of 29
<PAGE>
NATIONAL TECHNICAL SYSTEMS, INC.
Cross-Reference Sheet Pursuant to Item 501(b) of Regulation S-K
Showing Locations in Prospectus of the Information
Required by Items of Form S-3
Form S-3 Caption Caption in Prospectus
- ---------------- ---------------------
Item 1. Forepart of the Registration Outside Front Cover Page of Prospectus
Statement and Outside Front
Cover Page of Prospectus
Item 2. Inside Front and Outside Back Inside Front and Outside Back Cover
Cover Pages of Prospectus Pages of Prospectus
Item 3. Summary Information, Risk Prospectus Summary, Risk Factors;
Factors and Ratio of Earnings Certain Relationships and Related
to Fixed Charges Transactions
Item 4. Use of Proceeds Use of Proceeds
Item 5. Determination of Offering Plan of Distribution
Price
Item 6. Dilution Inapplicable
Item 7. Selling Security Holders Selling Shareholders
Item 8. Plan of Distribution Plan of Distribution
Item 9. Description of Securities to be Description of Common Stock
Registered
Item 10. Interests of Named Experts Legal Matters; Experts
and Counsel
Item 11. Material Changes Material Developments
Item 12. Incorporation of Certain Incorporation of Certain Documents by
Information by Reference Reference
Item 13. Disclosure of Commission Inapplicable
Position on Indemnification
for Securities Act Liabilities
i
Page 4 of 29
<PAGE>
Subject to Completion, November 4, 1998
Prospectus
NATIONAL TECHNICAL SYSTEMS, INC.
1,297,878 Shares
The 1,297,878 shares of Common Stock of National Technical Systems, Inc. which
may be offered hereby shall be sold by certain shareholders named under the
heading "Selling Shareholders". The selling shareholders received their shares
of common stock in connection with our acquisitions. We will not receive any of
the proceeds of any sales by the selling shareholders. The shares will be sold
through brokers on the Nasdaq National Market, or otherwise, at prevailing
market prices and subject to customary commissions.
The Common Stock is listed on the Nasdaq National Market under the symbol
"NTSC". The closing price of the Common Stock on November __, 1998 was $______.
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------
November ___, 1998.
Page 5 of 29
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any document that we file
at the Securities and Exchange Commission's public reference room at 450 Fifth
Street, N.W. Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. The SEC maintains an Internet
site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding issuers (including us) that file
documents with the SEC electronically. Our SEC filings may also be obtained from
our web site at http:// www.ntscorp.com.
This prospectus is part of a registration statement we filed with the
SEC.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and replace this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the selling shareholders sell all of the Common
Stock.
o Annual Report on From 10-K for the fiscal year ended January 31,
1998.
o Quarterly Reports on Form 10-Q for the fiscal quarters ended
April 30, 1998 and July 31, 1998.
o Current Reports on Form 8-K dated May 8, 1998 and November 4, 1998.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: Corporate Secretary, National Technical
Systems, Inc., 24007 Ventura Boulevard, Suite 200, Calabasas, California 91302.
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. Neither we nor any of the
selling shareholders is making an offer of the common stock in any state where
the offer is not permitted. You should not assume that the information in this
prospectus or any supplement is accurate as of any date other than the date on
the front of this prospectus.
This summary is qualified in its entirety by the detailed information
appearing elsewhere in this prospectus. You should carefully consider the
matters set forth under the heading "RISK FACTORS" beginning on page 4.
-2-
Page 6 of 29
<PAGE>
PROSPECTUS SUMMARY
The Company
We are a technology outsourcing and services company supporting domestic
and international firms with highly skilled personnel and state-of-the-art
equipment. We provide services and facilities to the following industries:
o Aerospace
o Automotive
o Commercial
o Computer
o Defense
o Electronics
o Telecommunications
o Energy
We operate 18 facilities and employ over 580 people. We are engaged in
three business segments: Technical Services, Technical Staffing and Registration
Services. Technical Services provides environmental testing, engineering and
analysis services to many industries. Technical Staffing offers technical and
professional personnel to information technology, information systems and
telecommunication companies on a temporary or permanent basis throughout the
United States. Registration Services provides third party registration services
for ISO 9000 certification.
We were incorporated in California in 1975, reincorporated in
Delaware in 1987 and reincorporated in California in 1996. You can contact us at
the following address and telephone numbers: 24007 Ventura Boulevard, Suite 200,
Calabasas, California 91302 (818) 591-0776.
The Offering
Shares Offered Hereby 1,297,878 shares of Common Stock,
no par value.
-3-
Page 7 of 29
<PAGE>
Plan of Distribution Up to 1,297,878 shares of Common Stock are
being offered by the selling shareholders.
The selling shareholders may offer from time
to time some or all of the shares of Common
Stock held by them directly or through
underwriters, dealers or agents. See "Plan of
Distribution".
Shares Outstanding 8,311,006 shares of Common Stock as of
November __, 1998.
Proceeds We will not receive any of the proceeds from
the sale of the shares by the selling
shareholders. See "Use of Proceeds."
Nasdaq Trading Symbol NTSC
Risk Factors You should read carefully and consider the
matters discussed under the heading "Risk
Factors" beginning on Page 4.
RISK FACTORS
You should consider the following factors, in addition to the other
information contained in this prospectus and the documents incorporated herein
by reference, before you invest in the Common Stock being offered by this
prospectus.
-4-
Page 8 of 29
<PAGE>
This prospectus contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements can be
identified by the use of forward-looking words such as "may", "will", "expect",
"anticipate", "intend", "estimate", "continue", "behave" and similar words.
Financial information contained within this prospectus, to the extent it is
predictive of financial condition and results of operations that would have
occurred on the basis of certain stated assumptions, may also be characterized
as forward-looking statements. Although forward-looking statements are based on
assumptions made, and information believed by management to be reasonable, no
assurance can be given that such statements will prove to be correct. Such
statements are subject to certain risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties occur, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated.
EXPECTED BENEFITS OF COMBINED BUSINESS MAY NOT BE ACHIEVED. The benefits
we expect to achieve as a result of our recent acquisition of XXCAL, Inc. and
XXCAL Limited (the "Acquisitions") may not be achieved. Our ability to achieve
the anticipated benefits of the Acquisitions depends on a number of factors,
including the ability of the combined companies to save administrative costs,
reduce costs, lower interest expense and to take advantage of general economies
of scale. The ability of the combined companies to develop new markets and
expand existing markets and generally to gain a benefit from the combined asset
base and strategic position of the combined companies are also critical to the
success of the Acquisitions.
INTEGRATION OF OPERATIONS. We cannot assure you that we can integrate
our business with the businesses of XXCAL, Inc. and XXCAL Limited in an
efficient and effective manner. The combination of the companies is dependent
upon, among other factors, our ability to integrate the respective recruiting,
training, marketing and sales efforts, our development of effective pricing and
employee benefits policies, and our liquidity and capital expenditure
requirements. Our successful integration also will require that we develop
effective acquisition strategies and our management teams and management
information systems. Integration may be more difficult because of our need to
coordinate organizations in different geographic locations. Our inability to
integrate the operations of the companies successfully would have a material
adverse effect on our business and the results of our operations.
-5-
Page 9 of 29
<PAGE>
MANAGEMENT AND MAINTENANCE OF GROWTH. Our financial results and
prospects depend on our ability to successfully manage and improve our operating
efficiencies and productivity of our existing and acquired operations. Any
future growth will depend on a number of factors, including competition from
other companies engaged in the same business segments. The availability of
attractive acquisition opportunities and the availability of working capital
will also affect our ability to grow in the future. Our systems, procedures and
controls may not be adequate to support our operations as they expand. Any
further growth will significantly increase the responsibilities of our senior
management. We may not be able to successfully recruit and retain needed
management. Our failure to manage our growth effectively or our inability to
attract and retain qualified management, could have a material adverse effect on
our business, financial condition and results of operations.
TRANSACTION AND RESTRUCTURING CHARGES. We expect to incur charges to
operations currently estimated to be $800,000, primarily in the quarter in which
the Acquisitions were completed, to reflect non-recurring costs resulting
directly from the Acquisitions. Such costs include investment banking, legal,
accounting and other related charges. These amounts are preliminary estimates
and are subject to change. We may incur additional and unanticipated expenses
relating to the integration of our business with the businesses of XXCAL, Inc.
and XXCAL Limited. Although we believe that the elimination of duplicative
expenses, as well as other efficiencies resulting from the integration of the
respective businesses, may offset additional expenses over time, we may not
achieve such benefit in the near term or at all.
RISK RELATED TO FUTURE FINANCING. Our long-term debt, excluding current
maturities, on a pro forma basis (NTS and XXCAL combined) at January 31, 1998,
was approximately $12.4 million. We expect to need additional capital from time
to time to pursue our acquisition strategy and to fund our internal growth. If
we do not have sufficient cash to pursue our plans for internal growth and
growth by acquisition, our growth could be limited, unless we are able to borrow
money or sell stock. In addition, substantially all of our existing indebtedness
at January 31, 1998 is priced at variable interest rates that fluctuate as
general interest rates change. As a result, an increase in interest rates could
adversely impact our future earnings.
DEPENDENCE ON AVAILABILITY OF QUALIFIED PERSONNEL. We are dependent on
our ability to attract, train and retain qualified personnel who possess the
skills and experience necessary to meet the staffing requirements of our
customers. Competition for the services of personnel within all professional
specialty groups is intense. Competition for information technology personnel
is particularly intense and recent demand for their services has, substantially
exceeded their supply. We compete for customers with national, regional and
local, full service and specialized staffing providers. Certain of our
competitors have greater marketing, financial and other resources, and more
established operations than do we. As a result, our competition may be better
able to respond or adapt to new or emerging technologies and changes in client
requirements or to devote greater resources to the development, marketing and
-6-
Page 10 of 29
<PAGE>
sales of their services than we are. We expect such competition to continue.
Factors influencing such competition include compensation, benefits, growth
opportunities, relationships with other specialty staffing companies and
full-time employment opportunities. We cannot be certain that qualified
personnel will continue to be available in sufficient numbers and on terms of
employment acceptable to us. Our inability to attract and retain qualified
personnel in sufficient numbers, or to upgrade the base of qualified personnel
to keep pace with changing customer needs and emerging technologies, could have
a material adverse affect on our business, financial condition and results of
operations.
DEPENDENCE ON GOVERNMENT CONTRACTS. A substantial portion of our
revenues are dependent upon continued funding of U.S. government agencies as
well as continued funding of programs targeted by our businesses. For the years
ended January 31, 1997 and 1998, U.S. government business represented
approximately 49% and 45%, respectively, of our revenues. The U.S. defense
budgets and the budgets of other government agencies have been declining in real
terms since the mid-1980's, and may continue to do so. Further significant
reductions in the funding of U.S. government agencies or in the funding areas
targeted by our business could materially and adversely affect our business,
results of operations and financial condition.
Our contracts with the U.S. government and our subcontracts with
government prime contractors can be terminated for the convenience of the
government, and terminated, reduced or modified in the event of change in the
government's requirements or budgetary constraints. Our subcontracts with prime
contractors also depend on the ability of the prime contractor to perform its
obligations under its prime contract. We have little or no control over the
resources allocated by the prime contractor to the prime contract. Failure by
the prime contractor to perform its obligations under the prime contract could
cause the loss of our subcontract.
Government contract-related costs and fees, including allocated indirect
costs, are subject to audits and adjustments by negotiation between the
contracting party and the U.S. government. As part of the audit process, the
government audit agency verifies that all charges made by a contractor against a
contract are legitimate and appropriate. Audits may cause recalculation of
contract revenues and non-reimbursement of some contract costs and fees and may
result in material adjustments to our revenues.
In addition, U.S. government contracts depend on the continuing
availability of Congressional appropriations. Congress usually appropriates
funds on a fiscal year basis even though a contract may take several years to
compete. Initially, major contracts are only partially funded and additional
funds are committed to the contract by the procuring agency as appropriations
are made by Congress for future years. The failure of such agencies to continue
to fund contracts could have a material adverse effect on our business, results
of operations and financial condition.
COMPETITION. The industries and markets in which we operate are highly
competitive, and we expect that competition will increase. In order for us to
compete in these markets, we must offer technologically advanced services at
-7-
Page 11 of 29
<PAGE>
lower prices than our competitors. Our core businesses compete with numerous
other domestic and international companies. Many of these companies have far
greater financial, engineering, technological, marketing, sales and customer
service resources than we do. In addition, some of these competitors have more
experience in certain of our markets. These competitors may be able to adapt
more swiftly to new or emerging technologies and changes in customer
requirements than we can. Our competition may also take advantage of acquisition
and other opportunities more readily, and devote greater resources to the
marketing and sale of their services than we are able to. Competitors in our
markets have established or may establish cooperative relationships among
themselves or with others to improve the performance and quality and to reduce
the price of their services. As a result our competitors may rapidly acquire
significant market share. Increased competition may result in price reductions,
reduced profit margins and loss of market share, any of which could have a
material adverse effect on our business, results of operations and financial
condition.
INCREASED COSTS OF EMPLOYMENT. We are required to pay unemployment
insurance premiums and workers' compensation benefits for our contract and
temporary employees. Unemployment insurance premiums are set annually by the
states in which employees perform services and could increase at any time. We
may be unable to increase the fees charged to our customers in a timely manner
and by an amount sufficient to cover increased unemployment insurance premiums.
Workers' compensation costs have increased as various states in which we conduct
business have increased benefit levels and expanded allowable claims. We
maintain workers' compensation insurance for our employees under insured
programs. Our workers' compensation obligations may exceed the amount of our
insurance coverage and we may not be able to increase the fees charged to our
customers sufficiently to offset increased employment costs.
LIABILITY FOR EMPLOYEE ACTIONS. As a provider of contract and temporary
staffing services, we usually place our employees in the workplace of other
businesses which creates a risk of employee misconduct. These risks include
claims relating to errors and omissions, misuse of proprietary information,
discrimination and harassment, and theft of customer property. While we have not
in the past experienced any significant claims of these types, and we have
insurance covering certain of these risks, employee misconduct claims could
arise in the future, and insurance coverage may not be available or adequate to
cover such liabilities.
RISKS RELATED TO TAX STATUS OF INDEPENDENT CONTRACTORS. Generally, we
treat our technical personnel as employees for federal and state tax purposes
and pay all required Social Security taxes (FICA), payroll taxes, unemployment
taxes, workers' compensation insurance premiums and other employee taxes. Some
of our technical personnel wish to be treated as independent contractors for
federal and state tax purposes. If appropriate, we treat such individuals as an
independent contractors for tax purposes. Historically, less than 5% of our
technical personnel have been treated as independent contractors for federal and
state tax purposes. We believe that we have complied with all applicable tax
regulations and neither federal nor state authorities have attempted to
reclassify any of our personnel treated as independent contractors. If federal
and state taxing authorities were to challenge the classification of our
technical personnel as independent contractors, additional taxes, interest and
-8-
Page 12 of 29
<PAGE>
penalties could be assessed. If that happens it could have a material adverse
effect on our financial condition.
YEAR 2000 COMPLIANCE. We have assessed and identified to the best of our
knowledge all requirements needed to correct potential problems related to the
Year 2000 issue. This includes: (1) the business software and hardware at all of
our locations, (2) test equipment used in all our laboratories and (3)
communications with our third party vendors to ensure they will meet their Year
2000 requirements. Much of our hardware has already been upgraded to become Year
2000 compliant or will become compliant by March 1999. We have identified
certain test equipment at our laboratories as date sensitive and vendors are
supplying new Year 2000 compliant software. If software is not available, we are
replacing the equipment. We have also identified new Year 2000 compliant
software to replace certain crucial software applications we currently use. We
expect to complete our software remediation by June 1999. We estimate the total
cost for the Year 2000 project to be approximately $400,000. We do not expect
these costs to have a material adverse effect on our financial condition or
results of operations.
We are in the process of obtaining assurances from our major third-party
vendors and that their systems are Year 2000 compliant. Although we do not
anticipate any material problems resulting from the Year 2000 issue, we are
developing a contingency plan in the event of system failures beyond our control
or due to failure by other companies or governmental entities to remediate their
own systems.
No one knows the extent of the potential impact of the Year 2000 problem
generally, and we cannot predict the likelihood that Year 2000 problems will
cause a significant disruption in the economy as a whole.
RISK OF GOVERNMENT REGULATIONS AND LEGISLATIVE PROPOSALS. The cost of
our operations could increase if there are any material changes in government
regulations. Recent federal and state legislative proposals have included
provisions seeking to extend health insurance benefits to employees who do not
currently receive such benefits. As a result of the wide variety of national and
state proposals currently under consideration, the impact of such proposals on
us cannot be predicted. We may not be able to increase the fees charged to our
customers in a timely manner and in an amount sufficient to cover increased
costs related to any new benefits that may be extended to our temporary
employees as a result of such legislation or regulations.
STOCK PRICE MAY VARY IN RESPONSE TO CHANGES IN BUSINESS AND ECONOMIC
CONDITIONS. The trading price of our Common Stock has been, and is likely to
continue to be, subject to significant fluctuations in response to quarterly
variations in our actual or anticipated operating results, changes in general
market conditions and other factors, including changes in our business,
operations and prospects and general market and economic conditions. As a
result, you should not rely on our operating results for any one quarter as an
indicator of our performance in future quarters.
-9-
Page 13 of 29
<PAGE>
RELIANCE ON KEY PERSONNEL. We are highly dependent upon the continued
services and experience of our senior management team, including Jack Lin,
President and Chief Executive Officer, Aaron Cohen, Vice Chairman and Senior
Executive Vice President, Arthur Edelstein, Executive Vice President and Marvin
Hoffman, director. The loss of the services of any of Messrs. Lin, Cohen,
Edelstein or Hoffman, or our failure to attract and retain other qualified
managerial personnel, could have a material adverse effect on our business,
financial condition and results of operations.
MATERIAL DEVELOPMENTS
Effective October 30, 1998, we completed the acquisitions of (i) XXCAL,
Inc. through an Agreement and Plan of Merger, dated as of August 21, 1998,
whereby our wholly owned subsidiary combined with XXCAL, Inc., a California
corporation, in a merger transaction in which XXCAL, Inc. became our wholly
owned subsidiary. (ii) XXCAL Limited, through a Share Purchase Agreement, dated
as of August 21, 1998, whereby we acquired all of the outstanding Ordinary
Shares of XXCAL Limited, a United Kingdom corporation and an affiliate of XXCAL,
Inc. In connection with the acquisitions of XXCAL, Inc. and XXCAL Limited,
together referred to as "XXCAL" (the "Acquisitions"), we issued to the
shareholders of XXCAL in the aggregate 1,297,878 shares of our Common Stock
constituting 15.6% of our outstanding Common Stock after giving effect to the
Acquisitions. Also pursuant to the terms of the Agreement and Plan of Merger,
each unexpired and unexercised outstanding option to purchase XXCAL, Inc. Common
Stock has been automatically converted into an option to purchase that number of
shares of our Common Stock equal to the number of shares of XXCAL, Inc. Common
Stock that could have been purchased under the XXCAL, Inc. option multiplied by
the merger exchange ratio of 1.2126 shares of NTS Common Stock for each share of
XXCAL, Inc. Common Stock (the "Exchange Ratio"), at a price per share of NTS
Common Stock equal to the option exercise price determined pursuant to the
XXCAL, Inc. option divided by the Exchange Ratio. We will pay cash in lieu of
fractional shares in connection with the Acquisitions. The Acquisitions have
been accounted for as a pooling of interests.
XXCAL, Inc. and XXCAL Limited are principally engaged in outsourcing
people for a wide variety of temporary technical and professional positions into
the information technology and information systems industries. The XXCAL
companies together have approximately 250 employees and XXCAL has offices in
Los Angeles, San Francisco, San Jose, Austin, Houston, London, England and
Yokohama, Japan.
-10-
Page 14 of 29
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of Common Stock offered
by the selling shareholders.
SELLING STOCKHOLDERS
This prospectus may be used in connection with the sale of certain
shares of Common Stock by the selling shareholders. The following table provides
information as to the shares of Common Stock owned beneficially by the selling
shareholders as of October 31, 1998, the number of shares to be sold by the
selling shareholders and the number of shares which will be owned by the selling
shareholders after the Offering.
Number of
Shares Number
Beneficially of Beneficial
Owned Prior Shares Ownership
Name of Selling to Being After
Shareholder Offering Offered Offering
- --------------------- -------- ------- --------
Marvin Hoffman (1) 867,278 867,278 0
Helen Gold 13,096 13,096 0
Eugene and Helen Gold 206,053 206,053 0
Patricia Evans 9,579 9,579 0
Bill and Marla Schoneman 49,250 49,250 0
Daniel and Doris De Mattia 42,258 42,258 0
Marilyn Gold 26,685 26,685 0
Rochelle Balch 8,246 8,246 0
Loren Hoffman 13,877 13,877 0
Darryl Hoffman 16,545 16,545 0
Bill Avery 5,337 5,337 0
Anne Hasz 4,850 4,850 0
Andrea Gold 4,850 4,850 0
Lorrayne Moss 4,850 4,850 0
Alan Gold 5,337 5,337 0
Dave Trebas 2,668 2,668 0
Lon Brown 970 970 0
Nancy Hongola 606 606 0
Deborah Randolph 485 485 0
Pam Marshall 97 97 0
Rose Marie Antonio 2,547 2,547 0
Christopher Smith 3,043 3,043 0
Felicity Smith 3,043 3,043 0
Susan Bohle 1,217 1,217 0
Al Lay 1,217 1,217 0
Steven Oettinger 1,217 1,217 0
John Knoeppel 243 243 0
John Remington 2,434 2,434 0
- -------
(1) Mr. Hoffman is expected to become a member of the Board of Directors
of National Technical Systems, Inc. prior to December 31, 1998.
-11-
Page 15 of 29
<PAGE>
DESCRIPTION OF COMMON STOCK
Each holder of the Common Stock is entitled to one vote per share held
of record on each matter submitted to shareholders. Cumulative voting for the
election of directors is not permitted, and the holders of a majority of shares
voting for the election of directors can elect all members of the Board of
Directors.
Holders of record of shares of the Common Stock are entitled to receive
dividends when and if declared by the Board of Directors out of funds
legally available therefor. In the event of a voluntary or involuntary winding
up or dissolution, liquidation or partial liquidation, holders of the Common
Stock are entitled to participate ratably in any distribution of the assets of
our Company.
Holders of the Common Stock have no conversion, redemption or preemptive
rights. All outstanding shares of the Common Stock are validly issued, fully
paid and nonassessable.
PLAN OF DISTRIBUTION
We have been advised that the selling shareholders may sell their shares
from time to time in transactions on the Nasdaq National Market or in
privately-negotiated transactions, or a combination of such methods of sale, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The selling shareholders may
effect transactions hereunder by selling the shares to or through
broker-dealers, who may receive compensation in the form of discounts,
concessions or commissions from the selling shareholders or the purchasers of
the shares for whom such broker-dealers may act as agent or to whom they may
sell as principal, or both.
The selling shareholders and any broker-dealers who act in connection
with the sale of shares may be deemed to be "underwriters" as that term is
defined in the Securities Act, and any commissions received by them and profit
on any resale of the shares as principal might be deemed to be underwriting
discounts and commissions under the Securities Act.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Marvin Hoffman, formerly Chief Executive Officer and the majority
shareholder of XXCAL, Inc. and XXCAL Limited, is expected to be elected to our
Board of Directors prior to December 31, 1998.
-12-
Page 16 of 29
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock has been passed upon for us
by Sheppard, Mullin, Richter & Hampton LLP, Los Angeles, California.
EXPERTS
The consolidated financial statements of National Technical Systems,
Inc. incorporated by reference in National Technical Systems, Inc.'s Annual
Report (Form 10-K) for the year ended January 31, 1998, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
-13-
Page 17 of 29
<PAGE>
No person has been authorized to give any
information to you or to make any representations
to you other than those contained in this prospectus
in connection with the offer made by this
prospectus. If given or made, you must not rely
on such information or representations. You
should not consider that the delivery of this NATIONAL TECHNICAL
prospectus or any sale made hereunder under any SYSTEMS, INC.
circumstances creates any implication that there
has been no change in us or in our business,
operations or financial condition since the date
of this prospectus. This prospectus does not 1,297,878 Shares of
constitute an offer to sell or a solicitation Common Stock
of an offer to buy the Common Stock in any
jurisdiction to anyone to whom it is unlawful to
make such an offer or solicitation in that jurisdiction.
Table of Contents
Where You Can Find More Information............2
Prospectus Summary.............................3
Risk Factors...................................4
Material Developments.........................10
Use of Proceeds...............................11
Prospectus
Selling Stockholders..........................11
Description of Common Stock...................12 November __, 1998
Plan of Distribution..........................12
Certain Relationships and Related
Transactions..................................12
Legal Matters.................................13
Experts.......................................13
-14-
Page 18 of 29
<PAGE>
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses in connection with
the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates,
except the Securities and Exchange Commission registration fee and the listing
fee.
Securities and Exchange Commission
registration fee $ 2,154
Listing fee $17,500
Printing and engraving expenses $ 2,000*
Accounting fees and expenses $ 7,500*
Legal fees and expenses $15,000*
Miscellaneous expenses $ 1,000*
--------
Total $45,154*
========
- -------------
* Estimated
Item 15. Indemnification of Directors and Officers
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation contain a provision limiting the
personal liability of directors to the Company or its shareholders for monetary
damages for breach of fiduciary duty as a director. This provision is intended
to eliminate the risk that a director might incur personal liability to the
Company or its shareholders for breach of the duty of care. Such provision
absolves directors of liability for negligence in the performance of their
duties, including gross negligence. Directors remain liable for breaches of the
duty of loyalty to the Company and its shareholders as well as for acts or
omissions not taken in good faith or which involve intentional misconduct or a
knowing violation of law and transactions from which a director derived improper
personal benefit. In addition, the Company's Articles of Incorporation do
II-1
Page 19 of 29
<PAGE>
not absolve directors of liability for unlawful dividend or stock repurchases
or redemptions to which a negligence standard presently applies under the
California General Corporation Law (the "CGCL"). Also, there may be certain
liabilities, such as those under the United States federal securities laws or
other state or federal laws, which a court may hold are unaffected by the
Articles of Incorporation.
The Company's By-laws provide that each person who is or was a director,
legal representative, officer or employee of the Company (or was serving at the
request of the Company as a director, legal representative, officer or employee
of any other entity), will be indemnified and held harmless by the Company to
the fullest extent authorized by the California General Corporation Law (as it
may be amended to allow for broader indemnification rights) from any liability
incurred as a result of such service. Among other things, the indemnification
provisions provide indemnification for officers and directors against
liabilities for judgments in and elements of lawsuits and other proceedings and
for the advance and payment of fees and expenses reasonably incurred by the
director or officer in defense of any such lawsuit or proceeding. The Company's
By-laws provide that the rights to indemnification and the payment of expenses
conferred therein will not be exclusive of any other right that any person may
have or acquire under any statute, provision of the Articles of Incorporation,
by-law, agreement, vote of shareholders or disinterested directors or otherwise.
The Company's By-laws also provide that the Company may maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Company against any liability asserted against such person and incurred by such
person in any such capacity, whether or not the Company would have the power to
indemnify such person against such liability under the CGCL. The Company
maintains this insurance coverage for its officers and directors as well as
insurance coverage to reimburse the Company for potential costs of its corporate
indemnification of officers and directors.
Item 16. EXHIBITS
5.1 Opinion of Sheppard, Mullin, Richter & Hampton LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Duitch Franklin & Co., LLP
23.3 Consent of Richardson Whitby Smith Chartered Accountants
23.4 Consent of Sheppard, Mullin, Richter & Hampton LLP (included in
Exhibit 5.1)
24.1 Power of Attorney of certain officers and directors (included on page
S-1)
Item 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration Statement:
II-2
Page 20 of 29
<PAGE>
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(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
Registrant 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;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
do not apply if the Registration Statement is on Form S-3, or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any 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.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement 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.
(c) 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 provisions described in Item 15
hereof, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnifications against pubic policy as
II-3
Page 21 of 29
<PAGE>
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 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 against the Registrant 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.
SIGNATURES
Pursuant to 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 for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Calabasas, State of California, on November 4, 1998.
NATIONAL TECHNICAL SYSTEMS, INC.
By /s/ Jack Lin
_______________________________
Jack Lin
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jack Lin and Aaron Cohen, and each of them, his
attorneys-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any amendments to this registration statement and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
S-1
Page 22 of 29
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Date
- --------- ----
/s/ Jack Lin November 4, 1998
________________________________
Jack Lin, President (Principal Executive
Officer and Director)
/s/ Arthur Edelstein November 4, 1998
________________________________
Arthur Edelstein, Director and Executive
Vice President
/s/ Lloyd Blonder November 4, 1998
________________________________
Lloyd Blonder, Senior Vice President
and Treasurer
(Principal Financial and Accounting Officer)
/s/ William L. Traw November 4, 1998
________________________________
William L. Traw, Group Vice President
and Director
/s/ Richard D. Short November 4, 1998
________________________________
Richard D. Short, Group Vice President
and Director
/s/ William McGinnis November 4, 1998
________________________________
William McGinnis, Group Vice President
and Director
/s/ Aloysius Casey November 4, 1998
________________________________
Aloysius Casey, Chairman of the Board
/s/ Aaron Cohen November 4, 1998
________________________________
Aaron Cohen, Vice Chairman of the
Board and Senior Executive Vice President
S-2
Page 23 of 29
<PAGE>
/s/ Harry Derbyshire November 4, 1998
________________________________
Harry Derbyshire, Director
/s/ Robert I. Lin November 4, 1998
________________________________
Robert I. Lin, Director
/s/ Ralph F. Clements November 4, 1998
________________________________
Ralph F. Clements, Director
/s/ Stanley Schoen November 4, 1998
________________________________
Stanley Schoen, Director
S-3
Page 24 of 29
<PAGE>
EXHIBIT INDEX
Exhibits Description Page
- --------------------------------------------------------------------------------
5.1 Opinion of Sheppard, Mullin, Richter & Hampton LLP 26
23.1 Consent of Ernst & Young LLP, Independent Auditors 27
23.2 Consent of Duitch Franklin & Co., LLP 28
23.3 Consent of Richardson Whitby Smith Chartered Accountants 29
23.4 Consent of Sheppard, Mullin, Richter & Hampton LLP
(included in Exhibit 5.1)
24.1 Power of Attorney of certain officers and directors
(included on page S-1)
Page 25 of 29
<PAGE>
Exhibit 5.1
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
A Limited Liability
Partnership Including Professional Corporations
Attorneys at Law
Forty-Eighth Floor
333 South Hope Street
Los Angeles, California 90071-1448
Telephone: (213) 620-1780
-----
Facsimile: (213) 620-1398
November 4, 1998
National Technical Systems, Inc.
24007 Ventura Boulevard
Calabasas, California 91302
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 filed by you with
the Securities and Exchange Commission (the "Commission") on November 4, 1998
(the "Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of 1,297,878 shares of your Common Stock
(the "Shares"). As your counsel in connection with this transaction, we have
examined the proceedings taken and are familiar with the proceedings proposed to
be taken by you in connection with the sale and issuance of the Shares.
It is our opinion that upon conclusion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon the completion of the proceedings being taken in order to
permit such transactions to be carried out in accordance with the securities
laws of the various states where required, the Shares, when issued and sold in
the manner described in the Registration Statement, will be legally and validly
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and final consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
and any amendment thereto, which has been approved by us.
Very truly yours,
/s/ SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
-------------------------------------------
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
Page 26 of 29
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3 No. 333-0000) pertaining to the related
Prospectus of National Technical Systems, Inc. for the registration of 1,297,878
shares of its common stock and to the incorporation by reference therein of our
report dated April 10, 1998, with respect to the consolidated financial
statements of National Technical Systems, Inc. included in the Annual Report
(Form 10-K) for the year ended January 31, 1998 filed with the Securities and
Exchange Commission.
/s/ Ernst & Young, LLP
Woodland Hills, California
November 4, 1998
Page 27 of 29
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
As the independent certified public accountants, we hereby consent to the
incorporation in the form S-3 of our report dated June 19, 1998 on the financial
statements of XXCAL, Inc. as of and for the years ended December 31, 1997, 1996
and 1995.
/s/ Duitch Franklin & Co., LLP
- ------------------------------
Duitch Franklin & Co., LLP
Los Angeles, California
November 4, 1998
Page 28 of 29
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
--------------------------------------------
As Registered Auditors, we consent to the incorporation in this
form S-3 (that you transmitted to us earlier today) of our report
dated July 15, 1998 on the financial statements of XXCAL Limited
for the three years ended December 31, 1997, 1996 and 1995.
/s/ Richardson Whitby Smith
- ------------------------------
Richardson Whitby Smith
Chartered Accountants
Bristol, England
November 4, 1998
Page 29 of 29
<PAGE>
