<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 24, 1996
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
RADYNE CORP.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
NEW YORK 3665 11-2569467
(State or jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
</TABLE>
------------------------
5225 SOUTH 37TH STREET
PHOENIX, ARIZONA 85040
(Address of principal place of business)
------------------------
ROBERT C. FITTING, PRESIDENT
RADYNE CORP.
5225 SOUTH 37TH STREET
PHOENIX, ARIZONA 85040
(602) 437-9620/(602) 437-4811 (TELECOPY)
(Name, address, and telephone number of principal executive offices and agent
for service)
------------------------
COPY TO:
JOHN B. WADE, III, ESQ.
MICHAEL A. MEISLER, ESQ.
BROCK, FENSTERSTOCK, SILVERSTEIN,
MCAULIFFE & WADE, LLC
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 371-2000/(212) 371-5500 (TELECOPY)
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities 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>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE MGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
2,255,833
Common Stock, par value $.002 per share Shares(1) $2.50 $5,639,582.50 $1,708.97
Common Stock, par value $.002 per share 30,000 Shares(2) $2.50 $75,000.00 $100.00
2,255,833
Subscription
Subscription Rights to Purchase Common Stock Rights $0.00 $0.00 $0.00
TOTAL -- -- $5,714,582.50 $1,808.97
</TABLE>
(1) Issuable upon exercise of Subscription Rights which are being distributed to
shareholders of Radyne Corp. or, in the case of the principal shareholder,
an affiliate thereof.
(2) This Registration Statement also registers the resale from time to time by
the holder thereof of 30,000 shares of Common Stock acquired by an entity in
transactions exempt from registration under the Securities Act of 1933, as
amended.
------------------------------
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.
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- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement covers the registration of (i) up to 2,255,833
shares of Common Stock, par value $.002 per share, (the "Common Stock") of
Radyne Corp. (the "Company"), a New York corporation, for sale by the Company
upon the exercise of rights to purchase such Common Stock (the "Subscription
Rights") which are being distributed to the Company's shareholders or, in the
case of the principal shareholder, an affiliate thereof, (ii) up to 2,255,833
Subscription Rights, and (iii) an additional 30,000 shares of Common Stock for
resale by the holder thereof (the "Selling Stockholder") from time to time. The
distribution of the Subscription Rights and the sale of shares of Common Stock
in connection therewith are referred to herein as the "Rights Offering".
The complete Prospectus relating to the Rights Offering follows immediately
after this explanatory note. Following the Prospectus for the Rights Offering
are pages of the Prospectus relating solely to the shares of Common Stock held
by the Selling Stockholder, including alternative front and back cover pages and
the sections entitled "Concurrent Public Offering," "Plan of Distribution" and
"Selling Stockholder," to be used in lieu of sections entitled "The Rights
Offering," "Shares Eligible for Future Sale" and "Principal and Management
Stockholders" in the Prospectus relating to the Rights Offering. Certain
sections of the Prospectus for the Rights Offering will not be used in the
Prospectus relating to the shares of Common Stock held by the Selling
Stockholder, such as "Use of Proceeds" and "Certain Federal Income Tax
Consequences."
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
LOCATION OR CAPTION
ITEM NUMBER OF FORM SB-2 IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Front of the Registration Statement and Outside Front
Cover Page of Prospectus............................. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Inside Front and Outside Back Cover Pages of the
Prospectus
3. Summary Information and Risk Factors................. Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Prospectus Summary; Purpose of the Rights Offering
and Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page
6. Dilution............................................. Not Applicable
7. Selling Security Holders............................. Principal and Management Stockholders
8. Plan of Distribution................................. Outside Front Cover Page
9. Legal Proceedings.................................... Business--Legal Proceedings
10. Directors, Executive Officers, Promoters, and Control
Persons.............................................. Management--Directors, Executive Officers and Key
Employees
11. Security Ownership of Certain Beneficial Owners and
Management........................................... Principal and Management Stockholders
12. Description of Securities............................ Outside Front Cover Page; Description of Capital
Stock
13. Interest of Named Experts and Counsel................ Legal Matters; Experts
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities....................... Part II
15. Organization......................................... Certain Transactions
16. Description of Business.............................. Business
17. Management's Discussion and Analysis or Plan of
Operation............................................ Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property.............................. Business--Facilities
19. Certain Relationships and Related Transactions....... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters.............................................. Dividend Policy; Description of Capital Stock; Price
Range of Common Stock; Shares Eligible for Future
Sale
21. Executive Compensation............................... Management
22. Financial Statements................................. Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OR CAPTION
ITEM NUMBER OF FORM SB-2 IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................. Not Applicable
24. Indemnification of Directors and Officers............ Part II
25. Other Expenses of Issuance and Distribution.......... Part II
26. Recent Sales of Unregistered Securities.............. Part II
27. Exhibits............................................. Part II; Exhibits
28. Undertakings......................................... Part II
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 18, 1996
PROSPECTUS
2,255,833 SHARES
RADYNE CORP.
COMMON STOCK
------------------
Radyne Corp., a New York corporation (the "Company" or "Radyne"), is
distributing subscription rights entitling the holder of each subscription right
to purchase one share of the Company's Common Stock, par value $.002 per share
(the "Common Stock"), for $2.50 (the "Subscription Price") during a specified
period. Of the subscription rights, approximately 215,833 (the "Shareholder
Rights") will be distributed to holders of record of shares of the Common Stock
as of the close of business on January 15, 1997 (the "Record Date"), other than
Stetsys US, Inc. ("ST"). In addition to the Shareholder Rights, 2,040,000
subscription rights (the "ST Rights") will be distributed to an affiliate of ST.
Of the 2,040,000 ST Rights, 80,000 will be further distributed by such affiliate
among employees of ST affiliates, including the non-employee directors of the
Company. Shareholders (other than ST) will be entitled to three Shareholder
Rights for every five shares of Common Stock held on the Record Date (as
adjusted for a 5-for-1 reverse stock split approved by the shareholders on
January 8, 1997 and effective on January 9, 1997). The number of ST Rights has
been similarly determined, i.e. there will be three ST Rights for every five
shares of Common Stock held by ST on the Record Date (as adjusted for such
reverse split). However, under certain circumstances described below, up to
280,000 ST Rights will be unexercisable. No fractional Rights will be issued.
The Shareholder Rights and the ST Rights are hereinafter referred to as the
"Rights." The Rights will in general expire at 5:00 p.m., New York time, on
March 14, 1997, unless extended by the Company (such date, as it may be extended
on one or more occasions, is referred to herein as the "Expiration Date"). The
Shareholder Rights will be freely transferable, but the ST Rights will have only
limited transferability. The distribution of the Shareholder Rights and the ST
Rights and the sale of shares of Common Stock in connection therewith are
collectively referred to herein as the "Rights Offering." The shares of Common
Stock underlying the Rights are referred to herein as the "Rights Shares" and
holders of Rights are referred to herein as "Holders." See "The Rights
Offering."
Concurrently with the distribution of the Rights, 280,000 options (the
"Rights Options") granted under the Company's 1996 Incentive Stock Option Plan
will become exercisable at the Subscription Price until March 14, 1997. The
Rights Options were granted by the Board on November 13, 1996 at the request of
ST. In order to ensure that ST's interest, rather than the other shareholders'
interests, in the Company would be diluted by the exercise of the Rights
Options, 280,000 of the ST Rights will not be exercisable, if at all, until the
Expiration Date. A portion of these 280,000 ST Rights, up to the number of
Shareholder Rights and Rights Options, if any, which expire unexercised, will
then be exercisable during the five business days following the Expiration Date.
The Common Stock is not currently traded in an established market and, as a
result, there is only a limited trading market in the Company's Common Stock.
The Company's Common Stock is traded over the counter, is not listed on any
exchange, and is currently not quoted by "NASDAQ." See "Price Range of Common
Stock." Although the Shareholder Rights are transferable, the Shareholder Rights
are not expected to trade on any securities exchange or over the counter and no
assurance can be given that any market for the Shareholder Rights will develop.
See "The Rights Offering."
Funds provided in payment of the Subscription Price may be sent to the
Company or to Continental Stock Transfer and Trust Co., as the Subscription
Agent. In the latter case, such funds will be held by the Subscription Agent
until the issuance of the related Rights Shares, which will occur promptly after
exercise. The exercise of Rights will be irrevocable once made, and no interest
will be paid to Holders exercising their Rights.
--------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 10 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
SUBSCRIPTION PRICE DISCOUNT COMPANY (1)
Per Share.................................. $2.50 N/A $2.50
<S> <C> <C> <C>
Total(2)................................... $5,639,582.50 N/A $5,639,582.50
</TABLE>
(1) Before deducting estimated expenses of $200,000, which are payable by the
Company.
(2) Represents the maximum total subscription and purchase price and total
proceeds to the Company. The actual amount could be less.
--------------------------
THE DATE OF THIS PROSPECTUS IS JANUARY , 1997
<PAGE>
AVAILABLE INFORMATION
The Company intends to furnish to its stockholders annual reports, which
will include financial statements audited by independent accountants, and such
other periodic reports as it may determine to furnish or as may be required by
law, including Sections 13(a) and 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington D.C. 20549, a registration
statement on Form SB-2 (the "Registration Statement"), including amendments
thereto, under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the securities offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement and the exhibits and
schedules filed therewith, as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the Rights
Offering, reference is hereby made to the Registration Statement and to the
exhibits and schedules filed therewith. Statements contained in this Prospectus
as to the contents of any contract or other document which has been filed as an
exhibit to the Registration Statement are qualified in their entirety by
reference to such exhibits for a complete statement of their terms and
conditions. The Registration Statement and the exhibits and schedules thereto
may be inspected without charge at the offices of the Commission and copies of
all or any part thereof may be obtained from the Commission's principal office
at 450 Fifth Street, N.W., Washington D.C. 20549 or at certain of the regional
offices of the Commission located at Seven World Trade Center, 13th Floor, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, upon payment of the fees prescribed by the Commission. Electronic
registration statements filed through the Electronic Data Gathering, Analysis,
and Retrieval system are publicly available through the Commission's Web site
(http://www.sec.gov).
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(i) The Company's Annual Report on Form 10-KSB for the year ended June 30,
1996, filed November 15, 1996.
(ii) The Company's Quarterly Report on Form 10-QSB, filed November 26, 1996,
for the quarter ended September 30, 1996;
(iii) The Company's Quarterly Report on Form 10-QSB, filed September 11, 1996
and amended November 6, 1996, for the quarter ended March 31, 1996;
(iv) The Company's Quarterly Report on Form 10-QSB, filed September 19, 1996
and amended November 6, 1996 for the quarter ended December 31, 1995;
(v) The Company's Current Report on Form 8-K, filed August 23, 1996 and
September 23, 1996 (confirming copy) (date of event August 12, 1996);
(vi) The Company's Current Report on Form 8-K, filed , 1996 (date
of event , 1996)
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, subsequent to the date of this Prospectus and prior
to the termination of the Rights Offering, shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the respective dates
of the filing thereof. 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 that is also deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any
2
<PAGE>
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of such person, a
copy of any or all documents incorporated by reference into this Prospectus that
are not delivered herewith, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents). Requests
for such copies should be directed to: Director of Administration, Radyne Corp.,
5225 South 37th Street, Phoenix, Arizona 85040; telephone number (602) 437-9620.
------------------------
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT RELATED TO
HISTORICAL RESULTS, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE
COMPANY'S BUSINESS STRATEGY AND OBJECTIVES AND FUTURE FINANCIAL POSITION, ARE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT AND SECTION 21E OF THE EXCHANGE ACT AND INVOLVE RISKS AND UNCERTAINTIES.
ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS ON WHICH THESE
FORWARD-LOOKING STATEMENTS ARE BASED ARE REASONABLE, THERE CAN BE NO ASSURANCE
THAT SUCH ASSUMPTIONS WILL PROVE TO BE ACCURATE AND ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO,
THOSE DISCUSSED UNDER "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS," AS WELL AS THOSE
DISCUSSED ELSEWHERE IN THIS PROSPECTUS. ALL FORWARD-LOOKING STATEMENTS CONTAINED
IN THIS PROSPECTUS ARE QUALIFIED IN THEIR ENTIRETY BY THIS CAUTIONARY STATEMENT.
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED HEREIN, THE INFORMATION
IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO UP TO 1,282,042 SHARES OF COMMON
STOCK RESERVED FOR ISSUANCE PURSUANT TO THE COMPANY'S 1996 INCENTIVE STOCK
OPTION PLAN (THE "PLAN"). THE INFORMATION IN THIS PROSPECTUS RELATING TO SHARES
OF COMMON STOCK AND PER SHARE AMOUNTS GIVES EFFECT TO A 5-FOR-1 REVERSE STOCK
SPLIT WHICH BECAME EFFECTIVE ON JANUARY 9, 1997.
THE COMPANY
Radyne has been involved in the advanced design and production of digital
data communications equipment and associated equipment for satellite
telecommunications systems for over sixteen years. Since the Company's inception
in 1980, Radyne has established itself as a supplier in the satellite ground
equipment business.
Radyne designs, manufacturers and sells satellite modems, frequency
converters, ancillary products and equipment racks containing integrated modems
and supporting equipment for data communications.
Although the Company was forced to file for Chapter 11 bankruptcy protection
in April 1994, it successfully emerged from bankruptcy in December of that year
upon the acquisition of approximately 91% of its Common Stock by Engineering and
Technical Services, Inc. ("ETS"), then a major customer of Radyne. On August 12,
1996, ETS was acquired by Singapore Technologies Pte Ltd through its indirect
wholly owned subsidiary, Stetsys US, Inc. ("ST"). As a result, approximately 91%
of the Company's Common Stock is now held by ST.
In 1995, ETS caused Radyne to install a new management team, which promptly
moved the Company's operations from New York to Phoenix, Arizona and commenced
the hiring of an almost all new staff of engineering, sales and support
personnel. With funding provided by ETS, and subsequently ST and its affiliates,
the new Radyne team has reinstituted Radyne's research, development and
marketing programs and reinvigorated its product line.
The Company's engineering staff and support facilities are dedicated to (i)
maintaining the state-of-the-art status of Radyne's traditional products for the
satellite ground equipment segment of the market, (ii) designing and enhancing
products for emerging markets, such as rural telephony for developing areas,
high-speed satellite communications, government data equipment and the growing
private network market, and (iii) providing special configurations to satisfy
customers' special needs.
Radyne's modems cover data rates from 2.4 Kilobytes per second to 50
Megabytes per second. The Company's frequency converters handle all three
frequency bands used in satellite communications. Radyne believes that most of
its current line of modems and converters are smaller and lower priced than the
previous generation of products, enabling large system installation in
significantly less rack space than the products of the Company's competitors.
The Company also markets redundancy switches which operate in conjunction with
satellite modems and converters and provide automatic fault monitoring and
switch over to standby equipment in the event of modem or converter failure.
Radyne's line of frequency converter products is usable in virtually all
earth stations for the conversion of intermediate frequencies to microwave
frequencies for satellite transmission. These converters are competitively
priced, small in size and offer either single, dual or all three bands used in
the satellite industry. In addition to being offered to commercial customers,
there is a military market for the three-band units.
The Company's newer products include a low cost modem with expanded features
and super fast acquisition capabilities, making it attractive for use in both
private networks and rural telephone systems
4
<PAGE>
being offered in China, Indonesia and India, and a line of satellite frequency
translators presently used for testing in satellite earth stations.
The development of digital compression technology has allowed the
transmission of television in a small bandwidth which has made TV transmission
by satellite more economical than ever before. Video compression allows 10 to 12
times as many channels on a satellite as before, producing a new market of major
interest. This compression technology is or may be used for transmission of TV
to all network facilities, distribution of cable TV to cable companies, high
definition TV distribution and video teleconferencing. Radyne has developed a
modulator product to be used in conjunction with compression equipment and has
been shipping this product for the past seven months.
Radyne's operating strategy is to (i) continue to build on the experience,
skills and customer access of its new management team, (ii) capitalize on its
development of smaller, less costly satellite modems, and (iii) expand into
market segments, such as rural telephone, private networks and compressed
television transmission. See "Business."
Notwithstanding the foregoing, investors should be aware that the Company's
plans are subject to a number of variables outside of its control, and there can
be no assurance that the Company will be able to implement any or all of such
plans or that such plans, when and if implemented, will be successful. See "Risk
Factors."
Radyne was incorporated in the State of New York on November 25, 1980. The
Company's current address is 5225 South 37th Street, Phoenix, Arizona 85040 and
its telephone number is (602) 437-9620.
PURPOSE OF THE RIGHTS OFFERING AND USE OF PROCEEDS
The Rights Offering, together with the Rights Options, is intended to raise
approximately $5,640,000 of gross proceeds as part of the Company's on-going
efforts to improve its liquidity. In establishing the size of the Rights
Offering, the Board of Directors consulted with management, and considered the
Company's need for additional capital.
If the Rights Offering is consummated, the maximum gross proceeds to the
Company from the Rights Offering, together with the Rights Options, would be
approximately $5,640,000 before payment of related fees and expenses estimated
to be $200,000. However, although the Company has been informed that ST's
affiliate, Stetsys Pte Ltd ("SPL"), intends to fully exercise its ST Rights, no
assurance can be given that any or all of the Rights received by others or the
Rights Options will be exercised. Therefore, the actual proceeds from the Rights
Offering could be substantially lower.
The Company currently expects that the net proceeds from the Rights Offering
will be used for general corporate and working capital purposes (including
research and development costs) and/or payment of its indebtedness to ST and its
affiliates (currently approximately $6.8 million in the aggregate, including
accrued interest), although a final determination as to the use or uses will not
be made until after the completion of the Rights Offering. Factors that will be
considered at that time in determining how the net proceeds will be used will
include: the amount of net proceeds actually generated, the Company's actual and
projected working capital requirements at that time, the Company's progress in
securing acceptable bank financing, interest rates in effect at that time and
such other factors as the Board of Directors considers to be relevant at that
time. For a description of the Company's debt, including interest rates,
maturity dates and use of proceeds from such debt, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
The Subscription Price has been established by the Board of Directors at
$2.50 per share, which the Board considers to be the fair market value of the
Common Stock. See "Purpose of the Rights Offering and Use of Proceeds."
5
<PAGE>
THE RIGHTS OFFERING
<TABLE>
<S> <C>
Shareholder Rights..................... Shareholders other than ST will receive three
Rights for every five shares of Common Stock held
on the Record Date, subject to adjustment for a
5-for-1 reverse stock split approved by the
shareholders on January 8, 1997 and effective on
January 9, 1997 (the "Reverse Split"). An aggregate
of approximately 215,833 Shareholder Rights will be
distributed. Holders are entitled to purchase at
the Subscription Price one share of Common Stock
for each Shareholder Right exercised. The
Shareholder Rights will expire on the Expiration
Date. The Shareholder Rights will be transferable.
No fractional Shareholder Rights will be issued.
ST Rights.............................. SPL will receive three Rights for every five shares
of Common Stock held by ST on the Record Date (as
adjusted for the Reverse Split), a total of
2,040,000 Rights, each entitling the Holder to
purchase one share of Common Stock at the
Subscription Price. SPL will redistribute 80,000 of
such Rights to employees of its affiliates,
including non-employee directors of the Company.
The ST Rights will otherwise be nontransferable.
The ST Rights will expire on the Expiration Date,
except that 280,000 of such Rights will be
exercisable, if at all, only during the five
business days next following the Expiration Date.
See "Rights Options" below.
Rights Options......................... Concurrently with the distribution of the Rights,
280,000 options (the "Rights Options") granted
under the Company's 1996 Incentive Stock Option
Plan will become exercisable at the Subscription
Price until March 14, 1997. The Rights Options were
granted by the Board on November 13, 1996 at the
request of ST. In order to ensure that ST's
interest, rather than the other shareholders'
interests, in the Company would be diluted by the
exercise of the Rights Options, 280,000 of the ST
Rights will not be exercisable, if at all, until
the Expiration Date. A portion of these 280,000 ST
Rights, up to the number of Shareholder Rights and
Rights Options, if any, which expire unexercised,
will then be exercisable during the five business
days following the Expiration Date. See
"Management--Stock Option Plan.")
Subscription Price..................... $2.50 per Rights Share.
Record Date............................ January 15, 1997.
Transferability of Shareholder
Rights............................... The Shareholder Rights will be transferable, but it
is not anticipated that a market will be made in
the Rights or that they will be listed for trading
on any exchange.
Expiration Date........................ 5:00 p.m., New York time, on March 14, 1997, unless
the Board of Directors determines that a material
event has occurred that necessitates one or more
extensions of the
</TABLE>
6
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<TABLE>
<S> <C>
Expiration Date in order to permit adequate
disclosure to Holders of information concerning
such event.
Procedure for Exercising Rights........ Rights may be exercised by properly completing the
certificate evidencing such Rights (a "Subscription
Certificate") and forwarding such Subscription
Certificate to the Subscription Agent or the
Company (or following the Guaranteed Delivery
Procedures, referred to below) on or prior to the
Expiration Date, together with payment in full of
the Subscription Price with respect to such Rights.
If the mail is used to forward Subscription
Certificates, it is recommended that insured,
registered mail be used. The exercise of a Right
may not be revoked or amended. If time does not
permit a Holder of a Right to deliver its
Subscription Certificate to the Subscription Agent
or the Company on or before the Expiration Date,
such Holder should make use of the Guaranteed
Delivery Procedures described under "The Rights
Offering-- Exercise of Rights."
THE EXERCISE OF RIGHTS IS IRREVOCABLE ONCE MADE. NO
INTEREST WILL BE PAID ON THE MONEY DELIVERED IN
PAYMENT OF THE SUBSCRIPTION PRICE.
If paying by uncertified personal check, please
note that the funds paid thereby may take at least
five business days to clear. Accordingly, Holders
who wish to pay the Subscription Price by means of
uncertified personal check are urged to make
payment sufficiently in advance of the Expiration
Date to ensure that such payment is received and
clears by such date and are urged to consider
payment by means of certified or cashier's check or
money order.
A Right may not be exercised in part and fractional
Rights Shares will not be issued.
Condition to Exercise by
Shareholders......................... Any shareholder of record who wishes to exercise a
Shareholder Right must submit his Common Stock
share certificate(s), either simultaneously with
his Subscription Certificate or prior to that time,
for exchange into a new share certificate
reflecting the Reverse Split. SUBSCRIPTION
CERTIFICATES WILL NOT BE ACCEPTED FROM SHAREHOLDERS
OF RECORD WHO DO NOT COMPLY WITH THIS REQUIREMENT.
However, this requirement will not affect the
transferability of Shareholder Rights.
Persons Holding Shares, or Wishing to
Exercise Rights, Through Others...... Persons holding shares of Common Stock, and
receiving Shareholder Rights distributable with
respect thereto, through a broker, dealer,
commercial bank, trust company or other nominee, as
well as persons holding certificates for Common
Stock personally who would prefer to have such
institutions effect transactions relating to the
Shareholder Rights on their behalf, should contact
the appropriate institution or nominee and request
it to effect the transactions for them.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Issuance of Common Stock............... Certificates representing Rights Shares issuable
upon exercise of Rights will be delivered to the
Holder of such Rights as soon as practicable after
such Rights are validly exercised. Funds delivered
to the Subscription Agent will be held by the
Subscription Agent until the issuance of the
related Rights Shares. No interest will be paid to
Holders on funds held by the Subscription Agent
regardless of whether such funds are applied to the
Subscription Price or returned to the Holders.
Subscription Agent..................... Continental Stock Transfer and Trust Co.
Information............................ Any questions regarding the Rights Offering,
including the procedure for exercising Rights, and
requests for additional copies of this Prospectus,
the Subscription Certificate or the notice of
guaranteed delivery should be directed to the
Company at 5225 South 37th Street, Phoenix, Arizona
85040, Attention: Director of Administration.
Telephone: (602) 437-9620.
Maximum Shares of Common Stock
Outstanding after the Rights
Offering............................. 6,015,554 shares based on 3,759,721 shares
outstanding on December 31, 1996 after adjustment
for the Reverse Split. Does not give effect to the
issuance of 1,002,042 shares reserved for issuance
upon the exercise of options (other than Rights
Options) heretofore granted or that may be granted
from time to time under the 1996 Incentive Stock
Option Plan.
</TABLE>
For more information regarding the Rights Offering, including the procedure
for exercising Rights, see "The Rights Offering."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
See "Certain Federal Income Tax Consequences" for a discussion of certain
tax consequences that should be considered in connection with the Rights
Offering.
RISK FACTORS
The purchase of Rights and the purchase of Common Stock in the Rights
Offering involve investment risks relating to the Company, to the data
communications equipment industry in general and to the Rights Offering.
Investors are urged to read and consider carefully the information set forth
under the heading "Risk Factors."
THE BOARD OF DIRECTORS OF THE COMPANY MAKES NO RECOMMENDATION TO HOLDERS
WITH RESPECT TO WHETHER A HOLDER SHOULD EXERCISE RIGHTS TO PURCHASE SHARES OF
COMMON STOCK PURSUANT TO THE RIGHTS OFFERING OR TO PERSONS WITH RESPECT TO
WHETHER A PERSON SHOULD PURCHASE RIGHTS.
8
<PAGE>
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PREDECESSOR
-------------------- THREE MONTHS ENDED
YEAR SIX AND ONE-HALF TEN AND ONE-HALF ----------------------------
ENDED MONTHS ENDED MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30,
JUNE 30, 1996 JUNE 30, 1995(1) DECEMBER 16, 1994(1) 1996 1995
------------- ---------------- -------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $ 3,829,523 $ 1,861,262 $ 2,569,396 $ 1,292,646 $ 1,296,792
Cost of sales...................... 2,559,350 1,228,747 2,229,329 1,052,385 775,652
Gross profit....................... 1,270,173 632,515 340,067 240,261 521,140
Selling, general, and
administrative expenses.......... 1,843,576 961,162 1,658,388 507,578 403,231
Research and development........... 1,794,823 0 0 438,599 160,095
Interest expense................... 256,871 36,209 118,235 112,260 28,956
Professional fees related to
reorganization................... 600,198
Loss before fresh start adjustments
and extraordinary items.......... $ (2,625,097) $ (364,856) $ (2,036,754) $ (818,176) $ (71,141)
Fresh start adjustments............ 1,598,841
Loss before extraordinary items.... $ (2,625,097) $ (364,856) (437,913) $ (818,176) $ (71,141)
Extraordinary items(2)............. 2,699,156
Net income (loss).................. $ (2,625,097) $ (364,856) 2,261,243 $ (818,176) $ (71,141)
Net loss per share before
extraordinary items.............. $ (.701) $ (.098) $ (1.33) $ (.218) $ (.019)
Net income (loss) per share........ $ (.701) $ (.098) $ 6.87 $ (.218) $ (.019)
Weighted average number of shares
outstanding...................... 3,742,227 3,729,721 329,020 3,749,721 3,730,016
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA
AT SEPTEMBER 30, 1996
AT JUNE -----------------------
30, AS
1996 ACTUAL ADJUSTED(3)
---------- ---------- -----------
<S> <C> <C> <C>
Cash.............................................. $ 971 $ 437,950 $5,877,533
Working Capital (deficit)......................... (4,082,987) (4,863,778) 575,805
Total assets...................................... 3,272,686 4,302,136 9,741,719
Long-term liabilities............................. 130,414 128,157 128,157
Stockholder equity (deficit)...................... (2,396,652) (3,214,828) 2,224,755
[Update as of 12/31/96, if possible]
</TABLE>
- ------------------------
(1) The Company petitioned for bankruptcy protection in April 1994 and operated
as a debtor-in-possession until December 16, 1994.
(2) Consists of $1,062,667 gain on exchange of debt for common stock and
$1,636,489 gain on debt forgiveness.
(3) Adjusted to reflect the receipt by the Company of the estimated net proceeds
of $5,439,582.50 from the sale of the Rights Shares at the offering price of
$2.50 per Rights Share and the application of the net proceeds therefrom.
See "Use of Proceeds."
9
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK IS HIGHLY SPECULATIVE, INVOLVES A HIGH
DEGREE OF RISK, AND SHOULD BE MADE ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT
DECISION, SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE OTHER MATTERS REFERRED TO
IN THIS PROSPECTUS, INCLUDING THE FINANCIAL STATEMENTS AND NOTES THERETO, THE
FOLLOWING RISK FACTORS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE IMPLIED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND
ELSEWHERE IN THIS PROSPECTUS. THE ORDER IN WHICH THESE CONSIDERATIONS ARE
PRESENTED SHOULD NOT BE INTERPRETED AS BEING INDICATIVE OF THEIR RELATIVE
IMPORTANCE.
LOSSES FROM RECENT OPERATIONS; WORKING CAPITAL DEFICIENCY
The Company incurred operating losses of $2,368,226 and $328,647,
respectively, during the year ended June 30, 1996 and the six and one-half
months ended June 30, 1995 and an operating loss of $705,916 for the quarter
ended September 30, 1996. As of September 30, 1996, the Company had a working
capital deficiency of $4,863,778. The Company has been dependent upon loans from
ETS, ST and an affiliate thereof, Singapore Technologies Electronics Pte Ltd
("STE") to satisfy its working capital requirements. See "Related Party
Financing" below and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Accordingly, the likelihood of the future
success of the Company must be considered in light of its recent bankruptcy and
the possibility of future operating losses, as well as the problems, expenses,
difficulties, risks and complications frequently encountered in connection with
similarly situated companies. In addition, the Company's future plans are
subject to known and unknown risks and uncertainties that may cause the
Company's actual results in future periods to be materially different from any
future performance implied herein. See "Recent Bankruptcy" below and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RELATED PARTY FINANCING
The Company has been dependent on loans and guarantees from its controlling
shareholder and affiliates thereof since it emerged from Chapter 11 protection
approximately two years ago. At present Radyne owes approximately $2,130,000 to
ST, payable on various dates between March 2 and March 31, 1997, and
approximately $4,670,000 to STE, payable February 10, 1997. In addition,
Singapore Technologies Pte Ltd, an affiliate of ST and STE, has guaranteed a $2
million bank line of credit for the Company. Loans pursuant to this facility,
which has been substantially drawn down, are demand loans. There can be no
assurance that the bank will not demand repayment at an inopportune time for the
Company or that ST and its affiliates will continue to make such financing
available to the Company. Although the Company is attempting to arrange for a $5
million bank line of credit (the "Proposed Credit Line"), there can be no
assurance that such a line of credit will be arranged. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
ADDITIONAL FINANCING REQUIREMENTS
Based on the Company's operating plan, the Company believes that the net
proceeds of the Rights Offering, together with cash flows from operations and
funding available under the Proposed Credit Line or from or through affiliates
(see "Related Party Financing" above), will be sufficient to satisfy its capital
requirements and finance its plans for expansion for at least the next 12
months. Such belief is based on certain assumptions, including without
limitation the availability of the Proposed Credit Line, and there can be no
assurance that such assumptions are correct. Accordingly, there can be no
assurance that such resources will be sufficient to satisfy the Company's
capital requirements for such period. After such 12-month period, the Company
anticipates that it may require additional financing in order to meet its
current plans for expansion. Such financing may take the form of the issuance of
common or preferred equity securities or debt securities, or may involve bank
financing. There can be no assurance that the
10
<PAGE>
Company will be able to obtain such additional capital on a timely basis, on
favorable terms, or at all. See "Use of Proceeds," "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RECENT BANKRUPTCY
In April 1994, Radyne sought protection from creditors under Chapter 11 of
the United States Bankruptcy Code (the "Bankruptcy Code"). By order dated
December 16, 1994, a Plan of Reorganization was confirmed by the United States
Bankruptcy Court for the Eastern District of New York and the Company emerged
from protection under Chapter 11 of the Bankruptcy Code. Despite the belief of
the Company that the confluence of circumstances which caused the Company to
seek bankruptcy protection no longer persists, the business and reputation of
the Company have undoubtedly been damaged. See "Business--Bankruptcy
Reorganization."
DEPENDENCE ON FACILITY
The Company maintains only one facility. Accordingly, any disruption or
suspension in the operations of the Facility would require the Company to seek
alternative facilities. While the Company believes that it would be able to
arrange for a suitable alternative facility without any significant interruption
in its business operations, there can be no assurance thereof. If for any reason
a suitable alternative facility could not be found, the Company's operations
could be materially and adversely affected. See "Business-- Facilities."
DEPENDENCE ON INTERNATIONAL MARKETS
The Company's success will be materially dependent upon its ability to
continue to successfully market video and data communication products in both
international and domestic markets. The Company has entered into distribution or
representation agreements with companies in Europe, the Middle East, Canada,
Latin America and the Pacific Rim. There can be no assurance that these
arrangements will be successful or continuing. Foreign sales may be subject to
political and economic risks, including political instability and changes in
import/export regulations, tariffs and freight rates. Changes in current tariff
structures or other trade policies could adversely affect the Company's sales to
foreign customers. See "Business--Sales and Marketing."
DEPENDENCE ON DISTRIBUTORS AND PRINCIPAL CUSTOMERS
Sales to distributors and principal customers have constituted and are
anticipated to constitute a significant portion of the Company's business. The
loss of any of these distributors or principal customers could have a material
adverse effect on the operating results and financial condition of the Company.
The Company's distributors are not obligated to purchase any minimum quantity of
the Company's products. There can be no assurance that such distributors will
continue to purchase the Company's products or that the Company will be able to
enter into favorable agreements with other distributors for the sale of its
products. See "Business--Sales and Marketing."
DEPENDENCE ON KEY PERSONNEL AND RECRUITMENT
The Company's future performance is significantly dependent on the continued
active participation of Robert C. Fitting, its President, and Steve Eymann,
Executive Vice President, and Peter Weisskopf, Microwave Products Division
President. Should any of these key employees leave or otherwise become
unavailable to the Company, the Company's business and results of operations
could be materially adversely affected. See "Management." The ability of the
Company to attract and retain highly skilled personnel is critical to the
operations and expansion of the Company. To date, the Company has been able to
attract and retain the personnel necessary for its limited operations. However,
there can be no assurance
11
<PAGE>
that the Company will be able to do so in the future. If the Company is unable
to attract and retain personnel with necessary skills when needed, its business
and expansion plans could be materially adversely affected.
MANUFACTURING
The Company's products are to a certain extent assembled and tested at its
Phoenix, Arizona facilities using subsystems and circuit boards supplied by
subcontractors. Although the Company believes that it maintains adequate stock
to reduce the procurement lead time for certain components, the Company's
products use a number of specialized chips and customized components or
subassemblies produced by a limited number of suppliers. In the event that such
suppliers were to be unable to fulfill the Company's requirements, the Company
could experience an interruption in production until an alternative source of
supply was developed. Moreover, given its previous financial difficulties, the
Company has experienced inflexibility on the part of some suppliers as to the
delivery of components in desired quantities on acceptable credit terms. The
Company believes that there are a number of companies capable of providing
replacements for the types of unique chips and customized components and
subassemblies used in its products. See "Business--Manufacturing".
RAPID TECHNOLOGICAL CHANGE
The market for modems, converters and related equipment is characterized by
rapid and significant technological change. There can be no assurance that the
Company's competitors will not succeed in developing or marketing products or
technologies that are more effective and/or less costly and which render the
Company's products obsolete or non-competitive. In addition, new technologies
could be developed that replace or reduce the value of the Company's products.
For example, as more fiber cables are laid under the oceans or otherwise brought
into service, the use of satellites for international telephony is slowing. The
Company's success will depend in part on its ability to respond quickly to
technological changes through the development and improvement of its products.
Accordingly, the Company believes that a substantial amount of capital will be
required to be allocated to research and development activities in the future.
There can be no assurance that the Company's product development efforts will be
successful. The failure by the Company to improve its existing products and
develop new products could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--Industry
Overview", "Business--Research and Development" and "Business-- Competition."
RESEARCH AND DEVELOPMENT
The Company's research and development efforts to date have been devoted to
the design and development of new products for the satellite communications and
telecommunications industries. The Company's future growth depends on increasing
the market shares of its new products and adaptation of its existing satellite
communications products to new applications, and the introduction of new
communications products that will find market acceptance and benefit from the
Company's established international distribution channels. Accordingly, the
Company is actively applying its communications expertise to design and develop
new hardware and software products and enhance existing products. However, there
is no assurance that the Company will continue to have access to sufficient
capital to fund the necessary research and development or that such efforts,
even if adequately funded, will prove successful.
In its fiscal years ended December 16, 1994, June 30, 1995 and June 30,
1996, the Company spent $0, $0 and $1.8 million, respectively, on research and
development activities. During this period, the Company introduced the RCS-10
Redundant Modem System, the DMD-15 Universal Modem, the DVB-3000 Digital Video
Modulator, the SFC-6400 Up Converter, the SFC-4200 Down Converter, and the
RCS-20 Modem Switch as well as the DMD-2400 Modem. See "Business--Research and
Development".
12
<PAGE>
COMPETITION
The Company has a number of major competitors in the satellite
communications field. These include large companies, such as Hughes Network
Systems, NEC, California Microwave, and Spar Aerospace, which have significantly
larger and more diversified operations and greater financial, marketing, human
and other resources than Radyne. The Company believes that it has been able to
compete by concentrating its sales efforts in the international market,
utilizing the resources of local distributors, and by emphasizing product
features. However, most of the Company's competitors offer products which have
one or more features or functions similar to those offered by the Company. The
Company believes that the quality, performance and capabilities of its products,
its ability to customize certain network functions and the relatively lower
overall cost of its products, as compared to the costs generally offered by the
Company's major competitors, have contributed to Radyne's ability to compete
successfully. However, the Company's major competitors have the resources
available to develop products with features and functions competitive with or
superior to those offered by the Company. There can be no assurance that such
competitors will not successfully develop such products or that the Company will
be able to maintain a lower cost advantage for its products. Moreover, there can
be no assurance that the Company will not experience increased competition in
the future from these or other competitors currently unknown. See "Business--
Competition."
PATENTS AND INTELLECTUAL PROPERTY
The Company believes that improvement of existing products, reliance upon
trade secrets, copyrights and unpatented proprietary know-how and the
development of new products are generally as important as patent protection in
establishing and maintaining a competitive advantage. Because patents often
provide only narrow protection which may not provide a competitive advantage in
areas of rapid technological change and because patent applications require
public disclosure of information which may otherwise be subject to trade secret
protection, Radyne has not obtained, and has no present intention to obtain,
patents on existing products. However, there can be no assurance that the
Company's technology will not be found to infringe upon the intellectual
property of others. If the Company's technology should be found to impermissibly
utilize the intellectual property of others, the Company's ability to utilize
the technology could be materially restricted or prohibited. In such event, the
Company might be required to obtain licenses from third parties to utilize the
patents or proprietary rights of others. No assurance can be given that any
licenses required could be obtained on terms acceptable to the Company or at
all. In addition, in such event, the Company could incur substantial costs in
defending itself against infringement claims made by third parties or in
enforcing its own intellectual property rights. See "Business--Technology."
CONTROL BY PRINCIPAL STOCKHOLDER
Upon the closing of the Rights Offering, ST, which currently owns
approximately 91% of the Company's outstanding Common Stock, will continue to
own a substantially similar level of control together with its affiliate, SPL.
ST and SPL will, therefore, continue to have the ability to elect all of the
directors of the Company and to control the outcome of all issues submitted to a
vote of the stockholders of the Company. As a result of ST and SPL's substantial
ownership interest in the Common Stock, it may be more difficult for a third
party to acquire the Company. A potential buyer would likely be deterred from
any effort to acquire the Company absent the consent of ST and SPL or their
participation in the transaction. See "Principal and Management Stockholders."
The Company is subject to Section 912 of the New York Business Corporation
Law, which restricts certain business combinations that are not approved by a
corporation's board of directors.
13
<PAGE>
NO DIVIDENDS
The Company has not paid any cash dividends on the Common Stock since
inception and does not intend to pay any dividends to its stockholders in the
foreseeable future. The Company currently intends to reinvest earnings, if any,
in the development and expansion of its business. See "Dividend Policy" and
"Description of Common Stock."
SUBSTANTIAL PORTION OF NET PROCEEDS ALLOCATED FOR GENERAL CORPORATE AND WORKING
CAPITAL PURPOSES
The net proceeds from the Rights Offering are expected to be allocated for
general corporate and working capital purposes (including research and
development costs) and the repayment of indebtedness to ST and STE. However,
such proceeds may be utilized in the discretion of the Board of Directors and
such utilitzation will depend in large part upon the Company's success in
arranging for the Proposed Credit Line. As a result, investors will not know in
advance how such net proceeds will be utilized by the Company. See "Use of
Proceeds."
IMMEDIATE AND SUBSTANTIAL DILUTION; NET TANGIBLE BOOK VALUE DEFICIENCY BEFORE
OFFERING
Upon the closing of the Rights Offering, investors in the offering will
incur immediate and substantial dilution in the per share net tangible book
value of their Common Stock. At September 30, 1996, giving effect to the Reverse
Split and receipt by the Company of the maximum net proceeds of the Rights
Offering, the Company had a pro forma net tangible book value of approximately
$.17 per share. (The corresponding figure without giving effect to the Reverse
Split would have been $.85 per share.) Net tangible book value is the amount of
the Company's total assets minus intangible assets and liabilities. See
"Selected Financial Data."
To the extent that Rights are exercised by other Holders and Rights Options
are exercised by employees, shareholders who do not exercise their Rights in
full will realize a dilution in their percentage voting interest and ownership
interest in future net earnings, if any, of the Company. The Company is not able
to predict the effect, if any, the Rights Offering will have on the market price
of the Common Stock. See "Market Considerations; Volatility of Stock Price"
below.
In addition to the 280,000 presently exercisable Rights Options, the Company
currently has outstanding under the 1996 Incentive Stock Option Plan options
which (if certain performance targets are met) may become exercisable to
purchase an aggregate of 668,395 shares of Common Stock at an exercise price of
$2.50 per share. Options on an additional 16,000 shares will become exercisable
at $2.50 per share over the next four years, assuming that the grantees'
employment does not terminate prematurely. An additional 317,647 shares are
available for options yet to be granted under the Plan. Exercise of the options
granted under the 1996 Incentive Stock Option Plan would further reduce a
shareholder's percentage voting and ownership interest. See "Management--Stock
Option Plan."
ELIMINATION OF PREEMPTIVE RIGHTS
The Company's shareholders recently voted to amend the Company's Certificate
of Incorporation to eliminate the preemptive rights accorded shareholders under
Section 622 of the New York Business Corporation Law with respect to the
purchase of securities of the Company. Therefore, the Company may in the future
offer securities for sale without giving existing shareholders an opportunity to
purchase any particular amount of such securities. [Disclose effect of
dissenter's rights if it becomes material.]
SHARES ELIGIBLE FOR FUTURE SALE
The sale, or availability for sale, of a substantial number of shares of
Common Stock in the public market subsequent to this offering pursuant to Rule
144 under the Securities Act ("Rule 144") or otherwise could materially
adversely affect the market price of the Common Stock and could impair the
14
<PAGE>
Company's ability to raise additional capital through the sale of its equity
securities or debt financing. Upon completion of the Rights Offering, if all
Rights and Rights Options are fully exercised, there would be approximately
6,015,554 shares of Common Stock issued and outstanding. Of these shares, the
Company believes that approximately 905,554 would be freely transferable
immediately due to the present or prior registration or the present availability
of a Rule 144 exemption from the requirement of registration. The remaining
approximately 5,110,000 shares would be "restricted securities" for purposes of
the Securities Act and would be eligible for resale at various times in the
future, in each case subject to the volume and manner of sale limitations of
Rule 144 under the Securities Act. Of these restricted shares, 3,400,000 shares
are owned by ST and it is estimated that 1,680,000 shares would be owned by SPL.
In addition to the Rights Options (which have been taken into account in the
above figures), there are currently 1,002,042 shares of Common Stock reserved
for issuance pursuant to options granted or to be granted under the 1996
Incentive Stock Option Plan. See "Shares Eligible for Future Sale."
In addition, the Registration Statement, of which this Prospectus forms a
part, includes a separate prospectus relating to the offering and resale by one
shareholder of 30,000 shares of Common Stock. See "Concurrent Sale by Selling
Stockholder."
DISCLOSURES RELATING TO LOW PRICED STOCKS
The Company's securities are subject to Rule 15g-9 under the Securities
Exchange Act of 1934, as amended, which imposes additional sales practice
requirements for broker-dealers which sell penny stocks to persons other than
established customers and accredited investors as defined in Regulation D under
the Securities Act of 1933. For transactions covered by this rule, a
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. Consequently, such rule may adversely affect the ability of broker-dealers
to sell the Company's securities and may adversely affect the ability of
purchasers in the Rights Offering to sell any of the securities acquired hereby
in the secondary market.
Securities and Exchange Commission regulations define a "penny stock" to be
any equity security not registered on a national securities exchange or for
which quotation information is disseminated on NASDAQ that has a market price
(as therein defined) of less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. Unless exempt, the rules
require delivery, prior to a transaction in a penny stock, of a disclosure
schedule prescribed by the Securities and Exchange Commission relating to the
penny stock market. Disclosure is also required to be made about commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements are required to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.
MARKET CONSIDERATIONS; VOLATILITY OF STOCK PRICE
The Company cannot predict the effect that the Rights Offering will have on
the trading price of the Common Stock, although the opening trading price of the
Common Stock on the first day that shares trade without the Rights attached
(I.E., the "ex-Rights day"), which will be the second trading day after the
Record Date, may be lower than the closing price on the previous trading day.
There can be no assurance that the market price of the Common Stock will not
fall below the Subscription Price or that, following the exercise of Rights, a
Holder will be able to sell shares acquired in the Rights Offering at a price
equal to or greater than the Subscription Price. Since the Company emerged from
bankruptcy, the price of the Common Stock, which trades in the over-the-counter
market under the OTC Bulletin Board symbol "RDYN", has varied widely and the
price of the Common Stock or the Shareholder Rights may be subject to
significant fluctuation in the future. See "Price Range of Common Stock" and
"Dividend Policy." There has been no prior market for the Rights.
15
<PAGE>
PURPOSE OF THE RIGHTS OFFERING AND USE OF PROCEEDS
The Subscription Price and the exercise price for the employee stock options
granted on November 13, 1996 (see "Management--Stock Option Plan") have been
independently established by the Board of Directors at $2.50 per share (after
adjustment for the Reverse Split), which the Board determined to be the fair
market value of the Common Stock. In making this determination, the Board
received the assistance of Corporate Capital Consultants, Inc. ("CCC"). CCC is a
speciality investment banking firm, which, since its inception in 1974, has
performed services in the areas of financial consulting, corporate valuations,
fairness opinions and mergers and acquisitions. In the valuation area, CCC has
provided valuations of corporate securities in connection with pending purchase
offers, plans to sell, recapitalizations, going-private transactions, tender
offers, the purchase of minority interests, employee stock purchase plans and
public offerings, for both publicly and privately held companies in a broad
range of industries. In determining the value of the Common Stock, the Board and
CCC considered a number of factors, including the book value of the Common
Stock, the Company's results of operations, its business plan, the recent change
in control, publicly available information about companies considered comparable
to Radyne in nature of business, the Company's history and the limited trading
activity in the Common Stock since early 1996.
The maximum net proceeds to be received by the Company from the sale of the
Rights Shares, net of estimated expenses payable by the Company, are estimated
to be approximately $5,440,000. The Company presently intends to use the net
proceeds of this offering to repay indebtedness to ST and STE and/or for general
corporate and working capital purposes (including research and development
costs).
The net proceeds of the sale of the Rights Shares are subject to
apportionment among the categories listed above or to new categories in response
to, among other things, changes in the Company's plans, industry conditions, and
future revenues and expenditures. The amount and timing of expenditures will
vary depending on a number of factors, including changes in the Company's
contemplated operations or business plan and changes in economic and industry
conditions. Finally, the success of the Company in securing the Proposed Credit
Line will have a major impact on the use of the proceeds of the Rights Offering.
If the Proposed Credit Line becomes available prior to the Expiration Date, it
is possible that funds made available thereunder will be used to repay a
substantial portion of the Company's indebtedness to ST and STE, thereby
allowing the Company to devote a substantially larger portion of the Rights
Offering proceeds to general corporate purposes or to the repayment of
indebtedness incurred pursuant to the Proposed Credit Line. On the other hand,
if the Proposed Credit Line should not become available prior to the Expiration
Date, it is possible that substantially all of the net proceeds of the Rights
Offering would be used to repay the Company's indebtedness to ST and STE, which
is currently about $6,800,000 in the aggregate (including accrued interest).
Based on the Company's operating plan, the Company believes that the net
proceeds of this offering, together with cash flows from operations, funding
available under the Proposed Credit Line and funding from or through affiliates
(See "Risk Factors--Related Party Financing"), will be sufficient to satisfy its
capital requirements and finance its plans for expansion for at least the next
12 months. Such belief is based upon certain assumptions, including, but not
limited to, the availability of the Proposed Credit Line, and there can be no
assurance that such assumptions are correct. Accordingly, there can be no
assurance that such resources will satisfy the Company's capital requirements
for such period. After such 12-month period, the Company anticipates that it may
require additional financing in order to meet its current plans for expansion.
Such financing may take the form of the issuance of common or preferred equity
securities or debt securities, and may involve bank financing. In addition,
contingencies may arise which may require the Company to obtain additional
capital. There can be no assurance that the Company will be able to obtain such
additional capital on a timely basis, on favorable terms, or at all. In any of
such events, the Company may be unable to implement its current plans. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
16
<PAGE>
CAPITALIZATION
The following table sets forth the pro forma actual capitalization of the
Company, giving effect to the Reverse Split, at September 30, 1996 and the
capitalization of the Company at September 30, 1996, adjusted to give effect to
the receipt by the Company of estimated net proceeds of approximately $5,439,583
from the sale of the Rights Shares and the use of such proceeds to repay
short-term indebtedness. See "Use of Proceeds."
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA AS ADJUSTED
------------ -----------
<S> <C> <C>
Short-term debt:.................................................. $ 6,277,620 $ 838,037
Long-term debt:................................................... 128,157 128,157
Stockholders' Equity (Deficit):
Common Stock--$.002 par value, Authorized--20,000,000 shares;
issued and outstanding 3,759,721 shares; 6,015,554 shares, as
adjusted...................................................... 7,519 12,031
Additional paid in capital........................................ 585,782 6,020,853
Retained earnings (deficit)....................................... (3,808,129) (3,808,129)
Total stockholders' equity (deficit).............................. (3,214,828) 2,224,755
Total capitalization.............................................. (3,086,671) 2,352,912
</TABLE>
[Update as of 12/31/96, if possible.]
17
<PAGE>
THE RIGHTS OFFERING
SHAREHOLDER RIGHTS
Shareholders other than ST will receive three Shareholder Rights for every
five shares of Common Stock held on the Record Date, as adjusted for the Reverse
Split. An aggregate of approximately 215,833 Shareholder Rights will be
distributed. Holders are entitled to purchase at the Subscription Price one
share of Common Stock for each Shareholder Right held. The Shareholder Rights
will expire on the Expiration Date. The Shareholder Rights will be transferable.
No fractional Rights will be issued.
ST RIGHTS
SPL will receive 2,040,000 ST Rights. This equals the number of rights which
ST would have received on the 3-for-5 basis applicable to other shareholders.
SPL will redistribute 80,000 of such Rights to employees of its affiliates,
including non-employee directors of the Company. The ST Rights will otherwise be
nontransferable. The ST Rights will expire on the Expiration Date, except that
280,000 of such Rights will be exercisable, if at all, only during the five
business days next following the Expiration Date. Holders will be entitled to
purchase one share of Common Stock at the Subscription Price for each ST Right.
Concurrently with the distribution of the Rights, 280,000 Rights Options
granted under the Company's 1996 Incentive Stock Option Plan will become
exercisable at the Subscription Price until March 14, 1997. (See
"Management--Stock Option Plan.") The Rights Options were granted by the Board
on November 13, 1996 at the request of ST. In order to ensure that ST's
interest, rather than the other shareholders' interests, in the Company would be
diluted by the exercise of the Rights Options, 280,000 of the ST Rights will not
be exercisable, if at all, until the Expiration Date. A portion of these 280,000
ST Rights, up to the number of Shareholder Rights and Rights Options, if any,
which expire unexercised, will then be exercisable during the five business days
following the Expiration Date.
EXPIRATION DATE
The Rights will expire at 5:00 p.m., New York time, on March 14, 1997,
except that the Company reserves the right to extend the exercise period on one
or more occasions if the Board of Directors determines that the occurrence of a
material event necessitates an amendment of the Registration Statement or
recirculation of this Prospectus, which forms a part thereof, in order to permit
time for the distribution of such information. After the Expiration Date,
unexercised Rights (except certain ST Rights as described above) will be null
and void. The Company will not be obligated to honor any purported exercise of
such Rights received by the Subscription Agent or the Company after the
Expiration Date, regardless of when the documents relating to such exercise were
sent, except pursuant to the Guaranteed Delivery Procedures described below.
If the Company elects to extend the Expiration Date, it will issue a press
release to such effect not later than the first business day following the most
recently announced Expiration Date. In the event the Company elects to extend
the Expiration Date by more than 14 calendar days, it will, in addition, cause
written notice of such extension to be promptly sent to all Holders of record.
EXERCISE OF RIGHTS
Rights may be exercised by delivering to the Subscription Agent or the
Company, at or prior to 5:00 p.m., New York time, on the Expiration Date, the
properly completed and executed Subscription Certificate evidencing such Rights
with any required signatures guaranteed, together with payment in full of the
Subscription Price for each Right exercised. Such payment in full must be by
check drawn upon a U.S. bank or postal, telegraphic or express money order
payable to Continental Stock Transfer and Trust Co., as Subscription Agent;
provided, however, that checks or money orders sent directly to the Company
should be made payable to Radyne Corp. Payment of the Subscription Price will be
deemed to have been
18
<PAGE>
received by the Subscription Agent or the Company, as the case may be, only upon
(a) clearance of any uncertified check, or (b) receipt by the Subscription Agent
or the Company, as the case may be, of any certified check drawn upon a United
States bank or of any postal, telegraphic or express money order.
IF PAYING BY UNCERTIFIED PERSONAL CHECK, PLEASE NOTE THAT THE FUNDS PAID
THEREBY MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR. ACCORDINGLY, HOLDERS WHO
WISH TO PAY THE SUBSCRIPTION PRICE BY MEANS OF UNCERTIFIED PERSONAL CHECK ARE
URGED TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO ENSURE
THAT SUCH PAYMENT IS RECEIVED AND CLEARS BY SUCH DATE AND ARE URGED TO CONSIDER
PAYMENT BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
The address to which the Subscription Certificates and payment of the
Subscription Price with respect to Rights should be delivered to the
Subscription Agent is set forth below under "Subscription Agent."
If a Holder wishes to exercise Rights, but time will not permit such Holder
to cause the Subscription Certificate or Subscription Certificates evidencing
such Rights to reach the Subscription Agent or the Company on or prior to the
Expiration Date, such Rights may nevertheless be exercised if all of the
following conditions (the "Guaranteed Delivery Procedures") are met:
(i) such Holder has caused payment in full of the Subscription Price for
each Rights Share being subscribed for to be received (in the manner set
forth above) by the Subscription Agent on or prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a guaranteed notice (a "Notice of Guaranteed Delivery") from a member
firm of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc., or from a commercial bank
or trust company having an office or correspondent in the United States
(each, an "Eligible Institution"), substantially in the form available upon
request from the Subscription Agent whose address and telephone numbers are
set forth under "Subscription Agent" below, stating the name of the
exercising Holder, the number of Rights represented by the Subscription
Certificate(s) held by such exercising Holder, the number of Rights Shares
being subscribed for and guaranteeing the delivery to the Subscription Agent
of any Subscription Certificate(s) evidencing such Rights within three
business days following the date of the Notice of Guaranteed Delivery; and
(iii) the properly completed Subscription Certificate(s), with any
required signatures guaranteed, is received by the Subscription Agent within
three days following the date of the Notice of Guaranteed Delivery relating
thereto. The Notice of Guaranteed Delivery may be delivered to the
Subscription Agent in the same manner as Subscription Certificates at the
address set forth under "Subscription Agent" below, or may be transmitted to
the Subscription Agent by facsimile transmission (telecopy no. (212)
509-5150).
A Holder who holds shares of Common Stock for the account of others, such as
a broker, a trustee or a depository for securities, should notify the respective
beneficial owners of such shares as soon as possible to ascertain such
beneficial owners' intentions and to obtain instructions with respect to the
Rights. If the beneficial owner so instructs, the record holder of such Rights
should complete the Subscription Certificate and submit it to the Subscription
Agent with the proper payment. In addition, the beneficial owner of Common Stock
or Rights held through such a holder of record should contact the Holder and
request the Holder to effect transactions in accordance with the beneficial
owner's instructions.
Unless a Subscription Certificate (i) provides that the shares of Common
Stock to be issued pursuant to the exercise of Rights represented thereby are to
be delivered to the Holder or (ii) is submitted for the account of an Eligible
Institution, signatures on such Subscription Certificate must be guaranteed by
an Eligible Institution.
If either the number of Rights Shares being subscribed for is not specified
on the Subscription Certificate, or the amount delivered is not enough to pay
the Subscription Price for all Rights Shares stated
19
<PAGE>
to be subscribed for, the number of Rights Shares subscribed for will be assumed
to be the maximum amount that could be subscribed for upon payment of such
amount, after allowance for the Subscription Price of any specified Rights
Shares.
These instructions should be read carefully and followed in detail.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT OR THE COMPANY WILL BE AT THE
ELECTION AND RISK OF THE RIGHTS HOLDER, BUT IF SENT BY MAIL IT IS RECOMMENDED
THAT SUCH CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE
ALLOWED TO ENSURE DELIVERY TO THE SUBSCRIPTION AGENT OR THE COMPANY AND
CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., NEW YORK TIME, ON THE EXPIRATION DATE.
BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO
CLEAR, RIGHTS HOLDERS ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY
MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
Any shareholder of record who wishes to exercise a Shareholder Right must
submit his Common Stock share certificate(s), either simultaneously with his
Subscription Certificate or prior to that time, for exchange into a new share
certificate reflecting the Reverse Split. SUBSCRIPTION CERTIFICATES WILL NOT BE
ACCEPTED FROM OR ON BEHALF OF SHAREHOLDERS OF RECORD WHO DO NOT COMPLY WITH THIS
REQUIREMENT. However, this requirement will not affect the transferability of
Shareholder Rights.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company, in its sole discretion, may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
Right. Subscriptions will not be deemed to have been received or accepted until
all irregularities have been waived or cured within such time as the Company
determines in its sole discretion. NEITHER THE COMPANY NOR THE SUBSCRIPTION
AGENT WILL BE UNDER ANY DUTY TO GIVE NOTIFICATION OF ANY DEFECT OR IRREGULARITY
IN CONNECTION WITH THE SUBMISSION OF SUBSCRIPTION CERTIFICATES OR INCUR ANY
LIABILITY FOR FAILURE TO GIVE SUCH NOTIFICATION.
Any questions or requests for assistance concerning the method of exercising
Rights or requests for additional copies of this Prospectus or the Notice of
Guaranteed Delivery should be directed to the Company at 5225 South 37th Street,
Phoenix, Arizonia 85040, Attention: Director of Administration. Telephone: (602)
437-9620.
NO REVOCATION
ONCE A HOLDER OF RIGHTS HAS EXERCISED THOSE RIGHTS, SUCH EXERCISE MAY NOT BE
REVOKED.
FRACTIONAL SHARES
Fractional Rights will not be distributed by the Company and a Right may not
be exercised in part.
METHOD OF TRANSFERRING SHAREHOLDER RIGHTS
The Shareholder Rights evidenced by a single Subscription Certificate may be
transferred in whole by endorsing the Subscription Certificate for transfer in
accordance with the accompanying instructions. A portion of the Rights evidenced
by a single Subscription Certificate may be transferred (but only in units to
purchase whole shares) by delivering to the Subscription Agent a Subscription
Certificate properly endorsed for transfer, with instructions to register such
portion of the Rights evidenced thereby in the name of the transferee (and to
issue a new Subscription Certificate to the transferee evidencing such
20
<PAGE>
transferred Rights). In such event, a new Subscription Certificate evidencing
the balance of the Rights will be issued to the Holder or, if the Holder so
instructs, to an additional transferee.
Holders wishing to transfer all or a portion of their Shareholder Rights
(but only in units to purchase whole shares) should allow a sufficient amount of
time prior to the Expiration Date for (i) the transfer instructions to be
received and processed by the Subscription Agent, (ii) a new Subscription
Certificate to be issued and transmitted to the transferee or transferees with
respect to transferred Rights, and to the transferor with respect to retained
Rights, if any, and (iii) the Rights evidenced by such new Subscription
Certificates to be exercised or sold by the recipients thereof. If time does not
permit a transferee of a Right who wishes to exercise its Right to deliver its
Subscription Certificate to the Subscription Agent on or before the Expiration
Date, such transferee should make use of the Guaranteed Delivery Procedure
described under "Exercise of Rights" above. Neither the Company nor the
Subscription Agent shall have any liability to a transferee or transferor of
Rights if Subscription Certificates or new Subscription Certificates are not
received in time for exercise or sale prior to the Expiration Date.
It is not anticipated that a market will be made in the Rights or that they
will be traded on any exchange. There is no assurance that any market will
develop for the Rights. In any event, trading in the Rights will cease at the
close of business on the business day preceding the Expiration Date.
FEES AND EXPENSES
Except for the fees charged by the Subscription Agent (which will be paid by
the Company as described below), all commissions, fees and other expenses
(including brokerage commissions and transfer taxes) incurred in connection with
the purchase or sale of Rights will be for the account of the transferor of the
Rights, and none of such commissions, fees or expenses will be paid by the
Company or the Subscription Agent.
All fees and other expenses incurred in connection with the exercise of
Rights will be for the account of the Holder of such Rights, and none of such
fees or expenses will be paid by the Company or the Subscription Agent.
SUBSCRIPTION AGENT
The Company has appointed Continental Stock Transfer and Trust Co. as
Subscription Agent for the Rights Offering. The Subscription Agent's address,
which is its address to which the Subscription Certificates and payment of the
Subscription Price must be delivered, as well as the address to which Notice of
Guaranteed Delivery must be delivered, is:
Continental Stock Transfer and Trust Co.
2 Broadway
New York, New York 10004
(212) 509-4000
Subscription Price payments received by the Subscription Agent will be held
thereby, pending the application or return of such payments in accordance with
the terms of the Rights Offering.
The Company will pay the Subscription Agent reasonable and customary
compensation for its services in connection with the Rights Offering and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
THE BOARD OF DIRECTORS OF THE COMPANY MAKES NO RECOMMENDATION TO HOLDERS
WITH RESPECT TO WHETHER A HOLDER SHOULD EXERCISE RIGHTS TO PURCHASE SHARES OF
THE COMMON STOCK PURSUANT TO THE RIGHTS OFFERING, TO INVESTORS WITH RESPECT TO
WHETHER AN INVESTOR SHOULD PURCHASE SHARES OF THE COMMON STOCK, OR TO PERSONS
WITH RESPECT TO WHETHER A PERSON SHOULD PURCHASE RIGHTS.
21
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain material U.S. federal income tax
consequences arising from the Rights Offering. The discussion of United States
law has been reviewed by Brock, Fensterstock, Silverstein, McAuliffe & Wade,
LLC, special counsel to Radyne. The Rights Offering is not conditioned on the
receipt of an Internal Revenue Service ruling or an opinion of tax counsel, nor
will such a ruling or opinion be sought.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), the Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practice, all of which are
subject to change on a prospective or retroactive basis, and on the accuracy of
certain representations of the Company. The tax consequences of the Rights
Offering under state, local and foreign law are not discussed. Moreover, special
considerations not described herein may apply to certain taxpayers, such as
financial institutions, broker-dealers, life insurance companies, regulated
investment companies, foreign entities, individuals who are not citizens or
residents of the United States for federal income tax purposes, tax-exempt
organizations or accounts and corporations affiliated with the Company. The
discussion is limited to those who have held the Common Stock, and will hold the
Rights and any Common Stock acquired upon the exercise of Rights as capital
assets (generally, property held for investment) within the meaning of Section
1221 of the Code and to U.S. citizen or resident individuals who receive ST
Rights in connection with the performance of services as a director of the
Company.
SHAREHOLDER RIGHTS
ISSUANCE OF THE SHAREHOLDER RIGHTS. Holders of Common Stock will not
recognize taxable income for federal income tax purposes in connection with the
receipt of the Shareholder Rights.
BASIS AND HOLDING PERIOD OF THE SHAREHOLDER RIGHTS. If either (i) the fair
market value of the Shareholder Rights on the date of issuance is equal to 15%
or more of the fair market value (on such date) of the Common Stock with respect
to which they are received or (ii) the shareholder properly elects, in the
shareholder's federal income tax return for the taxable year in which the
Shareholder Rights are received, to allocate part of the basis of such Common
Stock to the Shareholder Rights, then upon exercise or transfer of the
Shareholder Rights, the shareholder's basis in such Common Stock will be
allocated between the Common Stock and the Shareholder Rights exercised or
transferred in proportion to the fair market values of each on the date of
issuance. Except as provided in the preceding sentence, the basis of the
Shareholder Rights received by a shareholder as a distribution with respect to
such shareholder's Common Stock will be zero.
The holding period of a shareholder with respect to the Shareholder Rights
received as a distribution on such shareholder's Common Stock will include the
shareholder's holding period for the Common Stock with respect to which the
Shareholder Rights were issued.
In the case of a purchaser of Shareholder Rights, the tax basis of such
Shareholder Rights will be equal to the purchase price paid therefor, and the
holding period for such Shareholder Rights will commence on the day following
the date of the purchase.
TRANSFER OF THE SHAREHOLDER RIGHTS. A shareholder who sells the Shareholder
Rights prior to exercise will recognize gain or loss equal to the difference
between the amount realized from the sale and such shareholder's basis (if any)
in the Shareholder Rights sold. Such gain or loss will be capital gain or loss
if gain or loss from a sale of the underlying Rights Shares would be
characterized as capital gain or loss at the time of such sale. Any gain or loss
recognized on a sale of Shareholder Rights acquired by purchase will be capital
gain or loss if the underlying Rights Shares would be a capital asset in the
hands of the seller.
22
<PAGE>
LAPSE OF THE SHAREHOLDER RIGHTS. Shareholders who allow the Shareholder
Rights received by them to lapse will not recognize any gain or loss, and no
adjustment will be made to the basis of the Common Stock, if any, owned by such
shareholders.
Purchasers of the Shareholder Rights will be entitled to a loss equal to
their tax basis in the Shareholder Rights, if such Shareholder Rights expire
unexercised. Any loss recognized on the expiration of the Shareholder Rights
acquired by purchase will be a capital loss if the underlying Rights Shares
would be a capital asset in the hands of the purchaser.
EXERCISE OF THE SHAREHOLDER RIGHTS; BASIS AND HOLDING PERIOD OF COMMON
STOCK. Holders of Shareholder Rights will not recognize any gain or loss upon
the exercise of Shareholder Rights. The basis of the Common Stock acquired
through exercise of the Shareholder Rights will be equal to the sum of the
Subscription Price paid therefor and the holder's basis in such Shareholder
Rights (if any).
The holding period for the Common Stock acquired through exercise of the
Shareholder Rights will begin on the date the Shareholder Rights are exercised.
ST RIGHTS RECEIVED IN CONNECTION WITH SERVICES
The following discussion relates to individuals who are U.S. citizens or
residents for federal income tax purposes and receive ST Rights in connection
with the performance of services as a non-employee director of the Company.
RECEIPT OF RIGHTS. Directors should not recognize taxable income for
federal tax purposes in connection with the receipt of such ST Rights.
LAPSE OF RIGHTS. There should be no tax consequences upon the lapse of such
ST Rights.
EXERCISE OF RIGHTS. A director who exercises ST Rights generally will
recognize ordinary income on the exercise date in an amount equal to the excess,
if any, of the fair market value of the underlying Rights Shares on that date
over the Subscription Price, provided that he properly makes and files an
election under Section 83(b) of the Code (an "83(b) Election") within 30 days
after the exercise date to recognize ordinary income based on the value of the
Common Stock on the exercise date. Otherwise, the amount of such director's
ordinary income would be measured by the value of the Common Stock at the end of
the six-month holding period imposed under Section 16(b) of the Exchange Act.
Special rules may apply to a director who exercises an ST Right if the
Subscription Price is greater than the fair market value of the underlying
Rights Shares on the exercise date of the Right. Directors should consult their
tax advisors to determine the tax consequences to them of exercising Rights.
BASIS AND HOLDING PERIOD OF COMMON STOCK. A director's basis in a share of
Common Stock received upon the exercise of an ST Right will equal the
Subscription Price paid therefor plus the amount includible in income as
ordinary income as discussed above. The holding period for the Common Stock
acquired upon exercise of ST Rights will begin upon the expiration of the
six-month holding period imposed under Section 16(b) of the Exchange Act, unless
the director makes a timely and proper 83(b) Election with respect to such
stock, in which case the holding period would begin on the day after the
exercise date.
INFORMATION REPORTING AND WITHHOLDING
Under the backup withholding rules of the Code, a Holder may be subject to
backup withholding at the rate of 31 percent with respect to payments made
pursuant to the Rights Offering, unless such Holder (i) is a corporation or
comes within certain other exempt categories and, when required, demonstrates
this fact, or (ii) provides a correct taxpayer identification number and
certifies under penalties of perjury that the taxpayer identification number is
correct and that the Holder is not subject to backup withholding because of a
failure to report all dividends and interest income. Any amount withheld under
these rules will be credited against such Holder's federal income tax liability.
The Company may require Holders
23
<PAGE>
to establish exemption from backup withholding or to make arrangements
satisfactory to the Company with respect to the payment of backup withholding.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY,
EACH HOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES OF THE RIGHTS OFFERING APPLICABLE TO HIS OR HER OWN
PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE
AND LOCAL INCOME AND OTHER TAX LAWS.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the over-the-counter market under
the OTC Bulletin Board symbol "RDYN". However, there is no established trading
market as actual transactions are infrequent. The following table sets forth the
range of high and low closing bid quotations as reported by the National
Quotation Bureau, Inc. for the periods indicated. It should be noted that these
quotations relate to periods prior to the Reverse Split, for which no adjustment
has been made. At December 9, 1996, the Company had approximately 550
shareholders of record. The Company believes that the number of beneficial
owners is actually in excess of 1,600, due to the fact that a large number of
shares are held in street name.
<TABLE>
<CAPTION>
HIGH LOW
----- ---
<S> <C> <C> <C>
1995:
First Quarter (December 16, 1994* through March 31, 1995)..................... 1 5/8 1/8
Second Quarter................................................................ 1 3/8 5/8
Third Quarter................................................................. 1 5/8 5/8
Fourth Quarter................................................................ 1 1/2 3/4
1996:
First Quarter................................................................. 1 1/8 1/2
Second Quarter................................................................ 1 3/8 3/4
Third Quarter................................................................. 1 27/32 13/16
Fourth Quarter................................................................ [ ] [ ]
</TABLE>
- ------------------------
* The first day of trading of the Common Stock following Radyne's emergence
from bankruptcy.
On December 31, 1996 the last sale price of the Common Stock as reported by
the OTC Bulletin Board was $ per share.
DIVIDEND POLICY
The Company has not paid dividends on the Common Stock since inception and
does not intend to pay any dividends to its stockholders in the foreseeable
future. The Company currently intends to reinvest earnings, if any, in the
development and expansion of its business. The declaration of dividends in the
future will be at the election of the Board of Directors and will depend upon
the earnings, capital requirements and financial position of the Company,
general economic conditions and other pertinent factors.
24
<PAGE>
SELECTED FINANCIAL DATA
The following selected statement of operations data for the year ended June
30, 1996, the six and one-half month period ended June 30, 1995 and the ten and
one-half month period ended December 16, 1994, and the selected balance sheet
data at June 30, 1996, are derived from the Financial Statements of the Company
and notes thereto included elsewhere herein audited by Deloitte & Touche LLP,
independent certified public accountants for the Company. The unaudited selected
statement of operations data for the three months ended September 30, 1996 and
1995 and the unaudited selected balance sheet data at September 30, 1996, are
derived from the unaudited Financial Statements of the Company, which have been
prepared on a basis consistent with the audited Financial Statements of the
Company and, in the opinion of management, include all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of the
Company's financial position and results of operations. Per share data and
shares outstanding reflect an adustment for the effects of the Reverse Split.
The results of operations for any interim period are not necessarily indicative
of results to be expected for the entire year. The following data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements of the Company and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR
-------------------- THREE MONTHS ENDED
YEAR SIX AND ONE-HALF TEN AND ONE-HALF ----------------------------
ENDED MONTHS ENDED MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30,
JUNE 30, 1996 JUNE 30, 1995(1) DECEMBER 16, 1994(1) 1996 1995
------------- ---------------- -------------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net sales................... $ 3,829,523 $1,861,262 $ 2,569,396 $ 1,292,646 $ 1,296,792
Cost of sales............... 2,559,350 1,228,747 2,229,329 1,052,385 775,652
Gross profit................ 1,270,173 632,515 340,067 240,261 521,140
Selling, general, and
administrative expenses... 1,843,576 961,162 1,658,388 507,578 403,231
Research and development.... 1,794,823 0 0 438,599 160,095
Interest expense............ 256,871 36,209 118,235 112,260 28,956
Professional fees related to
reorganization............ 600,198
Loss before fresh start
adjustments and
extraordinary items....... $(2,625,097) $ (364,856) $ (2,036,754) $ (818,176) $ (71,141)
Fresh start adjustments..... 1,598,841
Loss before extraordinary
items..................... $(2,625,097) $ (364,856) (437,913) $ (818,176) $ (71,141)
Extraordinary items(2)...... 2,699,156
Net income (loss)........... $(2,625,097) $ (364,856) 2,261,243 $ (818,176) $ (71,141)
Net loss per share before
extraordinary items....... $ (.701) $ (.098) $ (1.33) $ (.218) $ (.019)
Net income (loss) per
share..................... $ (.701) $ (.098) $ 6.87 $ (.218) $ (.019)
Weighted average number of
shares outstanding........ 3,742,227 3,729,721 329,020 3,749,721 3,730,016
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
AT JUNE 30, --------------------------
1996 ACTUAL AS ADJUSTED(3)
----------- ---------- --------------
<S> <C> <C> <C>
Cash..................................................................... $ 971 $ 437,950 $5,877,533
Working Capital (deficit)................................................ (4,082,987) 4,863,778 575,805
Total assets............................................................. 3,272,686 4,302,136 9,741,719
Long-term liabilities.................................................... 130,414 128,157 128,157
Stockholder equity (deficit)............................................. (2,396,652) (3,214,828) 2,224,755
</TABLE>
[Update as of 12/31/96, if possible]
- ------------------------
(1) The Company petitioned for bankruptcy protection in April 1994 and operated
as a debtor-in-possession until December 16, 1994.
(2) Consists of $1,062,667 gain on exchange of debt for common stock and
$1,636,489 gain on debt forgiveness.
(3) Adjusted to reflect the receipt by the Company of the estimated net proceeds
of $5,439,582.50 from the sale of the Rights Shares at the offering price of
$2.50 per Rights Share and the application of the net proceeds therefrom.
See "Use of Proceeds."
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL YEAR ENDED JUNE 30, 1996 COMPARED TO SIX AND ONE-HALF MONTHS ENDED JUNE
30, 1995.
The following table sets forth, for the periods indicated, certain financial
items used in the discussion below.
<TABLE>
<CAPTION>
SIX AND ONE-HALF
HALF MONTHS ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1996
------------------ -------------
<S> <C> <C> <C> <C>
Net Sales................................ $ 1,861,262 $ 3,829,523
Cost of Sales............................ 1,228,747 (66% of Sales) 2,559,350 (67% of Sales)
Selling, G&A............................. 961,162 (52% of Sales) 1,843,576 (48% of Sales)
R&D...................................... -0- (0% of Sales) 1,794,823 (47% of Sales)
EBIT..................................... (328,647) (2,368,226)
Interest................................. 36,209 (2% of Sales) 256,871 (7% of Sales)
Net Loss................................. (364,856) (2,625,097)
</TABLE>
The Company's net sales increased 106% to $3,829,523 during the period ended
June 30, 1996 from $1,861,262 during the six and one-half months ended June 30,
1995.
The Company's cost of sales as a percentage of net sales increased to 67%
during the fiscal year ended June 30, 1996 from 66% for the six and one-half
months ended June 30, 1995.
Selling, general and administrative costs increased to $1,843,576 or 48% of
sales during the fiscal year ended June 30, 1996 from $961,162 or 52% of sales
for the six and one-half months ended June 30, 1995. The increase in expenses
was primarily attributable to the increased time frame of the current period
over the prior period.
Research and development expenditures increased to $1,794,823 during the
fiscal year ended June 30, 1996 from $-0- for the six and one-half months ended
June 30, 1995. The increase in expenses was primarily attributable to the
resumption of research and development activities during the later period due to
funds becoming available through borrowings from ETS and a shift in priorities
following the hiring of the Company's new management team.
Interest expense net of interest income increased to $256,871 (7% of sales)
during the fiscal year ended June 30, 1996 from $36,209 (2% of sales) for the
six and one-half months ended June 30, 1995.
Due to the net operating losses for the year ended June 30, 1996 and for the
six and one-half month period ended June 30, 1995, the Company provided for
income taxes in neither period.
For the twelve month period ended June 30, 1996, the Company had a net loss
of ($2,625,097) as compared with a net loss of ($364,856) in the six and
one-half month period ended June 30, 1995.
26
<PAGE>
FISCAL QUARTERS ENDED MARCH 31, JUNE 30 AND SEPTEMBER 30, 1996 COMPARED.
The following table sets forth, for the periods indicated, certain financial
items used in the discussion below.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------
<S> <C> <C> <C>
MAR 31, 1996 JUN 30, 1996 SEP 30, 1996
------------ ------------ ------------
Orders............................................. $1,017,211 $ 1,641,100 $ 3,579,183
Backlog............................................ 343,463 1,439,038 3,725,575
Net Sales.......................................... 886,763 545,525 1,292,646
% Margin........................................... 45% -9% 19%
R&D................................................ 541,490 664,882 438,599
Selling, G&A....................................... 502,652 494,811 507,578
EBIT............................................... (645,811) (1,205,802) (705,916)
</TABLE>
Results of operations for the quarter ended September 30, 1996, as compared
to the fiscal quarters ended March 31, 1996 and June 30, 1996 are as follows:
The Company's net sales increased 46% and 137% to $1,292,646 during the
quarter ended September 30, 1996 from $886,763 and $545,525 during the quarters
ended March 31, 1996 and June 30, 1996, respectively. This increase in sales was
primarily attributable to increased deliveries of new products ordered.
The gross margin declined (as a percentage of sales) to 19% during the
quarter ended September 30, 1996 from 45% for the three month period ended March
31, 1996. The margin for the period ended June 30, 1996 was (9%). The change was
attributable to increased sales volume of a single lower margin product and to
the fact that new products tend to have a higher proportion of cost of sales. As
described below, this is due to the increased engineering costs involved in the
initial manufacturing of new products.
Selling, general and administrative costs decreased (as a percentage of
sales) to 39% during the quarter ended September 30, 1996 from 57% in the
quarter ended March 31, 1996 and 90% in the quarter ended June 30, 1996.
Research and development expenditures decreased in absolute dollars and as a
percentage of sales during the quarter ended September 30, 1996. The amount
expended for the period ended September 30, 1996 was $438,599, down from
$541,490 and $664,882 for the periods ended March 31, 1996 and June 30, 1996,
respectively. This reduction was due to the shifting of new products from the
R&D phase to start-up manufacturing. This causes engineering and technical
manpower costs to shift from R&D to cost of sales. R&D expenditures decreased to
34% of net sales during the period ended September 30, 1996, compared to 61% and
122% for the periods ended March 31, 1996 and June 30, 1996, respectively.
FINANCIAL CONDITION
The Company's new orders booked increased 252% and 118% to $3,579,183 for
the quarter ended September 30, 1996 from $1,017,211 and $1,641,100 for the
quarters ended March 31, 1996 and June 30, 1996, respectively. More than 70% of
the orders booked in the period ended September 30 were for the Company's new
products.
The Company's backlog of orders to ship increased 985% and 159% to
$3,725,575 for the quarter ended September 30, 1996 from $343,463 and $1,439,038
for the quarters ended March 31, 1996 and June 30, 1996, respectively.
Typically, the Company must ship its backlog within 90 days to maintain
"on-time" delivery schedules. The Company anticipates that it will be able to
handle this large increase in orders while substantially maintaining this
delivery schedule.
27
<PAGE>
Orders booked in the three month period ending December 31, 1996 along with
residual backlog from prior period bookings are expected to maintain a backlog
in excess of $2,500,000 going into calendar and fiscal 1997.
The Company's assets have increased from $3,272,686 at June 30, 1996 to
$4,302,136 at September 30, 1996, while the company's liabilities have increased
from $5,669,338 at June 30, 1996 to $7,516,964 at September 30, 1996. The
decrease in net assets (assets minus liabilities) of $818,176 relates to the
Company's net loss for the three month period ended September 30, 1996.
Cash flows from operations of ($2,902,486) and ($1,137,464) for the periods
ended June 30, 1996 and June 30, 1995, respectively, were offset in whole or in
part by proceeds from loans payable to affiliates.
A bank line of credit in the amount of $2,000,000 has been established for
the Company through Bank of America's Asian Banking Unit, by Stetsys US, Inc.,
the new beneficial owner of almost 91% of the Company's outstanding stock. As of
the end of the period reported herein, the Company had drawn down $1,700,000 of
the available funds. This is a demand loan, guaranteed by an affiliate of
Stetsys US, Inc.
The Company borrowed $4,500,000 from Singapore Technologies Electronics Pte
Ltd, a related company, the proceeds from which were used to pay down the loan
payable to Engineering and Technical Services, Inc. ("ETS"), the former
beneficial owner of almost 91% of the Company's outstanding stock. This new loan
bears interest at 8% per annum and matures on February 10, 1997. An additional
$504,000 of the Company's cash was used to pay the balance of the ETS loan.
Approximately $370,000 was paid to ETS during the period for the repurchase of
inventories, machinery and equipment originally sold to ETS by Radyne in July,
1995, at a time when ETS was acting as the Company's manufacturing
subcontractor. In recognition of the fact that the Company is now fully settled
into its Phoenix facility and has sufficient staff to do so, the Board
determined that the Company should resume the direct conduct of this
manufacturing activity.
ST has made several loans to the Company, the proceeds of which have been
used for general corporate purposes described above. These loans, which bear
interest at 8% per annum mature in the following amounts on the following
respective dates: $400,000 on March 2, 1997, $1,000,000 on March 6, 1997 and
$700,000 on March 31, 1997.
The Company's working capital deficit was ($4,863,778) at September 30,
1996; an increase of $780,791 from ($4,082,987) at June 30, 1996.
28
<PAGE>
BUSINESS
GENERAL
Radyne has been involved in the advanced design and production of digital
data communications equipment and associated equipment for satellite
telecommunications systems for over sixteen years. Since the Company's inception
in 1980, Radyne has established itself as a supplier in the satellite ground
equipment business.
Radyne designs, manufacturers and sells satellite modems, frequency
converters, ancillary products and equipment racks containing integrated modems
and supporting equipment for data communications.
Although the Company was forced to file for Chapter 11 bankruptcy protection
in April 1994, it successfully emerged from bankruptcy in December of that year
upon the acquisition of approximately 91% of its Common Stock by Engineering and
Technical Services, Inc. ("ETS"), then a major customer of Radyne. On August 12,
1996, ETS was acquired by Singapore Technologies Pte Ltd through its indirect
wholly owned subsidiary, Stetsys US, Inc. ("ST"). As a result, approximately 91%
of the Company's Common Stock is now held by ST. See "Bankruptcy Reorganization"
below.
In 1995, ETS caused Radyne to install a new management team, which promptly
moved the Company's operations from New York to Phoenix, Arizona and commenced
the hiring of an almost all new staff of engineering, sales and support
personnel, with funding advanced by ETS and subsequently ST and its affiliates.
The new Radyne team has reinstituted Radyne's research, development and
marketing programs and reinvigorated its product line.
The Company's engineering staff and support facilities are dedicated to (i)
maintaining the state-of-the-art status of Radyne's traditional products for the
satellite ground equipment segment of the market, (ii) designing and enhancing
products for emerging markets, such as rural telephony for developing areas,
high-speed satellite communications, government data equipment and the growing
private network market, and (iii) providing special configurations to satisfy
customers' special needs.
Radyne's modems cover data rates from 2.4 Kilobytes per second to 50
Megabytes per second. The Company's frequency converters handle all three
frequency bands used in satellite communications. Radyne believes that most of
its current line of modems and converters are smaller and lower priced than the
previous generation of products, enabling large system installation in
significantly less rack space than the products of the Company's competitors.
The Company also markets redundancy switches which operate in conjunction with
satellite modems and converters and provide automatic fault monitoring and
switch over to standby equipment in the event of modem or converter failure.
Radyne's line of frequency converter products is usable in virtually all
earth stations for the conversion of intermediate frequencies to microwave
frequencies for satellite transmission. These converters are competitively
priced, small in size and offer either single, dual or all three bands used in
the satellite industry. In addition to being offered to commercial customers,
there is a military market for the three-band units.
The Company's newer products include a low cost modem with expanded features
and super fast acquisition capabilities, making its attractive for use in both
private networks and rural telephone systems being offered in China, Indonesia
and India, and a line of satellite frequency translators presently used for
testing in satellite earth stations.
The development of digital compression technology has allowed the
transmission of television in a small bandwidth, which has made TV transmission
by satellite more economical than ever before. Video compression allows many
times more channels on a satellite than was previously the case, thus producing
a new market of major interest. This compression technology is or is expected to
be used for transmission of TV to all network facilities, distribution of cable
TV to cable companies, high definition TV distribution
29
<PAGE>
and video teleconferencing. Radyne has developed a modulator product to be used
in conjunction with compression equipment and has been shipping this product for
the past seven months.
Radyne's operating strategy is to (i) continue to build on the experience,
skills and customer access of its new management team, (ii) capitalize on its
development of smaller, less costly satellite modems, and (iii) expand into
market segments, such as rural telephone, private networks and compressed
television transmission. See "Target Markets" below.
Notwithstanding the foregoing, investors should be aware that the Company's
future plans are subject to a number of variables outside of its control, and
there can be no assurance that the Company will be able to implement any or all
of such plans or that such plans, when and if implemented, will be successful.
See "Risk Factors."
BANKRUPTCY REORGANIZATION
In December 1994, Radyne emerged from protection under Chapter 11 of the
Bankruptcy Code. The Company believes that the reasons for Radyne having sought
bankruptcy protection have been neutralized by its new management team and
interim financing sources. When Radyne filed its bankruptcy petition in April
1994, it was suffering from severe cash flow problems due to shrinking sales.
Years of uninspired management and the failure to maintain the sort of research
and development program which is necessitated by the fast-moving data
communications industry had left Radyne with an aging product line and an
inability to access emerging markets.
On April 28, 1994, Radyne filed a petition for relief under Chapter 11 of
the federal bankruptcy laws in the United States Bankruptcy Court for the
Eastern District of New York. Under Chapter 11, certain claims against the
Company in existence prior to the filing were stayed while the Company continued
business operations as debtor-in-possession. Claims secured against the
Company's assets were also stayed, although the holders of such claims had the
right to move the court for relief from the stay prior to the Company's
reorganization plan being confirmed. Secured claims were secured primarily by
liens on all of the Company's assets.
The Company received approval from the Bankruptcy Court to pay certain of
its pre-petition obligations, employee wages and benefits. Tax claims were
rescheduled for payment in equal quarterly installments of $8,720, with interest
at 7%, over six years. A portion of these tax claims is the sole remaining
pre-petition liability of the Company.
On December 16, 1994, the Bankruptcy Court confirmed the Company's Plan of
Reorganization effective at the close of business on December 16, 1994. The
Plan, which has been consummated, called for the establishment of an escrow
account from which to pay claims and provided for the following:
(1) Exchange of Debt for Common Stock--The Company issued 17,000,000
(pre-Reverse Split) shares of previously authorized but unissued Common
Stock to Radyne Florida (a special purpose subsidiary of ETS), which had
previously purchased the Company's secured bank debt and the position of
certain holders of secured promissory notes. This issuance of stock gave
Radyne Florida approximately 91% of the Company's outstanding Common Stock.
In exchange for the stock, the Company was discharged of $2,350,000 of debt
owed to Radyne Florida. In addition, the 1,750,000 warrants held by Radyne
Florida (purchased with the secured promissory notes) were cancelled.
30
<PAGE>
(2) Cancellation of Debt--Unsecured claims and capitalized lease
obligations were settled as follows:
<TABLE>
<CAPTION>
ORIGINAL
TYPE OF CLAIM AMOUNT REDUCTIONS COMPROMISED
- ----------------------------------------------------------------------- ------------ ------------ -------------
<S> <C> <C> <C>
Accounts payable, accrued expenses, and capitalized lease
obligations.................................................. $ 1,483,343 $ 1,111,872 $ 371,471
Convertible debentures and bridge notes........................ 487,885 439,225 48,660
Taxes.......................................................... 309,143 99,866 209,277
------------ ------------ -------------
$ 2,280,371 $ 1,650,963 $ 629,408
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
(3) Other Claims--Priority Claims for wages of $53,786 were paid in
full.
Holders of the Company's Common Stock and options to purchase the Company's
Common Stock had their interests significantly diluted by the distribution of
Common Stock to Radyne Florida.
Holders of warrants to purchase the Company's Common Stock exchanged the
warrants for an aggregate of 53,437 shares of Common Stock.
INDUSTRY OVERVIEW
There are more than 150 major commercial communications satellites in orbit
today representing an investment of more than $30 billion. Over 80 more of these
expensive geosynchronous earth orbiting satellites (GEO's) are on order.
(Source: VIA SATELLITE, September 1996). The ways in which satellites are used
continue to shift over time. The principal uses today are for television
distribution, international telephone service and private networks. As more
fiber cables are laid under the oceans, the use of satellites for international
telephony is slowing. However, satellites represent a sizable investment and a
unique communications medium which will continue to be used in other ways. For
example, the use of this satellite resource is already shifting towards domestic
telephony in countries, such as China and India, which are seriously lacking in
infrastructure. In addition, technological advances, such as voice compression,
have made it economical for third world countries to have more telephone
service. Moreover, television distribution is going through a technology
revolution in which ten times as many programs can be transmitted through
satellites. This technological and economical breakthrough has created many new
markets. For example, it is now cost-effective for many relatively small market
segments to have their own TV networks (such as we are now seeing with regional
college sports). Finally, the lowering of international barriers and
privatization are allowing the expansion of more private networks.
Almost anyone who uses a satellite as a transmission path has the need for
equipment of the sort produced by Radyne. The Company estimates that the
specific segment of the ground equipment market in which Radyne currently
operates was approximately $260 million in 1995. The Company expects to continue
operating within the satellite ground equipment segment of the market for the
next several years, while continuing to expand into various new markets. For
example, the Company anticipates moving into high-speed satellite communication
products and government data equipment in the near future. Although the
telecommunications industry is rapidly changing, becoming more complex and
requiring new technology, the transformation and evolution of the industry is
not expected to cause satellite data equipment to become obsolete, at least
within the near future.
INDUSTRY TRENDS
Several major trends in the telecommunications industry should provide
opportunities for Radyne. First, telecommunications growth in the Pacific Rim
and an increase in the number of satellites orbiting over the Pacific and Indian
Oceans will produce a substantial need for satellite data communications
equipment. Second, the opening of the Asian Development Bank should provide
funds for badly needed
31
<PAGE>
telecommunications infrastructure. Third, the large demand for
telecommunications in the third world is expected to cause emerging countries to
make use of the Asian Development Bank to buy satellite data communications
equipment. Tremendous telecommunications growth is also expected in South
America. Fourth, if the United States defense budget continues to shrink, more
NDIs (non-developmental items) and COTS (commercial off-the-shelf products) may
be purchased from suppliers, such as Radyne, who can offer these products for
much less than the government would pay to develop the products. Radyne
anticipates being able to supply commercial versions of military equipment.
Fifth, as HDTV (high-definition television) becomes available, the need for
satellite equipment will increase. Finally, planned LEO (low earth orbit) and
MEO (medium earth orbit) satellite networks should serve as additional sources
of potential business for Radyne. However, there can be no assurance that the
Company will be successful in exploiting these opportunities.
Another trend in the telecommunications industry is the emergence of fiber
cable for voice and data transmission. Fiber cable is preferable to satellite
communications, although it performs the same functions as satellites, because
there is very little time-delay when using fiber cable. Satellite communication
exhibits a slight (approximately half-second) time delay. Although fiber cable
is favored over satellite communications, its emergence has not caused
obsolescence of satellite communications for several reasons. First, it is not
cost-effective to utilize fiber cable in all areas of the world, especially
emerging countries where telecommunications capabilities are just beginning to
develop. Second, although fiber cable has performance advantages, it has a
tendency to break, resulting in the need for satellite capabilities as a
back-up. Third, fiber cable is utilized mainly for point-to-point
communications. Satellite transmission, on the other hand, is superior for
distribution communications, for example video broadcasting on major television
networks. Thus, although fiber cable can be viewed as a competitor of satellite
communications, it has not historically reduced, nor is it anticipated to
reduce, the need for satellite modem equipment. Although the proliferation of
fiber optics is proceeding at a rapid pace, it is not expected to outrun
business requirements. Moreover, there should be "niche" requirements that can
be satisfied only with satellite communications for a long time to come.
(Source: SATELLITE COMMUNICATIONS, September 1996).
Compressed digital video is the latest frontier in satellite communications
technology. Three aspects of this market are of particular interest to Radyne.
The first is the requirement of television broadcasters for efficient and
economic distribution. Second, while broadcast quality digital video compression
algorithms are still in development, compressed video encoding and decoding are
already available for the less demanding business video teleconferencing and
distance learning markets. The economics of the new compressed video allow the
use of satellite transmission for nearly worldwide teaching. Third, there is an
emerging application for digital cinema distribution. As movie theaters get
smaller and thereby proliferate, the costs of making and distributing copies of
films becomes proportionally greater. Using satellite distribution, movies can
be distributed directly to thousands of theaters simultaneously. The Company
expects the digital cinema market to become substantial over the next five
years. However, there can be no assurance that the Company will succeed in the
emerging compressed digital television market.
TARGET MARKETS
Radyne has historically operated in an industry that has relatively few
customers. Today, fewer than 1,000 customers make up the market for satellite
data communication subsystems. Radyne's target markets include international
telecommunications, high speed satellite communications, rural telephony and
private network DAMA (demand assigned multiple access) users, as well as the
United States Government. Currently, Radyne has a presence in the international
telecommunications market and has just entered the DAMA products market with its
new DMD-2400 modem, but anticipates movement into the other markets in the near
future. Of course, there can be no assurance that Radyne will succeed in
capturing a significant share of these other markets.
The international telecommunications market includes users of IDR
(intermediate data rate), IBS (international business service) and open network
satellite equipment. The IDR environment is primarily
32
<PAGE>
for voice traffic, while IBS is specific to business data traffic. In addition,
the market includes customers for MUX (multiplexers), switches and peripheral
equipment. The international telecommunications market should provide
substantial business opportunities for Radyne in the near future. To illustrate
the magnitude of the potential market for Radyne's satellite modems alone, the
projected growth in transponders can be depicted as follows. A transponder is
the part of the satellite that receives an uplink signal at one frequency,
converts that signal's frequency, amplifies it and then retransmits the signal
to the ground. Satellites have an average of 24 transponders each. For each
transponder, an average of 50 modems are required (25 on the transmitting side
and 25 on the receiving end). The growth in total C-Band and Ku-Band transponder
capacity is projected to average more than 250 per year until the end of 1999,
to a world total of more than 5,000 transponders (Source: VIA SATELLITE, January
1995). This transponder growth translates into a need for up to 50,000 or more
additional satellite modems by the year 2000.
Rural telephony and private network DAMA products require special
communications equipment which is efficient for low traffic volume at many
different locations. DAMA products allow many users to access the same channel
on demand. Radyne has recently entered the DAMA products segment of the market
with its new DMD-2400 modem. The DMD-2400 can be utilized in both rural
telephony and private network systems. Rural telephony can be described as an
intra-country telecommunications network linking many small villages in a
country like Indonesia, for example, ultimately allowing the villages to
communicate with the world. A private network can be described as a network in
the commercial world. For example, banks and other financial institutions,
airlines, and large and multi-unit corporations all have the need for satellite
communications and may be linked via private networks.
Demand for DAMA products for use in private and rural telephony networks is
growing rapidly. It has been estimated that 20,000 to 50,000 new installations
will occur in North America alone over the next two or three years, translating
into substantial demand for satellite ground equipment. (Source: SATELLITE
COMMUNICATIONS, August 1996). Radyne has entered this market and has a product
agreement for both low speed data equipment and the necessary radio frequency
(RF) products.
The high-speed satellite communications market is just beginning to emerge.
Communications equipment in this segment possesses higher data rate capabilities
of approximately 12-150 megabits per second, allowing much more data to be
transmitted. Tests are currently underway by AT&T to use ATM (asynchronous
transfer mode) to transfer large amounts of data. It is Radyne's intention to
enter the high-speed satellite communications market as its engineers develop
advanced equipment designed to the higher data rate specifications.
Finally, the United States Government should provide a significant market
opportunity for Radyne as the defense budget shrinks and it becomes cost
prohibitive for the government to develop its own products. Because of the
expected growth in commercial off-the-shelf (COTS) and non-developmental item
(NDI) procurement, Radyne anticipates targeting the US Government as an
important revenue source.
MANUFACTURING
The Company's products are to a certain extent assembled and tested at its
Phoenix, Arizona facilities using subsystems and circuit boards supplied by
subcontractors. Although the Company believes that it maintains adequate stock
to reduce the procurement lead time for certain components, the Company's
products use a number of specialized chips and customized components or
subassemblies produced by a limited number of suppliers. In light of previous
financial difficulties, Radyne has experienced some inflexibility on the part of
certain suppliers in regard to credit terms for delivered components. In the
event that such suppliers were to be unable or unwilling to fulfill the
Company's requirements, the Company could experience an interruption in
production until an alternative source of supply was developed. The Company
maintains an inventory of certain chips and components and subassemblies to
limit the potential for such an interruption. The Company believes that there
are a number of companies capable of
33
<PAGE>
providing replacements for the types of unique chips and customized components
and subassemblies used in its products.
SALES AND MARKETING
The Company sells its products through international representatives,
distributors and systems integrators which are supported by the Company's sales
and marketing personnel. In-house direct sales by the Company are targeted
toward large accounts, new accounts and the establishment of distributors in new
markets. The Company has recently established new distribution or representation
arrangements in the Middle East, South America, Asia and the Pacific Rim.
The Company has an informal marketing arrangement with Agilis Communication
Technologies Pte Ltd, an affiliate of ST and the General Manager of which is a
director of the Company. Under this arrangement, Agilis acts as Radyne's sales
agent for several countries in Asia, as well as Australia and New Zealand.
During the first seven months of this arrangement, which was entered into prior
to the Company's affiliation with ST, Agilis produced over $650,000 of orders
for Radyne products.
The Company's direct sales force is comprised of [6] individuals in the
sales department, supported by systems and applications engineers. Direct sales
activities are focused on expanding the Company's international sales by
identifying emerging markets and establishing new distributor accounts.
Additionally, the Company directly targets certain major accounts which may
provide entry into new markets or lead to subsequent distribution arrangements.
Such major accounts tend to be telecommunications agencies and major
corporations in new international markets. The Company has a customer service
and support group, which primarily supports distributors and is responsible for
after-sale support and installation supervision. In certain instances the
Company uses third party companies for installation and maintenance.
Export sales, as a percentage of total revenues, were approximately 50% in
the fiscal year ended June 30, 1996, and the Company expects this figure to rise
in subsequent periods.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts to date have been devoted to
the design and development of new products for the satellite communications and
telecommunications industries. The Company's future growth depends on increasing
the market shares of its new products, adaptation of its existing satellite
communications products to new applications, and the introduction of new
communications products that will find market acceptance and benefit from the
Company's established international distribution channels. Accordingly, the
Company is actively applying its communications expertise to design and develop
new hardware and software products and enhance existing products. However, there
is no assurance that the Company will continue to have access to sufficient
capital to fund the necessary research and development or that such efforts,
even if adequately funded, will prove successful.
In its fiscal years ended December 15, 1994, June 30, 1995 and June 30,
1996, the Company spent $0, $0 and $1.8 million, respectively, on research and
development activities. During this period, the Company introduced the RCS-10
Redundant Modem System, the DMD-15 Universal Modem, the DVB-3000 Digital Video
Modulator, the SFC-6400 Up Converter, the SFC-4200 Down Converter, and the
RCS-20 Modem Switch, as well as the DMD-2400 Modem.
COMPETITION
The Company has a number of major competitors in the satellite
communications field. These include large companies, such as Hughes Network
Systems, NEC, California Microwave and Spar Aerospace, which have significantly
larger and more diversified operations and greater financial, marketing, human
and other resources than Radyne. The Company believes that it has been able to
compete by concentrating its sales efforts in the international market,
utilizing the resources of local distributors, and by emphasizing
34
<PAGE>
product features. However, most of the Company's competitors offer products
which have one or more features or functions similar to those offered by the
Company. The Company believes that the quality, performance and capabilities of
its products, its ability to customize certain network functions and the
relatively lower overall cost of its products, as compared to the costs
generally offered by the Company's major competitors, have contributed to
Radyne's ability to compete successfully. However, the Company's major
competitors have the resources available to develop products with features and
functions competitive with or superior to those offered by the Company. There
can be no assurance that such competitors will not successfully develop such
products or that the Company will be able to maintain a lower cost advantage for
its products. Moreover, there can be no assurance that the Company will not
experience increased competition in the future from these or other competitors
currently unknown.
TECHNOLOGY
The Company believes that improvement of existing products, reliance upon
trade secrets, copyrights and unpatented proprietary know-how and the
development of new products are generally as important as patent protection in
establishing and maintaining a competitive advantage. Because patents often
provide only narrow protection which may not provide a competitive advantage in
areas of rapid technological change and because patent applications require
public disclosure of information which may otherwise be subject to trade secret
protection, Radyne has not obtained, and has no present intention to obtain,
patents on existing products. However, there can be no assurance that the
Company's technology will not be found to infringe upon the intellectual
property of others. If the Company's technology should be found to impermissibly
utilize the intellectual property of others, the Company's ability to utilize
the technology could be materially restricted or prohibited. In such event, the
Company might be required to obtain licenses from third parties to utilize the
patents or proprietary rights of others. No assurance can be given that any
licenses required could be obtained on terms acceptable to the Company or at
all. In addition, in such event, the Company could incur substantial costs in
defending itself against infringement claims made by third parties or in
enforcing its own intellectual property rights.
EMPLOYEES
As of December 31, 1996, the Company had [60] full time employees, including
two executive officers, [43] in engineering, manufacturing and marketing
operations, and [3] in administration. None of the Company's employees are
represented by a union or governed by a collective bargaining agreement, and the
Company believes that its relations with its employees are satisfactory.
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings.
35
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors and executive officers of the Company, their positions held
with the Company, and their ages are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Lim Ming Seong............................. 49 Director, Chairman of the Board
Chan Wee Piak.............................. 41 Director
Lee Yip Loi................................ 52 Director
Robert A. Grimes........................... 44 Director
Robert C. Fitting.......................... 61 Director and President
Steven W. Eymann........................... 44 Vice President
</TABLE>
Each director is elected for a period of one year at the Company's annual
meeting of stockholders and serves until the next meeting and until his
successor is duly elected and qualified. Officers are elected by, and serve at
the discretion of, the Board of Directors.
The following is a brief summary of the background of each director,
executive officer and certain key employees of the Company:
DIRECTORS AND EXECUTIVE OFFICERS:
LIM MING SEONG has a been a Director and Chairman of the Board of the
Company since August 13, 1996 and is chairman of its Compensation Committee. He
is the Chairman of Vertex Management, Inc., a member of the ST group, and he has
been Group Director of Singapore Technologies Pte Ltd, an indirect parent of ST
since February of 1995. From March 1992 until February 1995, he was Executive
Director of Singapore Technologies Ventures Pte Ltd and from February 1990 to
March 1992, he was Group President of Singapore Technologies Holdings Pte Ltd.
Prior to that time he held various corporate and government positions, including
Deputy Secretary in the Singapore Ministry of Defense from 1979 to 1986.
LEE YIP LOI has been a Director of the Company since August 13, 1996 and is
chairman of the Audit Committee and a member of the Compensation Committee of
the Board. He has been Regional Director (America) of Singapore Technologies Pte
Ltd since March 1994 and has been President of Metheus Corporation, another
member of the same group of companies, since May 1990. Prior to that time he
held a number of managerial positions with such corporations as Morgan Guaranty
Trust and Singapore Technologies Pte Ltd and government positions with the
Singapore Ministries of Education, Defense, Culture and Home Affairs.
CHAN WEE PIAK has been a Director since August 13, 1996 and is a member of
the Compensation Committee of the Board. He has been General Manager of Agilis
Communication Technologies Pte Ltd, also a member of the Singapore Technologies
group, since January 1992. From November 1989 to February 1992, he was General
Manager of Chartered Microwave Pte Ltd. Prior to that time, he held various
managerial positions in the Singapore Ministry of Defense and with Singapore
Electronic and Engineering.
ROBERT A. GRIMES, who is a member of the Audit and Compensation Committees
of the Board, has served as a member of the Board of Directors since December,
1994. For the past seven years Mr. Grimes has also served as the President and a
member of the Board of Engineering and Technical Services, Inc.
ROBERT C. FITTING has been President of the Company since February, 1995,
became a Director of the Company in March, 1995 and is a member of the Audit
Committee of the Board. Mr. Fitting has a Master of Electrical Engineering
degree from New York University and a Bachelors with distinction from Penn
36
<PAGE>
State University. His professional career began at Bell Laboratories in 1962
where he spent six years developing innovative communication technologies. Mr.
Fitting then joined the Motorola Government Electronics Division where he was an
engineering manager. He published more than a dozen technical papers and was
awarded a number of patents. He left Motorola in 1978 to build a new company
under an agreement with Comtech Telecommunications. The new company was named
Comtech Data Corporation, currently known as Fairchild Data Corporation. Mr.
Fitting was the General Manager and President of Comtech Data Corporation from
1978 to 1984. He left Comtech to start a new company called EFData Corporation.
As co-founder, CEO and President of EFData Corporation, Mr. Fitting built the
company into a worldwide market leader in satellite communications equipment.
While at EFData, Mr. Fitting won the Arizona Entrepreneur award in 1993 in the
manufacturing/high technology category.
STEVEN EYMANN has been Executive Vice President of the Company since
February, 1995. Mr. Eymann graduated with honors and a Bachelor of Science in
Electrical Engineering from the University of Nebraska. His professional career
began at the Motorola Government Electronics Division where he was a design
engineer, task leader and finally a project leader for the DSU-23/29B fuse
development program. As project leader, he was responsible for project
management, budgets, schedules, design and testing of the fuse. He designed the
computer-controlled automatic test set for factory testing based on an HP 9825
computer. The DSU-23/29B is an L-Band PN radar for accurate, low-cost altitude
direction. In June of 1981, Mr. Eymann joined Comtech Data Corporation where he
was Director of Product Development. He was responsible for budget, schedule and
technical aspects of all new product development within Comtech. Prior to
becoming the Director of Product Development, he served as a senior engineer
with program and technical design responsibility. He left Comtech in 1984 to
begin a new company called EFData Corporation. As co-founder and Vice President
of EFData, Mr. Eymann was responsible for new product development and
engineering management in the design and manufacture of high technology,
military and commercial communications equipment.
CERTAIN KEY EMPLOYEES:
GARRY KLINE, Secretary, Controller and Acting CFO, joined the Company in
September of 1995. From 1987 through 1995, Mr. Kline served as CFO and
Controller of EFData Corporation. Prior to 1987, Mr. Kline served in various
positions, including Vice President of Finance for Megatronics Inc., a publicly
held printed circuit board manufacturer, Vice President of Operations for Vernal
Lodging Associates, a hospitality management company, and General Partner of Tax
and Accounting Computer Service, an accounting firm.
PETER WEISSKOPF has been the President of the Microwave Products Division at
Radyne since June, 1995. At Radyne, he is responsible for the operation of the
microwave products division. His duties include marketing, design and
manufacture of existing and new microwave products as well as the administration
of the division. Mr. Weisskopf has a Bachelor of Science in Computer and
Electrical Engineering from George Mason University. He has worked as an
engineer for several companies during his professional career, including
Magnavox Data Systems, M/A-COM Linkabit and M/A-COM Active Assemblies Division.
From 1990 to 1992, Mr. Weisskopf was an engineer at EFData Corporation, where he
designed synthesized frequency converters for use in satellite communications.
In 1992, Mr. Weisskopf founded Merit Microwave, Inc. As founder and President of
this start-up firm, Mr. Weisskopf designed and marketed various microwave
components and systems, including a complete line of satellite loopback test
translators.
ROBERT NOBIS has been the Director of Sales for the Company since April
1995. Mr. Nobis has a Master of Science degree in Electronics Engineering from
North Dakota State University. Prior to joining the Company he spent most of his
professional career working for Motorola, Inc. beginning in 1971 as a
communications project engineer. He joined the Motorola Integrated Circuits
Division in 1973 where he was a microcomputer systems engineer and was a member
of the original development team for the
37
<PAGE>
MC6806 MPU family. From 1976 through 1989, Mr. Nobis held several international
marketing positions for Motorola including Strategic Marketing Manager for
Asia-Pacific, Director of Market Development in Tokyo, Japan, Strategic
Marketing Manager, Technology Marketing Manager and Technology Sales Manager in
Phoenix, Arizona. In 1989, Mr. Nobis formed and organized Data Integrity
Services International to provide international marketing consulting services to
small businesses in Arizona. In 1991, he joined Fairchild Data Corporation, as
Regional Marketing Director for Asia-Pacific. At Fairchild, he was responsible
for the marketing and sales of satellite communications products in the
Asia-Pacific Region.
ALAN POTTER has been the Vice President of Marketing for the Company since
December 1995. His duties at Radyne include market research, neoteric product
concepts, new corporate alliances and distribution systems in Europe and the
Middle East. He joined Radyne after ten years with EFData as Sales Manager. Mr.
Potter graduated from the University of Houston with honors, holding a Bachelor
of Arts in Communications. After post graduate studies at the University of
Massachusetts, Amherst, he began his professional career as an Associate
Professor of Communications at the University of Texas at Houston. While there,
in 1973, he developed and operated the first practical bi-directional coaxial
cable network to simultaneously carry voice, data and video communications. He
then designed, developed and managed a series of broadband cable television and
data networks for Columbia Cable Television, Michelson Media and Cox Cable
Communications. Mr. Potter joined Comtech Data in 1984 and, two years later, he
followed Messrs. Fitting and Eymann to initiate the Sales and Marketing
Department at EFData. He is currently an MBA candidate at the University of
Phoenix.
DAVE KOBLINSKI has been the Vice President of Operations for the Company
since March, 1995. Mr. Koblinski has a Bachelor of Science in Business
Administration from Arizona Sate University. He also holds a degree in
Electronics Technology from Mesa Community College. His professional career
began in 1982 at Comtech Data Corporation where he held the position of Customer
Service Representative. He was responsible for repairs, field and telephone
support of satellite data modems. From 1985 to 1995, Mr. Koblinski was the
Senior Product Manager for EFData Corporation. His general responsibilities at
EFData included relating customer requests and concerns to the factory. His
direct responsibilities included the customer service, technical publication and
order entry departments.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established a Compensation Committee which
currently consists of Messrs. Lim, Chan, Lee and Grimes. The Compensation
Committee reviews and recommends to the Board the compensation and benefits for
all officers of the Company and reviews general policy relating to compensation
and benefits of the employees.
The Board of Directors has also established an Audit Committee consisting of
Messrs. Lee, Grimes and Fitting. This committee recommends the selection of the
Company's independent public accountants to the Board of Directors, evaluates
the independent public accountants and consults with them as to the Company's
internal accounting controls.
DIRECTOR COMPENSATION
The Company's policy is to pay no compensation to directors for acting as
such. Non-employee directors will receive the following ST Rights: Lim Ming
Seong--6,000; Lee Yip Loi--10,000; Chan Wee Piak--10,000; and Robert A.
Grimes--40,000.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for services in all
capacities to the Company for the period from the commencement of his employment
on March 1, 1995 through December 31, 1996 of the Company's President. No other
executive officer or employee received total annual salary and bonus of more
than $100,000. The Company and its President have not entered into an employment
agreement.
38
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND PRINCIPAL YEAR
POSITION ENDED(1) SALARY OPTIONS (#)
- ---------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Robert C. Fitting......................................... 12/31/96 $ 40,000 279,085
President................................................. 06/30/96 $ 80,000 0
06/30/95 $ 29,231 0
</TABLE>
- ------------------------
(1) Mr. Fitting's employment with the Company commenced on March 1, 1995, so the
figures shown for the fiscal year ended June 30, 1995 reflect a four-month
period. The Company's fiscal year has been changed to the calendar year, so
the figures shown for the year ended December 31, 1996 reflect a period of
six months.
DIRECTORS' LIMITATION OF LIABILITY
The Company's Certificate of Incorporation and By-Laws include provisions to
(a) eliminate the personal liability of directors for monetary damages resulting
from breaches of their fiduciary duty (except for liability for acts or
omissions in bad faith or which involve intentional misconduct or a knowing
violation of law, violations under Section 719 of the New York Business
Corporation Law or any transaction from which the director derived a personal
benefit to which he was not legally entitled) and (b) indemnify the directors
and officers to the fullest extent permitted by Article 7 of the New York
Business Corporation Law, including circumstances under which indemnification is
otherwise discretionary. The Company believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
The Company carries directors and officers liability insurance in the amount
of $2 million.
STOCK OPTION PLAN
On November 13, 1996, the Board of Directors of the Company adopted the 1996
Incentive Stock Option Plan (the "Plan"). On January 8, 1997, the stockholders
of the Company approved the Plan. The Plan provides for the grant of options to
purchase up to 1,282,042 shares of Common Stock to employees of the Company.
Options may be either "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended, or non-qualified options.
The Plan will be administered by the Compensation Committee, which is
composed of "disinterested members" of the Board of Directors (as defined by
Rule 16b-3 under the Exchange Act), who determine, among other things, the
individuals who shall receive options, the time period during which the options
may be partially or fully exercised, the number of shares of Common Stock
issuable upon the exercise of each option, and the option exercise price.
The exercise price per share of Common Stock subject to an option granted
under the Plan may not be less than the fair market value per share of Common
Stock on the date the option is granted. The aggregate fair market value
(determined as of the date the option is granted) of Common Stock for which any
person may be granted incentive stock options which first become exercisable in
any calendar year may not exceed $100,000, although in the case of Messrs.
Fitting and Eymann, the excess will be treated as non-qualified stock options.
No person who owns, directly or indirectly, at the time of the granting of an
option to such person, 10% or more of the total combined voting power of all
classes of stock of the Company (a "10% Stockholder") shall be eligible to
receive any stock options under the Plan unless the exercise price is at least
110% of the fair market value of the shares of Common Stock subject to the
option, determined on the date of grant.
No stock option may be transferred by an optionee other than by will or the
laws of descent and distribution, and, during the lifetime of an optionee, the
option will be exercisable only by the optionee. In
39
<PAGE>
the event of termination of employment other than by death or disability, the
optionee will have no more than three months after such termination during which
the optionee shall be entitled to exercise the option, unless otherwise
determined by the Board of Directors. Upon termination of employment of an
optionee by reason of permanent and total disability, such optionee's options
remain exercisable for one year thereafter to the extent such options were
exercisable on the date of such termination. Upon termination by reason of
death, such period shall be as determined by the Board of Directors.
Options under the Plan must be issued within ten years from the effective
date of the Plan. The effective date of the Plan is November 13, 1996. Options
granted under the Plan cannot be exercised more than ten years from the date of
grant. Stock options issued to a 10% Stockholder are limited to five year terms.
Options granted under the Plan generally provide for the payment of the exercise
price in cash and may provide for the payment of the exercise price by delivery
to the Company of shares of Common Stock already owned by the optionee having a
fair market value equal to the exercise price of the options being exercised, or
by a combination of such methods. Therefore, if so provided in an optionee's
options, such optionee may be able to tender shares of Common Stock to purchase
additional shares of Common Stock and may theoretically exercise all of his
stock options with no additional investment other than the purchase of his
original shares.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the Plan.
At December 31, 1996, options to acquire 964,395 shares of Common Stock were
outstanding under the Plan. Such options are exercisable at a price of $2.50 per
share. (For information regarding the establishment of the exercise price, see
"Purpose of the Rights Offering and Use of Proceeds".) 280,000 of these options
are Rights Options which have been granted to Radyne employees as a counterpart
to participation in the Rights Offering; accordingly such options are presently
exercisable, but may not be exercised after March 14, 1997. Another 16,000
options will become exercisable at the rate of 25% on each of the first four
anniversaries of their grant date (November 13, 1996) and expire on the tenth
anniversary of their grant date.
The remaining 668,395 options were allocated among a group of 30 key
employees with the intent of giving them the opportunity to purchase and retain
up to 10% of the fully diluted common equity of the Company (after giving effect
to the Reverse Split and the Rights Offering), if certain earnings milestones
(described below) are reached. These options also carry the right to a cash
bonus of approximately $1.72 per purchased share, payable upon exercise. Because
the Company's shares are so thinly traded at present, the grantees of these
options will be accorded the right to cause the Company to purchase at an
appraisal price any shares acquired upon exercise of these options if, as of the
end of the calendar quarter when such options become exercisable (or December
31, 1998, if later), ST and its affiliates continue to own more than 80% of the
Common Stock. Moreover, if the Company sells additional shares of Common Stock
in the future (other than pursuant to the Rights Offering or employee stock
options), these same optionees will be granted additional options (which may or
may not constitute incentive stock options, in the discretion of the Board of
Directors) to acquire a sufficient number of Common Shares, at the then offering
price, so that their unexercised options will maintain their proportionate fully
diluted common equity. One-third of the 668,395 options will become exercisable,
if and when the Company's earnings before interest and taxes (calculated without
regard to the above described cash bonus) for a period of four calendar quarters
("EBIT") exceeds $1,000,000. Another one-third of these options will become
exercisable if and when EBIT exceeds $2,500,000. The remaining one-third will
become exercisable if and when EBIT exceeds $6,000,000.
40
<PAGE>
STOCK OPTIONS
The following table provides information with respect to stock option grants
to Robert C. Fitting during the fiscal year ended December 31, 1996 under the
Company's 1996 Incentive Stock Option Plan. The Company does not have a stock
appreciation rights plan.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF TOTAL
OPTIONS GRANTED
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED IN FISCAL YEAR PRICE DATE
- --------------------------------------- ----------- ------------------- ----------- ------------
<S> <C> <C> <C> <C>
Robert C. Fitting...................... 215,085(1) 22.3% $ 2.50 Nov. 2006
64,000 6.6% $ 2.50 Mar. 1997
</TABLE>
- ------------------------
(1) One-third of these options will become exercisable if the Company's earnings
before interest and taxes, calculated without regard to the below described
cash bonus, for any period of four calendar quarters ("EBIT") exceeds
$1,000,000. An additional one-third will become exercisable if EBIT exceeds
$2,500,000. The final one-third will become exercisable if EBIT exceeds
$6,000,000. A cash bonus of approximately $1.72 per purchased share will be
payable at the time of exercise. If the Company sells additional shares of
its Common Stock (other than pursuant to the Rights Offering or employee
stock options), the grantee will be granted the option to maintain the fully
diluted equity percentage represented by the then outstanding portion of
this grant, at the price then offered. When these options become exercisable
(or, if later, December 31, 1998), if ST and its affiliates continue to own
more than 80% of the Company's Common Stock, the grantee will have the right
to sell shares acquired on exercise back to the Company at an appraised
value. If Mr. Fitting were to voluntarily leave the Company before the
earlier of August 16, 2001 or EBIT having exceeded $6,000,000, he would
forfeit 25% of these options. See "Stock Option Plan" above.
41
<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth, as of the date hereof, the ownership of the
Common Stock by (i) each person who is known by the Company to own of record or
beneficially more than 5% of the outstanding Common Stock, (ii) each of the
Company's directors and its President, and (iii) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the
stockholders listed in the table have sole voting and investment powers with
respect to the shares indicated.
<TABLE>
<CAPTION>
NUMBER
OF PERCENTAGE
NAME AND ADDRESS SHARES(1) OF CLASS
- ---------------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Stetsys US, Inc......................................................................... 3,400,000 90.4%
c/o Singapore Technologies Pte Ltd
83 Science Park Drive
#01-01/02 The Curie Singapore Science Park
Singapore 118258
Stetsys Pte Ltd......................................................................... 5,360,000(2) 93.7%
c/o Singapore Technologies Pte Ltd
83 Science Park Drive
#01-01/02 The Curie Singapore Science Park
Singapore 118258
Robert C. Fitting....................................................................... 64,000(3) 1.7%
5225 S. 37th Street
Phoenix, Arizona 85040
Robert A. Grimes........................................................................ 40,000(3) 1.1%
5225 S. 37th Street
Phoenix, Arizona 85040
Lee Yip Loi............................................................................. 10,000(3) *
c/o Singapore Technologies Pte Ltd
83 Science Park Drive
#01-01/02 The Curie Singapore Science Park
Singapore 118258
Chan Wee Piak........................................................................... 10,000(3) *
c/o Singapore Technologies Pte Ltd
83 Science Park Drive
#01-01/02 The Curie Singapore Science Park
Singapore 118258
Lim Ming Seong.......................................................................... 6,000(3) *
c/o Singapore Technologies Pte Ltd
83 Science Park Drive
#01-01/02 The Curie Singapore Science Park
Singapore 118258
All directors and executive officers of the Company as a group (6 persons).............. 188,000(3) 4.8%
</TABLE>
- ------------------------
* Less than one percent.
(1) Adjusted for the Reverse Split.
(2) Includes 1,960,000 Rights Shares underlying ST Rights received pursuant to
the Rights Offering. The Shares reported as owned by Stetsys Pte Ltd include
the shares reported as beneficially owned by Stetsys US, Inc., of which
Stetsys Pte Ltd is sole shareholder. No adjustment has been made for the
possibility that as many as 280,000 of such ST Rights will not become
exercisable or the effect of the exercise of Rights and Rights Options held
by others.
(3) Consists entirely of Rights Shares underlying Rights received pursuant to
the Rights Offering and/or shares underlying Rights Options.
42
<PAGE>
CERTAIN TRANSACTIONS
In 1995, the Company acquired the assets of Merit Microwave, Inc. ("Merit"),
as well as the manufacturing rights to the Merit line of microwave products,
which include translators and frequency converters. The purchase price was
allocated to inventory, machinery and equipment, and designs and drawings, and
was paid by the issuance of 30,000 shares of the Company's Common Stock (after
adjustment by the Reverse Split), cash of $60,000, and the assumption of a trade
payable of $20,000. Under the terms of the agreement, Peter Weisskopf, the
principal shareholder and chief operating officer of Merit entered into a
one-year agreement with the Company to serve as president of the newly created
Radyne Microwave Products Division for annual compensation of $75,000. As long
as he remains in this position, the Company is committed to pay royalties to
Merit of 5-10% of sales of Merit products. Through December 31, 1996, the
Company has paid approximately $4,600 in royalties pursuant to this arrangement.
During July 1995, the Company sold $163,770 of inventory and $119,367 of
machinery and equipment to ETS in exchange for a reduction in the loan payable
to ETS to facilitate the commencement of subcontract manufacturing by ETS.
During September 1996, in order to recommence the related manufacturing
operations at its own Phoenix facility, the Company purchased from ETS
approximately $370,000 of inventory, machinery and equipment. One of the
Company's Directors, Robert A. Grimes, is President and a Director of ETS. ETS
is a wholly owned subsidiary of ST.
The Company has an informal marketing arrangement with Agilis Communication
Technologies Pte Ltd, an affiliate of ST. Agilis acts as a sales agent for
Radyne products in a number of Asian countries, Australia and New Zealand.
During the first seven months of this arrangement, which predates the Company's
affiliation with ST, Agilis produced over $650,000 of orders for Radyne
products. The General Manager of Agilis, Chan Wee Piak, is a Director of the
Company.
On August 12, 1996, Stetsys US, Inc. ("ST"), a member of the Singapore
Technologies Pte Ltd ("STPL") group, acquired 100% of the outstanding common
stock of ETS. (ST is a wholly owned Delaware subsidiary of Stetsys Pte Ltd,
which is a wholly owned subsidiary of STPL. STPL is an indirect wholly owned
subsidiary of Temasek Holdings (Private) Limited, which is in turn wholly owned
by the Minister for Finance (Incorporated) of Singapore). Messrs. Lim Ming
Seong, Lee Yip Loi, Chan Wee Piak and Robert A. Grimes are all both Directors of
the Company and officers of other corporations in the STPL group. On October 22,
1996, Radyne Florida was merged into ETS and the shares of the Company that had
been owned by Radyne Florida were received by ETS and subsequently distributed
by ETS to ST. In addition, Singapore Technologies Electronics Pte Ltd ("STE"),
another member of the STPL group, made an unsecured loan of $4,500,000 to the
Company, the proceeds from which were used to pay down the loan payable to ETS.
ST has made subsequent advances to Radyne in the aggregate amount of $2,100,000.
At present, including accrued interest, Radyne owes approximately $2,130,000
to ST, payable on various dates between March 2 and March 31, 1997, and
approximately $4,670,000 to STE, payable February 10, 1997. A portion of the
proceeds of the Rights Offering may be used to repay these amounts to STE and
ST. See "Use of Proceeds."
In addition, Singapore Technologies Pte Ltd, an affiliate of ST and STE, has
guaranteed a $2 million bank line of credit for the Company. Loans pursuant to
this facility, which has been substantially drawn down, are demand loans. There
can be no assurance that the bank will not demand repayment at an inopportune
time for the Company or that ST and its affiliates will continue to make such
financing available to the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The following summary description of the Common Stock is qualified in its
entirety by reference to the Company's Certificate of Incorporation.
The Company is authorized to issue up to 20,000,000 shares of Common Stock,
par value $.002 per share, of which 3,759,721 shares are outstanding as of the
date hereof (after adjustment by the Reverse Split). Holders of Common Stock are
entitled to one vote for each share held of record on each matter submitted to a
vote of stockholders. There is no cumulative voting for election of directors.
Holders of Common Stock are entitled to receive ratably dividends when, as and
if declared by the Board of Directors out of funds legally available therefor
and, upon the liquidation, dissolution or winding up of the Company, are
entitled to share ratably in all assets remaining after payment of liabilities.
Holders of Common Stock have no preemptive rights and have no rights to convert
their Common Stock into any other securities. The outstanding Common Stock is
validly authorized and issued, fully paid and nonassessable.
TRANSFER AGENT
The Company has appointed Continental Stock Transfer and Trust Co. as
transfer agent for the Common Stock.
CONCURRENT SALE BY SELLING STOCKHOLDER
The Registration Statement, of which this Prospectus forms a part, also
includes a separate prospectus relating to the offering and resale by Merit
Microwave, Inc. (a corporation controlled by Peter Weisskopf, the president of
the Company's Microwave Products Division) of 30,000 shares of Common Stock
issued thereto in exchange for business assets.
Sales of such shares of Common Stock, or even the potential of such sales,
could have an adverse effect on the market price of the Common Stock. As a
result of the registration of the resale of such shares of Common Stock, the
freely tradeable Common Stock will be increased by 30,000 shares.
SHARES ELIGIBLE FOR FUTURE SALE
The sale, or availability for sale, of a substantial number of shares of
Common Stock in the public market subsequent to this offering pursuant to Rule
144 under the Securities Act ("Rule 144") or otherwise could materially
adversely affect the market price of the Common Stock and could impair the
Company's ability to raise additional capital through the sale of its equity
securities or debt financing. Upon completion of the Rights Offering, if all
Rights and Rights Options are fully exercised, there would be approximately
6,015,554 shares of Common Stock issued and outstanding. Of these shares, the
Company believes that approximately 905,554 would be freely transferable
immediately due to the present or prior registration or the present availability
of a Rule 144 exemption from the requirement of registration. The remaining
approximately 5,110,000 shares would be "restricted securities" for purposes of
the Securities Act and would be eligible for resale at various times in the
future, in each case subject to the volume and manner of sale limitations of
Rule 144 under the Securities Act. Of these restricted shares, 3,400,000 shares
are owned by ST and it is estimated that 1,680,000 shares would be owned by SPL.
Over 91% of the presently outstanding shares of Common Stock are "restricted
securities" within the meaning of Rule 144 under the Securities Act and, if held
for at least two years, would be eligible for sale in the public market in
reliance upon, and in accordance with, the provisions of Rule 144 following the
expiration of such two-year period. In general, under Rule 144 as currently in
effect, a person or persons whose shares are aggregated, including a person who
may be deemed to be an "affiliate" of the Company as that term is defined under
the Securities Act, would be entitled to sell within any three month period a
number of shares beneficially owned for at least two years that does not exceed
the greater of (i) 1% of the
44
<PAGE>
then outstanding shares of Common Stock, or (ii) the average weekly trading
volume in the Common Stock during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain requirements as to the manner
of sale, notice, and the availability of current public information about the
Company. However, a person who is not deemed to have been an affiliate of the
Company during the 90 days preceding a sale by such person and who has
beneficially owned such shares of Common Stock for at least three years may sell
such shares without regard to the volume, manner of sale, or notice requirements
of Rule 144.
Prior to this offering, there has been no established public market for the
Company's securities as trading in the Common Stock has been infrequent.
Following this offering, the Company cannot predict the effect, if any, that
sales of shares of Common Stock pursuant to Rule 144 or otherwise, or the
availability of such shares for sale, will have on the market price from time to
time. Nevertheless, sales by the current stockholders of a substantial number of
shares of Common Stock in the public market could materially adversely affect
market prices for the Common Stock. In addition, the availability for sale of a
substantial number of shares of Common Stock acquired through the exercise of
Rights or outstanding options under the Plan could materially adversely affect
market prices for the Common Stock.
Up to an aggregate of 280,000 shares of Common Stock may be purchased by the
holders of currently exercisable options outstanding under the Plan.
In addition, the Registration Statement, of which this Prospectus forms a
part, includes a separate prospectus relating to the offering and resale by one
shareholder of 30,000 shares of Common Stock. See "Concurrent Sale by Selling
Stockholder."
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Brock,
Fensterstock, Silverstein, McAuliffe & Wade, LLC, New York, New York, special
counsel.
EXPERTS
The financial statements included in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein and elsewhere in the Registration Statement (which expresses an
unqualified opinion and includes an explanatory paragraph relating to the United
States Bankruptcy Court of the Eastern District of New York entering an order
confirming the Company's plan of reorganization which became effective at the
close of business on December 16, 1994), and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
45
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors....................................................... F-2
Balance Sheet as at June 30, 1996.................................................... F-3
Statements of Operations for the Year Ended June 30, 1996 and the Six and One-Half
Month Period Ended June 30, 1995................................................... F-4
Statements of Stockholders' Equity (Deficit) for the Year Ended June 30, 1996 and the
Six and One-Half Month Period Ended June 30, 1995.................................. F-5
Statements of Cash Flows for the Year Ended June 30, 1996 and the Six and One-Half
Month Period Ended June 30, 1995................................................... F-6
Notes to Financial Statements........................................................ F-7
Condensed Balance Sheet as at September 30, 1996 (Unaudited)......................... F-14
Condensed Statements of Operations for the Three Months Ended September 30, 1996
(Unaudited) and September 30, 1995 (Unaudited)..................................... F-15
Condensed Statements of Cash Flows for the Three Months Ended September 30, 1996
(Unaudited) and the Three Months Ended September 30, 1995 (Unaudited).............. F-16
Notes to Financial Statements........................................................ F-17
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of Radyne Corp.:
We have audited the accompanying balance sheet of Radyne Corp. (a subsidiary
of Engineering and Technical Services, Inc.) (the Company or Radyne) as of June
30, 1996, and the related statements of operations, stockholders' equity
(deficit) and cash flows for the year ended June 30, 1996 and six and one-half
month period ended June 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Notes 1, 2, and 3 to the accompanying financial statements,
on December 16, 1994, the United States Bankruptcy Court for the Eastern
District of New York entered an order confirming the plan of reorganization
which became effective at the close of business on December 16, 1994. In
addition, the Company changed its fiscal year end to June 30. Accordingly, the
accompanying statements of operations, stockholders' equity (deficit) and cash
flows for the six and one-half month period ended June 30, 1995, are the initial
financial statements of the Successor Company.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of June 30, 1996, and the
results of its operations and its cash flows for the year ended June 30, 1996
and six and one-half month period ended June 30, 1995, in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
- ------------------------
DELOITTE & TOUCHE LLP
Orlando, Florida
August 23, 1996, except as to Note 12, the date of which is December 13, 1996
The accompanying financial statements retroactively reflect a 5-for-1
reverse stock split which is expected to be effective on January 9, 1997. The
above opinion is in the form which will be signed by Deloitte & Touche LLP upon
consummation of such a split, which is described in Note 12 to the financial
statements, and assuming that, from August 23, 1996 to the date of such split,
no other events shall have occurred that would affect the accompanying financial
statements and notes thereto.
Deloitte & Touche LLP
Phoenix, Arizona
December 13, 1996
F-2
<PAGE>
RADYNE CORP.
(A SUBSIDIARY OF ENGINEERING AND TECHNICAL SERVICES, INC.)
BALANCE SHEET
JUNE 30, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash.......................................................................... $ 971
Accounts receivable--trade (net of allowance for doubtful accounts of
$13,000).................................................................... 283,871
Inventories--net (Notes 1 and 4).............................................. 1,150,669
Prepaid expenses.............................................................. 20,426
----------
Total current assets...................................................... 1,455,937
----------
MACHINERY AND EQUIPMENT--Net of accumulated depreciation of $62,405
(Notes 1 and 6)............................................................... 571,927
----------
OTHER ASSETS:
Designs and drawings--Net of accumulated amortization of $361,529 (Note 1).... 1,236,810
Deposits...................................................................... 8,012
----------
Total other assets........................................................ 1,244,822
----------
TOTAL........................................................................... $3,272,686
----------
----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Temporary bank overdraft...................................................... $ 12,898
Capitalized lease obligations (Note 6)........................................ 26,820
Accounts payable.............................................................. 452,533
Accrued expenses (Note 5)..................................................... 400,966
Loan payable to affiliate (Note 1)............................................ 4,594,696
Taxes payable (Note 2)........................................................ 51,011
----------
Total current liabilities................................................. 5,538,924
----------
CAPITALIZED LEASE OBLIGATIONS (Note 6).......................................... 34,304
----------
TAXES PAYABLE (Note 2).......................................................... 96,110
----------
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 6 and 7)
STOCKHOLDERS' DEFICIT (Notes 2 and 3):
Common stock--$.002 par value, 20,000,000 shares authorized, 3,750,016 shares
issued and outstanding...................................................... 7,500
Additional paid-in capital.................................................... 585,801
Accumulated deficit........................................................... (2,989,953)
----------
Total stockholders' deficit............................................... (2,396,652)
----------
TOTAL........................................................................... $3,272,686
----------
----------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
RADYNE CORP.
(A SUBSIDIARY OF ENGINEERING AND TECHNICAL SERVICES, INC.)
STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 1996 AND THE SIX AND ONE-HALF MONTH
PERIOD ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
NET SALES (including sales of $311,600 and $159,731 to ETS for 1996 and 1995,
respectively) (Notes 1 and 9)...................................................... $ 3,829,523 $ 1,861,262
------------- ------------
OPERATING COSTS AND EXPENSES:
Cost of sales (including purchases of $2,461,529 and $-0-from ETS for 1996 and
1995, respectively).............................................................. 2,559,350 1,228,747
Selling, general and administrative expenses....................................... 1,843,576 961,162
Research and development........................................................... 1,794,823
Interest expense (Notes 1 and 6)................................................... 256,871 36,209
------------- ------------
Total operating costs and expenses............................................. 6,454,620 2,226,118
------------- ------------
NET LOSS............................................................................. $ (2,625,097) $ (364,856)
------------- ------------
------------- ------------
LOSS PER COMMON SHARE (Note 1)....................................................... $ (.70) $ (.10)
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING........... 3,742,227 3,729,721
------------- ------------
------------- ------------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
RADYNE CORP.
(A SUBSIDIARY OF ENGINEERING AND TECHNICAL SERVICES, INC.)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEAR ENDED JUNE 30, 1996 AND SIX AND ONE-HALF MONTH
PERIOD ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------------- PAID-IN
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------ --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 16, 1994.................... 3,730,016 $ 7,460 $ 545,841 $ -- $ 553,301
Net loss.................................... (364,856) (364,856)
------------ --------- ---------- ------------- -------------
BALANCE, JUNE 30, 1995........................ 3,730,016 7,460 545,841 (364,856) 188,445
Shares issued in acquisition of Merit
Microwave (Note 10)....................... 20,000 40 39,960 40,000
Net loss.................................... (2,625,097) (2,625,097)
------------ --------- ---------- ------------- -------------
BALANCE, JUNE 30, 1996........................ 3,750,016 $ 7,500 $ 585,801 $ (2,989,953) $ (2,396,652)
------------ --------- ---------- ------------- -------------
------------ --------- ---------- ------------- -------------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
RADYNE CORP.
(A SUBSIDIARY OF ENGINEERING AND TECHNICAL SERVICES, INC.)
STATEMENTS OF CASH FLOWS
YEAR ENDED JUNE 30, 1996 AND SIX AND ONE-HALF MONTH
PERIOD ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................................................... $ (2,625,097) $ (364,856)
------------- -------------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................... 276,913 147,523
Provision for losses on accounts receivable..................................... 1,000 14,000
Provision for losses on inventory............................................... 184,672 102,475
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable.................................... 250,806 (216,687)
Increase in bankruptcy claims escrow.......................................... 106,613
Decrease in prepaids and other assets......................................... 73,581 99,534
(Increase) decrease in employee relocation incentives and advances............ 112,353 (109,353)
Increase in inventory......................................................... (432,515) (456,161)
Increase in deposits.......................................................... (191,796)
Increase (decrease) in accounts payable....................................... (46,029) 204,383
Decrease in accrued liabilities............................................... (253,337) (348,004)
Decrease in taxes payable..................................................... (56,063) (6,093)
------------- -------------
Total adjustments........................................................... 111,381 (653,566)
------------- -------------
Net cash used in operating activities....................................... (2,513,716) (1,018,422)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES -
Purchase of machinery and equipment............................................... (388,770) (119,042)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in temporary bank overdraft................................... (67,214) 80,112
Proceeds from loan payable to affiliate........................................... 3,052,912 853,206
Principal payments on capitalized lease obligations............................... (84,350) (50,143)
------------- -------------
Net cash provided by financing activities................................... 2,901,348 883,175
------------- -------------
NET DECREASE IN CASH................................................................ (1,138) (254,289)
CASH, BEGINNING OF PERIOD........................................................... 2,109 256,398
------------- -------------
CASH, END OF PERIOD................................................................. $ 971 $ 2,109
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid..................................................................... $ 3,996 $ 7,059
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements.
F-6
<PAGE>
RADYNE CORP.
(A SUBSIDIARY OF ENGINEERING AND TECHNICAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 1996 AND SIX AND ONE-HALF MONTH
PERIOD ENDED JUNE 30, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS--Radyne Corp. (the Company or Radyne), designs,
manufactures, and sells products, systems, and software used for the
transmission and reception of data over satellite and cable communication
networks. A wholly owned subsidiary, Satellite Digital Systems Corp. (SDSC),
which was inactive and had no material assets and liabilities, filed a petition
for liquidation under Chapter 7 of the United States Bankruptcy Code with the
United States Bankruptcy Court for the Eastern District of New York on May 17,
1995. This did not have any significant impact on the financial position or
results of operations of the Company since SDSC had terminated all operations.
SDSC received its Final Decree of Bankruptcy on August 5, 1995, which
effectively dissolved SDSC.
Upon emergence from bankruptcy proceedings on December 16, 1994, (see Note
2) the Company became a majority-owned subsidiary of Radyne, Inc., which is a
wholly owned subsidiary of Engineering and Technical Services, Inc. (ETS). ETS
provides management services to Radyne, for which ETS charged Radyne $120,000
for the year ended June 30, 1996 and $65,000 for the six and one-half month
period ended June 30, 1995. During the bankruptcy proceedings, ETS provided
$770,175 of debtor-in-possession financing. Since emergence, the Company has
continued to borrow additional amounts. The sum of these advances are shown on
the balance sheet as loan payable to affiliate. The advances accrued interest at
7.5% through May 16, 1996 and at prime plus 2%, thereafter, until they were
repaid on August 12, 1996 (see Note 11).
REVENUE RECOGNITION--The Company recognizes revenue upon shipment of
product.
INVENTORIES--Inventories, consisting of satellite modems and related
products, are stated at the lower of cost (first-in, first-out) or market,
including material, direct labor, and overhead costs.
MACHINERY AND EQUIPMENT--Machinery and equipment are stated at cost.
Expenditures for repairs and maintenance are charged to operations as incurred,
and improvements, which extend the useful lives of the assets, are capitalized.
Depreciation and amortization of machinery and equipment are computed using the
straight-line method over an estimated useful life of seven years (see Note 6).
DESIGNS AND DRAWINGS--Amortization of designs and drawings is computed on
the straight-line basis over the estimated useful life of seven years.
INCOME TAXES--Radyne files a consolidated federal income tax return with
ETS.
The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future consequences
attributed to differences between the consolidated financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Differences between income for financial and tax reporting purposes arise
primarily from amortization of certain designs and drawings and accruals for
warranty reserves and compensated absences. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
F-7
<PAGE>
RADYNE CORP.
(A SUBSIDIARY OF ENGINEERING AND TECHNICAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1996 AND SIX AND ONE-HALF MONTH
PERIOD ENDED JUNE 30, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOSS PER COMMON SHARE--Loss per share of common stock was computed by
dividing net loss by the weighted average number of shares of common stock
outstanding during each of the periods presented. Such amounts have been
adjusted to reflect the 5-for-1 reverse stock split that is expected to occur on
January 9, 1997, as discussed in Note 12.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The fair values of accounts receivable,
accounts payable, and accrued expenses approximate the carrying value due to the
short-term nature of these instruments. Management has estimated that the fair
values of the loan payable to affiliate, capital lease obligations, and taxes
payable approximate the current balances outstanding, based on currently
available rates for debt with similar terms.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities, liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
NEWLY ISSUED PRONOUNCEMENTS--In March 1995, Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", was issued. SFAS
No. 121 establishes accounting standards for the impairment of long-lived
assets, certain unidentifiable intangibles, and goodwill related to those assets
to be held and used for long-lived assets and certain identifiable intangibles
to be disposed of. This statement requires that long-lived assets and certain
identifiable assets be reviewed for impairment by comparing the estimate of
future cash flows to result from the use of the asset and its eventual
disposition to its carrying amount to determine if the carrying amount is
recoverable. If the undiscounted expected future cash flows are less than the
carrying amount of the asset, an impairment loss is recognized. The Company is
required to adopt the requirements of SFAS No. 121 for its year ending December
31, 1996. The Company has not completed the process of evaluating the impact
that will result from SFAS 121, but no material impact on the results of
operations or the financial condition of the Company is expected.
In October 1995, SFAS No. 123, "Accounting for Stock Based Compensation",
was issued. SFAS No. 123 establishes a fair value based method of accounting for
stock-based compensation plans and the related disclosures. The Company is
required to adopt the disclosure requirements of SFAS No. 123 for its year
ending December 31, 1996. The Company has not completed the process of
evaluating the impact that will result from SFAS 123, but no material impact on
the results of operations or the financial condition of the Company is expected.
2. REORGANIZATION
On April 28, 1994, Radyne Corp. (the Predecessor Company) filed a petition
for relief under Chapter 11 of the federal bankruptcy laws in the United States
Bankruptcy Court for the Eastern District of New York. Under Chapter 11, certain
claims against the Predecessor Company in existence prior to the filing were
stayed while the Predecessor Company continued business operations as
debtor-in-possession. Claims secured against the Predecessor Company's assets
were also stayed, although the holders of such claims
F-8
<PAGE>
RADYNE CORP.
(A SUBSIDIARY OF ENGINEERING AND TECHNICAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1996 AND SIX AND ONE-HALF MONTH
PERIOD ENDED JUNE 30, 1995
2. REORGANIZATION (CONTINUED)
had the right to move the court for relief from the stay prior to the plan being
confirmed. Secured claims were secured primarily by liens on all of the
Predecessor Company's assets.
The Predecessor Company received approval from the Bankruptcy Court to pay
certain of its prepetition obligations, employee wages and benefits. Tax claims
were rescheduled for payment in equal quarterly installments of $8,720, with
interest at 7%, over six years.
On December 16, 1994, the Bankruptcy Court confirmed the Predecessor
Company's Plan of Reorganization effective at the close of business on December
16, 1994 (see Note 3).
3. FRESH START REPORTING
Under the provisions of SOP 90-7, the Successor Company was required to
adopt fresh start reporting as of the close of business on December 16, 1994,
because the reorganization value of the Predecessor Company was less than the
total of all post-petition liabilities and prepetition allowed claims, and the
preconfirmation stockholders retained less than 50% of the Successor Company's
common stock (see Note 2). Accordingly, the financial statements for the six and
one-half month period ended June 30, 1995 are the initial financial statements
of Radyne Corp.--the Successor Company.
4. INVENTORIES
Inventories at June 30, 1996 consist of:
<TABLE>
<S> <C>
Raw materials and components.................................... $ 626,525
Work-in-process................................................. 307,391
Finished goods.................................................. 293,660
Valuation allowance............................................. (76,907)
---------
Total........................................................... $1,150,669
---------
---------
</TABLE>
5. ACCRUED EXPENSES
Accrued expenses at June 30, 1996 consist of:
<TABLE>
<S> <C>
Professional fees................................................. $ 77,125
Warranty reserve.................................................. 109,775
Payroll and vacation.............................................. 153,894
Other............................................................. 60,172
---------
Total............................................................. $ 400,966
---------
---------
</TABLE>
6. CAPITALIZED LEASE OBLIGATIONS
During 1996, the Company entered into three capital leases for $80,462 of
machinery and equipment with monthly payments aggregating $2,699. One of the
leases expires in August 1998 with the other two
F-9
<PAGE>
RADYNE CORP.
(A SUBSIDIARY OF ENGINEERING AND TECHNICAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1996 AND SIX AND ONE-HALF MONTH
PERIOD ENDED JUNE 30, 1995
6. CAPITALIZED LEASE OBLIGATIONS (CONTINUED)
expiring in October 1998. These leases are secured by the equipment under lease.
The assets under capital lease had a net book value of approximately $75,000 at
June 30, 1996.
7. COMMITMENTS
In April and June 1995, operations were relocated to Phoenix, Arizona, and
Melbourne, Florida from Ronkonkoma, New York where facilities were being leased
on a monthly basis. Through the time of the relocation, the Company incurred
rent expense of approximately $18,000. With the relocation to Arizona, the
Company entered into a three-year lease, with a two-year renewal option, with
monthly lease payments of $7,352. Rent expense under the new lease for the year
ended June 30, 1996 and for the six and one-half month period ended June 30,
1995, was approximately $95,000 and $57,000, respectively.
Future minimum rentals under the lease are as follows:
<TABLE>
<S> <C>
1997.............................................................. $ 88,224
1998.............................................................. 66,168
---------
$ 154,392
---------
---------
</TABLE>
In February 1995, the Company entered into term agreements for five years
with two executives to manage the Company's operations. The agreements call for
the establishment of an incentive stock option plan whereby 10% of the Company's
outstanding common stock is to be made available to the executives and key
employees. The options would vest upon attainment of specified financial
results.
8. INCOME TAXES
The following summary reconciles taxes (recovery) from operations at the
federal statutory rate with the actual provision (recovery) at June 30:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Income taxes (recovery) at statutory rate........................... $ (893,000) $ (124,000)
----------- -----------
Increase (decrease) in taxes (recovery) resulting from:
State income tax benefit.......................................... (95,000)
Change in valuation allowance..................................... 988,000 117,600
Other adjustments................................................. -- 6,400
----------- -----------
Total provision..................................................... $ -- $ --
----------- -----------
----------- -----------
</TABLE>
F-10
<PAGE>
RADYNE CORP.
(A SUBSIDIARY OF ENGINEERING AND TECHNICAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1996 AND SIX AND ONE-HALF MONTH
PERIOD ENDED JUNE 30, 1995
8. INCOME TAXES (CONTINUED)
Deferred tax assets consist of the following at June 30, 1996:
<TABLE>
<S> <C>
Gross deferred tax assets:
Cumulative tax effect of net operating loss carryforwards..... $3,517,000
Tax credits................................................... 210,000
Temporary differences......................................... (365,000)
Valuation allowance........................................... (3,362,000)
---------
Total........................................................... $ --
---------
---------
</TABLE>
At June 30, 1996, the Company has net operating loss carryforwards of
approximately $9,347,000 expiring in various years through 2011 and general
business credit carryforwards of $210,000 expiring in various years through 2004
for utilization against taxable income/taxes payable of future periods.
Approximately $6,000,000 of the Company's net operating loss and tax credit
carryforwards are subject to an annual limitation under Internal Revenue Code
Section 382, in future years, as a result of changes in ownership of the
Company's stock. The annual limitation is generally equal to the value of the
corporation's equity immediately prior to the change in ownership, times the
federal long-term tax exempt rate published by the federal government.
Management believes that the inability to utilize net operating loss and tax
credit carryforwards to offset future taxable income within the carryforward
periods under existing tax laws and regulations is more likely than not.
Accordingly, a 100% valuation allowance has been recorded against the net
deferred tax asset as of June 30, 1996. In addition, any future benefits which
are recognized for the acquired net operating loss and tax credit carryforwards
will be applied to reduce the intangible assets.
9. SIGNIFICANT CUSTOMERS AND EXPORT SALES
Significant customers for the year ended June 30, 1996 and for the six and
one-half month period ended June 30, 1995, were as follows:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1995
----------- -----------
<S> <C> <C>
Customer A................................................................ 6.4% 22.0%
Customer B................................................................ -- 15.3%
Customer C................................................................ 8.1% 14.2%
Customer D................................................................ 12.7% 11.7%
</TABLE>
No other customers represented greater than 10% of net sales during the year
ended June 30, 1996 and the six and one-half month period ended June 30, 1995.
The Company has not entered into any long-term contracts with its customers to
ship products.
Export sales were 50% and 46% of net sales in the year ended June 30, 1996
and the six and one-half month period ended June 30, 1995, respectively.
F-11
<PAGE>
RADYNE CORP.
(A SUBSIDIARY OF ENGINEERING AND TECHNICAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1996 AND SIX AND ONE-HALF MONTH
PERIOD ENDED JUNE 30, 1995
10. ACQUISITION AND TRANSFER OF ASSETS
In 1996, the Company acquired from Radyne, Inc. the assets of Merit
Microwave, Inc., as well as the manufacturing rights to the Merit line of
microwave products, which include translator and frequency converters. The
purchase price of approximately $120,000 was allocated to inventory, machinery
and equipment, and designs and drawings, and was paid by the issuance of 150,000
shares (prior to the 5-for-1 reverse split) of the Company's stock ($40,000),
cash of $60,000, and the assumption of a payable of $20,000. Under the terms of
the agreement, the principal shareholder and chief operating officer of Merit
entered into a one-year agreement with the Company to serve as president of the
newly created Radyne Microwave Products Division for annual compensation of
$75,000. As long as he remains in this position, the Company is committed to pay
royalties to Merit of 5-10% of sales of Merit products.
During 1996, the Company exchanged $163,770 of inventory and $119,367 of
machinery and equipment to ETS in exchange for a reduction in the loan payable
to ETS.
11. ACQUISITION OF ETS
On August 12, 1996, Singapore Technologies Pte Ltd (STPL) acquired 100% of
the outstanding common stock of ETS through their indirect wholly owned
subsidiary, Stetsys US, Inc. (ST). The purchase price for the ETS stock was
$5,756,425. In addition, an ST affiliate made an unsecured loan of $4,500,000 to
the Company, the proceeds from which were used to pay down the loan payable to
ETS. Interest on the outstanding borrowing is payable at 8% per annum.
12. SUBSEQUENT EVENTS
RIGHTS OFFERING
In November 1996, the Board of Directors approved the distribution to
shareholders (other than ST) of, subject to the requisite approval of the
5-for-1 reverse stock split of common shares discussed below, rights to purchase
up to 215,833 shares of the Corporation's common stock at a price of $2.50 per
share. The Board further approved the distribution of rights to an affiliate of
ST to purchase up to 2,040,000 shares at a price of $2.50 per share.
In connection with the contemplated filing of the Registration Statement in
January 1997, the Company's Board of Directors authorized, subject to
shareholder approval, a 5-for-1 reverse stock split. All per share information
in these financial statements has been adjusted to give effect to this split.
1996 INCENTIVE STOCK OPTION PLAN
In November 1996, the Board of Directors adopted the 1996 Incentive Stock
Option Plan (the "Plan"), subject to the requisite approval by the stockholders.
The Plan provides for the grant of options to employees of the Company to
purchase up to 1,282,042 shares of common stock. The option price per share
under the Plan may not be less than the fair market value of the stock (110% of
the fair market value for an optionee who is a 10% shareholder) on the day the
option is granted.
F-12
<PAGE>
RADYNE CORP.
(A SUBSIDIARY OF ENGINEERING AND TECHNICAL SERVICES, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED JUNE 30, 1996 AND SIX AND ONE-HALF MONTH
PERIOD ENDED JUNE 30, 1995
12. SUBSEQUENT EVENTS (CONTINUED)
The Company expects to have 964,395 options outstanding at an exercise price
of $2.50 per share when approved. 280,000 of these options are Rights Options
granted to employees of the Company in conjunction with the Rights Offering.
Another 16,000 options will become exercisable at the rate of 25% on each of the
first four anniversaries of the grant date and expire on the tenth anniversary
of the grant date. The remaining 668,395 options will be allocated among a group
of 30 key employees. These options will also carry the right to a cash bonus of
approximately $1.72 per purchased share, payable upon exercise. One third of
these options will become exercisable, if and when the Company's earnings before
interest and taxes (calculated without regard to the cash bonus) for a period of
four calendar quarters ("EBIT") exceeds $1,000,000. Another one-third of these
options will become exercisable if and when EBIT exceeds $2,500,000 with the
remaininig one-third becoming exercisable if and when EBIT exceeds $6,000,000.
OTHER
Subsequent to August 23, 1996, the Company incurred additional debt:
<TABLE>
<S> <C>
Note payable to ST plus interest at 8% per annum; principal due March 2, 1997... $ 400,000
Notes payable to ST plus interest at 8% per annum; principal due March 6,
1997........................................................................... $1,000,000
Notes payable to ST plus interest at 8% per annum; principal due March 31,
1997........................................................................... $ 700,000
Note payable to bank under line of credit agreement; $2,000,000 available
borrowings guaranteed by an affiliate of ST; interest payable at the LIBOR rate
plus 0.5%...................................................................... $2,000,000
</TABLE>
The interest rate on the notes payable to ST increases to 14% if the
principal is not paid on the required due dates.
F-13
<PAGE>
RADYNE CORP.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
SEPT. 30,
1996
-------------
<S> <C>
(UNAUDITED)
ITEM 1--ASSETS
CURRENT ASSETS:
Cash and Temporary Cash Investments................................................................ $ 437,950
Accounts Receivable, less allowance of $32,829..................................................... 489,369
Inventories........................................................................................ 1,580,776
Prepaid and Other Current Assets................................................................... 16,934
-------------
TOTAL CURRENT ASSETS............................................................................... 2,525,029
IMPROVEMENTS AND EQUIPMENT,
Net of accumulated depreciation of $92,705....................................................... 589,375
OTHER ASSETS:
Designs and Drawings--Net of accumulated amortization of $418,619.................................. 1,179,720
Deposits........................................................................................... 8,012
-------------
TOTAL ASSETS....................................................................................... $ 4,302,136
-------------
-------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Temporary Bank Overdraft........................................................................... $ -0-
Accounts Payable................................................................................... 651,859
Accrued Liabilities................................................................................ 459,328
Current Portion Long-Term Debt and Capitalized Lease Obligations................................... 27,620
Loan from Bank--Short Term......................................................................... 1,700,000
Loan from Affiliate................................................................................ 4,550,000
-------------
TOTAL CURRENT LIABILITIES.......................................................................... 7,388,807
Long-Term Debt and capitalized lease obligations................................................... 128,157
-------------
STOCKHOLDERS' EQUITY:
Common Stock, $.002 par value, 20,000,000 shares authorized, 3,749,721 shares issued and
outstanding...................................................................................... 7,519
Additional Paid-In Capital......................................................................... 585,782
Accumulated (Deficit).............................................................................. (3,808,129)
-------------
TOTAL STOCKHOLDERS' EQUITY......................................................................... (3,214,828)
-------------
Total Liabilities and Stockholders' Equity......................................................... $ 4,302,136
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-14
<PAGE>
RADYNE CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
<S> <C> <C>
SEPT. 30, SEPT. 30,
1996 1995
------------ ------------
NET SALES............................................................................. $ 1,292,646 $ 1,296,792
COSTS AND EXPENSES:
Cost of Sales....................................................................... 1,052,385 775,652
Selling, general and administrative................................................. 507,578 403,231
Research and development............................................................ 438,599 160,095
------------ ------------
Total Costs and Expenses.............................................................. 1,998,562 1,338,978
INCOME (LOSS) FROM OPERATIONS......................................................... (705,916) (42,185)
INTEREST EXPENSE NET OF INTEREST INCOME............................................... 112,260 28,956
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES....................................... (818,176) (71,141)
PROVISION FOR INCOME TAXES............................................................ -0- -0-
------------ ------------
NET INCOME (LOSS)..................................................................... $ (818,176) $ (71,141)
------------ ------------
------------ ------------
NET INCOME (LOSS) PER COMMON SHARE.................................................... (.218) (.019)
------------ ------------
------------ ------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING.................................. 3,749,721 3,730,016
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
RADYNE CORP.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
<S> <C> <C>
SEPT. 30, SEPT. 30,
1996 1995
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (818,176) $ (71,141)
Adjustment to reconcile net income (loss) to net cash flows
provided by (used in) operating activities:
Depreciation and Amortization......................................................... 87,390 67,005
(Increase) Decrease in operating assets:
Accounts Receivable................................................................... (205,498) (82,350)
Inventories........................................................................... (430,107) 442,518
Prepaid and Other..................................................................... 3,492 38,384
Increase (Decrease) in operating liabilities:
Accounts Payable...................................................................... 186,428 (486,819)
Accrued Liabilities................................................................... 58,362 (187,327)
----------- ----------
Total Adjustments..................................................................... (299,933) (208,589)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES..................................... (1,118,109) (279,730)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures.................................................................. (47,748) 92,754
----------- ----------
NET CASH USED IN INVESTING ACTIVITIES................................................... (47,748) 92,754
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing............................................................... 1,700,000 -0-
Payments on Long Term Debt............................................................ (52,468) (70,381)
Loans from Affiliates................................................................. (44,696) 347,614
----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES............................................... 1,602,836 277,233
----------- ----------
NET INCREASE IN CASH.................................................................... 436,979 90,257
CASH, BEGINNING OF YEAR................................................................. 971 2,109
----------- ----------
CASH, END OF PERIOD..................................................................... $ 437,950 $ 92,366
----------- ----------
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-16
<PAGE>
RADYNE CORP.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 IS UNAUDITED)
1. BUSINESS
Radyne Corp. (the "Company") was incorporated on November 25, 1980 and
commenced operations on May 22, 1981. The Company designs, manufactures and
sells products, systems and software used for the transmission and reception of
data over satellite and cable communications networks.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The interim financial statements furnished reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
statement of financial position as of September 30, 1996 and the results of
operations and cash flows for the three months ended September 30, 1996 and
September 30, 1995. The financial statements should be read in conjunction with
the summary of significant accounting policies and notes to financial statements
included in the Company's Form 10-KSB for the year ended June 30, 1996.
The results of operations for the interim period are not necessarily
indicative of the results to be expected for the full year.
(B) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
value including material, direct labor and overhead costs.
(C) IMPROVEMENTS AND EQUIPMENT
Improvements and equipment are stated at cost. Expenditures for repairs and
maintenance are charged to operations as incurred, and improvements which extend
the useful lives of the assets are capitalized. Depreciation and amortization of
improvements and equipment are computed using the straight-line method based on
the following useful lives:
<TABLE>
<S> <C>
Improvements And Equipment......................................... 7 years
Furniture and fixtures............................................. 7 years
Leasehold improvements............................................. 5 years
</TABLE>
(D) RESEARCH AND DEVELOPMENT
Expenditures for research and development are charged to operations in the
period incurred.
(E) TAXES ON INCOME
The Company follows the liability method of accounting for income taxes, as
prescribed by Statement No. 109 of the Financial Accounting Standards Board.
(F) PER SHARE DATA
Earnings (loss) per share of common stock were computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding during each of the periods presented.
F-17
<PAGE>
RADYNE CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 IS UNAUDITED)
3. REORGANIZATION
On April 28, 1994, Radyne Corp. (the Predecessor Company) filed a petition
for relief under Chapter 11 of the federal bankruptcy laws in the United States
Bankruptcy Court for the Eastern District of New York.
The Predecessor Company received approval from the Bankruptcy Court to pay
certain of its pre-petition obligations, employee wages and benefits. Tax claims
were rescheduled for payment in equal quarterly installments of $8,720, with
interest at 7%, over six years.
On December 16, 1994, the Bankruptcy Court confirmed the Predecessor
Company's Plan of Reorganization effective at the close of business on December
16, 1994.
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPT. 30,
1996
------------
<S> <C>
Raw Materials and components.................................................... $ 279,702
Work in process................................................................. 1,080,309
Finished Goods.................................................................. 335,765
------------
Sub Total..................................................................... 1,695,776
Less Valuation Allowance...................................................... (115,000)
------------
Total....................................................................... $ 1,580,776
</TABLE>
5. IMPROVEMENTS AND EQUIPMENT
Improvements and Equipment consist of the following:
<TABLE>
<CAPTION>
SEPT. 30,
1996
----------
<S> <C>
Office Equipment.................................................................. $ 7,812
Manufacturing Equipment........................................................... 466,269
Computers and Software............................................................ 207,999
----------
682,080
Less: accumulated depreciation and amortization................................... (92,705)
----------
$ 589,375
----------
----------
</TABLE>
F-18
<PAGE>
RADYNE CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 IS UNAUDITED)
6. ACCRUED LIABILITIES
Accrued liabilities consists of the following:
<TABLE>
<CAPTION>
SEPT. 30,
1996
----------
<S> <C>
Payroll and vacation.............................................................. $ 124,320
Warranty Reserve.................................................................. 124,775
Professional fees................................................................. 71,625
Other............................................................................. 138,608
----------
$ 459,328
----------
----------
</TABLE>
F-19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATES AS OF WHICH SUCH INFORMATION IS FURNISHED.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 4
Risk Factors.................................... 10
Purpose of the Rights Offering and Use of
Proceeds...................................... 16
Capitalization.................................. 17
The Rights Offering............................. 18
Certain Federal Income Tax Consequences......... 22
Price Range of Common Stock..................... 24
Dividend Policy................................. 24
Selected Financial Data......................... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 26
Business........................................ 29
Management...................................... 36
Principal and Management Stockholders........... 42
Certain Transactions............................ 43
Description of Capital Stock.................... 44
Concurrent Sale by Selling Stockholder.......... 44
Shares Eligible for Future Sale................. 44
Legal Matters................................... 45
Experts......................................... 45
Financial Statements............................ F-1
</TABLE>
2,255,833 SHARES
RADYNE CORP.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
JANUARY , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the issuance and distribution of the securities being offered hereby (items
marked with an asterisk (*) represent estimated expenses):
<TABLE>
<S> <C>
SEC Registration Fee............................................. $1,808.97
Legal Fees and Expenses.......................................... 85,000.00*
Blue Sky Fees (including counsel fees)........................... 15,000.00*
Accounting Fees and Expenses..................................... 25,000.00*
Transfer Agent and Registrar Fees................................ 5,000.00*
Printing and Engraving Expenses.................................. 20,000.00*
Miscellaneous.................................................... 48,191.03*
Total............................................................ $ 200,000*
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
New York Business Corporation Law, Article 7, enables a corporation in its
original certificate of incorporation, or an amendment thereto validly approved
by stockholders, to eliminate or limit personal liability of members of its
Board of Directors for violations of a director's fiduciary duty of care.
However, the elimination or limitation shall not apply where there has been bad
faith, intentional misconduct or a knowing violation of law, the payment of a
dividend or approval of a stock repurchase which is deemed illegal, any other
violation of Section 719 of the New York Business Corporation Law, or a
financial profit or other advantage to which the director was not legally
entitled. The Company's Certificate of Incorporation includes the following
language:
"SEVENTH: A director of the Corporation shall not be personally liable to
the Corporation or its shareholders for damages for any breach of duty as
a director; provided that, except as hereinafter provided, this Article
SEVENTH shall neither eliminate nor limit liability: (a) if a judgment or
final adjudication adverse to the director establishes that (i) the
director's acts or omissions were in bad faith or involved intentional
misconduct or a knowing violation of law, (ii) the director personally
gained in fact a financial profit or other advantage to which the
director was not legally entitled, or (iii) the director's acts violated
Section 719 of the New York Business Corporation Law; or (b) for any act
or omission prior to the effectiveness of this Article SEVENTH. If the
Corporation hereafter may by law be permitted to further eliminate or
limit the personal liability of directors, then pursuant hereto the
liability of a director of the Corporation shall, at such time,
automatically be further eliminated or limited to the fullest extent
permitted by law. Any repeal of or modification to the provisions of this
Article SEVENTH shall not adversely affect any right or protection of a
director of the Corporation existing pursuant to this Article SEVENTH
immediately prior to such repeal or modification.
EIGHTH: The Corporation may, to the fullest extent permitted by Section
721 through 726 of the Business Corporation Law of New York, indemnify
any and all directors and officers whom it shall have power to indemnify
under the said sections from and against any and all of the expenses,
liabilities or other matters referred to in or covered by such section of
the Business Corporation Law, and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which the persons so
indemnified may be entitled under any By-Law, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action
in his/ her official capacity and as to action in another capacity by
holding such office, and shall continue as to a person who has ceased to
be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person."
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding the numbers of shares of Common
Stock sold by the Company, the number of options issued by the Company, and the
principal amount of debt instruments (other than demand or short-term promissory
notes issued to banks or Company affiliates) issued by the Company since
[January 1, 1994], the consideration received by the Company for such shares,
options and debt instruments and information relating to the section of the
Securities Act of 1933, as amended (the "Securities Act"), or rule of the
Securities and Exchange Commission under which exemption from registration was
claimed. None of these securities was registered under the Securities Act. No
sales of securities involved the use of an underwriter and no commissions were
paid in connection with the sale of any securities.
On January 25, 1994, the Company issued 12,000 (pre-Reverse Split) shares of
Common Stock to Christer Sigmundt as compensation for his services as a director
of the Company. This transaction was exempt from registration under the
Securities Act by virtue of the provisions of Section 4(2) of the Securities
Act.
On December 16, 1994, pursuant to the Company's Plan of Reorganization under
Chapter 11 of the Bankruptcy Code, the Company (i) issued 17,000,000
(pre-Reverse Split) shares of Common Stock to Radyne Florida in exchange for the
discharge of $2,350,000 of indebtedness and (ii) issued 53,437 (pre-Reverse
Split) shares of Common Stock to holders of warrants to purchase Common Stock in
exchange for such warrants. These transactions were exempt from registration
under the Securities Act by virtue of the provisions of Sections 3(a)(7) and
4(2) of the Securities Act.
By agreement dated June 7, 1995, the Company issued an aggregate of 150,000
(pre-Reverse Split) shares of Common Stock on various dates in exchange for the
assets of a business. See "Certain Transactions" in the Prospectus which forms a
part of this Registration Statement. This transaction was exempt from
registration under the Securities Act by virtue of the provisions of Section
4(2)of the Securities Act.
ITEM 16. EXHIBITS
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO.
- -------------
<C> <S>
3.1* Restated Certificate of Incorporation
3.2* Bylaws, as amended and restated
4.1* Form of Subscription Certificate
5.1* Opinion of Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC
10.1* 1996 Incentive Stock Option Plan
23.1 Consent of Deloitte & Touche, LLP
23.2* Consent of Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC (contained in the Opinion filed
as Exhibit 5.1)
24.1 Power of Attorney (set forth on the signature page hereof)
27.0(d)** Financial Data Schedule
27.1 *** Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
** Incorporated by reference from Registrant's current report on Form 10-KSB,
filed November 15, 1996.
*** Incorporated by reference from Registrant's current report on Form 10-QSB,
filed November 26, 1996.
II-2
<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;
(ii) to reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement;
(iii) to include any additional or changed material information on
the plan of distribution;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be treated as 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) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The Registrant hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act as part of this registration statement as of
the time the Commission declared it effective.
(2) For the purpose of determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of prospectus
as a new registration statement relating to the securities offered therein,
and the offering of such securities at that time as the initial bona fide
offering thereof.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Phoenix, Arizona on December 18, 1996.
RADYNE CORP.
By: /s/ ROBERT C. FITTING
-----------------------------------------
Robert C. Fitting, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert C. Fitting and Lim Ming Seong or any one
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all pre- or post-effective amendments to
this Registration Statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue hereof.
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.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ ROBERT C. FITTING President, Director
- ------------------------------ December 18, 1996
Robert C. Fitting
/s/ ROBERT A. GRIMES Director
- ------------------------------ December 18, 1996
Robert A. Grimes
/s/ LIM MING SEONG Chairman of the Board of
- ------------------------------ Directors December 18, 1996
Lim Ming Seong
/s/ LEE YIP LOI Director
- ------------------------------ December 18, 1996
Lee Yip Loi
/s/ CHAN WEE PIAK Director
- ------------------------------ December 18, 1996
Chan Wee Piak
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
3.1* Restated Certificate of Incorporation
3.2* Bylaws, as amended and restated
4.1* Form of Subscription Certificate
5.1* Opinion of Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC
10.1* 1996 Incentive Stock Option Plan
23.1 Consent of Deloitte & Touche, LLP
23.2* Consent of Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC (contained in
the Opinion filed as Exhibit 5.1)
24.1 Power of Attorney (set forth on the signature page hereof)
27.0(d)** Financial Data Schedule
27.1(d)*** Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
** Incorporated by reference from Registrant's current report on Form 10-KSB,
filed November 15, 1996.
*** Incorporated by reference from Registrant's current report on Form 10-QSB,
filed November 26, 1996.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 18, 1996
PROSPECTUS
30,000 SHARES
RADYNE CORP.
COMMON STOCK
This Prospectus relates to 30,000 shares of common stock, $.002 par value
per share (the "Common Stock") of Radyne Corp., a New York corporation (the
"Company"), held by one holder (the "Selling Stockholder"). The Selling
Stockholder's shares were issued to the Selling Stockholder by the Company in
exchange for business assets. See "Selling Stockholder" and "Plan of
Distribution."
The Common Stock offered by the Selling Stockholder pursuant to this
Prospectus may be sold from time to time by the Selling Stockholder or by its
transferees. The distribution of the Common Stock offered hereby by the Selling
Stockholder may be effected in one or more transactions that may take place on
the over-the-counter market, including ordinary brokers' transactions, privately
negotiated transactions or through sales to one or more dealers for resale of
such securities as principals, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid by the Selling Stockholder.
The Selling Stockholder, and intermediaries through whom such securities are
sold, may be deemed underwriters within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered,
and any profits realized or commissions received may be deemed underwriting
compensation.
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholder. See "Selling Stockholder" and "Plan and
Distribution."
On the date of this Prospectus, a registration statement under the
Securities Act with respect to a rights offering by the Company of 2,255,833
shares of Common Stock was declared effective by the Securities and Exchange
Commission (the "Commission"). The Company will receive approximately $5,440,000
in net proceeds from such offering after payment of estimated expenses of such
offering.
------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 10 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is January , 1997
A-1
<PAGE>
SELLING STOCKHOLDER
Up to 30,000 shares of Common Stock may be offered for resale by the
stockholder listed below.
The following table sets forth certain information with respect to the
Selling Stockholder for whom the Company has registered Common Stock for resale
to the public. The Company will not receive any of the proceeds from the sale of
such shares of Common Stock. The sole shareholder of the Selling Stockholder,
Peter Weisskopf, is the president of the Company's Microwave Products Division
and the holder of Rights Options entitling him to purchase 4,000 shares of
Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF
COMMON STOCK OWNED NUMBER OF SHARES OF COMMON STOCK OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING COMMONS STOCK TO BE SOLD AFTER OFFERING
- ------------------------------------------ --------------------- ------------------------- ---------------------
<S> <C> <C> <C>
Merit Microwave, Inc...................... 48,000 30,000 18,000(1)
</TABLE>
- ------------------------
(1) Consists of Rights Shares underlying Shareholder Rights.
A-2
<PAGE>
PLAN OF DISTRIBUTION
The sale of the shares of Common Stock by the Selling Stockholder may be
effected from time to time in transactions in the over-the-counter market or in
negotiated transactions, through the writing of options on the securities, a
combination of such methods of sale, or otherwise. Sales may be made at fixed
prices which may be changed, at market prices prevailing at the time of sale, or
at negotiated prices.
The Selling Stockholder may effect such transactions by selling its shares
of Common Stock directly to purchasers, through broker-dealers acting as agents
for the Selling Stockholder or to broker-dealers who may purchase Common Stock
as principals and thereafter sell the Common Stock from time to time in the
over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholder or the purchasers for
whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
Under applicable rules and regulations under the Securities Exchange Act of
1934 ("Exchange Act"), any person engaged in the distribution of the shares of
Common Stock offered hereby may not simultaneously engage in market making
activities with respect to any securities of the Company for a period of at
least two (and possibly nine) business days prior to the commencement of such
distribution. In addition, the Selling Stockholder will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation, Rules 10b-6, 10b-6A, and 10b-7, which
provisions may limit the timing of the purchases and sales of the Common Stock
by such Selling Stockholder.
The Selling Stockhoder and broker-dealers, if any, acting in connection with
such sale, might be deemed to be underwriters within the meaning of Section
2(11) of the Securities Act and any commission received by them and any profit
on the resale of the securities might be deemed to be underwriting discounts and
commissions under the Securities Act.
A-3
<PAGE>
CONCURRENT PUBLIC OFFERING
On the date of this Prospectus a registration statement was declared
effective under the Securities Act with respect to a rights offering by the
Company of 2,255,833 shares of Common Stock.
A-4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATES AS OF WHICH SUCH INFORMATION IS FURNISHED.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 4
Risk Factors.................................... 10
Capitalization.................................. 17
Price Range of Common Stock..................... 24
Dividend Policy................................. 24
Selected Financial Data......................... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 26
Business........................................ 29
Management...................................... 36
Selling Stockholder............................. 42
Certain Transactions............................ 43
Description of Capital Stock.................... 44
Plan of Distribution............................ 44
Concurrent Public Offering...................... 44
Legal Matters................................... 45
Experts......................................... 45
Financial Statements............................ F-1
</TABLE>
30,000 SHARES
RADYNE CORP.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
JANUARY , 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Radyne Corp. on Form
SB-2 of our report dated August 23, 1996 (which expresses an unqualified opinion
and includes an explanatory paragraph relating to the United States Bankruptcy
Court of the Eastern District of New York entering an order confirming the
Company's plan of reorganization which became effective at the close of business
on December 16, 1994), except as to Note 12 to the financial statements, the
date of which is December 13, 1996, appearing in the Prospectus, which is part
of this Registration Statement.
We also consent to the reference to us under the headings "Selected
Financial Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
December 18, 1996
The accompanying financial statements retroactively reflect a 5-for-1
reverse stock split which is expected to be effective on January 9, 1997. The
above consent is in the form which will be signed by Deloitte & Touche LLP upon
consummation of such a split, which is described in Note 12 to the financial
statements, and assuming that, from August 23, 1996 to the date of such split,
no other events shall have occurred that would affect the accompanying financial
statements and notes thereto.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
December 18, 1996
