As filed with the Securities and Exchange Commission on August 29, 1995
Registration No. 33-84222
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
to
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
JUDICATE, INC.
(Exact name of registrant as specified in charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
23-2257354
(I.R.S. Employer
Identification Number)
The Bellevue, 200 South Broad Street, Suite 800, Philadelphia, PA 19102
(215) 546-6200
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
STEPHEN J. DRESCHER
Chief Executive Officer
The Bellevue, 200 South Broad Street, Suite 800, Philadelphia, PA 19102
(215) 546-6200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public: From time to
time after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
Calculation of Registration Fee
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<TABLE>
<CAPTION>
Title of each class
of securities to be Amount to be Proposed maximum Proposed maximum Amount of
registered registered offering price per unit aggregate offering price registration fee (1)
<S> <C> <C> <C> <C>
Common Stock 2,140,442 $1.0625 $2,274,219.625 $784.21
Total $784.21
</TABLE>
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(1) $1,299.52 previously paid.
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SUBJECT TO COMPLETION
August 29, 1995
JUDICATE, INC
2,140,442 shares of Common Shares
($.0001 par value)
This Prospectus relates to the possible resale on a continuous basis of up
to 2,140,442 shares of Common Stock, $.0001 par value, of Judicate, Inc.
("Judicate" or the "Company"). 1,320,000 of these shares were previously issued
on conversion of the Company's Series A Preferred Shares, 618,240 of these
shares were issued upon exercise of Series II Warrants and 202,202 of these
shares were previously issued in a private placement. The shares included in the
Registration Statement of which this Prospectus is a part are sometimes referred
to as the "Securities". The Securities may be offered from time to time by the
selling securityholders (the "Selling Securityholders"). THE COMPANY WILL NOT
RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF THE SECURITIES BY THE SELLING
SECURITYHOLDERS.
The Securities will be offered for sale from time to time on terms to be
determined at the time of sale by the Selling Securityholders. The Securities
are listed on the NASDAQ Small Cap Market under the symbol "JUDG" and the last
reported bid and asked prices on August 28, 1995 were $2.25 and $2.25
respectively. The Company will pay certain expenses of this offering. See "USE
OF PROCEEDS" and "PLAN OF DISTRIBUTION."
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.
====================
An investment in the Securities offered hereby involves a high degree of
risk and should be considered only by persons who can afford the loss of their
entire investment. See "RISK FACTORS" (pp. 6-13) for important information which
should be considered by prospective investors.
Although Stratton Oakmont, Inc. ("Stratton") and Biltmore Securities, Inc.
("Biltmore") are not the sole market makers in the Company's common stock, from
time to time they may be the dominant market makers in the Company's common
stock. Each of Stratton and Biltmore is involved in litigation with the
Securities and Exchange Commission and in the event that such litigations
adversely affect Biltmore and Stratton's ability to act as a market maker for
the Company's securities, the market for and liquidity of the Company's
securities may be adversely affected. There can be no assurance that Stratton or
Biltmore will continue to make a market in the Company's securities. In the
event that other broker dealers fail to make a market in the Company's
securities, the possibility exists that the market for and the liquidity of the
Company's securities may be adversely affected to such an extent that public
securityholders may not have anyone to purchase their securities when offered
for sale at any price. In such event, the market for, liquidity
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<PAGE>
and prices of the Company's securities may not exist. For additional
information regarding Stratton and Biltmore, investors may call the National
Association of Securities Dealers, Inc. at (800) 289-9999.
====================
<TABLE>
<CAPTION>
Underwriting
Price to Discounts Proceeds to
Public(1) and Commissions(2) Selling Securityholders
<S> <C> <C> <C>
Per Share $2.25 -- $2.25
Total $4,815,994.50 -- $4,815,994.50
</TABLE>
============================================================================
(1) Based upon the average of the last reported bid and asked
prices on August 28, 1995.
(2) Not known at this time.
The Selling Securityholders, through agents designated from time to time, or
through dealers or underwriters also to be designated, may sell the Securities
from time to time on terms to be determined at the time of sale. To the extent
required, the specific Securities to be sold, the purchase price, the public
offering price, the name of any such agent, dealer or underwriter, and any
applicable commission or discount with respect to a particular offer will be
set forth in a Prospectus Supplement. The aggregate proceeds to the Selling
Securityholders from the Securities will be the purchase price of such
Securities sold less the aggregate agents' commissions and underwriters'
discounts, if any, and other expenses of issuance and distribution not borne
by the Company. Any such Prospectus Supplement will also set forth any
additional information regarding indemnification by the Company of the Selling
Securityholders or any underwriter, dealer or agent against certain
liabilities,including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). The Selling Securityholders and any broker-dealers,
agents or underwriters that participate with the Selling Securityholders in
the distribution of any of the Securities may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission received by them
and any profit on the resale of the Securities purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act. See
"PLAN OF DISTRIBUTION" generally.
The date of this Prospectus is August , 1995.
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission").
This Prospectus, which constitutes part of the Registration Statement, does
not contain all the information set forth in the Registration Statement and the
exhibits and schedule thereto, to which reference is hereby made, as permitted
by the rules and regulations of the Commission. Statements made in this
Prospectus or in any document incorporated or deemed to be incorporated by
reference herein as to the contents of any contract, agreement or other document
referred to are not necessarily complete and with respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. Any interested parties may inspect the Registration Statement,
the exhibits and schedules forming a part thereof and the reports, proxy
statements and other information referred to above, without charge, at the
public reference facilities of the Securities and Exchange Commission, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and may obtain copies of
all or any part of such documents from the Commission upon payment of the fees
prescribed by the Commission. Such documents also are available for inspection
and copying at prescribed rates at the regional offices of the Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048; and
the Northwestern Atrium Center, 500 W. Madison, Suite 1400, Chicago, Illinois
60661-2511.
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<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act (File No. 0-13324), are hereby
incorporated by reference and made a part of this Prospectus:
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994, as amended by Form 10-KSB/A, No. 1 and Form
10-KSB/A, No.2.
(2) The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1995, as amended by Form 10-QSB/A, No.1.
(3) The Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 1995.
(4) The Company's Current Report on Form 8-K dated March 31, 1995 as
amended by Form 8-K/A, No.1.
(5) The Company's Current Report on Form 8-K dated August 15, 1995.
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 shall be
deemed to be incorporated by reference and a part of this Registration Statement
from the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the request of such
person, a copy of any or all documents referred to above which have been
incorporated in this Prospectus by reference, other than exhibits to such
documents. Requests for such copies should be directed to Office of the
Secretary, Judicate, Inc., The Bellevue, 200 South Broad Street, Suite 800,
Philadelphia, Pennsylvania 19102.
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<PAGE>
THE COMPANY
Judicate, Inc. (the "Company") was incorporated in 1983 to provide a broad
range of alternative dispute resolution ("ADR") services, including non-binding
mediations (which consists of "judicial" settlement conferences and commercial
mediation) and binding arbitrations, to assist private parties in settling civil
disputes.
The increasing awareness of ADR by the legal community and the resulting
publicity of ADR has fostered a substantial number of competitors in the
Company's marketing areas. These competitive pressures have already adversely
affected the profitability of the ADR business and the Company has experienced
substantial cash flow deficits and operating losses since its formation. The
foregoing have caused the Company to explore acquisition opportunities in
unrelated lines of business and there can be no assurance as to how long the
Company will continue to operate the ADR business.
On March 31, 1995, the Company acquired, through Quest Electronic Hardware,
Inc. ("Quest"), an electronic fasteners distribution business ("Fasteners
Business"). Quest, which primarily operates out of San Jose, California, is a
specialized distributor of fasteners and electronic hardware sold to electronic
equipment manufacturers. The business serves more than 250 customers in the high
technology equipment manufacturers arena, including leading names in the ranks
of computer, telecommunications, and medical instrumentation companies. The
Company has limited experience in the Fastener Business and such business does
not bear any relation to the ADR business historically conducted by the Company.
The Company was incorporated in Delaware in 1983, and its principal
executive offices are located at The Bellevue, 200 South Broad Street, Suite
800, Philadelphia, PA 19102; (215) 546-6200.
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<PAGE>
RISK FACTORS
The Securities registered hereby are speculative in nature and involve a
high degree of risk of loss. Accordingly, in analyzing an investment in these
Securities, prospective investors should carefully consider, along with the
other matters referred to herein, the following risk factors in light of the
investor's particular financial circumstances and investment objectives:
Operating Losses; Decrease in Revenues
Since its formation, the Company has suffered substantial cash flow
deficits and operating losses. The Company has also experienced a substantial
erosion of revenue from its alternate dispute resolution ("ADR") service
business. Revenues for the fiscal year ended December 31, 1994 were $844,025
compared with $2,576,598 for the prior year, a decrease of 67%. ADR revenues for
the six months ended June 30, 1995 were $180,364 compared with $492,790 for the
comparable period in the prior year, a decrease of 63%.
In view of these results, there can be no assurance that the Company will
continue its ADR operations.
Litigation Involving Market Makers
Although Stratton Oakmont, Inc. ("Stratton") and Biltmore Securities, Inc.
("Biltmore") are not the sole market makers in the Company's stock, from time to
time they may be the dominant market makers in the Company's stock. Each of
Stratton and Biltmore is involved in litigation which may adversely affect its
ability to make a market in the Company's stock. This litigation is described
below.
Permanent Injunction Granted - Stratton Enjoined from Violating
Administrative Order and Ordered to Comply with Consultant's Report
The Company has been advised by Stratton that the Securities and Exchange
Commission (the "Commission") instituted an action on December 14, 1994 in the
United States District Court for the District of Columbia against Stratton. The
complaint alleged that Stratton was violating an Administrative Order entered by
the Commission on March 17, 1994 ("Administrative Order") by failing to adopt
the recommendations of an independent consultant. The Administrative Order was
consented to by Stratton, without admitting or denying the findings contained
therein, as settlement of an action commenced against Stratton by the Commission
in March 1992, alleging violations of the securities laws to the extent that
Stratton was alleged to have:
o engaged in and/or permitted unauthorized trading in customer accounts;
o manipulated the market price of a company's securities by dominating and
controlling the market for those securities;
o made improper and unsupported price predictions with regard to
recommended over-the-counter securities; and
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<PAGE>
o made material misrepresentations and omissions regarding certain
securities and its experience in the securities industry
On February 28, 1995, the court granted the Commission's motion for a
permanent injunction and ordered Stratton to comply with the Administrative
Order, including the requirement that all telephone conversations be taped
between Stratton's brokers and their customers. The failure by Stratton to
comply with the Administrative Order or Permanent Injunction may adversely
affect its ability to conduct its business in that the court may impose
sanctions restricting the ability of Stratton to conduct its business which may
restrict Stratton's ability to act as a market maker of the Company's
securities. The effect of such action may prevent the holders of the Company's
securities from selling such securities since Stratton may be restricted from
acting as a marketmaker of the Company's securities and, in such event, will not
be able to execute a sale of such securities.
As a result of the permanent injunction, the states of New Jersey,
Massachusetts and Indiana have commenced actions seeking among other things to
revoke Stratton's license to do business in such states. The states of Alabama,
Mississippi, Delaware, North Carolina and Arkansas have also suspended
Stratton's license pending a resolution of the proceedings in those states. The
states of Minnesota, South Carolina, Vermont, Nevada, Pennsylvania and Rhode
Island have served upon Stratton Notices of Intent to revoke Stratton's license
in such states. Finally, Stratton has received an Order Limiting License in the
state of Nebraska. Such sanctions, which ultimately may result in significant
fines if any of the state actions are successful, may adversely affect the
market for and liquidity of the Company's securities if additional broker
dealers do not make a market in the Company's securities. Moreover, should
investors purchase any of the securities of this offering prior to a revocation
of Stratton's license in their state, such investors will not be able to resell
such securities in such state through Stratton but will be required to retain a
new broker dealer firm for such purpose. The Company cannot ensure that other
broker dealers will make a market in the Company's securities. In the event that
other broker dealers fail to make a market in the Company's securities, the
possibility exists that the market for and the liquidity of the Company's
securities may be adversely affected to such an extent that public security
holders may not have anyone to purchase their securities when offered for sale
at any price. In such event, the market for, liquidity and prices of the
Company's securities may not exist. For additional information regarding
Stratton, investors may call the National Association of Securities Dealers,
Inc. at (800) 289-9999.
Commission Complaint Against Biltmore
The Company has been advised by Biltmore that on or about May 22, 1995,
Biltmore and Messrs. Loewenstern and Bronson, principals of Biltmore, and the
Commission agreed to an offer of settlement (the "Offer of Settlement") in
connection with a complaint filed by the Commission in the United States
District Court for the Southern District of Florida alleging violations of the
federal securities laws, Section 17(a) of the Securities Act of 1933, Section
10(b) and 15(c) of the Securities Exchange Act of 1934, and Rules 10b-5, 10b-6
and 15c1-2 promulgated thereunder. The complaint also alleged that in connection
with the sale
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<PAGE>
of securities in three (3) IPOs in 1992 and 1993, Biltmore engaged in
fraudulent sales practices. The proposed Offer of Settlement was consented to by
Biltmore and Messrs. Loewenstern and Bronson without admitting or denying the
allegations of the complaint. The Offer of Settlement was approved by Judge
Gonzales on June 6, 1995. Pursuant to the final judgment (the "Final Judgment"),
Biltmore:
o was required to disgorge $1,000,000 to the Commission, which amount was
paid in four (4) equal installments on or before June 22, 1995;
o agreed to the appointment of an independent consultant ("Consultant").
Such Consultant is obligated, on or before October 7, 1995:
o to review Biltmore's policies, practices and procedures in six (6) areas
relating to compliance and sales practices;
o to formulate policies, practices and procedures for Biltmore that the
Consultant deems necessary with respect to Biltmore's compliance and
sales practices;
o to prepare a report devoted to and which details the aforementioned
policies, practices and procedures (the "Report");
o to deliver the Report to the President of Biltmore and to the staff of
the Southeast Regional office of the Commission;
o to prepare, if necessary, a supervisory procedures and compliance manual
for Biltmore, or to amend Biltmore's existing manual; and
o to formulate policies, practices and procedures designed to provide
mandatory on-going training to all existing and newly hired employees
of Biltmore. The Final Judgment further provides that, within thirty
(30) days of Biltmore's receipt of the Report, unless such time is
extended, Biltmore shall adopt, implement and maintain any and all
policies, practices and procedures set forth in the Report.
The Final Judgment also provides that an independent auditor ("Auditor")
shall conduct four (4) special reviews of Biltmore's policies, practices and
procedures, the first such review to take place six (6) months after the Report
has been delivered to Biltmore and thereafter at six-month intervals. The
Auditor is also authorized to conduct a review, on a random basis and without
notice to Biltmore, to certify that any persons associated with Biltmore who
have been suspended or barred by any Commission order are complying with the
terms of such orders.
On July 10, 1995, the action as against Messrs. Loewenstern and Bronson was
dismissed with prejudice. Mr. Bronson has agreed to a suspension from
associating in any supervisory capacity with any broker, dealer, municipal
securities dealer, investment advisor or investment company for a period of
twelve (12) months, dating from the beginning of
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<PAGE>
such suspension. Mr. Loewenstern has agreed to a suspension from
associating in any supervisory capacity with any broker, dealer, municipal
securities dealer, investment advisor or investment company for a period of
twelve (12) months commencing upon the expiration of Mr. Bronson's suspension.
In the event that the requirements of the foregoing judgment adversely
affect Biltmore's ability to act as a market maker for the Company's stock, and
additional brokers do not make a market in the Company's securities, the market
for and liquidity of the Company's securities may be adversely affected. In the
event that other broker dealers fail to make a market in the Company's
securities, the possibility exists that the market for and the liquidity of the
Company's securities may be adversely affected to such an extent that public
security holders may not have anyone to purchase their securities when offered
for sale at any price. In such event, the market for, liquidity and prices of
the Company's securities may not exist. For additional information regarding
Biltmore, investors may call the National Association of Securities Dealers,
Inc. at (800) 289-9999.
Entry into New Line of Business
The Company acquired on March 31, 1995, through Quest Electronic Hardware,
Inc. ("Quest"), an electronic fasteners distribution business ("Fasteners
Business"). The Company has limited experience in the Fastener Business and such
business does not bear any relation to the ADR business historically conducted
by the Company.
Unproven Ability to Operate Fasteners Distribution Business on a Stand
Alone Basis
The Fasteners Business which the Company has acquired was previously
operated by Arrow Electronics, Inc. ("Arrow"), a major public company with
substantially more resources and support systems than the Company. There can be
no assurance that the Company can operate this business profitably with the more
limited resources available to it.
Unproven Market
The Company was incorporated in August 1983 and commenced providing its ADR
services in 1985. To date, operations have not been profitable. Management
believes that there is a need and market for ADR services such as those provided
by the Company, but there can be no assurance the market for ADR services
provided by the Company will ever be sufficient to facilitate profitable
operations. There can be no assurance as to how long the Company will continue
to operate the ADR business.
Lack of Major Clients
Since a single party to a dispute cannot compel the other party to accept
the Company's jurisdiction absent a pre-existing agreement to do so, and because
the potential defendant in an existing dispute may have a vested interest in
exploiting the delays that may occur in the public court system, management
believes that the Company's prospects would be improved if it were able to enter
into arrangements with entities such as insurance companies, large corporations
and unions representing the employees of such corporations pursuant to which the
entities agree to
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<PAGE>
promulgate form contracts that provide for resolution of contract disputes
through the Company. To date, the Company has not been successful in effecting
any such arrangements. Although the Company has received filings from insurance
companies on a case-by-case basis (almost exclusively at the regional level), no
insurance company has entered into a contractual arrangement to continue to use
the Company's services in the future.
Change in Company Management; Absence of Meetings of Stockholders
Over the four-month period from November 1993 to February 1994 all members
of the Company's prior Board of Directors and senior management resigned except
for one member of senior management. Almost all of the current members of the
Board and senior management have become associated with the Company within the
past 18 months and have limited experience with the ADR business and the
recently acquired fastener distribution business. In addition, the Company has
not held a meeting of stockholders for the purpose of electing directors since
December 1992. The ability of the stockholders of the Company to change the
composition of the Board of Directors will be adversely affected in the event
that stockholder meetings continue to be infrequently held.
Reliance on Judges and Mediators
The market for the Company's ADR services depends on a perception by
potential users that the Company judges and mediators are impartial, qualified
and experienced. The Company believes that the individuals who have agreed to
serve as Company judges and mediators meet the high standards required. However,
the Company's success in marketing its services is dependent upon a favorable
perception of the Company judges and mediators by the public, of which there can
be no assurance. Moreover, the Company's ability to continue to retain qualified
Company judges and mediators, or maintain arrangements with its present Company
judges and mediators in the face of increasing competition, is uncertain. The
Company judges and mediators are retained on a case-by-case basis and most are
free to render services independently as well as through competing ADR services.
If Company judges or mediators, particularly those who are highly regarded in
their respective communities, are unwilling or unable to continue to serve the
Company, the Company's business and operations could be materially adversely
affected.
Competition
The Company's most significant competition in providing ADR services
nationally is the American Arbitration Association ("AAA"), an established
not-for-profit corporation widely accepted in the legal and business
communities. Because AAA is well-established and highly regarded, it is
difficult for the Company to compete successfully against it, particularly in
the labor dispute market. In addition, Resolute Systems of Brookfield,
Wisconsin, competes with the Company as a national ADR provider.
Moreover, in certain areas of the country, organizations similar to the
Company have been formed on a regional level, and similar companies may be
formed in the future. For example, Judicial Arbitration Mediation Services, Inc.
("JAMS") has recently expanded its operations adding offices in Dallas, Houston,
Atlanta and New York City, and has
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<PAGE>
considerable financial support from E.M. Warburg, Pincus & Co., Inc., an
investment banking firm.
The Company is also aware that several of its former employees have
commenced operations providing ADR services in Nassau and Suffolk counties in
New York and in Philadelphia, Pennsylvania. Although these businesses presently
occupy a small segment of the market, the Company believes that such competition
could adversely affect the business and prospects of the Company.
Furthermore, the insurance industry has continued its support for
Arbitration Forums, a not-for-profit organization created to service the
insurance subrogation market with ADR programs. It is unclear whether
Arbitration Forums or other trade-related ADR programs will have a negative
impact on the Company's business.
Experienced judges and mediators could become scarce and revenues could
decrease as a result of such competition. Moreover, the Company judges are
obtained on a case-by-case basis and may compete with the Company by rendering
services independently or through competing ADR service providers. There is no
assurance that the Company can successfully compete in the present or future
marketplace for ADR services.
In general, the ADR industry furnishes an alternative to public dispute
mechanisms, principally the public courts. The Company's marketing efforts have
been based on its belief that there exists dissatisfaction among litigants and
their counsel with the public court system. Several public court systems have
recently instituted court- coordinated ADR programs and it is uncertain as to
whether they will be effective. To the extent that the public courts reduce case
backlogs and provide effective settlement mechanisms, the Company's business
opportunities in such markets may be significantly reduced.
Effect of Options and Warrants; Change of Control
At August 28, 1995, the Company believes that it had outstanding options
and warrants to purchase 3,256,223 shares of the Company's Common Stock at
exercise prices ranging from $0.249 to $33.75 with expiration dates ranging from
December 1994 to November 2004. In addition, as of August 28, 1995 there were
25,000 shares of Series A Preferred Stock outstanding which are convertible into
50,000 shares of Common Stock. These options and warrants and rights to convert,
if exercised, would constitute approximately 21% of the outstanding Common Stock
of the Company and may result in substantial dilution to the other stockholders.
As a part of its acquisition of Quest, the Company issued to the Quest
stockholders Common Stock of the Company in an amount which resulted in the
former stockholders of Quest owning 25% of the Company's Common Stock
outstanding (on a fully diluted basis). In addition, the Company has entered
into certain agreements pursuant to which it will be obligated to grant warrants
to purchase up to 15% of the Company's Common Stock outstanding (on a fully
diluted basis) as of the date of the closing of the Fasteners Business (March
31, 1995) at $.10 per share upon the attainment of specified earnings targets.
The issuance of the 25% interest to the stockholders of Quest caused substantial
dilution to the other stockholders. In addition, warrants issued in connection
therewith may result in further dilution to the stockholders.
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<PAGE>
To the best knowledge of management, the foregoing represents all of the
outstanding options and warrants of the Company. Due to the resignations of
members of the Company's senior management team, current management is unable to
verify at this time whether additional options or warrants may have been granted
which are not reflected on the corporate records. If such additional options or
warrants exist, and are lawfully exercised, a stockholder's interest in the
Company may be further diluted.
Dependence on Bank Financing; Substantially All of Quest's Assets Pledged
In connection with its acquisition of the Fasteners Business, Quest has
entered into a security and loan agreement pursuant to which all of the shares
of stock and substantially all of the assets of Quest have been pledged to the
bank as security for such financing.
Absence of Dividends
The Company has not paid any cash dividends on the Common Stock of the
Company and does not expect to do so in the foreseeable future.
Voting Control; Potential Anti-Takeover Effect
The principal stockholders of the Company beneficially own up to
approximately 58.9% of the Company's Common Stock. Accordingly, such persons may
be able to approve major corporate transactions including amending the
Certificate of Incorporation of the Company or the sale of substantially all of
the Company's assets, to elect all of the directors of the Company and to
control the Company's affairs. Changes to the Certificate of Incorporation
currently under consideration by the Board of Directors include increasing the
authorized capital of the Company and providing for a classified board. The
Company's stockholders do not have the right to cumulative voting in the
election of directors. The Board of Directors has the authority, without further
approval of the Company's stockholders, to issue shares of Preferred Stock,
having such rights, preferences and privileges as the Board of Directors may
determine. Any such issuance of shares of Preferred Stock, under certain
circumstances, could have the effect of delaying or preventing a change in
control of the Company and could adversely affect the rights of the holders of
the shares of Common Stock of the Company. In addition, the Company is subject
to a State of Delaware statute regulating business combinations which may also
hinder or delay a change in control of the Company.
NASDAQ Listing and Maintenance
The Company's Common Stock is listed for trading in the over-the-counter
market on the National Association of Securities Dealers' Automated Quotation
System ("NASDAQ") for Small Cap Securities. If for any reason, however, such
securities are not eligible for continued listing or an active trading in such
securities does not exist, holders of the Common Stock may have difficulty
selling their securities should they desire to do so. Under rules of the
National Association of Securities Dealers ("NASD"), in order to qualify for
continued quotation of securities on the NASDAQ Small Cap market, a company,
among other things, must have $2,000,000 in total assets, $1,000,000 in capital
and surplus, and a minimum bid price of $1.00 per share. There can be no
- 12 -
<PAGE>
assurance that the Company's NASDAQ listing can be maintained or that an
active trading market will develop or be maintained.
Penny Stock Restrictions
If the Common Stock registered hereby is removed from NASDAQ, the shares
could be subject to a rule that imposes additional sales practice requirements
on broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally defined as persons with assets in
excess of $1,000,000 or annual income exceeding $200,000 individually or
$300,000 together with their spouse). For transactions covered by this rule, the
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
purchase. Consequently, the rule may restrict the ability of broker-dealers to
sell the Company's securities and may affect the ability of holders to sell the
Company's securities in the secondary market.
The Commission has also adopted regulations which define a "penny stock" to
be any equity security that has a market price (as defined) less than $5.00 per
share, subject to certain exceptions. For any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the transaction,
of a disclosure schedule prepared by the Commission related to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control of the market.
Finally, monthly statements must be sent disclosing recent price information for
the penny stock held in the account and information on the limited market in
penny stocks. While many NASDAQ listed securities would be covered by the
definition of penny stock, transactions in a NASDAQ listed security would be
exempt from all but the sole market maker provisions for (i) issuers who have in
excess of $2,000,000 in net tangible assets ($5,000,000 if the issuer has not
been in continuous operation for three years), (ii) transactions in which the
customer is an institutional accredited investor, and (iii) transactions that
are not recommended by the broker-dealer. In addition, transactions in a NASDAQ
security directly with a NASDAQ market maker for such securities would be
subject only to the sole market maker disclosure and the disclosure with respect
to commissions to be paid to the broker-dealer and the registered
representative.
Sale of Substantial Number of Shares May Adversely Affect Market Price
Sales of substantial numbers of shares of Common Stock in the public market
pursuant to the Registration Statement of which this Prospectus is a part or
otherwise could adversely affect the market price of the Common Stock. In
addition, as noted above (see "Effect of Options and Warrants; Change of
Control"), there are a substantial number of shares issuable upon exercise of
outstanding options or warrants or in connection with the acquisiton of the
Fasteners Business. The market overhang of such substantial number of shares may
also adversely affect the market price for the stock.
- 13 -
<PAGE>
RECENT RESTRUCTURING AND ACQUISITIONS
Commencing in September 1993, the Company instituted a continuing vigorous
cost reduction program with a goal of establishing appropriate cost
relationships with revenues. This has led to substantial downsizing of the
Company's activities. During the fourth quarter of 1994, the New York sales
office was discontinued and all of the Company's operations are now handled at
the Philadelphia office. The Philadelphia office also is operating with a
substantially reduced staff of administrative and sales personnel. Some of the
Philadelphia judges have also discontinued their relationship with the Company.
In November 1994, the Company announced that it had agreed to acquire an
electronic fasteners distribution business and as of the close of business on
March 31, 1995 the Company acquired 100% of the stock of Quest Electronic
Hardware, Inc. ("Quest"), a privately owned company, in exchange for a 25%
interest in Judicate, Inc. on a fully diluted basis. Such acquisition was
effected pursuant to a Share Acquisition Agreement, dated November 29, 1994, by
and among Gulfstream Financial Group, Inc., a Florida corporation
("Gulfstream"), Phillip D. Schwiebert, an individual ("Schwiebert"), Quest and
the Company (the "Share Agreement"). Pursuant to the Share Agreement, the
Company issued, at the closing of the transaction, to Gulfstream and Schwiebert
(the sole stockholders of Quest) 3,871,944 newly issued, fully-paid and
non-assessable shares of Common Stock of the Company, in exchange for all of the
issued and outstanding shares of common stock of Quest owned by such
stockholders. As required by the Share Agreement, this number represented 25% of
the outstanding Common Stock of the Company on a fully diluted basis. The
Company will account for such acquisition using purchase accounting.
Simultaneously with the foregoing events, Quest acquired the fasteners
distribution business (the "Fasteners Business") of Arrow Electronics, Inc., a
New York corporation ("Arrow"). Such acquisition was effected pursuant to a
Purchase of Assets Agreement, dated November 29, 1994, by and between Quest and
Arrow (the "Purchase Agreement"). Under the Purchase Agreement, Quest acquired
the assets of Arrow used exclusively in connection with Arrow's operation of the
Fasteners Business. Such assets include, but are not limited to, machinery,
equipment, furniture, motor vehicles and other personal property and
inventories. The Company is using the acquired assets to continue the business
of the Fasteners Business.
The purchase price for the acquisition of the Fasteners Business was a
negotiated fixed price. The price consisted of a cash payment of approximately
$5 million plus the assumption of certain liabilities of the Fasteners Business.
As more fully described below, the purchase price was funded through a
combination of the proceeds from the sale of the Company's securities under a
private placement, borrowing under the Loan Agreement (as defined below) and
available cash.
Under a Loan and Security Agreement, dated as of March 31, 1995, by and
between Quest and Silicon Valley Bank (the "Loan Agreement"), Quest borrowed
$2.2 million to partially fund the acquisition of the Fasteners Business. In
order to secure the obligations of Quest under the Loan Agreement, the Company
entered into a Stock Pledge Agreement, dated as of March 31, 1995, with Silicon
Valley Bank (the "Bank"). Under the terms of said agreement, the Company pledged
to the Bank the shares of
- 14 -
<PAGE>
capital stock of Quest which the Company held at such date and any shares of
Quest which the Company may thereafter acquire an interest. In addition, Quest
granted a security interest in substantially all of its assets to the Bank.
An additional portion of the funds for the purchase price for the Fasteners
Business (approximately $1.5 million) was provided from the proceeds of the
issuance by the Company to a group of subscribers, in a private placement, of
1,160,000 shares of Common Stock at a purchase price of $1.50 per share. The
balance of the cash portion of the purchase price for the Fasteners Business was
provided by available cash.
Pursuant to a Management Advisory and Consulting Agreement, dated November
29, 1994, between the Company and Gulfstream, Gulfstream has agreed to provide
administrative services to the Company and to act as an advisor and consultant
to the management of the Company. In consideration of its services to the
Company under said agreement, the Company is to compensate Gulfstream at the
rate of $150,000 per annum during the term of said agreement. Additionally,
pursuant to the terms of said agreement, Gulfstream may be entitled to be
awarded as incentive compensation, subject to certain conditions and
restrictions, warrants to purchase up to 10.0% of the Company's Common Stock
outstanding at March 31, 1995 (for purposes of such calculation, the Common
Stock outstanding at March 31, 1995 assumes the conversion of all outstanding
warrants, options and preferred stock), at a price of $.10 per share, upon the
attainment of certain earnings targets.
Pursuant to an Employment Agreement, dated November 29, 1994, by and
between Quest and Dominic A. Polimeni ("Polimeni"), Quest has agreed to employ
Polimeni, and Polimeni has agreed to serve, as Chairman, Chief Executive Officer
and Chief Financial Officer of Quest for a period of five (5) years unless
terminated pursuant to the terms of said agreement. In consideration of his
services to the Company under said agreement, the Company is to compensate
Polimeni at the rate of $100,000 per annum during the term of said agreement.
Polimeni is also a Director and the President of Gulfstream and has been named a
Director and the President and Chief Operating Officer of the Company.
Pursuant to an Employment Agreement, dated November 29, 1994, by and
between Quest and Schwiebert, Quest has agreed to employ Schwiebert, and
Schwiebert has agreed to serve, as President and Chief Operating Officer of
Quest for a period of five (5) years unless terminated pursuant to the terms of
said agreement. In consideration of his services to the Company under said
agreement, the Company is to compensate Schwiebert at the rate of $100,000 per
annum during the term of said agreement. Additionally, pursuant to the terms of
said agreement, Schwiebert may be entitled to be awarded as incentive
compensation, subject to certain conditions and restrictions, warrants to
purchase up to 5.0% of the Company's Common Stock outstanding at March 31, 1995
(for purposes of such calculation, the Common stock outstanding at March 31,
1995 assumes the conversion of all outstanding warrants, options and preferred
stock), at a price of $.10 per share, upon the attainment of certain earnings
targets.
Quest, which primarily operates out of San Jose, California, is a
specialized distributor of fasteners and electronic hardware sold to electronic
equipment manufacturers. The business serves more than 250 customers in the high
technology equipment manufacturers arena, including
- 15 -
<PAGE>
leading names in the ranks of computer, telecommunications, and medical
instrumentation companies. Arrow has operated the fasteners distribution
business since acquiring it in 1988, prior to which it operated as a distributor
of fasteners and electronic hardware for more than twenty years.
The Company may engage in additional acquisitions despite the fact that
earlier discussions with a manufacturer of custom-fabricated metal enclosures
for high technology manufacturers and a related company have ended. The Company
intends to identify and evaluate potential merger and acquisiton candidates
engaged in lines of business complimentary to the distribution of fasteners and
electronic hardware business conducted by Quest. While certain of such potential
acquisition opportunities are at various stages of consideration and evaluation,
none are at any definitive stage at this time, and there can be no assurance
that the transactions under consideration and evaluation will be successfully
completed.
The Company has limited prior experience in the fasteners and electronic
hardware business. This line of business bears no relation to the ADR business
historically conducted by the Company. There can be no assurance as to how long
the Company will continue to operate the ADR business.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Securities by
the Selling Securityholders.
- 16 -
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth certain information with respect to the
Selling Securityholders. The Securities to which this Prospectus relates may be
sold from time to time in whole or in part by the Selling Securityholders. See
"PLAN OF DISTRIBUTION".
<TABLE>
<CAPTION>
Shares of Shares that may Shares of
Common Stock be offered Common Stock % of Class
Selling owned prior to pursuant to this owned after owned after
Security holders this offering Prospectus offering(1) Offering(2)
<S> <C> <C> <C> <C>
Applebaum, Irving
4 Birnawoods Lane
St. Louis, MO 63102 20,000 20,000 0 N/A
Baretti, Phillip
Two North Fifth Street
Brooklyn, NY 11211 53,048 53,048 0 N/A
Beall, David
c/o Stratton Oakmont
1979 Marcus Ave.
Lake Success, NY 11042 2,222 2,222 0 N/A
Beckner, James
c/o Shirt Factory & Sporting Goods
Rural Route 3, Box 7
Parkersburg, WV 26101 17,777 17,777 0 N/A
Berg, Andrew
Two Bay Club Drive
Bayside, NY 11360 26,524 26,524 0 N/A
Bibicoff, Harvey
Harmony Holdings
2921 W. Alameda Avenue
Burbank, CA 91505 27,022 8,888 18,134 N/A
Braun, Elliot Y.
566 Westgate Drive
Edison, NJ 08820 40,000 40,000 0 N/A
Brown, Marcia
73 Robertsville Road
Marlboro, NJ 07746 50,000 50,000 0 N/A
Brutman, Alan P.
416 E. Balboa Blvd.
Newport, CA 92661 20,000 20,000 0 N/A
Burg, Marc
PO Box 488
West Hampton, NY 11977 22,080 22,080 0 N/A
Davis, R.E.
c/o Progressive Insurance
Services, Inc.
1315 Leestown Road
Lexington, KY 40508 20,000 20,000 0 N/A
</TABLE>
- -----------------------------
(1) Assuming all shares being offered pursuant to this Prospectus are sold.
(2) If 1% or more.
- 17 -
<PAGE>
<TABLE>
<CAPTION>
Shares of Shares that may Shares of
Common Stock be offered Common Stock % of Class
Selling owned prior to pursuant to this owned after owned after
Securityholders this offering Prospectus offering(1) Offering(2)
<S> <C> <C> <C> <C>
Denton, Robert
c/o Biltmore Securities
6700 N. Andrews Ave.
Ft. Lauderdale, FL 33309 23,262 23,262 0 N/A
Dillon, Bobby D.
Route 2 Box 70B
Temple, TX 76502 4,444 4,444 0 N/A
Dritz, Jim
c/o Para Partners
505 Park Avenue, 4th Floor
New York, NY 10022 26,524 26,524 0 N/A
Eimerman, John
7410 Spencer Court
McLean, VA 22102 50,000 50,000 0 N/A
Emory, John A.
1106 Delf Drive
McLean, VA 22101 18,000 18,000 0 N/A
Enslein, Spencer
20944 Bay Ct., #346
Aventura, FL 33180 10,000 10,000 0 N/A
General American Financial
Corporation
c/o Paul Nortman
PO Box 348
Woodbury, NY 11797 100,000 100,000 0 N/A
Goldrich, Howard
4633 Elm Terrace
Skokie, IL 60076 2,652 2,652 0 N/A
Goldrich, Jean
4633 Elm Terrace
Skokie, IL 60076 5,304 5,304 0 N/A
Goldrich, Steve
4633 Elm Terrace
Skokie, IL 60076 5,304 5,304 0 N/A
Goodrich, Robert
15-38 215th Street
Bayside, NY 11360 2,222 2,222 0 N/A
Holmquist, Bill
3430 Rocky Springs Court
Marietta, GA 30062 8,888 8,888 0 N/A
Independence Funding Corp.
485 Madison Avenue, Suite 1100
New York, NY 10022 50,000 50,000 0 N/A
Ito, Ken
2861 234th Street
Torrance, CA 90505 40,000 40,000 0 N/A
</TABLE>
- -----------------------------
(1) Assuming all shares being offered pursuant to this Prospectus are sold.
(2) If 1% or more.
- 18 -
<PAGE>
<TABLE>
<CAPTION>
Shares of Shares that may Shares of
Common Stock be offered Common Stock % of Class
Selling owned prior to pursuant to this owned after owned after
Security holders this offering Prospectus offering(1) offering(2)
<S> <C> <C> <C> <C>
Iulo, Ken
165 Prospect Avenue
Passaic, NJ 07055 8,888 8,888 0 N/A
Kipperman, Neil
c/o Stratton Oakmont
1979 Marcus Avenue
Lake Success, NY 11042 2,222 2,222 0 N/A
Koock, Ken
Two Robin Hill Road
N. Caldwell, NJ 07006 153,048 103,048 50,000 N/A
Krause, Steve
Two Bay Club Drive, 5A
Bayside, NY 11360 26,524 26,524 0 N/A
Kraut, Jon
740 River Road
Trenton, NJ 08625 26,524 26,524 0 N/A
Kraut, Dr. Irving
740 River Road
Trenton, NJ 08625 625,285 406,096 219,189 1.76%
Leach, Jeff
#5 Concourse Parkway, Suite 3100
Atlanta, GA 30328 4,444 4,444 0 N/A
Loewenstern, Sharon & Howard
3202/11 Hadekel Blvd.
Post Office Box 2075
Bet Shemesh, Israel 26,524 26,524 0 N/A
Lyerly, J. Edward
1416 Vendome Court
Cape Coral, FL 33904 22,000 22,000 0 N/A
McCaleb, Malcolm
77 West Wacker Drive, 49th Floor
Chicago, IL 60601 40,000 40,000 0 N/A
MH Meyerson & Co.
30 Montgomery St.
Post Office Box 260
Jersey City, NJ 07303 100,000 50,000 50,000 N/A
Morrison, Jeffrey
c/o Biltmore Securities
6700 N. Andrews Ave.
Ft. Lauderdale, FL 33309 23,262 23,262 0 N/A
Moscowicz, Alec
22620 Hatteras Street
Woodland Hills, CA 91367 4,444 4,444 0 N/A
Motti, Stelio
628 Winding Hollow Drive
Franklin Lakes, NJ 07024 84,444 34,444 50,000 N/A
</TABLE>
- -----------------------------
(1) Assuming all shares being offered pursuant to this Prospectus are sold.
(2) If 1% or more.
- 19 -
<PAGE>
<TABLE>
<CAPTION>
Shares of Shares that may Shares of
Common Stock be offered Common Stock % of Class
Selling owned prior to pursuant to this owned after owned after
Securityholders this offering Prospectus offering(1) offering(2)
<S> <C> <C> <C> <C>
Motti, Sergio
1534 10th Street
Fort Lee, NJ 07024 28,888 28,888 0 N/A
MSB Research
100 Wall Street
New York, NY 10005 94,444 94,444 0 N/A
Muhlgeier, Jeffrey & Lisa
c/o Atlantic Beverages
950 New Durham Road
Edison, NJ 08817 20,000 20,000 0 N/A
Notowitz, Allen
c/o Numis International
301 Broadway
Millbrae, CA 94030 36,524 36,524 0 N/A
Randazzo, Sebastian
27 First Street
Syosset, NY 11797 20,000 20,000 0 N/A
Raymer, Brett
2811 East 26th Street
Brooklyn, NY 11235 20,000 20,000 0 N/A
Reiss, Steve
58 Reyam Road
Lynbrook, NY 11563 50,000 30,000 20,000 N/A
Rinehart, Martin
6766 South Evanston
Tulsa, OK 74136-4509 106,097 106,097 0 N/A
Rothstein, Martin
400 E. 56th St., Apt 27 B
New York, NY 10022 113,048 53,048 60,000 N/A
Rough, Lee
c/o Biltmore Securities
6700 N. Andrews Ave.
Ft. Lauderdale, Fl 33309 23,262 23,262 0 N/A
Schilowitz, Matthew
5 Riverside Drive, 4C
New York, NY 10023 53,048 53,048 0 N/A
Schilowitz, Harvey
5 Riverside Drive, 4C
New York, NY 10023 39,786 39,786 0 N/A
Sherman, Victor
c/o Salco Industries
209 W. 18th Street
New York, NY 10011 10,000 10,000 0 N/A
</TABLE>
- -----------------------------
(1) Assuming all shares being offered pursuant to this Prospectus are sold.
(2) If 1% or more.
- 20 -
<PAGE>
<TABLE>
<CAPTION>
Shares of Shares that may Shares of
Common Stock be offered Common Stock % of Class
Selling owned prior to pursuant to this owned after owned after
Security holders this offering Prospectus offering(1) offering(2)
<S> <C> <C> <C> <C>
Siden, Marc
c/o Biltmore Securities
6700 N. Andrews Ave.
Ft. Lauderdale, Fl 33309 36,524 36,524 0 N/A
Silverstein, Mildred
4520 B Fiscus Tree Road
Boynton Beach, FL 33436 20,000 20,000 0 N/A
Tripoli, Ken
c/o Biltmore Securities
6700 N. Andrews Ave.
Ft. Lauderdale, FL 33309 23,262 23,262 0 N/A
Universal Solutions
PO Box 280128
Lakewood, CO 80228 50,000 50,000 0 N/A
Weiss, David
c/o Shapiro, Weiss & Co.
One Post Office Square
Boston, MA 02109 60,000 60,000 0 N/A
Wlodarski, Arthur
8237 North Ozark
Niles, IL 60648 10,000 10,000 0 N/A
------ ------ -
Total 2,607,765 2,140,442 467,3232
========= ========= ========
</TABLE>
- -----------------------------
(1) Assuming all shares being offered pursuant to this Prospectus are sold.
(2) If 1% or more.
Except as noted below, during the last three years, none of the Selling
Securityholders has held any position or office with the Company, nor have any
of the Selling Securityholders had any material relationship with the Company
other than their status as holders of the Company's stock. A number of the
Selling Securityholders identified above are employed by Biltmore Securities,
Inc. ("Biltmore"). Biltmore has acted as placement agent in connection with a
number of private placements by the Company and has received fees in respect of
such services. In addition, Biltmore is party to a consulting agreement with the
Company pursuant to which it has provided financial advisory services and
received compensation. Dr. Irving Kraut, listed above as a Selling
Securityholder, beneficially owns directly and through a pension plan 625,285
shares of Common Stock which represents 5.02% of the Common Stock outstanding.
- 21 -
<PAGE>
PLAN OF DISTRIBUTION
Any and all of the Securities registered hereby may be sold from time to
time to purchasers directly by the Selling Securityholders. Alternatively, the
Selling Securityholders may from time to time sell the Securities through
brokers,underwriters, dealers or agents, who may receive compensation in the
form of underwriting discounts, concessions or commissions from the Selling
Securityholders and/or the purchasers of Securities for whom they may act as
agent. The Selling Securityholders and any such underwriters, dealers or agents
that participate in the distribution of the Securities may be deemed to be
underwriters, and any profit on the sale of Securities by them and any
discounts, commissions or concessions received by any such underwriters, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act of 1933. The Securities may be sold at varying prices determined
at the time of sale or negotiated prices. Such prices will be determined by the
Selling Securityholders, or by agreement between the Selling Securityholders and
underwriters or dealers.
At the time a particular sale of Securities is made, to the extent
required, a Prospectus Supplement will be prepared and distributed by the
Company based on information provided by the Selling Securityholders of the
Securities, which will set forth the number of dealers or agents, any discounts,
commissions or concessions allowed or paid to dealers, including the proposed
selling price to the public.
In order to comply with certain states' securities laws, if applicable, the
Securities will be sold in certain jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain states the Securities may
not be sold unless the Securities have been registered or qualified for sale in
such state or an exemption from registration or qualification is available and
such sale is made in compliance with the exemption.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue 20,000,000 shares of Common Stock,
$0.0001 par value per share, of which 12,445,749 shares were issued and
outstanding as of August 28, 1995.
Holders of Common Stock are entitled to receive, as, when and if declared
by the Board of Directors, from time to time, such dividends and other
distributions in cash, stock or property of the Company out of assets or funds
of the Company legally available therefor, subject to the rights of holders of
preferred stock having a dividend preference over the Common Stock. The Company
has not paid any dividends on its Common Stock to date. The Company anticipates
that for the foreseeable future it will follow a policy of retaining earnings,
if any, in order to finance the expansion and development of its business.
Payment of dividends will depend upon the earnings, capital requirements and the
operating and financial condition of the Company, among other factors.
In the event of the liquidation, dissolution or winding up of the Company,
stockholders will be entitled to share ratably in the assets
- 22 -
<PAGE>
remaining after creditors and holders of preferred stock having a
liquidation preference over the Common Stock have been paid in full.
Each share of Common Stock entitles the holder thereof to one (1) vote on
all matters submitted to stockholders. There are no preemptive, conversion,
redemption or cumulative voting rights applicable to the Common Stock. The
outstanding shares of the Common Stock are fully paid and non-assessable.
The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer & Trust Company, New York, New York.
Series A Preferred Stock
The Company is authorized to issue 1,000,000 shares of Preferred Stock, par
value $.01 per share. Of these authorized shares, the Board of Directors has
established a Series A Preferred Stock. The number of shares of Series A
Preferred Stock authorized to be issued is 900,000 shares. 25,000 shares were
issued and outstanding as of August 28, 1995.
Subject to certain exceptions, summarized below, the holders of Series A
Preferred Stock are not entitled to vote on matters submitted to the
stockholders of the Company. The Company shall not without the affirmative vote
of the holders of at least a majority of the Series A Preferred Stock
outstanding, voting as a separate class: (i) authorize or create any class of
stock ranking either as to payment of dividends or distribution of assets, prior
to or on a parity with the Series A Preferred Stock; (ii) in any manner alter or
change the designations, preferences or rights or qualifications of the Series A
Preferred Stock; or (iii) grant any registration rights that would dilute or
adversely affect the registration rights relating to the Series A Preferred
Stock or the Common Stock issuable upon the conversion of the Series A Preferred
Stock. In the event of the liquidation, dissolution or winding up of the
Company, the shares of Series A Preferred Stock are entitled to a liquidation
preference before any distribution to other classes or series of stock of $1.00
per share. Each share of Series A Preferred Stock is convertible, without
further consideration, into two (2) shares of Common Stock. Holders of Series A
Preferred Stock will be entitled to dividends when and as declared by the Board
of Directors. However, the Company has not paid any dividends on the Series A
Preferred Stock and does not expect to do so in the foreseeable future.
Series I Warrants
Each warrant entitles the registered holder to purchase 2.511 shares of
Common Stock at a price of $1.80 per share on or before June 30, 1996. Any
warrant not exercised by that date will be null and void. As of August 28, 1995,
there were 25,760 Series I Warrants outstanding.
Options
Effective January 1, 1994, Biltmore Securities, Inc. and the Company
entered into a one year consulting agreement pursuant to which the Company
issued to Biltmore an option to purchase 250,000 shares of Common Stock at a
price of $0.625 per share. Options to purchase the first 125,000 of these shares
vested and became exercisable on April 1, 1994
- 23 -
<PAGE>
and the options to purchase the remaining 125,000 shares vested and became
exercisable on July 1, 1994. These options expire on December 31, 1998. By
reason of the application of the anti-dilution provisions of such option, the
adjusted aggregate number of shares purchasable under said option is 626,956 and
the adjusted exercise price is $.249.
LEGAL MATTERS
The legality of the Securities will be passed upon for the Company by Gould
& Wilkie.
EXPERTS
The Company's Consolidated Financial Statements and Financial Statement
Schedules as of December 31, 1993 and 1992 and for the years then ended
incorporated by reference in this Prospectus and the Registration Statement have
been incorporated herein in reliance on the report of Goldenberg Rosenthal
Friedlander, independent certified public accountants, given on the authority of
such firm as experts in accounting and auditing.
The Company's Consolidated Financial Statements as of December 31, 1994 and
for the year then ended incorporated by reference in this Prospectus and the
Registration Statement have been incorporated herein in reliance on the report
of Mortenson and Associates, P.C., independent certified public accountants,
given on the authority of such firm as experts in accounting and auditing.
MATERIAL CHANGES
The Company has announced that it has made a material acquisition. See "THE
COMPANY."
- 24 -
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses of the registration of the Common Stock concerned
herein which are payable by the Registrant are as follows:
SEC Registration Fee $ 784.21
Legal Expenses 25,000.00
Accounting Expenses 15,000.00
Miscellaneous Expenses 4,215.79
----------
Total $45,000.00
==========
Item 15. Indemnification of Directors and Officers
Reference is made to Section 145 of the General Corporation Law of the
State of Delaware under the law of which the Company is incorporated, which
provides for indemnification of directors and officers under certain
circumstances. Provisions for indemnification of directors and officers of the
Company are also contained in the Company's By-Laws.
Item 16. Exhibits
Exhibit No. Description
2.1 Purchase of Assets Agreement dated as of
November 29, 1994 by and between Quest
Electronic Hardware, Inc. and Arrow Electronics,
Inc.*
2.2 Share Acquisition Agreement dated as of November 29,
1994 by and among Gulfstream Financial Group, Inc.,
Philip D. Schwiebert, Quest Electronic Hardware,
Inc. and Judicate, Inc.*
4.1 Certificate of Incorporation of Judicate, Inc., as
amended*
4.2 By-Laws of Judicate, Inc.*
5.0 Form of Opinion of Gould & Wilkie*
23.1 Consent of Goldenberg Rosenthal Friedlander
23.2 Consent of Mortenson and Associates, P.C.
23.3 Consent of Gould & Wilkie (see Exhibit 5.0)
* Filed with Amendment No. 1 to this Registration Statement.
-II-1-
<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 to include material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by reference
into the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
-II-2-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned thereunto
duly authorized on August 28, 1995.
JUDICATE, INC.
By:/s/ STEPHEN J. DRESCHER
Stephen J. Drescher
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities indicated on August 28, 1995.
/s/ STEPHEN J. DRESCHER
Stephen J. Drescher Chairman, Chief Executive Officer and
Director (Principal Executive Officer)
/s/ MILTON M. ADLER
Milton M. Adler Treasurer, Secretary and Controller
(Principal Financial and Accounting
Officer)
/s/ PAUL L. BURTON
Paul L. Burton Director
/s/ MITCHELL HYMOWITZ
Mitchell Hymowitz Director
Michael Minkoff Director
Marc Powell Director
/s/ DOMINIC A. POLIMENI Director
Dominic A. Polimeni
-II-3-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description Numbered Page
<S> <C> <C>
2.1 Purchase of Assets Agreement dated as of November 29, 1994
by and between Quest Electronic Hardware, Inc. and Arrow
Electronics, Inc.*
2.2 Share Acquisition Agreement dated as of November 29, 1994
by and among Gulfstream Financial Group, Inc., Philip D.
Schwiebert, Quest Electronic Hardware, Inc. and Judicate,
Inc.*
4.1 Certificate of Incorporation of Judicate, Inc., as
amended*
4.2 By-Laws of Judicate, Inc.*
5.0 Form of Opinion of Gould & Wilkie*
23.1 Consent of Goldenberg Rosenthal Friedlander 30
23.2 Consent of Mortenson and Associates, P.C. 31
23.3 Consent of Gould & Wilkie (see Exhibit 5.0)
</TABLE>
*Filed with Amendment No. 1 to this Registration Statement.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Amendment No. 3 to the Form
S-3 Registration Statement of Judicate, Inc. (the "Company"), relating to shares
of common stock of the Company, of our report dated February 18, 1994, which is
incorporated by reference in the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1994, as amended by Form 10-KSB/A, No. 2, and to
the use of our name, and the statements with respect to us, as appearing under
the heading "Experts" in the Prospectus.
GOLDENBERG ROSENTHAL FRIEDLANDER, LLP
GOLDENBERG ROSENTHAL FRIEDLANDER, LLP
formerly known as GOLDENBERG/ROSENTHAL
Jenkintown, Pennsylvania
August 28, 1995
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in Amendment No. 3 to the Form
S-3 Registration Statement and Prospectus of Judicate, Inc. [the "Company"]
relating to shares of common stock of the Company, of our report dated April 10,
1995, which is incorporated in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1994, as amended by Form 10-KSB/A, and to the use of
our name, and the statements with respect to us, as appearing under the heading
"Experts" in the Prospectus.
MORTENSON AND ASSOCIATES, P.C.
Certified Public Accountants
Cranford, New Jersey
August 25, 1995
