As Filed with the Securities and Exchange Commission on January 17, 1996
Registration No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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EA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
------------
New Jersey 21-0606484
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
185 Monmouth Parkway
West Long Branch, New Jersey 07764-9989
(908) 229-1100
(Address, including zip code, and
telephone number, including area
code, of registrant's principal
executive offices)
Richard P. Jaffe, Esquire
Mesirov Gelman Jaffe
Cramer & Jamieson
1735 Market Street, 38th Floor
Philadelphia, PA 19103-7598
(215) 994-1046
(Name, address, including
zip code, and telephone number,
including area code, of agent
for service)
---------------------------------------------
Approximate date of commencement of proposed sale to 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 any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, 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, 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. [_]
Calculation of Registration Fee
<TABLE>
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Title of each class of Proposed Maximum Proposed maximum
securities to be offering price per aggregate offering Amount of
registered Amount to be unit (1) price (1) Registration Fee
registered
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<S> <C> <C> <C> <C>
Common Stock 3,614,052 $4.875 $17,618,503.50 $6,076.00
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Preferred Stock Purchase Rights 36,140.52 __ __ __
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<FN>
(1) Determined pursuant to Rule 457(c) under the Securities Act of 1933, as
amended, solely for purposes of calculation of the registration fee.
Based upon the last reported sale on the New York Stock Exchange on
January 15, 1996.
</FN>
</TABLE>
--------------------------------------------
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 Section 8(a), may determine.
<PAGE>
CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY FORM S-3
FILED AS PART OF REGISTRATION STATEMENT
<TABLE>
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Item
Number
in Form
S-3 Item Caption in Form S-3 Caption in Prospectus
- --- ------------------------ ---------------------
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1 Forepart of Registration Statement and Outside Cover Page
Front Cover Page of Prospectus
2 Inside Front and Outside Back Cover Pages of Inside Front Cover Page; Table of
Prospectus Contents
3 Summary of Information, Risk Factors and Ratio The Company; Risk Factors; and
of Earnings to Fixed Charges Selected Consolidated Financial
Data
4 Use of Proceeds Use of Proceeds
5 Determination of Offering Price Cover Page
6 Dilution Inapplicable
7 Selling Security Holders Plan of Distribution and Selling
Securityholders
8 Plan of Distribution Plan of Distribution and Selling
Securityholders
9 Description of Securities to be Registered Inapplicable
10 Interests of Named Experts and Counsel Legal Matters
11 Material Changes The Company
12 Incorporation of Certain Documents by Reference Incorporation of Certain
Information by Reference
13 Disclosure of Commission Position on Indemnification of Directors and
Indemnification for Securities Act Liabilities Officers
</TABLE>
(ii)
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. 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.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 17, 1996
Prospectus
3,614,052 Shares
[EA INDUSTRIES, INC. LOGO]
EA INDUSTRIES, INC.
Common Stock
This Prospectus relates to the offer for sale of 3,614,052 shares of
common stock (the "Shares") of EA Industries, Inc. (the "Company" or "EAI") from
time to time after the date hereof by certain stockholders, warrant holders and
convertible debenture holders ("Debenture Holders") of the Company (the warrant
holders, Debenture Holders and such stockholders are collectively referred to as
the "Selling Securityholders" and individually as a "Selling Securityholder"),
together with the 36,140.52 Preferred Stock Purchase Rights ("Rights")
associated with such Shares. The Rights associated with the Shares are not
exercisable or transferrable apart from the Shares as of the date of this
Prospectus and no additional consideration has been, or will be, received by the
Company in connection with the granting of such Rights upon the issuance of the
Shares. Except as described elsewhere in this Prospectus, the Company will not
receive any portion of the proceeds from the sale of the Shares offered hereby.
See "Plan of Distribution and Selling Securityholders."
THE SECURITIES BEING SOLD HEREBY ARE SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK. THE COMPANY HAS EXPERIENCED LOSSES FOR THE PAST FOUR YEARS. SEE
"RISK FACTORS" COMMENCING ON PAGE 8 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The Shares will be offered by the Selling Securityholders or their
donees or pledgees for resale by this Prospectus from time to time after the
date hereof in one or more transactions on the New York Stock Exchange ("NYSE"),
in negotiated transactions, or private transactions, or otherwise, 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 Securityholders may effect such transactions by selling the
Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
(which compensation may be in excess of customary commissions). Any
broker-dealers that participate in the distribution of the Shares including,
without limitation, the Debenture Holders, may be deemed to be underwriters and
any commissions received by them and any profit on the resale of Shares sold by
them might be deemed to be underwriting discounts and commissions under the
Securities Act of 1933, as amended (the "Securities Act"). Each of the Selling
Securityholders may also be deemed to be an underwriter as defined in the
Securities Act.
The Company's common stock (the "Common Stock") is traded on the NYSE
under the symbol EA. However, as a result of, among other things, continuing
losses, the Company has been informed by the NYSE that its shares of Common
Stock no longer qualify for listing on the NYSE. Although the NYSE has not
taken any affirmative action to de-list the Common Stock, it has reserved the
right to do so. See "Risk Factors." On January 15, 1996, the last reported sale
price of the Common Stock as reported by the NYSE was $4.875.
The expenses relating to the offering are estimated to be $42,076 all
of which will be paid by the Company.
The Date of this Prospectus is January 17, 1996.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those 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 or the Selling
Securityholders. This Prospectus does not constitute an offer to sell or
solicitation of an offer to buy, nor shall there be any sale of these securities
by anyone in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities law of any
such State, or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's Regional
Offices at 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates.
The Company's Common Stock is listed on the New York Stock Exchange
("NYSE"), 11 Wall Street, New York, New York 10005. Information regarding the
Company is also available at the NYSE.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
31, 1994, as amended on Form 10-K/A dated April 28, 1995, Quarterly Report on
Form 10-Q for the quarter ended April 1, 1995, Current Report on Form 8-K dated
January 4, 1995, as amended on Form 8-K/A dated March 17, 1995, relating to the
Tanon Acquisition (as such term is hereinafter defined), Current Report on Form
8-K dated January 16, 1995, as amended on Form 8-K/A dated March 30, 1995,
relating to the BarOn Investment (as such term is hereinafter defined), Current
Report on Form 8-K dated May 24, 1995, relating to updated pro forma financial
data and historical financial statements for Tanon Manufacturing, Inc. and BarOn
Technologies Ltd., Quarterly Report on Form 10-Q for the quarter ended June 30,
1995, Current Report on Form 8-K dated August 3, 1995 relating to an agreement
in principle to form a joint venture with IAI (hereinafter defined), as amended
on Form 8-K/A dated August 10, 1995, and the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995, and the definitive Proxy Statement dated
September 14, 1995 are incorporated herein by reference and made a part hereof.
All documents filed subsequent to the date of this Prospectus by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior
to the termination of the offering described in this Prospectus shall be deemed
to be incorporated in this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
(2)
<PAGE>
The description of the Company's Common Stock is incorporated herein by
reference from the registration statement therefor under Section 12 of the
Exchange Act, including any amendment or report filed for the purpose of
updating such description.
The description of the Company's Preferred Stock Purchase Rights is
incorporated herein by reference from the registration statement therefor under
Section 12 of the Exchange Act, including any amendment or report filed for the
purpose of updating such description.
The Company will provide, without charge, to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the oral or written
request of such person, a copy (without exhibits, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates) of any and all information that has been incorporated by reference
in this Prospectus. Written or telephone requests for such information should be
directed to Shareholder Relations, EA Industries, Inc., 185 Monmouth Parkway,
West Long Branch, New Jersey 07764-9989, telephone: (908) 229-1100.
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
AVAILABLE INFORMATION.........................................................................................(2)
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................................................(2)
THE COMPANY...................................................................................................(4)
RISK FACTORS .................................................................................................(8)
USE OF PROCEEDS..............................................................................................(17)
SELECTED CONSOLIDATED FINANCIAL DATA.........................................................................(18)
PLAN OF DISTRIBUTION AND SELLING SHAREHOLDERS................................................................(19)
LEGAL MATTERS................................................................................................(21)
EXPERTS......................................................................................................(21)
INDEMNIFICATION OF DIRECTORS AND OFFICERS....................................................................(21)
</TABLE>
(3)
<PAGE>
THE COMPANY
General
The Company is in the business of providing contract electronic
manufacturing services to original equipment manufacturers. The Company
functions in whole or in part as the manufacturing arm of its customers,
providing services which range from the assembly of printed circuit boards to
the complete procurement, production, assembly, testing and delivery of entire
electronic products and systems.
The Company has invested in new manufacturing equipment to accommodate
the increased business for surface mount technology ("SMT") equipment. The SMT
process is increasingly replacing the older, through-hole technology previously
utilized in the assembly of printed circuit boards. SMT allows for production of
a smaller circuit board, with greater component and circuit density, resulting
in increased performance. Management believes that SMT will continue to
constitute an increasing percentage of printed circuit board production and
assembly.
The Company manufactures over 1,500 different assemblies which are
incorporated into product lines of over 30 different companies. The Company
provides its services primarily to manufacturers of: micro, mini and mainframe
computers; computer peripheral equipment; high quality graphic equipment; office
equipment; telecommunications equipment; consumer appliances, industrial tools
and measuring devices.
During 1994, the Company's sales and gross profit increased to
approximately $30.5 million and $2.8 million, respectively, while sales, general
and administrative expenses declined. The Company's net loss from continuing
operations in 1994 was $4,784,000 which includes a provision for restructuring
of $2,400,000, compared to a loss of $4,664,000 in 1993 from continuing
operations. During the first nine months of 1995, the Company's sales increased
to $56,128,000 from $22,491,000 during the same period in 1994, primarily as a
result of the additional sales generated by Tanon. The Company had a net loss of
$26,871,000 for the first nine months of 1995, which included non-recurring
charges of $7,874,000 and $11,672,000, representing the charge to expense of
purchased research and development resulting from its investments in BarOn and
the Joint Venture with IAI, respectively, compared with a net loss of $868,000
for the first nine months of 1994. See "The Company - Recent Developments."
Historically, the Company has had substantial recurring sales from
existing customers. Current marketing efforts are aimed at obtaining long-term
relationships with new customers, as well as maintaining its current customer
base. The Company employs a variety of marketing techniques for the sale of its
products, including direct sales efforts by an in-house sales force, and the
utilization of independent sales representatives. The Company's backlog consists
of firm purchase orders which are typically shipped within twelve months from
receipt of order. As of year-end 1994 and 1993, the Company's backlog from
continuing operations totalled approximately $19,240,000, and $19,453,000,
respectively. At September 30, 1995 backlog was $44,719,000, which includes
backlog of Tanon.
In addition to the contract electronic manufacturing services conducted
by the Company, during 1995 the Company completed the Tanon Acquisition (Tanon
is a company also engaged in contract electronic manufacturing services), the
BarOn Investment and entered into the Joint Venture with Israel Aircraft
Industries, Ltd. For information with respect to these transactions, see "The
Company - Recent Developments."
The shares of the Company's Common Stock have been continuously listed
for trading on the NYSE since 1962; however, the Common Stock presently does not
meet the NYSE's requirements for continued listing. See "Risk Factors."
(4)
<PAGE>
The Company's principal executive offices are located at 185 Monmouth
Parkway, West Long Branch, New Jersey 07764-9989, and its telephone number is
(908) 229-1100.
Recent Developments
Tanon Acquisition. On January 4, 1995, the Company acquired Tanon
Manufacturing, Inc. ("Tanon"), a privately owned contract electronic
manufacturing firm with operations located in Fremont, California (the "Tanon
Acquisition"). The Tanon Acquisition has been reported as a purchase for
accounting purposes and, accordingly, the results of operations of Tanon are
included with those of the Company from January 4, 1995 forward. Tanon's
manufacturing services consist primarily of the assembly of printed circuit
boards, the manufacturing and assembly of integrated electro-mechanical systems
and related engineering support. At the closing of the Tanon Acquisition, the
Company issued 1,538,462 shares of its Common Stock and granted options to
purchase its common stock with a combined appraised value of $14,460,000 in
exchange for all the outstanding common stock of Tanon and outstanding options
to purchase common stock of Tanon. In addition, (a) the Company invested
$2,000,000 in Tanon, and (b) the Company has agreed to use its best efforts to
invest in (or, at the Company's option, loan to) Tanon (in form and on terms
acceptable to the Company and its lenders) up to an additional $5,000,000
subject to receipt by the Company of an acceptable operating plan. To date the
Company has invested approximately $2.4 million in Tanon.
BarOn Investment. On January 16, 1995, the Company acquired a 25.01%
equity interest in BarOn Technologies Ltd. ("BarOn"), a privately-owned Israeli
corporation based in Haifa, Israel (the "BarOn Investment"). BarOn is a
development stage company engaged in the research and development of a computer
input device that can directly digitize handwriting in a variety of languages,
from any surface. The BarOn Investment has been accounted for as a purchase of a
minority interest using the equity method of accounting, and, accordingly, the
Company's investment in BarOn and the 25.01% equity interest in the results of
BarOn are included in the consolidated results of the Company from January 16,
1995 forward. At the closing of the BarOn Investment, the Company acquired
25.01% of the ordinary shares of BarOn for a consideration of cash and shares of
Common Stock in the Company and a right to acquire an additional 8.33% of the
ordinary shares of BarOn. The Company acquired 8.33% of the 25.01% equity
interest in BarOn from certain shareholders of BarOn for $2,700,000 which was
paid in cash at closing. The balance of 16.68% was acquired from BarOn in
exchange for $3,000,000 in cash and 127,592 shares of Common Stock of the
Company with an estimated value of $1,000,000. On September 30, 1995, the
Company elected to acquire, in accordance with the terms of an Investment
Agreement with BarOn, an additional equity interest of 8.33% of BarOn, which
increased the Company's aggregate equity interest to 33-1/3% of the outstanding
ordinary shares of BarOn. As a result of Company's election to acquire such
additional equity interest, the Company recorded a current payable in the amount
of $2,000,000 and issued 255,183 shares of Company's Common Stock valued at
approximately $995,000. Subsequent to September 30, 1995 the Company paid
$1,500,000 of such payable.
Joint Venture with IAI. The Company, through a 52.3% owned subsidiary,
has entered into a Joint Venture Agreement ("JVA") with Israel Aircraft
Industries, Ltd., an Israel government corporation ("IAI"), for the purpose of
forming a joint venture ("Joint Venture") with IAI to review, develop, and
exploit certain non-military, non-classified technological applications
("Applications") developed by IAI. The transaction was consummated on August 8,
1995.
To implement the JVA, in early August, 1995, the Company entered into a
Preincorporation Agreement to form an Israeli corporation ("Partner") which is
the joint venture partner and owns 50.1% of the Joint Venture. IAI owns 49.9% of
the Joint Venture. Under the Preincorporation Agreement, Partner is owned as
follows: (a) the Company owns a 52.3% interest, (b) certain Israeli persons own
an aggregate of 25.2%, (c)
(5)
<PAGE>
Mark Hauser owns a 15% interest, (d) Irwin L. Gross, Chairman of the Company,
owns a 5% interest, and (e) Broad Capital Associates owns a 2.5% interest.
The equity interests in Partner were issued for an aggregate
consideration of $10,000 to each of the shareholders. In addition, the Company
and the Israeli citizens have advanced $6.3 million and $1.575 million,
respectively, to Partner. Of such funds, $7.5 million has been advanced to the
Joint Venture to be used solely for working capital purposes. The remaining
$375,000 was used by Partner to pay expenses relating to Consummation of the
Joint Venture and for working capital purposes. In connection with the
consummation of the Joint Venture with IAI, warrants for 500,000 shares of the
Company's common stock and 600,000 shares of the Company's common stock were
granted to Israel Aircraft Industries Ltd. and A.M.P. Argonauts Ltd.,
respectively, at an exercise price of $7.25 per share. In addition, the Company
issued 140,719 additional shares of Common Stock to Control Centers Ltd. and
Moshe Wertheim in exchange for additional services rendered in connection with
the Joint Venture. In addition, (i) Mark S. Hauser was granted options to
purchase 100,000 shares of the Company's Common Stock at an exercise price of
$8.175, of which 33,333 shares are currently exercisable, (ii) Broad Capital
Associates was granted options to purchase 425,000 shares of the Company's
common stock at an exercise price of $8.125 per share, which options were
subsequently amended to an exercise price of $4.50 per share and all of which
are currently exercisable, provided that such amended options are exercised
prior to March 1996, and (iii) Dedi Graucher was granted options to purchase
250,000 shares of the Company's common stock at an exercise price of $8.125 per
share, which options were subsequently amended to an exercise price of $4.50 per
share and all of which are currently exercisable, provided that such amended
options are exercised prior to March, 1996.
The JVA provides that the Joint Venture will review and evaluate
Applications developed by IAI, which are in various stages of development. To
review and evaluate the Applications, an investment committee ("Investment
Committee") comprised of seven persons has been formed. Partner selected four of
the seven members of the Investment Committee. If an Application is selected for
development and exploitation, an entity will be formed ("Licensee") in which
Partner will own a 50% interest and IAI will own a 50% interest, and IAI will
grant such Licensee a perpetual, royalty free license for such Application. The
Investment Committee will prepare a business plan to exploit each application
selected, including a funding plan. The Company will be primarily responsible to
raise the funds necessary to exploit the Application selected. However, the
Company will not be under any obligation to raise any funds for such purpose
unless and until the Investment Committee selects an Application for
exploitation. In the event the Company is unable to raise the funds necessary to
exploit any Application which the Investment Committee selects, IAI can
terminate the JVA. The JVA can also be terminated under certain other
circumstances.
To fund its obligations under the Preincorporation Agreement, on August
3, 1995 the Company sold 1,458,333 shares of its Common Stock at a price of
$4.80 per share for an aggregate of $7.0 million to five Israeli persons, three
of whom are shareholders in Partner. The offering was made pursuant to an
exemption under the Securities Act. The purchase agreements pursuant to which
the shares were sold contained an adjustment provision which required the
issuance of additional shares in the event that the average closing price of the
shares for a certain period of time was less than the offering price in the
offering. Such adjustment provision was triggered, and accordingly, the Company
issued an aggregate of 59,281 additional shares to the five Israeli persons for
no additional consideration. The proceeds from the offering were placed in
escrow and were released upon the execution of the JVA. The balance of $700,000
remaining from the sale of 1,458,333 shares after funding the Company's
obligations under the Preincorporation Agreement was used by the Company for
working capital purposes. See "Risk Factors -Working Capital Needs and Liquidity
Problems" and "Risk Factors - Future Sales of Common Stock."
With the exception of the initial investment of $6.3 million in
Partner, the Company is unable to determine at this time the effect, if any, of
this transaction on the results of operation of the Company or on its liquidity
and capital resources.
(6)
<PAGE>
$3.6 Million Offering of 9% Convertible Debentures. On September 19,
1995 and October 2, 1995, the Company completed the sale of 9% convertible
debentures in the aggregate principal amount of $3,600,000 to two foreign
purchasers in an offering exempt from registration under the Securities Act. The
proceeds from the sale were used by the Company for working capital purposes.
The debentures were subsequently converted into a total of 800,000 shares of
Company's Common Stock in accordance with their terms.
$2.2 Million Offering of 10% Convertible Debentures. On November 22,
1995 and November 28, 1995, the Company completed the sale of 10% convertible
debentures in the aggregate principal amount of $2,200,000 to four purchasers,
in an offering exempt from registration under the Securities Act. The debentures
are convertible into shares of Company's Common Stock at a conversion price
equal to 80% of the average of the closing price of the Company's Common Stock
trading on the New York Stock Exchange for the five days immediately preceding
the date of conversion, provided that in no event shall the conversion price
exceed $6.00 per share of Common Stock. In accordance with the terms of the
debentures, the shares underlying the debentures are included in the
registration statement of which this Prospectus is a part.
$10 Million Offering of Convertible Notes. On December 29, 1995 (the
"Closing Date"), the Company completed the sale of 7% convertible notes of the
Company in the aggregate principal amount of $10,000,000 to GFL Advantage Fund
Limited and GFL Performance Fund Limited (the "GFL Notes"). The Offering was
made pursuant to an exemption under the Securities Act. The GFL Notes will
mature on December 29, 1997 and are convertible into shares of the Company's
Common Stock at a conversion price equal to 82% of the average of the closing
price of the Company's Common Stock as traded on the New York Stock Exchange for
the five days immediately preceding the date of notice to the Company that a
purchaser wishes to exercise its right of conversion. The terms of the GFL Notes
require that the GFL Notes will automatically convert into shares of Company's
Common Stock as of the maturity date if the entire aggregate principal amount of
the GFL Notes has not been converted as of such date, and each purchaser may not
convert its GFL Note into a number of shares of Company's Common Stock which
would result in the beneficial ownership by the purchaser of greater than 4.9%
of the issued and outstanding shares of Company's Common Stock. In connection
with the transaction, the Company has entered into a registration rights
agreement pursuant to which it agreed to file a registration statement with the
Securities and Exchange Commission covering the shares of Company's Common Stock
underlying the GFL Notes within 25 days of the Closing Date and to cause the
shares to be registered within 105 days following the Closing Date. Accordingly,
such shares are included in this registration statement. The entire $10,000,000
received by the Company as consideration for the sale of the GFL Notes is being
used for working capital purposes including the payment of $500,000 representing
the final amount due to BarOn in connection with its acquisition of BarOn. See
"Risk Factors - Future Sales of Common Stock." In the event that this
registration statement is not declared effective within 105 days following the
Closing Date (the "Computation Date"), the Company is obligated to pay to each
purchaser an amount equal to 1.5% of the purchase price (i.e. the principal
amount) of such purchaser's GFL Note on each of (i) the Computation Date and
(ii) on the date of expiration of each subsequent 30-day period following the
Computation Date until this registration statement has been declared effective.
Notwithstanding the foregoing, the Company shall not be required to make such
payments beyond the twelve-month anniversary of the Computation Date. Under
certain circumstances, the purchasers may request that the foregoing payments be
made in shares of Company's Common Stock in lieu of cash.
(7)
<PAGE>
RISK FACTORS
In addition to the information set forth elsewhere in, and incorporated
by reference into, this Prospectus, the following factors should be considered
carefully in evaluating the Company and its business before purchasing the
Shares offered hereby.
Absence of Profitable Operations
The Company has not had a profitable year since 1990. Although the
Company has eliminated certain operations and reduced expenses in an attempt to
improve its operating results, there can be no assurance that the Company's
results of operations will improve or that the Company will be profitable in the
future.
History of Losses
The Company has incurred significant losses in each of the last four
years and for the nine-month period ended September 30, 1995, accumulating to
approximately $41.2 million. The Company's accumulated deficit was approximately
$39.3 million as of September 30, 1995. In addition, the Company had negative
cash flows from continuing operations in each of the last four years and for the
nine-month period ended September 30, 1995. Moreover, under the Company's asset
based credit facility, the Company's borrowing capacity can be severely
curtailed by its lenders.
Delisting of the Company's Common Stock from Trading on the New York Stock
Exchange
The Company has been informed by the New York Stock Exchange ("NYSE")
that the Company's Common Stock no longer qualifies for listing on the NYSE. In
order for the Company to maintain the listing of its Common Stock on the NYSE,
the Company must meet certain continued listing criteria, including without
limitation, minimum levels with respect to (1) the number of shareholders and
shareholdings (1,200 holders each owning 100 shares or more), (2) the number of
publicly-held shares (600,000), (3) the aggregate market value of publicly-held
shares ($5,000,000) and of all outstanding shares ($8,000,000), and (4) minimum
annual earnings (average of $600,000 per year for prior three years). On
September 11, 1991, the NYSE notified the Company in writing that a review of
the Company's annual financial results for the fiscal year ended December 31,
1990 indicated that the Company had fallen below the continued listing criteria
for aggregate market value of outstanding shares (less than $8,000,000) and
average earnings for the prior three years (less than $600,000 per year). As of
the date of this Prospectus, the Company believes that it is in compliance with
all of the NYSE's continued listing criteria, with the exception of the minimum
average earnings of $600,000 for each of the last three fiscal years. The NYSE
has indicated in each of its letters following March 29, 1995 approving the
listing of additional shares of Common Stock, that consideration is being given
to the appropriateness of continued listing of the Company's Common Stock.
Management of the Company met with representatives of the NYSE on April 21, 1995
to discuss this matter, and the NYSE has requested another meeting to be
tentatively held in early 1996. To date, to the Company's knowledge, the NYSE
has taken no affirmative action to delist the Common Stock, but has reserved the
right to do so in the future. If the Company's Common Stock is delisted from the
NYSE, it could have a material adverse effect on the price and liquidity of the
Company's Common Stock.
In the event that the Company's Common Stock is de-listed from the
NYSE, it could seek to list its Common Stock on the National Association of
Securities Dealers Inc.'s Automated Quotation System ("NASDAQ") or another
exchange. While the Company believes that it is presently eligible for listing
on the NASDAQ Small-Cap Market System but not the National Market, there can be
no assurance that the Company would be eligible for listing its Common Stock on
either of such NASDAQ listing systems or any other exchange
(8)
<PAGE>
at such time. If the Company would be ineligible to list its Common Stock on
NASDAQ or any other exchange at such time, there would be no established trading
market for the Company's Common Stock except as may be established in the
National Association of Securities Dealers Inc.'s OTC Bulletin Board Service or
in the "pink sheets," which, as discussed above, could have a material adverse
effect on the price and liquidity of the Company's Common Stock. In addition,
the Company's Common Stock could then become subject to the Commission's "penny
stock" rules which regulate broker-dealer sales practices. Such rules could
restrict the ability of broker-dealers to sell the Company's Common Stock, which
could also have a material adverse effect on the price and liquidity of the
Company's Common Stock.
Working Capital Needs and Liquidity Problems
As described above, the Company has experienced negative cash flow from
operations and significant operating losses in each of the four years ending
December 31, 1994 and for the nine-month period ended September 30, 1995. In
January and February 1994, in order to conserve cash and reduce expenses, the
Company imposed a 20% decrease in pay on substantially all employees, arranged
for additional concessions from its West Long Branch landlord, deferred certain
debts and lease payments and arranged to raise capital as described below. Cash
flows from financing activities during 1994 amounted to $13,192,000, resulting
primarily from the issuance of 1,200,000 units (each unit consisting of one
share of Common Stock, a Class A Warrant (hereinafter defined) and a Class B
Warrant (hereinafter defined)) (the "February Units") in the private placement
completed in February 1994 (the "February 1994 Private Placement") and the
issuance of 2,500,000 units (each unit consisting of one share of Common Stock
and one Class C Warrant (hereinafter defined) (the "June Units") in the private
placement commenced in June 1994 (the "June 1994 Private Placement") and
exercise of related Class C Warrants issued in the June 1994 Private Placement,
net of reductions in outstanding debt. The proceeds from these activities were
used to maintain cash balances for working capital and to consummate the Tanon
Acquisition and the BarOn Investment.
In order to provide additional capital, the Company made the following
offerings, each exempt from the registration provisions under the Securities
Act: (i) on April 14, 1995, the Company completed the sale of 525,000 shares of
Common Stock at $5.85 per share for net proceeds of approximately $3,000,000;
(ii) on July 21, 1995, the Company completed the sale of 416,667 shares of
Common Stock at $4.80 per share for net proceeds of approximately $2,000,000;
(iii) on September 19, 1995, the Company completed the sale of $3,150,000
principal amount convertible subordinated debentures, which debentures were
subsequently converted into 700,000 shares of Company's Common Stock; (iv) on
October 2, 1995, the Company completed the sale of $450,000 principal amount
convertible subordinated debentures, which debentures were subsequently
converted into 100,000 shares of Company's Common Stock; (v) on November 22,
1995 and November 28, 1995, the Company completed the sale to four purchasers of
an aggregate of $2,200,000 principal amount convertible subordinated debentures,
which debentures are convertible into shares of Common Stock as set forth in
such debentures; and (vi) on December 29, 1995, the Company completed the sale
to two purchasers of an aggregate of $10,000,000 principal amount debentures,
which debentures are convertible into shares of Common Stock as set forth
therein. The proceeds from these offerings are being used for working capital
purposes. In addition, in November 1995 the Company and Broad Capital Associates
agreed to amend certain options for (i) 375,000 shares of Company's Common Stock
granted to Broad Capital Associates on April 27, 1995 (the "April Options") at
an exercise price of $8.1875 per share and (ii) 425,000 shares of Company's
Common Stock granted to Broad Capital Associates on July 5, 1995 (the "July
Options") at an exercise price of $8.125 per share. The exercise price and the
vesting provisions of the April Options and July Options were amended so that
the exercise price was decreased to $4.50 per share and all of the options
became immediately exercisable, provided that such amendments will remain
effective until March 1996, at which time the terms of the unexercised options
will revert to their original terms. In November 1995, Broad Capital exercised
the April Options for 200,000 shares which resulted in proceeds of $900,000 to
the Company. Such proceeds were used for working capital purposes. None of the
other options have been exercised as of the date hereof. In addition, in
contemplation of the Tanon
(9)
<PAGE>
Acquisition, the Company had implemented measures to reduce costs, including the
closing and sale of its Southwest operations in Arizona and Mexico, which the
Company substantially completed in the second quarter of 1995, and reduction of
indirect manufacturing and sales, general and administrative staff in its West
Long Branch, New Jersey and Fremont, California facilities which the Company
substantially completed by the third quarter of 1995. Although the Company's
projections indicate that operating losses and negative cash flows from
operations will continue during 1996, management believes that its available
cash, together with funds available under its existing lines of credit, will
enable the Company to meet its obligations in the normal course of business
through December 31, 1996, however, no assurance can be given in that regard.
The Company believes that the proceeds from the sale of the convertible
notes in December, 1995 will provide sufficient capital to satisfy the
requirements of its business plan which includes making certain investments in
BarOn and Tanon. The Class A and Class B warrants issued in the February 1994
Private Placement, if exercised, could provide the Company with additional
capital of approximately $3,100,000. Additional capital could also come from the
exercise of the other warrants held by warrant holders of which the underlying
shares are covered by the Company's currently effective registration statement
(such warrants, together with the Class A Warrants and Class B Warrants are
collectively hereinafter referred to as the "Warrants"). To date, Class A and
Class B warrants to purchase 1,241,000 shares have been exercised and the
Company received $1,302,000 in proceeds. No assurance can be given that the
remainder of such Warrants will be exercised. In addition, the Company is
presently in negotiations with its existing lenders to increase the amount
available under its revolving credit facilities and is attempting to raise
additional capital. There can be no assurance that such additional borrowings or
financing will be available. See "The Company - Recent Developments."
The Company maintains an asset based credit facility with Congress
Financial Corporation, which is described in detail in note 5, "Notes Payable
and Line of Credit" of Notes To Consolidated Financial Statements at Item 8 of
the Company's latest Annual Report on Form 10-K, as amended on Form 10-K/A, for
the year ended December 31, 1994. At September 30, 1995, the Company had
$3,514,000 outstanding under this credit facility and had approximately $229,000
available for borrowing. There are two covenants with which the Company must
comply under this facility. Working capital, as defined, must exceed $750,000
and tangible net worth must exceed negative $500,000. The Company was in
compliance with both covenants as of September 30, 1995 and believes that it is
in compliance with such covenants as of the date of this Prospectus.
Tanon maintains a separate revolving line of credit with a commercial
bank that provides for short-term borrowings up to $5.5 million based on
eligible accounts receivable and inventories. At September 30, 1995, $5,500,000
was committed under this line ($5,195,000 in loans and $305,000 in a letter of
credit). This line bears interest at prime plus 1.5% and is due on demand. The
credit agreement pertaining to this line of credit restricts Tanon from entering
into certain transactions and contains covenants regarding the maintenance of
working capital, minimum net worth and debt-to-equity ratios, together with
minimum profitability requirements. The covenants require Tanon to maintain or
achieve working capital in an amount greater than deficit $150,000, tangible net
worth of not less than $2.8 million, a quick ratio of .50 to 1, a debt to equity
ratio of less than 5.50 to 1, and minimum quarterly profitability of $20,000 for
each fiscal quarter of Tanon. At September 30, 1995 Tanon was in compliance with
all of these covenants, and the Company believes that it is in compliance with
such covenants as of the date of this Prospectus.
Limitations on Dividend Payments
The Company has not had a profitable year since 1990 and has paid no
cash dividends from that date through the date of this Prospectus. If the
Company were to become profitable, it would expect that all of such earnings
would be retained to support the business of the Company. Accordingly, the
Company does not anticipate paying cash dividends on its Common Stock in the
foreseeable future. Moreover, certain financial covenants set forth in the
Company's current loan agreement prohibit the Company from paying cash
dividends.
(10)
<PAGE>
Dependence on a Limited Number of Customers and the Electronics Industry
Concurrent Computer Corporation, Iris Graphics, Inc. and Dialogic
Corporation were the Company's largest customers during the fiscal year ended
December 31, 1994 and accounted for 33%, 25% and 11%, respectively, of the
Company's net sales for such period. Two customers of Tanon, Tandem Computers
Incorporated and another customer which is a private company, accounted for 39%
and 16%, respectively, of Tanon's net sales during its fiscal year ended
December 31, 1994. The Company expects that most of its and Tanon's current
customers will continue to account for a significant portion of its net sales.
However, since customer contracts can be cancelled and purchase levels can be
changed or purchases delayed at any time, the timely replacement of cancelled,
delayed or reduced contracts with new orders cannot be assured. In addition,
substantially all of the Company's and Tanon's customers are in the computer,
telecommunications and electronics industries which are each subject to rapid
technological changes. Such technological changes could have a material adverse
effect on the Company's and Tanon's major customers which, in turn, could have a
material adverse effect on the Company's results of operations.
At December 31, 1994, the Company had accounts receivable of
approximately $2,150,000 from one of its major customers that has indicated to
management of the Company as having cash flow difficulties. At the request of
this customer, the Company agreed to extend the terms of this receivable by an
additional 15 days to 75 days and said customer agreed to reimburse the Company
by paying interest at market rates for the balance outstanding beyond normal
terms. The Company evaluates this receivable balance continuously and maintains
constant dialogue with management of the customer. As of December 31, 1995, the
outstanding balance with this customer was approximately $715,000 and such
receivable has been paid in accordance with the special terms. Recently, the
level of sales with this customer has been substantially reduced. The loss of
such sales has been offset, in part, by the increased sales to another current
customer of the Company.
Between December 31, 1993 and December 31, 1994, total accounts
receivables increased from $3,598,000 to $5,958,000 representing an increase of
$2,360,000 or 65.6%. The increase was primarily due to an increase in sales in
the fourth quarter of 1994 from the fourth quarter of 1993 of $2,496,000,
including sales to the customer discussed in the immediately preceding
paragraph. The balance at September 30, 1995 is $12,689,000, which is an
increase of $6,731,000 from December 31, 1994 which is attributable primarily to
the consolidation of Tanon.
Availability of Raw Materials
The Company relies on third-party suppliers for components which it
uses in its assembly processes. At various times in the electronics industry
there have been shortages of these kinds of components. While management
believes that these shortages have not impacted significantly its performance in
the past, if shortages should occur in the future, the Company may be forced to
delay manufacturing and shipments, which could have a material adverse effect on
the Company's results of operations.
Competition
The Company competes with numerous domestic and offshore contract
manufacturers as well as the in-house manufacturing capabilities of certain of
its existing and potential customers. Some of the Company's competitors have
substantially greater manufacturing, financial and marketing resources than the
Company. The Company believes that the significant competitive factors in
contract manufacturing are technology, quality, service, price and ability to
deliver finished products on a timely and reliable basis. The Company's
inability to compete effectively in any of these areas could have a material
adverse effect on the Company's business.
(11)
<PAGE>
Environmental Compliance and Current Litigation
The Company is subject to a variety of environmental regulations
relating to the use, storage, discharge and disposal of hazardous chemicals used
during its manufacturing process. Any failure by the Company to comply with
present and future regulations could restrict the Company's ability to expand
its facilities or require the Company to acquire costly equipment or to incur
other expenses to comply with environmental regulations, or incur fines and
penalties.
In addition, there are two lawsuits presently pending which involve
environmental claims against EAI, namely, the Lemco Associates lawsuit and the
Bridgeport Rental and Oil Services Superfund Site lawsuit. In October, 1992,
Lemco Associates L.P., a limited partnership ("Lemco"), the owner of property
previously owned by EAI, initiated an action against EAI and others alleging,
among other things, that the defendants created environmental contamination at
the property and is seeking damages in unspecified amounts. EAI has denied
Lemco's allegations, asserted numerous defenses to the claims asserted and made
cross claims for indemnification and contribution against co-defendants and
others. In addition, the Company has made a demand upon its insurance carriers
for coverage for the claims made by Lemco and cross claims and third party
claims may be filed against these insurance companies seeking indemnification
against these claims. To date, the Company's insurance carriers have agreed to
pay 71% of its defense costs under a reservation of rights. Discovery in this
matter is ongoing. By letter dated March 30, 1995, Lemco has provided the
Company with a statement of its remediation costs to date, as well as an
estimate of future remediation costs associated with the contamination for which
it seeks recovery in this action. Specifically, Lemco claims that it has
expended approximately $424,000 in remediation costs, including fees for legal
oversight and consultation. It further estimates that its future remediation
costs will amount to approximately $4,900,000. Such amount is included in a
report made by Lemco's environmental consultants based on their current
assessment of the extent of contamination and the method and period required to
complete the remediation. Further, by letter dated June 7, 1995, Lemco has
provided the Company with an appraisal report made by a real estate appraisal
company engaged by Lemco in support of Lemco's claim for diminution in the value
of the property. Such report states that it is the appraisal company's opinion
that the market value of the property as of May 23, 1988 was $3.6 million and as
of April 14, 1995 was $750,000. The appraisal company subsequently increased its
1995 valuation to $960,000. Based on the foregoing, management believes that the
range of possible loss in this matter ranges from zero to approximately $7.8
million, not including costs and expenses, such as legal and expert fees, which
will be incurred in connection with this matter, and not taking into account the
amount of any loss which may be offset by insurance coverage as discussed above.
The Company and its consultants recently completed the investigation and
evaluation of additional information recently received from Lemco and have
determined that Lemco's remediation cost estimates are premature and conceptual
in nature. In addition, an independent analysis of the site to determine the
appropriateness of Lemco's claims and of the estimated cost of remediation has
not been completed; therefore, it is not possible to predict its outcome at this
time. Moreover, there is no assurance that the outcome of this matter will come
within the above-mentioned range of possible loss.
The second matter involves environmental claims against EAI and others
regarding the Bridgeport Rental and Oil Services Superfund Site in Logan
Township, New Jersey (the "B.R.O.S. Site"). By letter dated August 31, 1988, the
United States Environmental Protection Agency ("EPA") notified EAI that the EPA
had identified EAI as one of the parties potentially responsible for clean up
costs at, and for any other possible damages in connection with, the B.R.O.S.
Site. EAI's alleged connection to the B.R.O.S. Site is through Rollins
Environmental Services, Inc. ("Rollins") which is a waste transporter that was
allegedly hired by EAI to transport certain waste material alleged to be
hazardous from EAI's operations for appropriate disposal. Information in the
EPA's files suggests that the EPA is likely to assert that one shipment of waste
allegedly generated by EAI and presumed to constitute less than one quarter of
one percent of the total liquid waste allegedly released at the B.R.O.S. Site,
was delivered to the B.R.O.S. Site in 1973 by Rollins. On March 29, 1989, the
New Jersey Department of Environmental Protection and Energy ("DEPE") issued an
administrative
(12)
<PAGE>
directive under New Jersey's Spill Compensation and Control Act to over one
hundred companies, including EAI, demanding payment by May 15, 1989 of
$9,224,189 as DEPE's share of remedial costs at the B.R.O.S. Site. By letter
dated August 29, 1989, and by similar letters to fifty-seven other alleged waste
generators, or transporters of waste allegedly released at the B.R.O.S. Site,
the EPA demanded that the targeted companies, individually or jointly, pay to
the "EPA Hazardous Substances Trust Fund" the sum of $17.8 million by September
29, 1989 in full reimbursement of past costs incurred by the EPA in connection
with the B.R.O.S. Site. The EPA estimated at that time that the costs of the
remaining remedial work will be in the range of $70 - $100 million. On May 15,
1989, a group of companies among those which had received demands from DEPE,
including EAI, without admitting liability, made a "good faith" payment of
$1,344,500 in response to DEPE's directive demanding payment of $9,224,189.
EAI's share of this payment was $5,000. On September 29, 1989, a group of
companies, including EAI, targeted by the EPA responded to the EPA's demand
letter for past costs of $17.8 million by declining to make any payments at that
time and by offering to negotiate a settlement of the EPA's claims. Litigation
has been initiated in the federal courts with respect to the remediation alleged
to be required at the B.R.O.S. Site. EAI is not a party to this litigation but
is participating in informal discovery and settlement negotiations with respect
to the federal court actions without admitting liability. Rollins has agreed to
pay administrative expenses which may be assessed against EAI in connection with
its participation in the settlement process as well as defend EAI should EAI be
sued after participating in the settlement process. Rollins has not agreed to
assume any liability that any of its customers may incur as a result of these
claims, including liability for any amount that EAI may agree to pay in
settlement. EAI has pursued insurance coverage for these claims. To date, one
carrier has responded, has agreed to pay one-third of EAI's defense costs and
has otherwise reserved rights. The other carrier to which EAI has submitted the
B.R.O.S. claims has denied coverage on grounds that EAI believes are without
merit under New Jersey law. This insurance company advised EAI that it has no
information at this time that would support EAI's claim of coverage under any of
the policies issued by it to EAI. EAI has asked for reconsideration of its
position and is awaiting a response. Based solely upon the alleged single
shipment of waste generated by EAI and presumed to constitute less than one
quarter of one percent of the total liquid waste allegedly released at the
B.R.O.S. Site discussed above, management believes that the range of possible
loss in this matter ranges from zero to approximately $300,000, not including
costs and expenses which will be incurred in connection with this matter which
are not paid by Rollins as discussed above, and not taking into account the
amount of any loss which may be offset by insurance coverage as discussed above
or which may be recoverable from Rollins based on indemnification claims.
Settlement discussions in this matter are ongoing and the Company's
participation in such settlement discussions has been limited to date;
therefore, it is not possible to predict its outcome at this time. Moreover,
there is no assurance that the outcome of this matter will come within the
above-referenced range of possible loss.
Dependence on Key Executives
The Company is continually assessing and evaluating its management
team. The Company is and will continue to be dependent upon the ability and
experience of its executive officers. There can be no assurance that the Company
will be able to retain experienced management. If, for any reason, the Company
is unable to retain such management, the Company's operations could be adversely
affected.
Possible Volatility of Stock Price
The trading price of the Company's Common Stock could be subject to
significant fluctuations in response to variations in quarterly operating
results, general conditions in the electronics industry, general conditions in
the economy and other factors, including the relatively small number of shares
held publicly.
(13)
<PAGE>
Limitation of Net Operating Loss Carryforward
A limitation on the ability to utilize a portion of the Company's net
operating loss carryforwards, which amounted to approximately $23.4 million as
of December 31, 1994, may result if future stock ownership changes exceed
certain thresholds as defined in Section 382 of the Internal Revenue Code of
1986.
Future Sales of Common Stock
At December 31, 1995, the Company had approximately 15,690,000 shares
of Common Stock outstanding. Of these shares, approximately 7,500,000 shares are
"restricted" or "affiliate" securities as such terms are defined in the
Securities Act and may not be sold in the absence of registration under the
Securities Act or an exemption therefrom, including the exemption contained in
Rule 144. The Company has granted certain holders of restricted or affiliate
shares of Common Stock certain rights which enable such holders to require the
Company to register shares of Common Stock held by them, including without
limitation, (i) the 1,200,000 shares included in the February Units sold in the
February 1994 Private Placement, (ii) the 2,500,000 shares included in the June
Units sold by the Company in the June 1994 Private Placement, (iii) the
1,482,744 shares purchased upon exercise of the Class C Warrants included in the
June Units sold by the Company in the June 1994 Private Placement, and (iv) the
1,538,000 shares issued to stockholders of Tanon upon consummation of the Tanon
Acquisition on January 4, 1995. Of such shares, 5,925,000 shares are covered by
currently effective registration statements. To the Company's knowledge, none of
the Company's approximately 7,500,000 restricted or affiliated securities
outstanding as of December 31, 1995 are currently for sale in the public in
reliance upon Rule 144. However, since such date an aggregate of 800,000 of such
shares have been resold by four shareholders. As of December 31, 1995, the
Company has granted to employees and others options to purchase up to
approximately 7,337,937 shares of Common Stock, of which approximately 4,020,000
shares are covered by currently effective registration statements. The Company
has also issued warrants which are exercisable for an aggregate of approximately
5,600,000 shares of the Company's Common Stock and which contain certain
registration rights for the underlying shares. Of such warrants, 3,876,084
shares (including without limitation, the shares underlying the Class A Warrants
and Class B Warrants issued in the February 1994 Private Placement) are included
in the Company's currently effective registration statement. Also, in offerings
exempt from the registration provisions under the Securities Act, (i) on April
14, 1995, the Company completed the sale of 525,000 shares of Common Stock; (ii)
on July 21, 1995, the Company completed the sale of 416,667 shares of Common
Stock, (iii) on September 19, 1995, the Company completed the sale of
convertible debentures in the principal amount of $3,150,000, which debentures
were subsequently converted into 700,000 shares of Common Stock, (iv) on October
2, 1995, the Company completed the sale of convertible debentures in the
principal amount of $450,000, which debentures were subsequently converted into
100,000 shares of Common Stock; (v) on November 22, 1995 and November 28, 1995
the Company completed the sale of convertible debentures in the principal amount
of $2,200,000 to four purchasers, which debentures may be converted into shares
of Common Stock as set forth in the subscription agreements in connection
therewith (the "Convertible Debentures"); and (vi) on December 29, 1995, the
Company completed the sale to two purchasers of convertible notes in the
aggregate principal amount of $10,000,000, which notes are convertible into
shares of Common Stock as set forth therein (the "Convertible Notes"). The
purchase agreements pursuant to which the shares were sold in the April 14 and
July 21 offerings contain adjustment provisions which in the case of the shares
sold on April 14, 1995 required the issuance of an additional 15,712 shares
without additional consideration, and in the case of the shares sold on July 21,
1995 did not require the issuance of any additional shares. Further, to fund its
obligations under the Preincorporation Agreement in contemplation of the Joint
Venture with IAI, the Company sold 1,458,333 shares of its Common Stock in an
offering exempt from the registration provisions under the Securities Act, which
shares were subject to certain adjustment provisions set forth in the purchase
agreements in connection therewith and which resulted in the issuance of an
additional 59,281 shares without additional consideration. The Company also
issued an aggregate of 140,719 shares to Moshe Wertheim and Control Centers Ltd.
in connection with the consummation of the Joint Venture with IAI.
(14)
<PAGE>
The shares are subject to certain registration rights which have been granted to
the holders of such shares by the Company. In addition, the shares underlying
the debentures sold in the November 1995 offering and the convertible notes sold
in the December 29 offering are included in the registration statement of which
this Prospectus is a part. Possible or actual sales made under Rule 144, or
pursuant to exemptions under the Securities Act, or pursuant to registration
rights, of the aforementioned shares of Common Stock or shares of Common Stock
issued upon the exercise of the aforementioned stock options or warrants may
have a material adverse effect upon the market price of the Company's Common
Stock.
Control by Board of Directors
As of December 31, 1995, all officers and directors of the Company as a
group beneficially owned approximately 1,755,472 shares or 10.6% of the
outstanding Common Stock or options or warrants exercisable for Common Stock,
assuming the exercise of presently exercisable options and warrants held by such
persons. Consequently, the Board of Directors can and will be able to continue
to exercise significant influence over the Company and its affairs.
Possible Issuances of Preferred Stock
Shares of Preferred Stock of the Company may be issued by the Board of
Directors of the Company, without shareholder approval, on such terms as the
Board of Directors may determine. 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 in the future. Moreover, although the
ability to issue Preferred Stock may provide flexibility in connection with
possible acquisitions and other corporate purposes, such issuance may make it
more difficult for a third party to acquire, or may discourage a third party
from acquiring, control of the Company. The Company has no outstanding Preferred
Stock.
Provisions with Possible Anti-Takeover Effect
The New Jersey Business Corporation Act ("NJBCA") provides that in
determining whether a proposal or offer to acquire a corporation is in the best
interests of the corporation, the corporation's board of directors may, in
addition to considering the effects of any action on shareholders, consider any
of the following: (a) the effects of the proposed action on the corporation's
employees, suppliers, creditors and customers, (b) the effects on the community
in which the corporation operates and (c) the long-term as well as short term
interests of the corporation and its shareholders, including the possibility
that these interests may best be served by the continued independence of the
corporation and if, based on these factors, the board of directors determines
that any such offer is not in the best interest of the corporation, it may
reject the offer. The New Jersey Shareholders Protection Act (the "Protection
Act"), prohibits a publicly held New Jersey corporation with its principal
executive office and significant business operations in New Jersey from engaging
in any business combination with an "Interested Shareholder" (defined generally
as a beneficial owner of 10% or more of the outstanding voting stock) for a
period of five years from the date the Interested Shareholder became an
Interested Shareholder, unless such transaction is approved by the board of
directors prior to the date the shareholder became an Interested Shareholder. In
addition, the Protection Act prohibits any business combination at any time with
an Interested Shareholder other than a transaction that (i) is approved by the
board of directors for the applicable company prior to the date the Interested
Shareholder became an Interested Shareholder; or (ii) is approved by the
affirmative vote of the holders of two-thirds of the voting stock not
beneficially owned by the Interested Shareholder at a meeting called for that
purpose; or (iii) satisfies certain stringent price and terms criteria.
The Company's Certificate of Incorporation and By-Laws provide that the
Board of Directors of the Company shall be divided into three classes, each of
which serves for a three year term, with one class standing for election every
year. As a result, it ordinarily requires two annual meeting cycles and more
than one
(15)
<PAGE>
year for stockholders holding a majority of the shares to elect a majority of
the Board. The Company has also adopted a Shareowners Rights Plan, pursuant to
which it has granted to shareholders one Preferred Stock Purchase Right for each
outstanding share of Common Stock. Under certain conditions, each Right entitles
shareholders to purchase one 1/100th of a share of Series A Junior Participating
Preferred Stock of the Company at an exercise price of $11.00, which Rights
expire in 1998. The Rights are exercisable only if a person or group acquires
15% or more of EAI's outstanding Common Stock (except in a transaction directly
with the Company which the Board determines is in the best interests of
shareowners) or commences a tender offer the consummation of which would result
in ownership by a person or group of 15% or more of the Common Stock. In the
event a person or group acquires 15% or more of EAI's outstanding Common Stock
(except in a transaction directly with the Company which the Board determines is
in the best interest of shareowners) each Right will entitle all other holders
to receive, upon exercise, EAI Common Stock with a value of twice the exercise
price. In addition, at any time after a 15% position is acquired, the Board of
Directors may, at its option, require each outstanding Right to be exchanged for
one share of Common Stock. Further, if EAI is acquired in a merger or other
business combination transaction after the Rights become exercisable, each Right
will entitle its holder to purchase, at the Right's then-current exercise price,
a number of the acquiring company's common shares having a value at that time of
twice the Right's exercise price.
These provisions of New Jersey Law, the Company's Certificate of
Incorporation and By-Laws, and Preferred Stock Purchase Rights Plan could delay
or impede the removal of incumbent directors and could make a merger, tender
offer or proxy contest involving the Company more difficult, even if such event
could be beneficial to the interests of the stockholders. Such provisions could
limit the price that certain investors might be willing to pay in the future for
the Company's Common Stock.
(16)
<PAGE>
USE OF PROCEEDS
The Company will not receive any portion of the proceeds of the resale
of the Shares by the Selling Securityholders at the conversion of the
Convertible Notes and Convertible Debentures. However, approximately $12,200,000
of liabilities of the Company as of December 31, 1995 would be converted to
equity upon the conversion of the Convertible Notes and Convertible Debentures,
assuming the exercise in full of the Convertible Notes and Convertible
Debentures. As of the date of this Prospectus, none of the Debenture Holders had
converted his or her Convertible Notes or Convertible Debentures. There can be
no assurance that any of the Convertible Debentures will be converted; however,
the terms of the Convertible Notes state that if the entire principal amount of
the Convertible Notes has not been converted as of the date of their maturity
(December 29, 1997), such Convertible Notes shall convert into shares of
Company's Common Stock as of the maturity date. The Company could receive gross
cash proceeds of up to approximately $3,625,000 from the issuance of shares
included in this registration statement upon the exercise of certain warrants.
As of the date of this Prospectus none of the warrant holders has exercised its
warrants, and therefore no proceeds have been received. There can be no
assurance that any of the warrants will be exercised.
(17)
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth historical consolidated financial data
of the Company for the nine-month periods ended September 30, 1995 and September
30, 1994 and for each of the years in the five-year period ended December 31,
1994. The selected historical consolidated financial data for each of the years
ended December 31, 1990 through 1994 presented below were derived from the
consolidated financial statements of the Company, which were audited by Arthur
Andersen LLP, independent public accountants. The financial data of the Company
for the nine-month periods ended September 30, 1995 and September 30, 1994 were
derived from the unaudited consolidated condensed financial statements of the
Company. The results for the nine-month periods ended September 30, 1995 and
September 30, 1994 are not necessarily indicative of results for the full year
or any future period. This data should be read in conjunction with the Company's
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated by reference in the Company's
Form 10-K, as amended on Form 10-K/A dated April 28, 1995, filed for the year
ended December 31, 1994 and Form 10-Q filed for the quarter ended September 30,
1995.
<TABLE>
<CAPTION>
(in thousands, except per share data)
Nine-Month Period Ended
September September
30 30 Year Ended December 31,
----------------------------------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------------
Unaudited Unaudited
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Results: (Note 1)
Sales from Continuing
Operations $ 56,128 $ 22,491 $ 30,539 $ 26,024 $ 22,248 $ 22,933 $ 19,620
Provision (Credit) for
Restructuring -- -- 2,400 (68) 285 -- --
Loss from Continuing
Operations Before Taxes $ 26,871 $ (868) (4,784) (5,348) (3,524) (6,811) (497)
Loss from Continuing
Operations $ 26,871 $ (868) (4,784) (4,664) (3,189) (5,227) (334)
Income from Discontinued
Operations $ -- -- -- 1,327 651 1,531 793
Net Income (Loss) $(26,871) $ (868) (4,784) (3,337) (2,538) (3,696) 459
Income (Loss) per
Common Share:
Continuing Operations $ (2.35) $ (.20) (.95) (1.76) (1.22) (2.02) (.12)
Discontinued Operations $ -- -- -- .50 .25 .59 .28
Net Income (Loss) $ (2.35) $ (.20) (.95) (1.26) (.97) (1.43) .16
- -----------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
Current Assets $ 32,128 -- 16,969 7,355 14,547 12,267 12,168
Current Liabilities $ 24,067 -- 12,603 8,614 11,594 5,019 4,339
Working Capital $ 8,061 -- 4,366 (1,259) 2,953 7,248 7,829
Net Property and
Equipment $ 6,894 -- 2,719 3,603 4,344 2,351 2,610
Total Assets $ 55,799 -- 22,845 12,762 19,836 14,805 15,153
Long-Term Debt $ 5,134 -- 690 1,820 1,678 605 703
Shareholders' Equity
(Deficit) $ 20,302 -- 7,244 (546) 2,776 5,137 9,671
Common Shares
Outstanding 14,976 -- 8,108 2,661 2,646 2,588 2,602
Book Value per
Common Share $ 1.36 -- .89 (.21) 1.05 1.99 3.72
- -----------------------------------------------------------------------------------------------------------------------------------
Other Data:
Number of Shareholders
of Record 4,314 -- 4,447 4,600 4,718 4,877 4,969
Number of Employees 464 -- 334 315 458 368 379
Orders Received $ 81,607 -- 30,326 18,805 31,592 20,064 24,656
Sales Backlog at End of
Period $ 44,719 -- 19,240 19,453 26,676 17,260 20,239
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
Note (1): 1995 amounts include the results of Tanon Manufacturing, Inc.
from the date of the Tanon Acquisition (January 4, 1995), EAI's equity
in the results of BarOn Technologies Ltd. from the date of the BarOn
Investment (January 16, 1995), and EAI's equity in the results of the
JVA with Israel Aircraft Industries, Ltd. from the date of formation
(August 8. 1995).
</FN>
</TABLE>
(18)
<PAGE>
PLAN OF DISTRIBUTION AND
SELLING SECURITYHOLDERS
The Shares will be offered by the Selling Securityholders or their donees
for resale by this Prospectus from time to time after the date hereof in one or
more transactions on the NYSE, in negotiated transactions, or private
transactions, or otherwise, 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 Securityholders may effect
such transactions by selling the Shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions (which compensation may be in excess of customary
commissions). The following table sets forth as of January 15, 1996 (a) the name
of each Selling Securityholder, (b) the nature of any position, office or other
material relationship which the Selling Securityholder has had within the past
three years with the Company, (c) the number of Shares owned prior to the
offering, (d) the number of Shares to be offered for the Selling
Securityholder's account, (e) the number of Shares to be owned by the Selling
Securityholder after completion of the offering, and (f) the percentage of
Common Stock to be owned by the Selling Securityholder after completion of the
offering.
<TABLE>
<CAPTION>
Percentage
Number of of Common
Number of Shares Stock
Relation- Shares Number of Owned Owned
Name of Selling ship to Owned Prior Shares After After
Securityholder Company(1) to Offering Offered Offering(2) Offering(2)
- -------------- ---------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Israel Aircraft Industries
Ltd. 500,000 500,000(3) -0- -0-
Jules Nordlicht 338,600 120,000(4) 218,600 1.14%
Mueller Trading, L.P. 60,000 60,000(4) -0- -0-
Millennium Partners, 240,000 240,000(4) -0- -0-
L.P.
David Schick 20,000 20,000(4) -0- -0-
GFL Advantage Fund
Limited 1,013,333 1,013,333(5) -0- -0-
GFL Performance Fund 1,520,000 1,520,000(5) -0- -0-
Limited
Moshe Wertheim 677,406 70,360(6) 607,046 3.17%
Control Centers Ltd. 94,072 70,359(6) 23,713 less than 1%
</TABLE>
- --------------------------------------
(1) Except as expressly set forth in the table, none of the Selling
Securityholders has had any relation to the Company within the past three years.
(2) Assumes that all Shares which are registered are sold in the Offering.
Also, calculation is based on approximately 15,690,000 shares of EAI Common
Stock outstanding at December 31, 1995.
(3) Represents a warrant to purchase up to 500,000 Shares of Company's
Common Stock at the price of $7.25 per share, which warrant was granted in
connection with the consummation of the Joint Venture between Company and IAI.
(4) Represents shares of Company's Common Stock into which certain 10%
convertible subordinated debentures in the aggregate principal amount of
$2,200,000 issued by the Company to (i) Millennium Partners, L.P. and Jules
Nordlicht on November 22, 1995, and (ii) Mueller Trading, L.P. and David Schick
on November 28, 1995, are convertible. For purposes of determining the number of
shares of Company's Common Stock to include in this registration statement, the
Company assumed a conversion price of $5.00 per share. The actual number of
shares of Common Stock to be issued upon the conversion of the debentures will
be equal to the principal amount of the debentures divided by a conversion price
equal to 80% of the average of the closing price of the Company's Common Stock
(19)
<PAGE>
as traded on the New York Stock Exchange for the five days immediately preceding
the date of notice of conversion to the Company, provided that in no event shall
the conversion price exceed $6.00 per share of Common Stock.
(5) Represents (i) shares of Company's Common Stock into which certain 7%
convertible notes in the aggregate principal amount of $10,000,000 issued by the
Company on December 29, 1995 to (a) GFL Advantage Fund Limited and (b) GFL
Performance Fund Limited, are convertible, and (ii) shares of Company's Common
Stock which may be issued, at Company's election, in lieu of payment of interest
due on the notes. For purposes of determining the number of shares of Company's
Common Stock to include in this registration statement, the Company assumed a
conversion price of $4.50 per share. The Company is obligated, pursuant to a
registration rights agreements with each of GFL Advantage Fund Limited and GFL
Performance Fund Limited, to register at least 2,500,000 shares of Company's
Common Stock pursuant to the convertible notes. The actual number of shares of
Common Stock to be issued upon the conversion of the debentures will be equal to
the principal amount of the debentures divided by a conversion price equal to
the average of the closing price of the Company's Common Stock as traded on the
New York Stock Exchange for the five days immediately preceding the date of
receipt of a notice of conversion by the Company. In accordance with Rule 416
under the Securities Act, this registration statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon the conversion of the notes to prevent dilution resulting from stock
splits, stock dividends or similar transactions or by reason of changes in the
conversion price as aforesaid. In no event shall either GFL Advantage Fund
Limited or GFL Performance Fund Limited (collectively the "Funds") be entitled
to convert the principal amount of the convertible notes into a number of shares
of Company's Common Stock which, in the aggregate, would result in the
beneficial ownership by either of the Funds or any person associated with, or
serving as an advisor to, the Funds, of more than 4.9% of the outstanding shares
of Company's Common Stock.
(6) Represents shares of Company's Common Stock issued in exchange for
services rendered in connection with the formation of the Joint Venture with
IAI.
(20)
<PAGE>
LEGAL MATTERS
The validity of the shares being offered hereby will be passed upon for the
Company by Mesirov Gelman Jaffe Cramer & Jamieson, 1735 Market Street,
Philadelphia, Pennsylvania 19103-7598. Richard P. Jaffe, a partner of such law
firm, is the Secretary of the Company.
EXPERTS
The audited financial statements and schedules of EA Industries, Inc.,
incorporated by reference in this Prospectus and in the Registration Statement
of which the Prospectus is a part, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and have been included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.
The financial statements and schedules of Tanon Manufacturing, Inc. as of
and for the year ended December 31, 1994, incorporated by reference in this
Prospectus and in the Registration Statement of which the Prospectus is a part,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and have been included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
The financial statements of Tanon Manufacturing, Inc. as of and for the
year ended December 31, 1993, incorporated by reference in this Prospectus and
in the Registration Statement of which the Prospectus is a part, have been
incorporated herein in reliance upon the report of KPMG Peat Marwick LLP,
independent auditors, incorporated therein, and upon the authority of said firm
as experts in accounting and auditing.
The financial statements of Tanon Manufacturing, Inc. as of December 31,
1992 and for the years ended December 31, 1992 and 1991, incorporated by
reference in this Prospectus and in the Registration Statement of which the
Prospectus is a part, have been incorporated herein and in the Registration
Statement in reliance upon the report of Shilling & Kenyon Inc., certified
public accountants, incorporated therein, and upon the authority of said firm as
experts in accounting and auditing.
The financial statements of BarOn as of December 31, 1994, 1993 and 1992,
and for the years ended December 31, 1994 and 1993 and the period from inception
in 1992 through December 31, 1992, incorporated by reference in this Prospectus
and in the Registration Statement of which the Prospectus is a part, have been
audited by Luboshitz, Kasierer & Co. and Yosef Shimony, independent public
accountants, as indicated in their reports with respect thereto, and have been
included herein in reliance upon the authority of said firms as experts in
accounting and auditing.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized under New Jersey law, the Company's Certificate of
Incorporation eliminates the personal liability of directors and officers to the
Company and its shareholders for monetary damages for acts or omissions
(including negligent and grossly negligent acts or omissions) in violation of
directors' and officers fiduciary duties of care. The duty of care refers to the
fiduciary duty of directors and officers to manage the affairs of the
corporation with the same degree of care as would be applied by an "ordinarily
prudent person under similar circumstances." The Certificate of Incorporation
does not, however, in any way eliminate or limit the liability of a director or
officer for breaching his duty of loyalty (i.e., the duty to refrain from fraud,
self-dealing, and transactions involving improper conflicts of interest) to the
Company or its shareholders, failing to
(21)
<PAGE>
act in good faith, or knowingly violating or obtaining an improper personal
benefit. These provisions do not have any effect on the availability of
equitable remedies (such as an injunction or rescission) for breach of fiduciary
duty. However, as a practical matter, equitable remedies may not be available in
particular circumstances.
Article 37 of the Company's by-laws ("Article 37") provides, among other
things, that the Company shall, to the fullest extent permitted by the laws of
the State of New Jersey as from time to time in effect, indemnify any person who
is or was made a party or is threatened to be made a party to any proceeding by
reason of the fact that he is or was a director or officer of the Company or,
while serving as a director or officer of the Company, is or was serving at the
request of the Company as a director, officer, trustee, employee or agent of
another corporation, partnership, trust, employee benefit plan or other
enterprise against all expenses and liabilities. Article 37 further provides
that the Company shall, from time to time, reimburse or advance to any such
director or officer the funds necessary for payment of expenses incurred in
connection with any proceeding, upon receipt of a written undertaking by or on
behalf of such director or officer to repay such amount unless it shall
ultimately be determined that he is entitled to indemnification. The rights and
authority conferred in Article 37 are not exclusive of any other right which an
indemnified party may have or acquire under any statute, provision of the
Company's by-laws, agreement, vote of the shareholders or directors or
otherwise. The Company's by-laws specify that the right to indemnification is a
contract right, enforceable against the Company with respect to any act or
omission which occurs while such by-law provision is in effect, even if such
by-law provision is not in effect when the claim for indemnification is made.
The NJBCA generally provides that a corporation may, and in certain
circumstances, shall, indemnify its officers, directors, employees and agents
("Corporate Agents"), Corporate Agents of constituent corporations that it has
absorbed by merger or consolidation, and Corporate Agents of other corporations
if such Corporate Agents serve at the indemnifying corporation's request. A
corporation may indemnify such Corporate Agent in a civil proceeding if the
Corporate Agent acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and, in a criminal
proceeding, if he had no reasonable cause to believe his conduct was unlawful,
except that indemnification is not permitted in an action by or in the right of
the corporation if the Corporate Agent is adjudged to be liable to the
corporation, unless the court in which the proceeding was brought shall have
determined that indemnification is appropriate in light of the circumstances of
the case.
The Company has purchased and maintains insurance for its officers and
directors against certain liabilities, including liabilities under the
Securities Act. The effect of such insurance is to indemnify any officer or
director of the Company against expenses, judgements, fines, attorney's fees and
other amounts paid in settlements incurred by him, subject to certain
exclusions. Such insurance does not insure against any such amount incurred by
an officer or director as a result of his own dishonesty.
These provisions of the Company's Certificate of Incorporation and By-laws
apply only to claims against a director or officer arising out of his service in
such a capacity. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and therefore is unenforceable.
(22)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
SEC registration fee $ 6,076
Legal fees and expenses $15,000*
Accounting fees and expenses $15,000*
Blue sky fees and expenses $ 2,500*
Printing expenses $ 2,500*
Miscellaneous $ 1,000*
-------
TOTAL $42,076
=======
- -------------------
*Estimated.
Item 15. Indemnification of Directors and Officers
As authorized under New Jersey law, the Company's Certificate of
Incorporation eliminates the personal liability of directors and officers to the
Company and its shareholders for monetary damages for acts or omissions
(including negligent and grossly negligent acts or omissions) in violation of
directors' and officer's fiduciary duties of care. The duty of care refers to
the fiduciary duty of directors and officers to manage the affairs of the
corporation with the same degree of care as would be applied by an "ordinarily
prudent person under similar circumstances." The Certificate of Incorporation
does not, however, in any way eliminate or limit the liability of a director or
officers for breaching his duty of loyalty (i.e., the duty to refrain from
fraud, self-dealing, and transactions involving improper conflicts of interest)
to the Company or its shareholders, failing to act in good faith, knowingly
violating or obtaining an improper personal benefit. These provisions do not
have any effect on the availability of equitable remedies (such as an injunction
or rescission) for breach of fiduciary duty. However, as a practical matter,
equitable remedies may not be available in particular circumstances.
Article 37 of the Company's by-laws ("Article 37") provides, among other
things, that the Company shall, to the fullest extent permitted by the laws of
the State of New Jersey as from time to time in effect, indemnify any person who
is or was made a party or is threatened to be made a party to any proceeding by
reason of the fact that he is or was a director or officer of the Company or,
while serving as a director or officer of the Company, is or was serving at the
request of the Company as a director, officer, trustee, employee or agent of
another corporation, partnership, trust, employee benefit plan or other
enterprise against all expenses and liabilities. Article 37 further provides
that the Company shall, from time to time, reimburse or advance to any such
director or officer the funds necessary for payment of expenses incurred in
connection with any proceeding, upon receipt of a written undertaking by or on
behalf of such director or officer to repay such amount unless it shall
ultimately be determined that he is entitled to indemnification. The rights and
authority conferred in Article 37 are not exclusive of any other right which an
indemnified party may have or acquire under any statute, provision of the
Company's by-laws, agreement, vote of the shareholders or directors or
otherwise. The Company's By-laws specify that the right to indemnification is a
contract right, enforceable against the Company with respect to any act or
omission which occurs while such By-law provision is in effect, even if such
By-law provision is not in effect when the claim for indemnification is made.
II-1
<PAGE>
The NJBCA generally provides that a corporation may, and in certain
circumstances, shall, indemnify its officers, directors, employees and agents
("Corporate Agents"), Corporate Agents of constituent corporations that it has
absorbed by merger or consolidation, and Corporate Agents of other corporations
if such Corporate Agents serve at the indemnifying corporation's request. A
corporation may indemnify such Corporate Agent in a civil proceeding if the
Corporate Agent acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation and, in a criminal
proceeding, if he had no reasonable cause to believe his conduct was unlawful,
except that indemnification is not permitted in an action by or in the right of
the corporation if the Corporate Agent is adjudged to be liable to the
corporation, unless the court in which the proceeding was brought shall have
determined that indemnification is appropriate in light of the circumstances of
the case.
The Company has purchased and maintains insurance for its officers and
directors against certain liabilities, including liabilities under the
Securities Act. The effect of such insurance is to indemnify any officer or
director of the Company against expenses, judgements, fines, attorney's fees and
other amounts paid in settlements incurred by him, subject to certain
exclusions. Such insurance does not insure against any such amount incurred by
an officer or director as a result of his own dishonesty.
II-2
<PAGE>
Item 16. Exhibits
Exhibit No.
*2.1 Agreement and Plan of Reorganization by and
among Electronic Associates, Inc., Tanon
Manufacturing, Inc., EA Acquisition Corp. and
Joseph R. Spalliero, dated December 12, 1994 was
filed as Exhibit 2 to the Company's Current
Report on Form 8-K (Date of Report: January 4,
1995) and is hereby incorporated herein by
reference.
*2.2 Form of Investment Agreement dated January 16,
1995 by and between Electronic Associates, Inc.
and BarOn Technologies Ltd., was filed as
Exhibit 10.1 to the Company's Current Report on
Form 8-K (Date of Report: January 16, 1995), as
amended, and is hereby incorporated herein by
reference.
*2.3 Form of Stock Purchase Agreement, dated January
10, 1995, between the Company and various
shareholders of BarOn Technologies Ltd., was
filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K (date of report: January 16,
1995), as amended, and is hereby incorporated
herein by reference.
*2.4 Form of Shareholders Agreement, dated January
16, 1995, among the Company, BarOn Technologies
Ltd. and the shareholders of BarOn Technologies
Ltd., was filed as Exhibit 10.3 to the Company's
Current Report on Form 8-K (Date of Report:
January 16, 1995), as amended, and is hereby
incorporated herein by reference.
*2.5 Form of Pre-Incorporation Agreement in
connection with the IAI Joint Venture was filed
as Exhibit 2.1 to the Company's Current Report
on Form 8-K (Date of Report: August 3, 1995) and
is hereby incorporated herein by reference.
*2.6 Form of Joint Venture Agreement in connection
with IAI Joint Venture was filed as Exhibit 2.2
to the Company's Current Report on Form 8-K
(Date of Report: August 3, 1995) and is hereby
incorporated herein by reference.
4.1 Specimen of Common Stock share Certificate was
filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-1, No.
33-81892 and is hereby incorporated by
reference.
4.2 Rights Agreement, dated as of February 10, 1988,
between the Company and Manufacturers Hanover
Trust Company, as Rights Agent, was filed as
Exhibit 1 to the Company's Form 8-A, dated
February 11, 1988, and is hereby incorporated by
reference. (File No. 1-4680)
4.3 Amendment, dated as of October 24, 1990, to the
Rights Agreement, was filed as Exhibit 2 to the
Company's Form 8, dated October 24, 1990, and is
hereby incorporated by reference.
5 Opinion of Mesirov Gelman Jaffe Cramer &
Jamieson.
23.1 Consent of Mesirov Gelman Jaffe Cramer &
Jamieson is included in their opinion filed as
Exhibit 5 hereto.
II-3
<PAGE>
23.2 Consent of Arthur Andersen LLP, Independent
Public Accountants of EA Industries, Inc.
23.3 Consent of KPMG Peat Marwick LLP, Independent
Auditors of Tanon Manufacturing, Inc.
23.4 Consent of Shilling & Kenyon Inc., Certified
Public Accountants of Tanon Manufacturing, Inc.
23.5 Consent of Luboshitz, Kasierer & Co., and Yosef
Shimony, Independent Auditors of BarOn
Technologies Ltd.
23.6 Consent of Arthur Andersen LLP, Independent
Public Accountants of Tanon Manufacturing, Inc.
- -------
* The Company will furnish supplementally to the Commission, upon request,
copies of any Appendices, Schedules and Exhibits to the named Agreement which
are omitted from Exhibit Nos. 2.1 through 2.4.
+ [ TO COME ]
II-4
<PAGE>
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:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "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 registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement:
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 by the undersigned 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 Act,
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 Act, 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.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions discussed in Item 14 of this registration statement,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-5
<PAGE>
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
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 West Long Branch, New Jersey on the 17th day of
January, 1996.
EA INDUSTRIES, INC.
By: /s/ Joseph R. Spalliero
-------------------------------
Joseph R. Spalliero
(President)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- -----
<S> <C> <C>
/s/ Irwin L. Gross Chairman of the Board January 17, 1996
- -------------------------------- (Principal Executive
Irwin L. Gross Officer)
/s/ Joseph R. Spalliero President and Director January 17, 1996
- --------------------------------
Joseph R. Spalliero
/s/ Stanley O. Jester Treasurer and Vice January 17, 1996
- -------------------------------- President, Finance
Stanley O. Jester Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Bruce P. Murray Director January 17, 1996
- -------------------------------------
Bruce P. Murray
/s/ Jules M. Seshens Director January 17, 1996
- --------------------------------
Jules M. Seshens
[Signatures continued on next page]
II-6
<PAGE>
/s/ Seth Joseph Antine Director January 17, 1996
- --------------------------------
Seth Joseph Antine
/s/ David J. Reibstein Director January 17, 1996
- ---------------------------------
David J. Reibstein
/s/ Mark S. Hauser Director January 17, 1996
- --------------------------------
Mark S. Hauser
/s/ William Spier Director January 17, 1996
- --------------------------------
William Spier
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- -------
<S> <C> <C>
*2.1 Agreement and Plan of Reorganization by and Among Electronic Associates, Inc.,
Tanon Manufacturing, Inc., EA Acquisition Corp. and Joseph R. Spalliero, dated
December 12, 1994 was filed as Exhibit 2 to the Company's
Current Report on Form 8-K (Date of Report: January 4, 1995)
and is hereby incorporated herein by reference.
*2.2 Form of Investment Agreement dated January 16, 1995 by and between Electronic
Associates, Inc. and BarOn Technologies Ltd., was filed as
Exhibit 10.1 to the Company's Current Report on Form 8-K
(Date of Report: January 16, 1995), as amended, and is hereby
incorporated herein by reference.
*2.3 Form of Stock Purchase Agreement, dated January 10, 1995, between the Company
and various shareholders of BarOn Technologies Ltd., was
filed as Exhibit 10.2 to the Company's Current Report on Form
8-K (date of report: January 16, 1995), as amended, and is
hereby incorporated herein by reference.
*2.4 Form of Shareholders Agreement, dated January 16, 1995, among the Company, BarOn
Technologies Ltd. and the shareholders of BarOn Technologies
Ltd., was filed as Exhibit 10.3 to the Company's Current
Report on Form 8-K (Date of Report: January 16, 1995), as
amended, and is hereby incorporated herein by reference.
*2.5 Form of Pre-Incorporation Agreement in connection with the IAI Joint Venture was
filed as Exhibit 2.1 to the Company's Current Report on Form
8-K (Date of Report: August 3, 1995) and is hereby
incorporated herein by reference.
*2.6 Form of Joint Venture Agreement in connection with IAI Joint Venture was filed
as Exhibit 2.2 to the Company's Current Report on Form 8-K
(Date of Report: August 3, 1995) and is hereby incorporated
herein by reference.
4.1 Specimen of Common Stock share Certificate was filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-1, No. 33-81892 and is hereby incorporated by reference.
4.2 Rights Agreement, dated as of February 10, 1988, between the Company and
Manufacturers Hanover Trust Company, as Rights Agent, was
filed as Exhibit 1 to the Company's Form 8-A, dated February
11, 1988, and is hereby incorporated by reference. (File No.
1-4680).
4.3 Amendment, dated as of October 24, 1990, to the Rights Agreement, was filed as
Exhibit 2 to the Company's Form 8, dated October 24, 1990,
and is hereby incorporated by reference.
5 Opinion of Mesirov Gelman Jaffe Cramer & Jamieson.
23.1 Consent of Mesirov Gelman Jaffe Cramer & Jamieson is included in their opinion
filed as Exhibit 5 hereto.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
23.2 Consent of Arthur Andersen LLP, Independent Public Accountants of Electronic
Associates, Inc.
23.3 Consent of KPMG Peat Marwick LLP, Independent Auditors of Tanon
Manufacturing, Inc.
23.4 Consent of Shilling & Kenyon Inc., Certified Public Accountants of Tanon
Manufacturing, Inc.
23.5 Consent of Luboshitz, Kasierer & Co., and Yosef Shimony, Independent Auditors of
BarOn Technologies Ltd.
23.6 Consent of Arthur Andersen LLP, Independent Public Accountants of Tanon
Manufacturing, Inc.
<FN>
- -------
* The Company will furnish to the Commission, upon request, copies of any
Appendices, Schedules and Exhibits to the named Agreement which are omitted from
Exhibit Nos. 2.1 through 2.4.
</FN>
</TABLE>
<PAGE>
Exhibit 5
Opinion of Mesirov Gelman Jaffe Cramer & Jamieson
<PAGE>
Mesirov Gelman Jaffe Cramer & Jamieson
(215) 994-1000
January 17, 1996
SECURITIES AND EXCHANGE COMMISSION
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re:EA Industries, Inc.
Registration Statement on Form S-3
Gentlemen:
This firm is counsel to Electronic Associates, Inc. (the "Company"). In
such capacity, we have assisted in the preparation of the Company's Registration
Statement on Form S-3, "Registration Statement"), filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, covering
3,614,052 shares of the Company's Common Stock ("Shares") to be sold by certain
securityholders named in the Registration Statement (the "Selling
Securityholders") and the 36,140.52 Preferred Stock Purchase Rights associated
with such Shares. Of the 3,614,052 Shares, (i) 140,719 have been issued by the
Company to certain of the Selling Securityholders (the "Outstanding Shares"),
(ii) 500,000 ("Warrant Shares") are issuable by the Company to certain of the
Selling Securityholders upon exercise of certain warrants (the "Warrants"),
(iii) 440,000 ("Debenture Shares") are those into which certain 10% convertible
subordinated debentures are convertible, and (iv) 2,533,333 ("Note Shares") are
those into which certain 7% convertible notes (the "Notes") are convertible and
which the Company may issue in lieu of payment of interest due on the Notes.
In this connection, we have examined and considered the original or copies,
certified or otherwise identified to our satisfaction, of the Company's
Certificate of Incorporation, as amended, its By-laws, as amended, resolutions
of its Board of Directors and shareholders, and such other documents and
corporate records relating to the Company and the issuance and sale of the
Shares, as we deemed appropriate for purposes of rendering this opinion.
Based upon the foregoing, it is our opinion that:
1. The Outstanding Shares are validly issued, fully paid and
non-assessable; and
2. The Warrant Shares, when issued in accordance with the terms of,
and for the consideration set forth in, the Warrants, will be validly
issued, fully paid and non-assessable.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
January 17, 1996
Page 2
3. The Debenture Shares, when issued upon conversion of the Debentures
in accordance with the terms of, and for the consideration set forth in,
the Debentures, will be validly issued, fully paid and non-assessable.
4. The Note Shares, when issued upon conversion of the Notes or the
payment by the Company of interest due on the Notes in accordance with the
terms of, and for the consideration set forth in, the Notes, will be
validly issued, fully paid and non-assessable.
We hereby expressly consent to the reference to our firm in the
Registration Statement under the Prospectus caption "Legal Matters," to the
inclusion of this opinion as an exhibit to the Registration Statement, and to
the filing of this opinion with any other appropriate governmental agency.
Very truly yours,
MESIROV GELMAN JAFFE CRAMER & JAMIESON
1735 Market Street, Philadelphia, PA 19103
<PAGE>
Exhibit 23.2
Consent of Arthur Andersen LLP
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To EA Industries, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-3 Registration Statement of our report dated April 14,
1995 included in EA Industries, Inc.'s (formerly known as Electronic Associates,
Inc.) Form 10-K for the year ended December 31, 1994, as amended by Form
10-K/A dated April 28, 1995 and to all references to our firm included in or
made a part of this registration statement.
/s/ Arthur Andersen LLP
-------------------------
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 12, 1996
<PAGE>
Exhibit 23.3
Consent of KPMG Peat Marwick LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Electronic Associates, Inc.
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of Electronic Associates, Inc. of our report dated March 31, 1994, with
respect to the balance sheet of Tanon Manufacturing, Inc. as of December 31,
1993 and the related statements of operations, shareholders' equity and cash
flows for the year ended December 31, 1993, which report appears in the Form 8-K
of Electronic Associates, Inc. dated January 4, 1995. We also consent to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
---------------------------
KPMG Peat Marwick LLP
San Jose, California
January 12, 1996
<PAGE>
Exhibit 23.4
Consent of Shilling & Kenyon Inc.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Electronic Associates, Inc.:
As independent public accountants of Tanon Manufacturing, Inc., we hereby
consent to the incorporation by reference in this Form S-3 Registration
Statement of our report dated September 23, 1994 included in the financial
statements of Tanon Manufacturing, Inc. as of December 31, 1992 and for the
years ended December 31, 1992 and 1991 filed as part of Exhibit 99 to Electronic
Associates, Inc.'s Form 8-K (date of report: January 4, 1995), as amended by
Form 8-K/A dated March 17, 1995 and to all references to our firm included in or
made a part of this registration statement.
/s/ Shilling & Kenyon, Inc.
---------------------------
SHILLING & KENYON, INC.
San Jose, California
January 12, 1996
<PAGE>
Exhibit 23.5
Consents of Luboshitz, Kasierer & Co., and Yosef Shimony
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Electronic Associates, Inc.:
As independent public accountants of BarOn Technologies Ltd., we hereby consent
to the incorporation by reference in this Form S-3 Registration Statement of our
report dated March 21, 1995 included in the financial statements of BarOn
Technologies Ltd. as of December 31, 1993 and December 31, 1992 and for the year
ended December 31, 1993 and for the period from inception in 1992 through
December 31, 1992 filed as part of Exhibit 99.1 to Electronic Associates, Inc.'s
Form 8-K (date of report: January 4, 1995), as amended by Form 8-K/A dated March
30, 1995, and our report dated March 21, 1995 included in the financial
statements of BarOn Technologies Ltd. as of December 31, 1994 and December 31,
1993 and for the years ended December 31, 1994 and December 31, 1993 filed as
part of Exhibit 99.2 to Electronic Associates, Inc.'s Form 8-K (date of report:
May 24, 1995), and to all references to our firm included in or made a part of
this registration statement.
/s/ Luboshitz, Kasierer & Co.
---------------------------------------
LUBOSHITZ, KASIERER & CO., C.P.A. (Isr.)
Tel-Aviv, Israel
January 12, 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Electronic Associates, Inc.:
As an independent public accountant of BarOn Technologies Ltd., I hereby consent
to the incorporation by reference in this Form S-3 Registration Statement of my
report dated March 21, 1995 included in the financial statements of BarOn
Technologies Ltd. as of December 31, 1993 and December 31, 1992 and for the year
ended December 31, 1993 and for the period from inception in 1992 through
December 31, 1992 filed as part of Exhibit 99.1 to Electronic Associates, Inc.'s
Form 8-K (date of report: January 4, 1995), as amended by Form 8-K/A dated March
30, 1995, and my report dated March 21, 1995 included in the financial
statements of BarOn Technologies Ltd. as of December 31, 1994 and December 31,
1993 and for the years ended December 31, 1994 and December 31, 1993 filed as
part of Exhibit 99.2 to Electronic Associates, Inc.'s Form 8-K (date of report:
May 24, 1995), and to all references to my firm included in or made a part of
this registration statement.
/s/ Shimony Yosef
---------------------------
YOSEF SHIMONY, C.P.A. (Isr.)
Tel-Aviv, Israel
January 12, 1996
<PAGE>
Exhibit 23.6
Consent of Arthur Andersen LLP
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Electronic Associates, Inc.:
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated March 3, 1995 on
the financial statements of Tanon Manufacturing, Inc. included in Electronic
Associates, Inc.'s Form 8-K dated May 24, 1995 and to all references to our Firm
included in this registration statement.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
San Jose, California
January 12, 1996
