<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 19, 1995
REGISTRATION NO. 33-60653
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DECORA INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 10775 68-0003300
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1 MILL STREET
FORT EDWARD, NEW YORK 12828
(518) 747-6255
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
TIMOTHY N. BURDITT
1 MILL STREET
FORT EDWARD, NEW YORK 12828
(518) 747-6255
(NAME, ADDRESS, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES OF COMMUNICATIONS TO:
DALE S. MILLER, ESQ.
MILLER & HOLGUIN
2029 CENTURY PARK EAST, SUITE 1060
LOS ANGELES, CALIFORNIA 90067
(310) 556-1990
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX. [x]
------------------------
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> 2
DECORA INDUSTRIES, INC.
Cross-Reference Sheet Pursuant to Item 501(b) of Regulation S-K
Showing the Location in the Prospectus of the Information
Required by Part I of Form S-1
<TABLE>
<CAPTION>
Form S-1 Item Number Heading or Subheading in Prospectus
-------------------- -----------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Facing Page of Registration Statement; Cross
Outside Front Cover Page of Prospectus Reference Sheet; Outside Cover of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Covers of Prospectus
of Prospectus
3. Summary Information, Risk Factors and Prospectus Summary; Certain Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Outside Front Cover of Prospectus; Prospectus
Summary; Plan of Distribution and Use of Proceeds
5. Determination of Offering Price Inapplicable
6. Dilution Inapplicable
7. Selling Security Holders Inapplicable
8. Plan of Distribution Outside Front Cover of Prospectus; Plan of
Distribution and Use of Proceeds
9. Description of Securities to be Registered Description of Securities
10 Interests of Named Experts and Counsel Legal Matters; Experts
11. Information with Respect to the
Registration Prospectus Summary; the Company; Certain Factors;
Price Range of Common Stock and Dividend Policy;
Selected Financial Data; Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Business of the Company; Directors and
Executive Officers; Executive Compensation; Market
Price of the Securities; Legal Proceedings;
Security Ownership of Certain Beneficial Owners
and Management; Certain Relations and Related
Transactions; Financial Statements
12. Disclosure of Commission Position on Inapplicable
Indemnification for Securities Act
Liabilities
</TABLE>
<PAGE> 3
PROSPECTUS
----------
DECORA INDUSTRIES, INC.
1 Mill Street
Fort Edward, New York 12828
(518) 747-6255
---------
1,640,769 Shares of Common Stock
----------
This Prospectus relates to the issuance by Decora Industries, Inc. (the
"Company") to certain individuals (the "Security Holders") of 1,640,769 shares
of Common Stock in settlement of certain litigation. All of the Security
Holders were given the right to have their shares registered under the
Securities Act of 1933, as amended (the "Act"). The Company will not receive
any cash proceeds from the sale of the securities offered hereunder by the
Security Holders. However, the registration of the shares is in full
satisfaction of a claim of the Security Holders against the Company. See "Plan
of Distribution and Use of Proceeds".
The Common Stock is quoted on NASDAQ under the symbol "DECO". The closing bid
price of the Common Stock reported by NASDAQ on July 12, 1995 was $1.03. See
"Price Range of Common Stock and Dividend Policy."
----------
<PAGE> 4
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES
A HIGH DEGREE OF RISK. SEE "CERTAIN FACTORS".
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 COMMIS-
SION 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 July 19, 1995
<PAGE> 5
No dealer, salesman or other person has been authorized to give any information
or make any representations, other than those contained in this Prospectus, in
connection with the offering hereby, and, if given or made, such information
and representations must not be relied upon as having been authorized by the
Company or the Security Holders. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, any securities to any person in
any State or other jurisdiction in which such offer or solicitation is
unlawful. 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 or the facts herein set forth since the
date hereof.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission, in its
Washington, D.C. office, the Registration Statement (of which this Prospectus
is a part), on Form S-1 pursuant to the Securities Act of 1933, as amended,
with respect to the securities of the Company being registered hereby. The
Prospectus contains only a portion of the information contained in the
Registration Statement. For further information pertaining to the securities
registered hereby, and the Company, reference is made to the Registration
Statement and to the schedules and exhibits filed. Statements contained in
this Prospectus as to the contents of any contracts or other documents referred
to herein are not necessarily complete. Where such contract or other document
is an exhibit to the Registration Statement, each said statement is deemed to
be qualified in all respect by the provisions of the exhibits.
The Company is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended, and, in accordance therewith, files reports, proxy
statements and other information with the Commission. All such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at the headquarters office of
the Commission, Room 1024, 450 5th Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the Commission: 7 World Trade Center, Suite
1300, New York, New York 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60621-2511. Copies of such material may also be
obtained from the Public Reference Section of the Commission, 450 5th Street,
N.W., Washington, D.C. 20549, at prescribed rates.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
CERTAIN FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . 7
SELECTED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . 10
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . 30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 32
PLAN OF DISTRIBUTION AND USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
<PAGE> 7
PROSPECTUS SUMMARY
The following is a brief summary of certain information contained elsewhere in
this Prospectus. The summary should not in any way be considered complete and
is qualified in its entirety by and reference is made to the more detailed
information contained in this Prospectus and the documents referred to herein.
THE COMPANY
Decora Industries, Inc. (the "Company" or "Decora"), a holding company, is a
Delaware corporation operating through its subsidiary, Decora, Incorporated
("Decora Manufacturing" and its divisions). The main emphasis of Decora
Manufacturing is the development, manufacture and sale of consumer decorative
products and of specialty industrial products, utilizing its
pressure-sensitive, self-adhesive, release and coating technologies including a
new proprietary technology known as Wearlon(R).
The Company's principal offices are located at 1 Mill Street, Fort Edward, New
York 12828, and its telephone number is (518) 747-6255.
PLAN OF DISTRIBUTION
The Company will issue certain shares, within seven business days of the
effectiveness of its registration statement, in settlement of certain debt
obligations and litigation with the Rabinowitz family, the former owners of its
discontinued Yorkville Industries, Inc. subsidiary (the "Settlement Shares") as
follows: (i) 768,307 shares of common stock; (ii) the number of shares of its
common stock determined by dividing $587,250 by the average of the closing bid
price for the 60 consecutive trading days prior to the effective date of the
registration statement but in no event less than 475,000 shares; and (iii) in
the event that the average closing bid price during the 30 consecutive trading
days before the effective date of the registration statement, and the 30
consecutive trading days after the effective date of the registration statement
do not exceed $587,250, the Company will issue the number of additional shares
of its common stock necessary to achieve a net sales value of $587,250 for the
shares issued described in subparagraph (ii) above. The Settlement Shares will
be issued to members of the Rabinowitz family in satisfaction of amounts owed
to them by the Company for the purchase of Yorkville which occurred in December
1989. In connection with such settlement which was finalized in July 1994, the
Company agreed to register such Settlement Shares under the Act. This
Prospectus was prepared pursuant to the foregoing contractual commitment to
register the Settlement Shares.
2
<PAGE> 8
THE OFFERING
<TABLE>
<S> <C>
Total Shares Offered to the
Security Holders (1) . . . . . . . . . . . 1,640,769 shares
Common Stock Outstanding Prior
to this Offering . . . . . . . . . . . . . 30,669,562 shares
Common Stock to Be Outstanding
After Completion of this
Offering(2) . . . . . . . . . . . . . . . . 32,310,331 shares
Certain Factors . . . . . . . . . . . . . . . This offering is speculative and involves a high
degree of risk. See "Certain Factors."
Use of Proceeds . . . . . . . . . . . . . . . The Company will not receive cash proceeds from
the issuance of Shares pursuant to this Prospectus.
However, the registration of the Shares is part
of a settlement of claims totaling $1,587,250.
NASDAQ symbol . . . . . . . . . . . . . . . . DECO
</TABLE>
- --------------------
(1) Additional shares may be issued pursuant to the settlement, the amount
of shares to be issued, if any, shall be determined 30 days following
the effective date of the registration statement pursuant to the terms
of the settlement with Security Holders.
(2) Does not include (i) 4,454,000 shares issuable upon the exercise of
certain options; (ii) 975,000 shares issuable upon the exercise of
certain warrants; (iii) 1,765,355 shares issuable upon the exercise of
certain convertible securities; (iv) 1,200,000 shares reserved for
issuance under the Company's 1987 Stock Option Plan; or (v) 500,000
shares reserved for issuance under the Company's 1988 Stock Purchase
Plan. See "Description of Securities."
3
<PAGE> 9
SUMMARY FINANCIAL DATA
The following selected financial data of the Company as to the five fiscal
years ended March 31, 1995 are derived from the consolidated financial
statements that have been audited by Price Waterhouse LLP as to all years.
The following table should be read in conjunction with the Company's financial
statements and the notes thereto. None of the information in the table
includes discontinued operations of the Company. See Note 3 of the financial
statements.
DECORA INDUSTRIES, INC.
SELECTED FINANCIAL DATA
For the five years ended March 31, 1995
(In thousands except per share data)
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------------------------
Statement of Operations Data: 1995 1994 1993 1992 1991
----------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $40,414 $39,955 $38,543 $40,751 $ 35,472
Operating Income 3,895 4,192 3,107 3,291 3,530
Income (Loss) from Continuing Operations 2,408 1,629 623 (428) (136)
Income (Loss) from Discontinued Operations (1,297) (1,481) 68 (8,673) (2,225)
------- ------- ------- ------- -------
Net Income (Loss) $ 1,111 $ 148 $ 691 ($9,101) ($2,361)
======= ======= ======= ======= =======
Income (Loss) Per Share(1):
Continuing Operations $ 0.08 $ 0.06 $ 0.02 $ 0 ($ 0.01)
Discontinued Operations ( 0.04) ( 0.05) 0.01 ( 0.44) ( 0.13)
------- ------- ------- ------- -------
Income (Loss) Per Share(1) $ 0.04 $ 0.01 $ 0.03 ($ 0.44) ($ 0.14)
======= ======= ======= ======= =======
Balance Sheet Data:(3)
------------------
Total Assets $31,021 $30,023 $34,952 $34,165 $55,038
Working capital (deficit) $ 238 $ 515 ($ 1,904) ($ 5,605) ($ 7,980)
Long-term Obligations $18,163 $18,473 $18,883 $19,358 $22,033
Stockholders Equity: $ 4,396 $ 2,577 $ 1,666 ($ 2,838) ($ 431)
--------------------
Cash Dividends per common share(2) $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>
- -----------------------
(1) Includes shares issuable upon exercise of outstanding warrants and
options to purchase Common Stock if their inclusion is dilutive.
(2) The Company does not anticipate paying cash dividends in the
foreseeable future.
(3) Historical balance sheet data has not been restated for discontinued
operations in years prior to the year in which the relevant
measurement date occurred.
4
<PAGE> 10
CERTAIN FACTORS
The securities offered hereby are speculative in nature, involve a
high degree of risk, and should not be acquired by any investor who cannot
afford the loss of his entire investment. Prior to making an investment
decision with respect to the securities offered hereby, prospective investors
should carefully consider, along with the other matters discussed in this
Prospectus, the following risk factors:
1. Major Source of Revenues in Single Market and from Single Purchaser.
The Company's core business, operated through its Decora Manufacturing
subsidiary, has been dependant on a large purchaser for substantially all of
its revenues. Over 93% of Decora Manufacturing's revenues in its last full
fiscal year were from sales to Rubbermaid Incorporated ("Rubbermaid") of
variations of its decorative covering products. See "Customers" and "Products
and Services - Consumer Decorative Products Group". Demand for its ConTact(R)
line, its oldest decorative covering product can vary, but has been relatively
flat in the last two years. The Company is working to address this product
dependence by expanding its product line both with Rubbermaid to include new
variations on its existing product and by expanding its offerings in the
consumer decorative, adhesive and industrial areas with new products utilizing
its proprietary technology, including Wearlon(R). The Company has introduced
Fabri-Art(TM), Cushion(TM), and Ultra in the last year, but so far only 8% of
its revenues are derived from these new products. The market acceptance of the
new products which is necessary to relieve its dependance on its older
ConTact(R) product has yet to be proven. At the same time, the Company's
dependence on Rubbermaid has recently increased as a result of the signing of a
new manufacturing agreement which incorporates new processes into Decora's
Rubbermaid product operations and which is estimated to increase Rubbermaid
product revenues by approximately 18% in the first full year of operations. At
present, Decora Manufacturing's continuing profitable operations are dependent
on maintaining sales of its core product and a continuing relationship with
Rubbermaid. The current Manufacturing Agreement with Rubbermaid was recently
extended until 1999.
2. Risks in Developing and Commercializing New Technology. Decora
Manufacturing has recently developed a number of new self adhesive consumer
decorative products with its new technology. See "Decora Manufacturing
Products and Services". The commercialization and sale of these new products
are partially new ventures with high costs, expenses, difficulties and delays
associated with commercialization of new products. Such new product
development necessitates new production processes for cost effective
manufacture in commercial quantities. At the same time, the Company has
developed a distribution plan for each product, either through an internal
sales and marketing organization or through establishing relationships with
companies with existing distribution networks. This development process
typically spans over a period of years. Although the Company in the last few
years has expended substantial sums on accomplishing development of new
products from its new technologies which has taxed the Company's resources,
significant additional funds must be expended for the new product and process
development and marketing activities to continue. Further, certain of the
industrial products are in the testing phase. See "Decora Manufacturing -
Marketing, Research and Development". The Company has introduced certain new
products in the last year through its existing relationship with Rubbermaid and
other distributors and is still seeking strategic partners for its industrial
products. However, thus far only 8% of its revenues are derived from its new
products. The sale of the new products have not yielded significant revenue
and/or profits and no assurances can be given that such revenues or profits
will be achieved. Further, until significant revenues are achieved and
efficiencies created in the production process for new product, the earnings of
the Company will be adversely impacted through significant research and
development expenditures. See "Management's Discussion and Analysis".
3. Competition. Although ConTact(R) products are not sold by the Company
to the ultimate consumer, competition experienced by Rubbermaid affects the
Company's revenues directly. Although there are competitive products,
management believes Rubbermaid dominates the market, based on price and
superior product. Some of the Company's new industrial products are based on
technology which compete with similar
5
<PAGE> 11
applications derived from other technologies. Furthermore, the markets served
are extremely competitive and are composed of many companies, many of which
have more capital, marketing expertise and personnel resources than that of the
Company. There can be no assurance that the Company will be able to compete
successfully in each market in which it is embarking. See "Decora
Manufacturing - Competition".
4. Significant Company Debt. The Company (Decora Industries, Inc. or
the "Parent") has short term debt obligations including convertible notes in
the amount of $1,500,000 to a significant shareholder due in November 1995 and
$550,000 due to a lender in December 1995. The Company has also guaranteed the
debt of its discontinued ComTel subsidiary which following the sale of the
assets has a remaining balance of $764,519 and is being restructured. The
Company intends to increase debt by $2,000,000-$3,000,000 over the next twelve
months to finance the necessary expansion required in connection with the
expanded Manufacturing Agreement with Rubbermaid (see "Management's Discussion
and Analysis of Financial Condition"). In addition, it has guaranteed Decora
Manufacturing's debt which includes a $4,000,000 sinking fund payment due in
April 1996 and $1,500,000 for each of the next two years in April of each year
and ongoing quarterly payments of $333,000 to its primary lender. Although
the Company intends to seek extension of the existing convertible notes and
sinking fund obligations of Decora Manufacturing, management believes its
Decora Manufacturing subsidiary will have sufficient funds both to make its
upcoming sinking fund payment and to pay its outstanding bank debt in the
ordinary course of its business. In the event additional funds are needed to
address any shortfall in payments, the Company anticipates some combination of
an extension and a refinancing, all of which the Company has successfully
accomplished in the past. No assurances can be given that these plans will be
successfully implemented. To the extent that the Company is not able to obtain
the necessary extensions or otherwise satisfy each of the foregoing creditors,
its ability to effectively operate may be materially and adversely affected.
See "Management's Discussion and Analysis of Financial Condition".
5. Earnings History. Although the Company has significant revenues and
has been profitable for the past two full fiscal years, the Company has never
had substantial net income. The income from continuing operations of the
Company for its last fiscal year, which ended March 31, 1995, was $2,408,000 or
$0.08 per share on revenues of $40,414,000. See "Selected Financial
Information" and "Management's Discussion and Analysis of Financial Condition".
6. Dependence on Key Personnel. The Company is dependent on its
executive officers including Nathan Hevrony, its Chief Executive Officer and
Chairman of the Board and key staff members of Decora Manufacturing. See
"Management" which describes the employment agreements which the Company has
entered into with these individuals and other members of management. Should
any such officer cease to be affiliated with the Company before an acceptable
replacement is found, there could be a material adverse affect on the Company's
business and prospects. No assurances can be given that suitable replacements
could be hired, if at all, except at substantial additional cost to the
Company. No key person insurance has been obtained by the Company for
management. In addition, John Smith, a full time consultant to the Company's
Decora Manufacturing subsidiary is the head of the subsidiary's research and
development efforts pursuant to a consulting agreement which term ends in
August 1996 (unless extended by mutual agreement). Decora Manufacturing
purchased the rights to much of its current technology from Mr. Smith. If Mr.
Smith terminates such consulting arrangement, it could have a material adverse
effect on the development by the Company of new technologies. Decora
Manufacturing has purchased key person life insurance policies in the amount of
$5,000,000 on various key personnel. See "Description of Business - Decora
Manufacturing".
7. Proprietary Rights. The Company has certain patents and proprietary
registrations for certain of its products. In addition, it has applied for
many foreign patents and tradename registrations for certain other products.
The Company's ability to compete effectively with other companies will depend
in part on its ability to maintain the proprietary nature of its technologies.
The Company has in the course of its development of
6
<PAGE> 12
the pressure sensitive and new coating technology, licensed its technology to
various parties and provided samples of various components of its technology to
certain third parties. Although the Company relies on Trade Secrets and
Confidentiality Agreements with licensees, employees and other parties, the law
in this area is not free from doubt and rights of the Company may be difficult
to enforce. A theft or other appropriation of the Company's technology by a
competitor could materially and adversely affect the Company's business.
Additionally, there is no guarantee that technology deemed by the Company to be
proprietary will not be challenged by other parties as either belonging to them
or existing in the public domain. The legal costs of a trade dispute could be
expensive and could sharply affect the Company's growth of its new technology.
It is also possible that competitors will develop products substantially
similar to those outside the protection of any trade secret or other
protection. See "Proprietary Rights".
8. Dilution. The Company's refinancing plans or requirements to satisfy
its debt may involve issuances of additional securities of the Company to
certain lenders or third parties; such issuances could result in immediate
dilution to purchasers of the Company's common stock. See "Management's
Discussion and Analysis of Financial Condition".
9. No Dividends. The Company has never paid any cash dividends and does
not intend to pay any dividends in the foreseeable future. The Company intends
to retain any future earnings for use in its business.
10. Authorization of "Blank Check" Preferred Stock. The Company's
Certificate of Incorporation authorizes the issuance of preferred stock, par
value $.01 per share ("Preferred Stock"), with such designation, rights and
preferences as may be determined from time to time by the by the Board of
Directors. Accordingly, the Board of Directors is empowered, without further
action or approval by the holders of the Company's Common Stock, to issue
Preferred Stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the voting power or other rights of the holders of
Common Stock. Under certain circumstances, issuance of Preferred Stock could
have the effect of discouraging, delaying or preventing a change in control of
the Company. Although the Company has no present intention to issue any shares
of its Preferred Stock, there can be no assurance that the Company will not do
so in the future. See "Description of Securities."
11. Shares Eligible for Future Sale. 5,449,000 shares have been reserved
for issuance by the Company upon the exercise of outstanding options and
warrants shares have been reserved for issuance by the Company upon conversion
of outstanding convertible debt instruments, 1,200,000 shares have been
reserved for issuance by the Company under the Company's 1987 Stock Option
Plan, and 500,000 shares have been reserved for issuance by the Company under
the Company's 1988 stock purchase plan. Sales of such shares in the public
market (which, in the case of freely tradeable stock, can occur at any time or,
in the case of stock subject to restrictions, after applicable restrictions
lapse) could adversely affect the market price of the Company's Common Stock.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded in the over-the-counter market. The
Company's Common Stock has been quoted on NASDAQ since 1986. Until April 1992
the stock traded under the symbol UTLL. After the completion of the
reincorporation in the State of Delaware and the change of the Company's name,
the Company's NASDAQ symbol was changed to DECO.
The following table reflects inter-dealer quotations, without retail markup,
markdown or commission, and may not necessarily represent actual transactions.
The high and low range of the Common Stock and bid prices for the dates
indicated have been provided by the National Quotation Bureau, Inc.
7
<PAGE> 13
<TABLE>
<CAPTION>
Common Stock
------------
Bid Prices
----------
High Low
---- ---
<S> <C> <C>
Fiscal 1996:
First Quarter 1 5/16 15/16
Fiscal 1995:
First Quarter 1 5/16 5/16
Second Quarter 2 3/32 1 1/8
Third Quarter 1 13/32 1 7/16
Fourth Quarter 1 1/4 15/16
Fiscal 1994:
First Quarter 2 1/8 1 1/2
Second Quarter 2 1/32 1 7/16
Third Quarter 1 5/8 1 7/16
Fourth Quarter 1 9/16 1
</TABLE>
On July 12, 1995, the closing bid and asked prices for the shares in the
over-the-counter market were $1.03 and $1.09, respectively, as reported by the
National Quotation Bureau, Inc. The Company has also authorized a class of
preferred stock, although no shares of preferred stock have yet been issued.
The estimated number of beneficial owners of the Company's Common Stock is
approximately 1,761 and the number of stockholders of record on July 12, 1995
was 990.
The Company has never paid a cash dividend and intends to retain earnings, if
any, for use in its business. The Company's agreements with its lenders
restrict the ability of the Company to pay cash dividends and the Company does
not presently intend to pay any cash dividends on its Common Stock for the
foreseeable future.
SELECTED FINANCIAL INFORMATION
The following selected financial data of the Company as to the five fiscal
years ended March 31, 1995 are derived from the consolidated financial
statements that have been audited by Price Waterhouse LLP as to all years.
The following table should be read in conjunction with the Company's financial
statements and the notes thereto. None of the information in the table
includes discontinued operations of the Company. See Note 3 of the financial
statements.
8
<PAGE> 14
DECORA INDUSTRIES, INC.
SELECTED FINANCIAL DATA
For the five years ended March 31, 1995
(In thousands except per share data)
<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Statement of Operations Data:
-----------------------------
<S> <C> <C> <C> <C> <C>
Revenues $40,414 $39,955 $38,543 $40,751 $ 35,472
Operating Income 3,895 4,192 3,107 3,291 3,530
Income (Loss) from Continuing Operations 2,408 1,629 623 (428) (136)
Income (Loss) from Discontinued Operations (1,297) (1,481) 68 (8,673) (2,225)
------- ------- ------- ------- -------
Net Income (Loss) $1,111 $ 148 $ 691 ($ 9,101) ($ 2,361)
======= ======= ======= ======= =======
Income (Loss) Per Share(1):
Continuing Operations $ 0.08 $ 0.06 $ 0.02 $ 0 ($ 0.01)
Discontinued Operations ( 0.04) ( 0.05) 0.01 ( 0.44) ( 0.13)
------- ------- ------- ------- -------
Income (Loss) Per Share(1) $ 0.04 $ 0.01 $ 0.03 ($ 0.44) ($ 0.14)
======= ======= ======= ======= =======
Balance Sheet Data:(3)
------------------
Total Assets $31,021 $30,023 $34,952 $34,165 $55,038
Working capital (deficit) $ 238 $ 515 ($ 1,904) ($ 5,605) ($ 7,980)
Long-term Obligations $18,163 $18,473 $18,883 $19,358 $22,033
Stockholders Equity: $ 4,396 $ 2,577 $ 1,666 ($ 2,838) ($ 431)
--------------------
Cash Dividends per common share(2) $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>
- -----------------------
(1) Includes shares issuable upon exercise of outstanding warrants and
options to purchase Common Stock if their inclusion is dilutive.
(2) The Company does not anticipate paying cash dividends in the
foreseeable future.
(3) Historical balance sheet data has not been restated for discontinued
operations in years prior to the year in which the relevant
measurement date occurred.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
After an extensive period of product and market development utilizing the
Company's proprietary Wearlon(R) coating and adhesives technologies, the
Company's results of operations for the year ended March 31, 1995 reflect a
change in product breadth and mix as well as customer and market
diversification. The results also reflect initial start-up manufacturing costs
and inefficiencies resulting from such new products and customer programs.
Such activities are discussed in more detail below. In April 1995 the Company
signed an expanded exclusive manufacturing agreement with its largest customer,
Rubbermaid, Inc. ( the "new Rubbermaid agreement") under which the Company will
integrate additional decorative product manufacturing operations into its
existing facilities. After the planned completion of the integration in July
1995 and the absorption of excess inventory levels created by the
consolidation, these new operation are anticipated to increase the Company's
revenues by approximately $7.5 million in the first full year of operation (see
"Subsequent Events" below).
The Company's financial statements for the year ended March 31, 1995 also
reflect completion of the divestiture of the operations of Company's last
non-core subsidiary, ComTel Industries, Inc, as well as the restructuring and
refinancing of debts and judgements primarily related to a previously
discontinued Yorkville Industries operations. These significant transactions
have all contributed to clarification of the Company's strategic direction and
enhancement of its financial condition.
In April 1994, management decided to discontinue the operations of a second
wholly-owned subsidiary, ComTel Industries, Inc. ("ComTel"). The divestiture
plan was completed through the sale of ComTel's operations in three
transactions, the last of which was completed on June 14, 1995. Cash proceeds
from the sales of these operations (aggregating $1.9 million) were used to
reduce the secured debt of the subsidiary. The operating losses for the
divested business caused largely by its manufacturing operation which was the
last part to be sold, and the net loss on disposal have been segregated and
reported as a discontinued operation (see "Discontinued Operations" below).
On July 22, 1994, the Company completed a refinancing and settlement
transaction which refinanced all of the past due debt and settlement
obligations of the Parent Company including obligations to Chase Manhattan Bank
("Chase"), InterEast Capital Limited ("IECL"), the former owners of Yorkville
(the "Former Yorkville Owners") and a former director. These obligations
totaling $7,552,000 as of March 31, 1994, consisted of debt securities and
previous settlements related primarily to the previously discontinued Yorkville
operations. All of such obligations had become due and payable during fiscal
1994. The total amount due was settled for a combination of cash, securities
and forgiveness of debt. The transaction included full releases from the
former creditors with respect to all past obligations other than the pending
registration and issuance of common stock to the Former Yorkville Owners (see
Note 13 to the financial statements and "Liquidity and Capital Resources").
RESULTS OF CONTINUING OPERATIONS
While revenues of the Company's operating subsidiary, Decora Manufacturing,
grew slightly in the year just ended, the mix of such revenues changed as lower
revenues from its mature core Con-Tact(R) housewares products and certain
phased out industrial products were offset by increased sales of new products
both to its largest customer, Rubbermaid and to new customers primarily in the
walldecor and other self- adhesive decorative markets. The commercialization
and full-scale manufacture of such new products, many of which incorporate the
Company's Wearlon(R) technology, also resulted in non-recurring start-up costs
and
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<PAGE> 16
inefficiencies in the production of brand new processes which adversely
affected the Company's overall profitability but which the Company believes
have been reduced and will continue to be reduced during fiscal 1996. The
Company also invested in increased sales and marketing costs related to the
sale of such new products and the establishment of supply agreements with new
customers which the Company anticipates will result in future increased sales
and profitability.
FISCAL 1995 VS. FISCAL 1994 AND FORWARD LOOKING INFORMATION
Revenues of Decora Manufacturing increased by 1.1% or $459,000 from $39,955,000
in fiscal 1994 to $40,414,000 in fiscal 1995. Revenues from its traditional
Con-Tact(R) product line decreased by 4.5% or $1,615,000 and discontinued
industrial release liner product revenue decreased $850,000. These declines
were off-set by a $2,054,000 increase in sales of recently introduced, and
newly developed, self-adhesive products for Rubbermaid including Con-Tact(R)
Ultra, Con-Tact(R) Cushion(TM) and Fabri-Art(TM) and a $1,105,000 increase of
other consumer decorative products to other customers in the wallcovering and
decorative markets including North American Decorative Products, Inc.
("Norwall") and Friedola Gebr. Holzapfel GmbH & Co. KG ("Friedola"). While not
yet significant, sales of Wearlon(R) liquid coatings in the industrial
maintenance market also increased over the prior year.
As a result of the new Rubbermaid agreement (see "Subsequent Events" below),
the Company will consolidate into its facility additional processing operations
previously performed by Rubbermaid with respect to its core product line
beginning in fiscal 1996. Integration of the operations is scheduled for
completion in July 1995 and is anticipated to generate approximately $7,500,000
of additional revenue during the first full year of operations. As a result of
the consolidation of operations, such increase will be partially offset by
absorption of excess inventory in the forms of work-in-process and finished
goods owned by Rubbermaid in the Company's facility. Such absorption is
anticipated to occur in the first and second quarters of fiscal 1996.
During the first quarter of fiscal 1995, Decora Manufacturing signed two five
year exclusive license and supply agreements with Norwall for (a) proprietary
coating and laminating services for the conversion of Norwall's standard
wallcovering products into repositionable, removable, self-adhesive products
and (b) the manufacture and supply of decorative thin film coordinated accents.
These agreements contain minimum purchase volumes in order for Norwall to
retain exclusivity in addition to royalties to be paid based on the sale of
such products. In addition to the Norwall agreements, during fiscal 1995 the
Company signed a License and Supply Agreement with Friedola under which
Friedola will purchase from Decora a wide variety of its consumer and
commercial decorative products for exclusive distribution throughout western
Europe. Based in Germany, Friedola is a 105 year old manufacturer and
wholesaler of housewares and home furnishing products with annual revenues in
excess of $100 million. This agreement also contains minimum purchase volumes
in order to retain exclusivity.
Initial sales under the Company's new supply agreements with Norwall and
Friedola occurred primarily during the third and fourth quarters of the fiscal
year ended March 31, 1995 as a result of initial market introductions. While
these new products generated interest in the marketplace, the Company
concentrated on upgrading production from small lots to commercial production
and experienced start-up manufacturing inefficiencies and shipping delays with
certain products. As a result, initial minimum volumes under the agreements
were not achieved and the customers are currently refining product programs
based on market feedback from the initial introduction. The Company
anticipates completing modifications to the respective agreements to reflect
the anticipated timing of orders and the new programs which are scheduled to be
introduced beginning in September 1995 in the U.S. and later in the year in
Europe.
Gross profit of the Company increased by $1,230,000 during the current fiscal
year from $10,386,000 in fiscal 1994 to $11,616,000 in fiscal 1995 reflecting a
combination of increased sales volume, discontinuance of
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<PAGE> 17
certain less profitable industrial products and manufacturing cost reductions.
While gross profit margins increased from 26% to 29%, management anticipates
that such margins may return to more historical levels until such time that the
revenue contribution of new products with greater margin is more significant
relative to its core products. Gross margins are also anticipated to return to
more historical levels as a result of additional costs related to products
which have been in the development stage and changes in product mix related
primarily to the new manufacturing operations being added pursuant to the new
Rubbermaid agreement.
Operating Income of the Company decreased $297,000 during the current fiscal
year from $4,192,000 in fiscal 1994 to $3,895,000 in fiscal 1995. Higher gross
profit was offset by new product manufacturing development and start-up costs.
These additional costs which were mainly a result of manufacturing process
development as well as market development resulted primarily from existing and
new consumer products being distributed by Rubbermaid as well as those for the
Company's new additional strategic supply relationships with Norwall and
Friedola. While the Company anticipates continued investment in these
activities in the future, certain expenditures in fiscal 1995 were
non-recurring costs associated with initiating the commercial production of new
technology-based products. The Company continues to place more emphasis on
sales and marketing activities as well commercial processing development rather
than on pure research and development. R&D spending decreased from $1,364,000
in fiscal 1994 to $1,067,000 in fiscal 1995 with such decrease being more than
offset by increases in sales and marketing and production activities. The
primary emphasis is now the fulfillment of its major customer product
requirements and the domestic and international sales and marketing of products
which are the result of research and development activities over the past three
years.
Interest expense increased 8% from $2,451,000 in fiscal 1994 to $2,658,000 in
fiscal 1995. While total liabilities decreased by $821,000 during the year,
such decrease was offset by increased interest rates on floating rate debt and
increased amortization of the debt discount related to the CIGNA Subordinated
notes as a result of the extension of the first sinking fund payment from April
1995 to April 1996 (see "Liquidity and Capital Resources" below).
Income from continuing operations was impacted favorably by a tax benefit of
$1,400,000 resulting from net operating loss carry forwards which had not
previously been given value on the Company's financial statements (see Note 8
to the financial statements). The final disposition of non-core subsidiaries
and the historical profitability of continuing operations resulted in the
recognition of this benefit under accounting principles applicable to a portion
of the Company's net operating loss carry forwards. The remaining unrecognized
net operating loss carry forwards will be reviewed periodically and credited to
income when their recognition is considered to be more likely than not.
For the fourth quarter of fiscal 1995, revenues of the Company were lower by
$778,000 (8%) as compared to the comparable period of the prior year primarily
as a result of the timing differences of large, end of quarter orders by the
Company's largest customer, Rubbermaid. Such decline was offset by cost
savings and changes in product mix resulting in an increase in gross profit of
$155,000 in the current period. The revenues and operating results of ComTel
(discontinued operations) experienced a sharp decline in the fourth quarter
mainly as the result of the pending sales of the operations on customer orders,
supplier deliveries and internal operations. On March 31, 1995, ComTel
disposed of its telecommunications Secondary Market and Services businesses and
on June 14, 1995 completed the sale of its last remaining operation in Sanford,
Florida (see "Results of Discontinued Operations" below). The net income of
$88,000 for the fourth quarter of fiscal 1995 is attributable to the losses
incurred by ComTel, offset by the income from continuing operations which
included the tax benefit of $1,400,000. There were no other material unusual
charges or adjustments during the fourth quarter.
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<PAGE> 18
The Company's near term growth is anticipated by management to come primarily
from the addition of new manufacturing operations under its New Manufacturing
Agreement with Rubbermaid and the sale of Wearlon(R) coating and self-adhesive
systems for wallcovering as well as decorative thin film products. Such
increases will initially be offset by the absorption of excess inventory owned
by Rubbermaid. Longer term growth is also anticipated to be derived from these
products as well as from sales of Wearlon(R) liquid coatings both in the
industrial maintenance and other niche markets and the international expansion
of sales activities for its other consumer decorative products. It is
anticipated that such products and marketing activities will add growth to the
relatively flat revenues experienced in the last few years from the mature
domestic Con-Tact(R) business.
FISCAL 1994 VS. FISCAL 1993
Revenues of Decora Manufacturing increased by 4% or $1,412,000 from $38,543,000
in fiscal 1993 to $39,955,000 in fiscal 1994. The prior year's results
included $618,000 of revenues from other industrial products of Decora
Manufacturing which were previously discontinued and thus revenues from
comparable existing and new product lines increased by approximately 5% or
$2,030,000 in fiscal 1994 over the prior fiscal year as new products lines
began to show results. Approximately 40% of the increase in such revenues was
derived from new products and their respective selling programs which had no
revenue in the prior year including sales of the new thin film decorative
products, sales of Wearlon(R) coatings and chemicals and international sales of
ConTact(R) products by the Company's international sales group. Additionally,
approximately 28% of such increase in revenues was derived from sales of new
ConTact(R) products including Fabri-Craft(TM) textile products, KidScape(TM)
self adhesive wall murals and decorative trims and borders, and 24% of the
increase in sales resulted from the Company's proprietary industrial transprint
release paper products. Traditional ConTact(R) products provided the remainder
of the growth in revenues increasing less than 1% over the prior year.
Operating Income of Decora Manufacturing increased by $785,000, during the
current fiscal year from $3,921,000 in fiscal 1993 to $4,706,000 in fiscal
1994. Higher sales and marketing expenses were partially offset by lower
research and development costs as well as increased gross profit resulting from
the combination of higher revenues and reduced fixed and variable expenses. As
the Company started to market its new products, it increased investment in
sales and marketing efforts and to a lesser degree on research and development,
spending an aggregate of $2.8 million in fiscal 1994 as compared with $2.0
million in the prior year for all such activities with all of the increase
related to increased sales and marketing activities. These expenses include
all marketing, sales and development costs which are also related to the
consumer products being distributed by Rubbermaid.
During the fourth quarter of fiscal 1994, the Company signed a new and
exclusive six year Manufacturing Agreement with Rubbermaid covering the
traditional ConTact(R) products as well as new products including
Fabri-Craft(TM) self-adhesive textiles and KidScape(TM) wall murals. In
addition, the new agreement allows Decora Manufacturing to sell its decorative
products in certain international markets. The Company generated over $500,000
of such sales during the last half of fiscal 1994 in the Middle East and South
America.
Corporate expenses were approximately $200,000 greater in the current fiscal
year compared to the prior year as the result of the significant one-time legal
and professional fees incurred in connection with the debt restructurings
finalized in July 1994.
Interest expense decreased 3% from $2,514,000 in fiscal 1993 to $2,451,000 in
fiscal 1994. This decrease resulted primarily from the favorable impact of the
two year extension of the potential put obligation relating to the warrants in
the subsidiary (see Note 5(b) to the financial statements) which was partially
offset by higher interest expense of Decora Manufacturing resulting from
increases in prime rate and higher average line of credit borrowings.
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<PAGE> 19
RESULTS OF DISCONTINUED OPERATIONS
Revenues of ComTel Industries through completion of the sale of all operations
decreased $2,382,000 from $11,603,000 in fiscal 1994 to $9,221,000 in the
fiscal 1995, primarily due to the ongoing sales of the operations through
several transactions during the year and the related impact such sales
activities had on customer orders, vendor supplies and internal operations,
particularly in the fourth quarter of fiscal 1995 primarily for the metals
operation. Declining business from two of ComTel's major customers, Siemens
Stromberg-Carlson and the General Services Administration (GSA), and restricted
working capital also contributed to significant operating losses late in the
fourth quarter. As a result, operating losses from discontinued operations were
$875,000 in fiscal 1995 versus $1,269,000 in fiscal 1994.
On March 31, 1995, the Company sold the telecommunications assets of ComTel for
$1,810,000 (consisting of cash of $250,000 and notes receivable of $1,560,000).
In addition, the purchaser assumed approximately $1,700,000 of the Company's
liabilities. The notes receivable bear interest monthly at 7% with interest
only accruing during the first three years and level interest and principal
payments due thereafter until maturity on March 31, 2002. The notes are
secured by the assets of the purchaser and are guaranteed by the purchaser's
parent company. The transaction resulted in a gain approximating $118,000.
On June 14, 1995, the Company completed the sale of the fixed assets and
inventory related to the manufacturing division of ComTel's business. The
selling price was $1,370,000 (consisting of $1,100,000 cash and a note for
$270,000) plus the assumption of approximately $75,000 of liabilities. The
note is scheduled to be repaid during the six months following closing as
inventory purchased is used by the purchaser to fulfill customer purchase
orders. In addition, in conjunction with the sale, claims on ComTel's assets
with respect to a $300,000 note payable to a customer were forgiven except for
$50,000 which is to be paid from the proceeds of the note receivable. The
assets of the company were sold to a buyer who does not intend to continue in
the same business and therefore did not assume operational liabilities which
were anticipated to be assumed. As a result, the net loss arising from this
transaction was approximately $540,000 (which was approximately $745,000 less
than the net gain anticipated at December 31, 1994).
On September 28, 1992 ComTel entered into a credit agreement with Fleet Bank
which provided for a $1,000,000 term loan and up to a $2,500,000 revolving
credit facility, secured by certain of its fixed assets and substantially all
of its inventory and receivables. The term loan ($750,000 at March 31, 1994)
was payable through 1997 and the revolving credit facility was extended until
June 30, 1995. The balance outstanding on the revolving credit facility was
$2,175,000 at March 31, 1994. Due to the divestiture plan and the
manufacturing and operating difficulties experienced by ComTel in that period
as discussed elsewhere herein, ComTel had been in default of certain financial
covenant tests applicable to this credit agreement. As a result of the sales
of the operations which was completed on June 14, 1995, ComTel repaid the
entire term loan balance from cash proceeds and the majority of the revolving
credit facility. Following the final sale on June 14, 1995, the remaining
balance on the credit facility was $765,000. The Company is in principal
agreement with the lender to restructure the remaining balance and to repay it
with the proceeds of a new two year promissory note.
Certain liabilities of the ComTel businesses, were not assumed by the buyers of
those business units. As a result, the Company is in the process of settling
these liabilities for less than face value and expects to be able to do so.
Certain remaining notes and accounts receivable were not sold to the buyers,
and the Company expects to recover the majority of accounts receivable although
no assurances can be given. The Company presently expects that the net effects
of the assets and liabilities (not settled in connection with the sale
transactions described above) will result in a gain approximating $500,000.
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At December 31, 1994, the Company had expected that gains on the sale of assets
and the anticipated timing of such sales would offset any additional operating
losses through the date of disposition. The Company was not able to complete
the sale transactions soon enough to stop the operating losses or to fully
attain the anticipated sale value. The additional operating losses of the
ComTel businesses recorded during the quarter ended March 31, 1995 were
$592,000. As a result of the consummation of these transactions on March 31,
1995 and June 14, 1995, the Company recorded a loss from discontinued
operations of $1,297,000 for the year ended March 31, 1995 which was comprised
of operating losses of $875,000 and losses on disposal of $422,000.
While the Company is in the process of settling certain net liabilities of its
former ComTel business, no operations remain and no further losses are expected
to be incurred with respect to the ComTel operations.
LIQUIDITY AND CAPITAL RESOURCES
Changes in the Company's consolidated balance sheet from March 31, 1994 to
March 31, 1995 reflect a slight decrease in overall net working capital from
$515,000 as of March 31, 1994 to $238,000 as of March 31, 1995. Accounts
receivable decreased $966,000 and inventory increased $1,866,000, primarily as
a result of timing differences between the periods with respects to large
orders from the Company's major customer. The $909,000 reduction in accounts
payable also reflects timing differences, primarily regarding raw material
deliveries while the $2,282,000 increase in the current portion of long term
debt is a result primarily of the reclassification from long term debt of a
convertible note of the Company in the amount of $550,000 which is due December
31, 1995 and a subordinated convertible note of the Company in the principal
amount of $1,500,000 which is due November 3, 1995.
Consolidated cash balances as of March 31, 1995 were $309,000 which are limited
by certain security agreements and debt covenants as to use. The Parent
Company therefore has limited cash resources. During recent fiscal periods,
the Company and its subsidiaries generated cash from operations which was
utilized primarily to fund working capital requirements and repay debt. During
the current fiscal year Decora Manufacturing generated positive operating cash
flow while the Parent Company, due to administrative expenses and expenses
associated with the Refinancing and Settlement Transaction had negative cash
flow which was funded through management fees and through a small private
placement of equity securities (see Note 13 to the financial statements). The
Company also owes former directors and officers of the Company with respect to
a contingent obligation of approximately $185,000 which resulted from a
settlement and restricted stock issuance in 1992 and which came due in
September 1994. The Company is attempting to structure payment terms in
accordance with the its cash flow resources, although no assurances can be
given that such a settlement will be achieved.
In conjunction with the Refinancing and Settlement Transaction described above,
Decora Manufacturing's revolving credit line was increased to $6,000,000 and
was extended to July 31, 1996. In addition, the remaining term loan balance of
$2,000,000 as of the closing date was refinanced together with an additional
$6,000,000 of new debt in a five-year term loan facility and an additional
$1,000,000 was made available under the term loan facility (if required) to
fund capital expenditures until July 31, 1995. The $6,000,000 of new term loan
funding was utilized to refinance Parent Company debt (see Note 13 to the
financial statements). As of March 31, 1995, the balance of the term loan was
$7,625,000, and the balance of the revolving credit facility was $1,704,000.
As of March 31, 1995, the Company had not drawn down any of the available
capital expenditure term loan facility.
In connection with the acquisition of Decora Manufacturing by the Company in
April 1990, Decora Manufacturing issued $7,000,000 principal amount of
subordinated notes, of which $2,500,000 was due April 15, 1995 and $1,500,000
on each April 15 thereafter through 1998. CIGNA and the Company have agreed
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<PAGE> 21
to extend the April 15, 1995 payment until April 15, 1996 at which time a total
of $4,000,000 will be due. These notes were issued with warrants which include
certain put features which may become payable in May 1997 and call features
which begin in May 1998. This put feature was extended from its previous
effective date of May 1995 as part of the Refinancing and Settlement
Transaction.
Pursuant to a court mandated settlement in July 1994 of an action filed in the
Supreme Court of the State of New York relating to the purchase of the
Company's former Yorkville subsidiary, the Company is obligated by the court
order to the Former Yorkville Owners to file a registration statement for the
purpose of registering shares worth $1,587,000. The deadline for the Company
to have an effective registration statement was June 30, 1995. The Company
filed a registration statement with the SEC, however it is not yet effective.
While the shares were not registered by June 30, 1995, the Company has 20 days
to cure such default and Management believes that such default does not create
a default under the Company's other debt agreements. If the Company is unable
to cure in the prescribed time, the Former Yorkville Owners may be entitled to
enter a judgment in the amount of $1,587,000 against the Company. The SEC has
not notified the Company when the Registration Statement may be effective.
Management believes that Decora Manufacturing's cash flow from operations and
lending facilities will be adequate to meet its debt service and fund its
working capital needs.
Capital expenditures for the fiscal year ended March 31, 1995 were
approximately $920,000. Management considers the aforementioned amount of
capital expenditures to be typical for the historical level of operations. As
a result of the New Manufacturing Agreement signed with Rubbermaid (see
"Subsequent Events" below) and the resulting consolidation of additional
manufacturing operations into the Company's Fort Edward facility, the Company
anticipates spending approximately $2,500,000 on capital improvements, employee
hiring and training and other costs during fiscal 1995 in addition to routine
capital expenditures of approximately $1,200,000. The Company is in the
process of executing a financing plan for these expenditures which combines (a)
raising additional debt in the amount of approximately $2,875,000 through the
issuance of tax-exempt industrial development bonds and through a low cost loan
from the local municipal development corporation; (b) receipt of interest
subsidy and job training grants through existing State programs; (c)
utilization of existing bank facilities and operating cash flow and (d) the
sharing of certain project costs with Rubbermaid. The additional operations
are anticipated to generate sufficient cash flow to service additional debt to
be raised, although no assurances can be given that such funds will be adequate
or that the financing plan will be executed as currently planned.
SUBSEQUENT EVENT
On April 17, 1995, Decora Manufacturing signed an expanded exclusive
manufacturing agreement with its largest customer, Rubbermaid. Under the new
agreement, which expires on March 31, 1999, the Company will perform consumer
packaging operations for its decorative products line which are currently
performed by Rubbermaid in the Company's Fort Edward facility. The Company
anticipates that the additional manufacturing operations, which will centralize
an integrated manufacturing process with resulting time and cost efficiencies,
will generate incremental annual revenues of approximately $7,500,000 in the
first full year of operations and is anticipated to contribute to the overall
profitability of the decorative coverings business. The agreement becomes
effective upon the relocation of the operations which is ongoing and is
anticipated to be completed in July 1995. Integrating the operations requires
relocation of machinery and equipment from North Carolina to New York as well
as improvements to the Company's facility and is anticipated to create
approximately fifty additional manufacturing jobs at the Company's facility.
The Company has developed a financing plan to fund the required improvements
which it is in the process of executing (see "Liquidity and Capital Resources"
above).
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BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Decora Industries, Inc. (the "Company" or "Decora"), a holding company, is a
Delaware Corporation operating through its primary subsidiary, Decora
Incorporated ("Decora Manufacturing"). The main emphasis of the Company is the
development, manufacture and sale of self-adhesive consumer decorative products
and of specialty industrial products, utilizing its proprietary
pressure-sensitive, self-adhesive, release and protective coating technologies.
In April 1994, the Company made the decision to sell the operations of ComTel
Industries, Inc. ("ComTel"), a full service telecommunications company which
manufactures, sells and services new and used telephone equipment and
accessories (see "Discontinued Operation" below).
HISTORY OF THE COMPANY
The Company, as presently structured, is the result of a 1988 change in control
effected by a group of investors who completed a management change and new
strategic plan. In March 1992, the Company, formerly named Utilitech,
Incorporated, changed its name to reflect the strategic decision of management
to place future emphasis on consumer decorative products as well as specialized
industrial products derived from its coating, laminating, adhesive and release
technologies. In 1988, the Company was a diversified holding company with a
number of subsidiaries operating various businesses, including industrial
lighting, utility repair, utility software, and pipe manufacture. Management
evaluated these businesses and determined that the majority of these businesses
either did not possess sufficient growth potential or did not fit with the
Company's strategic direction. From late 1988 to 1990, the Company engaged in
the divestiture of these entities and meanwhile sought other opportunities.
On April 18, 1990, the Company acquired the assets of the Decora Division of
United Merchants and Manufacturers, Inc. (a NYSE company). Decora
Manufacturing has been in business since 1945 and was the originator of the
pressure-sensitive, stylized, decorative covering material bearing the brand
name Con-Tact(R). Concurrent with the acquisition, Decora Manufacturing
entered into a five-year manufacturing and distribution agreement (the
"Manufacturing Agreement") with Rubbermaid Incorporated ("Rubbermaid") which
has since been extended to 1999, whereby decorative self-adhesive vinyl and
textile products are exclusively manufactured for and distributed by Rubbermaid
under their Con-Tact(R), Fabri-ArtTM, and Kid ScapesTM brand names. The
Con-Tact(R) manufacturing and adhesive technology and trademark were originally
developed and owned by Decora Manufacturing and in the 1950's enabled Decora
Manufacturing to establish its market leadership position in the industry.
Decora Manufacturing has continued to invest in and improve the coating and
adhesive technology involved in the manufacture of these products, and in
conjunction with the development of its Wearlon(R) technology, has recently
developed a new group of proprietary products for Rubbermaid and for new
strategic partners.
In May 1988 the Company acquired ComTel (then known as Utility Marketing and
Development Corporation), a privately held, fully integrated telecommunications
enterprise - installing, refurbishing and servicing new and used
telecommunications equipment and systems. In July 1990 and September 1991,
respectively ComTel's 80%-owned subsidiary, ComTel Metals, Inc., acquired the
Siemens-Stromberg Carlson ("SSC") metal manufacturing divisions in El Paso,
Texas and Sanford, Florida. The purchases included 5-year supply contracts for
all metal parts required to produce SSC's line of central office equipment. In
June of 1993, ComTel acquired the assets of the SSC International Division
("SCCI") of Sun Financial Group, Inc. to expand its market base into the
telemarketing of repair, resale, installation, service and maintenance of
secondary market customer-premises telephone equipment. Included with the
acquisition was a marketing support agreement whereby ComTel will have access
to Sun Financial Group's customer base. In December 1993,
17
<PAGE> 23
ComTel entered into a purchase and service support agreement with Fujitsu
Business Communications Systems to provide secondary market support for
Fujitsu's Focus 960 telecommunications switching system. As a result of its
desire to focus resources on its core Decora Manufacturing subsidiary, in April
1994, the Company made the decision to sell the operations of ComTel. The
ComTel business has now been disposed of (see "Discontinued Operations" below).
In December 1989, the Company, in a leveraged acquisition acquired all of the
stock of Yorkville Industries, Inc. ("Yorkville"), a nationwide distributor of
specialty light bulbs and lighting products which was then severely
undercapitalized. The Company at that time had another lighting subsidiary and
intended to expand its lighting business. The Company intended to raise
significant working capital by selling Yorkville's real estate holdings and
creating liquidity for working capital purposes. Following the acquisition,
the planned turnaround was not viable due to a continuing severe shortage of
capital caused in large measure by the recessionary drastic decrease in the
value of the real estate as well as reduced demand for Yorkville's products due
primarily to the recession. Yorkville continued to incur substantial losses.
After reviewing the deteriorating financial condition of Yorkville, and its
overall business plan and growth plan, the Company liquidated the assets and
discontinued substantially all of the operations of Yorkville as of June 1992.
NARRATIVE DESCRIPTION OF THE BUSINESS
GENERAL
Decora Industries, Inc. is a holding company operating through its subsidiary,
Decora Manufacturing. The Company provides complete management oversight to
its subsidiaries including the direction of strategic planning, financing and
business development. The "Company" as used herein shall refer to the holding
company and its subsidiaries unless the context indicates otherwise.
DECORA MANUFACTURING
Decora Manufacturing is in the business of developing, manufacturing and
selling self-adhesive consumer decorative products and specialty industrial
products. It develops and manufactures these products utilizing its
proprietary pressure-sensitive adhesive and release technologies, including its
technology known as Wearlon(R). At this time, 92% of the Company's revenues
are for sales of its core ConTact(R) product and other decorative houseware
products similar to ConTact(R) under a single contract with Rubbermaid.
Following the acquisition in April 1990, Management began to seek growth and
diversification opportunities in order to complement Decora Manufacturing's
mature core business. In the development of long-term growth strategies
management's main focus has been:
o To maximize its strategic alliance with Rubbermaid and its
outstanding consumer distribution network;
o To utilize its modular product components and technologies to
create self-adhesive products for new applications and market
segments;
o To establish additional strategic relationships for distribution
of new products in segments and channels not served by
Rubbermaid; and
o To compliment its consumer products with other applications and
products for the industrial and coatings and substrates
markets.
Significant resources have been invested in researching and initiating new
product programs arising from the Company's base technology. The development
program has resulted in a new generation of decorative consumer products
including several for its core business with Rubbermaid as well as for other
new strategic
18
<PAGE> 24
distributors. Several new consumer products were introduced during this past
fiscal year and the Company continues to invest in research efforts as well as
in the commercialization and refinement of new products and the expansion of
marketing relationships and distribution channels.
As a compliment to the Company's consumer products business, Decora
Manufacturing also introduced new industrial release coating and coated
substrate products based upon its Wearlon(R) adhesive and release coating
technologies. These industrial products further broaden the Company's
potential market opportunities.
Products and Services - Consumer Decorative Products Group
Decora Manufacturing manufactures decorative self-adhesive products for sale
into an increasing number of market segments including housewares, arts and
crafts, wallcovering and hardware. Such products are produced with a modular
system of varying substrates, coatings, finishes and packaging depending on the
requirements of the application, distribution channel and end user. The
Company's goal is to maximize this modular system through the development and
sale of self-adhesive products for as many household applications and through
as many market segments as possible.
The Company's traditional and primary consumer product is Con-Tact(R), a
repositionable, self-adhesive, vinyl decorative covering material which is used
for do-it-yourself shelf decorations, surface protection, arts and crafts and
other applications. Con-Tact(R) is manufactured by Decora Manufacturing
utilizing the Company's proprietary and patented repositionable adhesive
technology and is sold in roll form with a wide range of finishes including
printed patterns, solid colors, clear vinyl and specialty metallics. All of
Decora Manufacturing's Con- Tact(R) production is purchased by Rubbermaid under
a recently renewed Manufacturing Agreement which currently expires in 1999.
Rubbermaid markets and sells Con-Tact(R) primarily in the housewares
departments of mass merchandisers in the U.S., including WalMart, K-Mart,
Target and others.
In addition to Con-Tact(R), Decora Manufacturing has developed several new
products for distribution by Rubbermaid which are being sold to an increasing
range of market segments. These include decorative self-adhesive Rubbermaid
Borders for the wallcovering segment, FabriArt TM self-adhesive textiles for
the arts and crafts segment, Kid ScapesTM self-adhesive wall murals and borders
for the juvenile segment, Con- Tact(R) Cushion foam shelf-liner for the
housewares segment and Con-Tact(R) Ultra self-adhesive woodgrains for the
hardware/Do-it-yourself ("DIY") segment.
Under the Manufacturing Agreement, Decora Manufacturing provides Rubbermaid
with 100% of its worldwide product needs according to periodically negotiated
pricing levels which are adjusted primarily based on changes in raw material
costs and volume. The recently renewed Manufacturing Agreement also permits
Decora Manufacturing to market Rubbermaid's decorative products in certain
international markets and to market its own line of decorative products in
Europe as well as to perform the consumer packaging component of the
manufacturing process.
In July 1994, Decora Manufacturing established a strategic distribution
relationship for its decorative products in Europe with the signing of a
License Agreement with Friedola Debr. Holzapfel GmbH & Co. KG ("Friedola")
under which Friedola purchases from Decora self-adhesive decorative products
for exclusive distribution throughout western Europe. In conjunction with
Friedola, the Company expanded product offering with a new range of decorative
designs, substrates and finishes. The Europe line was introduced to the
market at the Heimtextil show in Frankfurt, Germany in January 1995. Due to
manufacturing inefficiencies and customer response, the product is currently
being refined. Revenues are anticipated beginning at the end of calender 1995.
In addition to its European activities, the Company is also selling decorative
products internationally to customers in South America and the Middle East.
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<PAGE> 25
Decora Manufacturing has also recently introduced new technology based products
for the wallcovering and home decorating market. The Company has introduced
self-adhesive thin film products based on a new, proprietary thin film
technology (patents pending) developed over the last three years. These new
decorative film products are very thin, yet durable and removable and printed
in a variety of solid colors and decorative patterns. Sold in the form of
accents or stencil-like products, they blend seamlessly onto most smooth or
textured surfaces. The Company recently signed a long-term exclusive supply
agreement with North American Decorative Products, Inc. ("Norwall"), a leading
wallcovering manufacturer, for the manufacture and supply of such thin film
decorative products to be sold by Norwall under the brand name ArtworksTM.
In addition to the thin film products, the Company has developed a potential
system through which a conventional wallpaper substrate is converted into a
stable, self-wound, self-adhesive, repositionable and removable wallcovering.
Using Wearlon(R) and Decora Manufacturing's other adhesive and coating
technologies, the Company believes this is a breakthrough for the wallcovering
industry with significant market potential primarily in the area of decorative
border products. In addition to the agreement with Norwall noted above, in
June 1994, Decora Manufacturing signed an exclusive Licensing and Supply
Agreement with Norwall, under which the Company will supply its self-adhesive
wall covering system exclusively for Norwall's wallcovering products which are
sold primarily through the mass merchants in North America. Both agreements
with Norwall expire five years from the date of first successful commercial
shipments and in order to maintain exclusivity, Norwall must purchase minimum
volumes of such products from the Company over the life of the agreements.
While issues related to the efficient large scale production of these new
products continue to be addressed, the Company anticipates significant revenues
to be generated from such products during the second half of fiscal 1996.
Management believes these new products and marketing efforts broaden Decora
Manufacturing's potential consumer products revenue base beyond housewares and
across new market segments such as hardware, paint and sundries, arts and
crafts and wallcovering, both in the U.S. and internationally. During the
first nine months of fiscal 1995, 92% of Decora Manufacturing's sales were to
Rubbermaid, as opposed to 96% for the same period in the prior year. Decora
Manufacturing plans to continually introduce new consumer products through its
principal distributors and to pursue its growth plan both domestically and
internationally.
Products and Services - Industrial Products Group
In addition to its consumer decorative products, Decora Manufacturing has
developed an industrial liquid coatings business which markets coatings under
the Wearlon(R) brand name to the specialty industrial coatings market. The
Company has recently embarked on a program of marketing such coatings for use
in a wide range of applications in the specialty industrial coatings market.
These unique non-stick, yet abrasion resistant coatings are water-based and
cure at room temperature, providing the industrial market with an
environmentally friendly coating system for specialized applications. These
include industrial maintenance applications such as machinery valves and clean
rooms, marine maintenance and foul release, and specialized OEM product and
process applications. The Company has established a sales network in North
America, consisting initially of eight manufacturers representatives and
twenty-three qualified professional applicators through which the product is
marketed for a variety of applications. To date, the coatings have been sold
through this network on a limited basis for use in the automotive, marine,
paper, petroleum and food processing industries.
The Company is also marketing Wearlon(R) on a direct basis to large potential
end users including government agencies, utilities and OEM's where there are
several ongoing pilot programs. Wearlon(R) is currently being tested by the
U.S. Navy for marine applications as well as by several North American utility
companies for Zebra mussel protection and friction reduction applications. In
addition to these programs, in November 1994, the Company signed a License and
Technology Development and Cooperation Agreement with The B.F.
20
<PAGE> 26
Goodrich Company for the development of specialty coatings for its various
divisions utilizing Wearlon(R). The Company is actively engaged in research
and development under this agreement.
As a result of the high performance nature of the coating and the costs
associated with installing such coatings in large projects, testing for
specific applications and any associated tailored product development takes
many months and requires additional product development in response to testing
response. As a result, revenue potential for Wearlon(R)-based specialty
coatings is anticipated to develop over a longer time frame than is associated
with new consumer decorative products. Although management continues to
believe that liquid coating products hold significant opportunity for the
Company, to date revenues from all coating products have not been material to
Decora Manufacturing's overall business. The necessity of long-term evaluation
and testing programs required for various industrial applications and related
long selling cycle result in a slower initial growth of revenue opportunities
than is achievable with certain of the Company's consumer products.
In addition to the products summarized above, Decora Manufacturing's Industrial
Products Group also markets various other products, including commercial
laminating, coating and printing services and a line of high quality hazardous
marking tapes and electrical tapes sold under the Cobra(R) tradename.
For the first nine months of fiscal 1995, industrial products represented 3% of
Decora Manufacturing's revenues. Ongoing technology development and
commercialization efforts may generate additional revenues in the future both
through its own direct development and selling efforts and through domestic and
international strategic relationships.
Manufacturing
The majority of the products sold by Decora Manufacturing are produced at its
facility in Fort Edward, New York. Management believes that the plant
currently has available capacity which will be utilized in connection with the
proposed expansion of existing and new decorative self- adhesive products and
industrial products. The Company also utilizes outside suppliers when required
for certain printing, coating and finishing purposes for which it does not have
industrial capabilities. Management also anticipates making significant
capital expenditures in the future in order to increase operating efficiencies
and to add additional capacity as warranted by product demand and mix. The
Company is currently spending significant capital on the addition of finished
consumer packaging equipment to its Fort Edwards facility for its ConTact(R)
product line. The primary raw materials used in Decora Manufacturing's
products are paper, vinyl, adhesives, inks, silicone and other chemicals.
Decora Manufacturing uses two primary suppliers for its vinyl and relations
with such suppliers are good. The Company believes that it has alternative
sources of its significant and primary raw materials.
Marketing, Research and Development
Decora Manufacturing's strategy for its consumer products is to develop and
sell products and marketing programs through strategic partners with existing
and significant distribution capabilities. Such distribution partners may have
broad market impact such as Rubbermaid, or more focus in a particular market
segment, such as the wallcovering manufacturer. Accordingly, for the majority
of sales of product covered by the Manufacturing Agreement and other supply
agreements, Decora Manufacturing does not incur what might otherwise be typical
marketing and selling expenses relating to consumer decorative products and
has relied on the services of third party sales and marketing consultants when
deemed necessary. Establishment of distribution relationships for a new
product is ordinarily a long term process because the distributor must become
familiar with the new product and engage in testing prior to agreeing to the
distribution of a new product. Of course, the product is often modified based
upon response to pilot testing. The Company has taken a similar strategy for
international sales of its Consumer Decorative Products as reflected by its new
distributor agreement with Friedola. Initial sales to its European
distributor began in the third quarter of fiscal
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<PAGE> 27
1995 although time and effort required to initiate market penetration is
significant revenues are not anticipated until the second half of fiscal 1996.
For its Industrial Products Group, Decora Manufacturing is pursuing varying
marketing strategies for different markets. As noted above, for its industrial
coatings, the Company has established a manufacturer's representative network
in the U.S. and with this network has developed relationships with carefully
selected professional applicators across the country to market and apply its
Wearlon(R) coatings in industrial maintenance, OEM and marine applications.
The Company is also actively pursuing opportunities for strategic relationships
in other specific niche markets where Wearlon(R) coatings are believed by
management to have the most potential, such as it has in the anti-graffiti and
aviation markets. As described above, due to the nature of these products, the
development process for the industrial products is expected to span a
significant duration.
With regard to research and development, Decora Manufacturing maintains a small
internal research group which has made significant progress in producing
various new products based on Wearlon(R) and the rest of its proprietary
adhesive and coating technologies. The majority of recent efforts have been
placed on the refinement and enhancement of products already developed:
However, that group also continues to focus its efforts on the pursuit of new
consumer and industrial applications. In addition, the Company has been
seeking other entities which have development expertise in certain niche areas
to complement the Company's commercialization efforts such as B.F. Goodrich.
This strategy will allow the Company to conserve its existing resources.
Since fiscal 1992, Decora Manufacturing has increased significantly its
expenditures on marketing, research and development as it seeks to expand its
product lines through the commercialization of new products and technology in
the consumer and industrial markets. Expenditures on marketing, research and
development amounted to approximately $2.8 million, $2.0 million and $1.3
million in fiscal 1994, 1993 and 1992, respectively. Management anticipates
continued expenditures at the same or greater rate as new distribution
relationships are developed, new product applications are explored and
developed, and the same process is repeated as international marketing channels
are opened. As new products have recently been commercialized, additional
resources have been invested on the development of strategic marketing
relationships and distribution channels as preparation for expansion of
production and sales activities (see "Management's Discussion and Analysis of
Results of Continuing Operations").
Proprietary Rights
Decora Manufacturing owns the rights to the pressure sensitive adhesive
technology used in the manufacturing of Con-Tact(R) products, although the
tradename is owned by Rubbermaid. In addition, it has applied for tradename
and patent protection for certain of its new products including the
self-adhesive wallcovering system, protective and decorative thin film products
and Wearlon(R) liquid coatings and was recently issued a U.S. patent for its
new protective wallcovering product. Several of the Company's new products
utilize Wearlon(R) technology as a component of their construction. Decora
Manufacturing's rights to Wearlon(R) were formalized in fiscal 1991 and the
technology is the result of more than a decade of research and development in
adhesive and coating systems. Wearlon(R) includes a water based polymer which
management believes is a breakthrough in coatings requiring extraordinary
non-stick and slip-lubricity properties combined with excellent levels of
resistance to corrosion, abrasion, chemicals and solvents. It also provides
the ability to control surface release characteristics across a broad spectrum
for a variety of applications and cures at room temperature. The Company
believes that its commercial position is enhanced by the patents it owns as
well as the know-how and trade secrets it has developed and maintains. Decora
Manufacturing has also applied for foreign protection for certain of its
established and new technologies and has acquired certain trademark protection.
In the interests of product development and establishment of a distribution
network, certain of its
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<PAGE> 28
technologies have been licensed to third parties. The Company has executed
trade secrets and confidentiality agreements with its licensees and others to
protect its proprietary rights as part of its overall secrecy protection
program.
Customers
During fiscal 1994, sales to Rubbermaid represented 95% of Decora
Manufacturing's revenues while during the first nine months of fiscal 1995,
such sales totaled 92% of the Company's revenues. Con-Tact(R), Fabri.ArtTM and
other related products are distributed through Rubbermaid on a nationwide basis
to consumers in conjunction with the extensive product lines of Rubbermaid.
The Company has also recently signed supply agreements with Norwall and
Friedola both of which have the future potential of becoming significant
contributors to Decora Manufacturing's business. Decora Manufacturing has
approximately 50 customers in addition to Rubbermaid, Norwall and Friedola,
primarily for its Industrial Products Group but also for international
decorative product sales. Decora Manufacturing plans to develop strategic
distribution relationships for its industrial products, similar to the
relationship it has with Rubbermaid for its consumer products.
Competition
Although Con-Tact(R) and associated products are not sold by Decora
Manufacturing to the ultimate consumer, competition experienced by Rubbermaid
affects the purchase requirements under the Manufacturing Agreement and Decora
Manufacturing's ultimate revenues. Management believes that the Con-Tact(R)
product dominates the U.S. market for its class of decorative material as well
as miscellaneous end-use surface protection applications. There are several
similar products, including a low cost shelf liner produced and sold by
Rubbermaid, which, in Management's opinion, have not significantly penetrated
the market. Management believes that Decora Manufacturing (and ultimately
Rubbermaid) compete effectively on the basis of price and the superior quality
of their product.
Domestic and international markets for self-adhesive decorative products and
industrial coating products are very competitive with competitors who are
larger and have more financial resources than the Company. Management believes
that the formulation and performance characteristics of Wearlon(R)-based
products are unique, and that the proprietary technology utilized in several
new products may provide a competitive advantage in certain applications.
Management intends to focus on such specific applications. Other than
Con-Tact(R) sold in the U.S., Decora Manufacturing does not yet have any
significant market share in its various other consumer decorative or industrial
coating products.
Seasonality
Decora Manufacturing generally experiences higher earnings in its first two
fiscal quarters due to the purchase requirements of Rubbermaid to meet late
spring and late summer slightly seasonal demand for Con-Tact(R). There is no
identified seasonality for Decora Manufacturing's other products.
Employees
At July 10, 1995, the Company employed 196 people of which 193 were in Decora
Manufacturing and three were employed in the Company's corporate office. 125
of Decora Manufacturing's employees are represented by a labor union. The
contract with such union currently expires in April 1996. There have been no
major work stoppages in recent years and the Company believes that its
relations with its labor force are good.
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<PAGE> 29
DISCONTINUED OPERATIONS OF COMTEL INDUSTRIES, INC.
In April 1994, the Company decided to sell the operations of its last non-core
subsidiary, ComTel Industries, Inc. ("ComTel"), headquartered in Tampa,
Florida. ComTel is a full service telecommunications company which
manufactures, sells and services new and used telephone equipment and
proprietary accessories. The first step in the plan to divest the operations
was completed in June 1994 with the sale of ComTel's El Paso, Texas
manufacturing operation to a third party. The second phase was completed on
March 31, 1995 with the sale of the Secondary Market and Services Division
which was headquartered in Tampa, Florida, and the sale of the remaining
operation located in Sanford, Florida was completed on June 14, 1995 (see
"Management's Discussion and Analysis - Discontinued Operations").
PROPERTIES
Decora Manufacturing owns its 220,000 square foot facility located on
approximately 12 acres in Fort Edward, New York. The Company's corporate
headquarters are located within this facility.
Management of the Company believes that the facilities of the Company are
adequate for present and foreseeable future needs including the addition of new
consumer packaging operations in the facility.
LEGAL PROCEEDINGS
In May 1994, a complaint was filed by in the U.S. District Court, Eastern
District of California, by Rudolph J. Burgin, a former employee of the
Company's Elsco Lighting & Products, Inc. subsidiary prior to the Company's
disposition of such entity. The complaint alleges various ERISA violations as
well as a failure to pay benefits and seeks unspecified damages. The Company
has been in negotiations to resolve this matter and anticipates settling the
claim by payment of his accrued contributions. The Company believes that such
amount will be less than $100,000.
In June 1992, a complaint was filed against the Company's ComTel Metals, Inc.
subsidiary in the 210th Judicial District Court of Texas, by a former employee
of the subsidiary. The claim seeks damages stemming from the alleged wrongful
termination of the plaintiff, although management believes that this claim has
no merit. The matter was settled in July 1995.
In July 1993, the Company's Decora Manufacturing subsidiary was notified by the
Environmental Protection Agency ("EPA") that a site in which it disposed of
hazardous waste has been named a Superfund site and that it is a potentially
responsible party. It is likely that Decora Manufacturing will be required to
contribute to the cost of cleanup of the site. The amount of such cleanup cost
cannot be quantified at this time although the Company is pursuing a potential
de minimis party settlement and has reserved an estimated amount based upon
available information.
The Company and its subsidiaries are defendants in other pending actions,
which, in the opinion of management of the Company, are not material to the
Company's financial condition or results of operations. Although no assurances
can be given regarding the ultimate outcome of such matters, the Company has
accrued amounts for defense and settlement costs which the Company considers
adequate.
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<PAGE> 30
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain biographical information, present occupation,
and business experience for the past five years of each director and executive
officer, including those persons nominated to serve on the Board of Directors:
<TABLE>
<CAPTION>
Year First
Became
Name Age Position Director
- ----------------- --- --------------------------- ------------
<S> <C> <C> <C>
Nathan Hevrony 43 Director, Chairman, 1988
Chief Executive Officer
Roger Grafftey-Smith 63 Director 1988
Gabriel Thomas 53 Director 1991
Stephen Verchick 54 Director 1993
Ronald Artzer 52 Director 1994
Timothy N. Burditt 40 Executive Vice President, -
Administration and Finance,
Secretary
Richard A. DeCoste 56 Executive Vice President, -
Decora Industries; President
Decora Manufacturing,
Consumer Decorative Products Group
Frank J. Nolfi, Jr. 63 Vice President-Finance, -
Decora Manufacturing
</TABLE>
NATHAN HEVRONY. Mr. Hevrony has served as a director and secretary of the
Company since August 1988. He was elected Chief Executive Officer and Chairman
of the Board in September 1989. He was a Director of two publicly traded
companies, until June 1988 while he was employed as a Director of Planning and
Development at a publicly traded holding Company from June 1986 to June 1988.
ROGER GRAFFTEY-SMITH. Mr. Grafftey-Smith has served as a director of the
Company since August 1988 and has been a managing partner of Grafftey-Smith &
Associates since 1981, an international financial consulting firm. Mr.
Grafftey-Smith also serves as a director of Americanino Capital Corporation, a
publicly-traded corporation.
GABRIEL THOMAS. Mr. Thomas has served as a director of the Company since June
1991. He has served as President and Director of Unilab Corporation since
December 1989. During the period from 1986 to 1991, Mr. Thomas has been a
consultant in international marketing and management. In 1985 to 1986, he was
a consultant to Frankfurt Consult, the mergers and acquisitions subsidiary of
BHF Bank, Frankfurt, Germany.
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<PAGE> 31
STEPHEN H. VERCHICK. Mr. Verchick was elected to the Board of Directors in
October 1993. He has been engaged in the private practice of law as President
of Stephen H. Verchick & Associates, Professional Corporation, in Beverly
Hills, California, for the past 24 years. Mr. Verchick is also President of
Warner Capital Associates, a Los Angeles based investment banking and venture
capital firm.
RONALD A. ARTZER. Mr. Artzer was elected to the Board of Directors in May
1994. In March 1994, Mr. Artzer became President and Chief Executive Officer
of Signature Foods, a food processing and packaging company. From 1991 to
1993, Mr. Artzer served as President and Chief Executive Officer of Design
Foods, a Division of Sara Lee Corporation. From 1988 to 1991, he was President
of STP Consumer Services, Inc., a subsidiary of First Brands Corporation. From
1984 to 1988 he was President of Toddle House Restaurants, Inc., a subsidiary
of Carson Pirie Scott & Company. Prior thereto, he served in various Executive
Officer capacities of Sambo's Restaurants, Pepsi-Cola Company and General Foods
Corporation.
Directors of the Company hold office until the next annual meeting of
shareholders, until successors are elected and qualified or until their earlier
resignation or removal.
COMPENSATION OF DIRECTORS
Directors are paid $1,000 for each Board meeting which they attend, and $500
for each committee meeting which they attend. Directors may also receive stock
options under the Company's 1987 Stock Option Plan, or by other grant by the
Company. The Company reimburses directors for reasonable expenses incurred in
connection with their attendance at meetings and other Company related
functions.
EXECUTIVE OFFICERS
TIMOTHY N. BURDITT. Mr. Burditt was named as Executive Vice President,
Administration and Finance in April 1993 and was named Secretary in August
1993. From 1991 until his employment with the Company, Mr. Burditt was
President and Chief Operating Officer of Monitor Television, Inc., a Boston
area cable and broadcasting television station and worldwide shortwave radio
network. Prior to his employment with Monitor, Mr. Burditt was Vice
President, Investment Banking, of Fleet Associates, Inc., an investment banking
firm, from 1988 through 1991, Senior Associate for Investment Banking for the
First Boston Corporation from 1986 to 1987 and held various positions with GE
Capital, Inc. from 1983 to 1986.
JOHN TATTERSALL. Mr. Tattersall was named as Chief Operating Officer of the
Company's Decora Manufacturing subsidiary at the end of June 1995. From 1984
until his employment with Decora Manufacturing, Mr. Tattersall held several key
executive positions with General Electric Company including Business Manager
from 1991 to June 1995 and Product Manager from 1989 to 1991.
RICHARD A. DECOSTE. Mr. DeCoste was named as the President of the Company's
Decora Manufacturing subsidiary in January 1993. In February 1994, Mr. DeCoste
became President of its Consumer Decorative Products Group. In November 1994,
he became Executive Vice President of the Company. From 1989 through 1991 Mr.
DeCoste was President of Plural Technologies, a manufacturer of commercial
coatings. In addition, he has owned DeCoste Remodeling/Design, a building
materials company since 1987.
FRANK J. NOLFI, JR. Mr. Nolfi has served as Vice-President Finance of the
Company's Decora Manufacturing subsidiary since the Company's acquisition in
April 1990. He served in the same position for the Uniglass Industries
division of the prior owner, United Merchants and Manufacturers, Inc.
Officers of the Company are elected by the Board of Directors and hold office
until their successors are chosen and qualified, until their death or until
they resign or have been removed from office. All corporate officers serve at
the discretion of the Board of Directors. There are no family relationships
between any director or executive officer of the Company and any other director
or executive officer of the Company. Richard DeCoste was an officer of Plural
Technologies, Inc. when it filed a petition for bankruptcy under Chapter 7 of
the Bankruptcy Code in September 1991.
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<PAGE> 32
EXECUTIVE COMPENSATION
The tables and discussion below set forth information about the compensation
awarded to, earned by, or paid to the Company's Chief Executive Officer and to
its most highly compensated executive officers during the fiscal years ended
March 31, 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------- ----------------------
FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS STOCK OPTIONS
- --------------------------- ---- ----------- ------- -------------
<S> <C> <C> <C> <C>
Nathan Hevrony 1995 $180,000(5) $25,000 400,000(2)
Chief Executive Officer 1994 $125,000 $25,000 -
1993 $125,000 - 750,000
Timothy N. Burditt 1995 $ 90,000 $27,000 -
Executive Vice President, 1994 $ 81,000 - 100,000
Administration & Finance 1993 - - -
Walter E. Buske 1995 $136,115 - -
President, Decora 1994 $130,000 - 50,000(3)
Manufacturing 1993 - - -
Richard DeCoste 1995 $128,000 - -
Executive Vice President, 1994 $116,000 - -
Decora Manufacturing 1993 $ 32,900 - 75,000(4)
- -----------------------
</TABLE>
(1) Messrs. Hevrony, DeCoste and Burditt were compensated pursuant to
employment agreements. See "Employment Agreements" below.
(2) The options vest as follows: 150,000 vest if the share price is $3.00
or more for 30 consecutive days and 250,000 shall vest if the share
price is $4.00 or more for 30 consecutive days any time until May 31,
1997. None of these options are vested at this time.
(3) Although Mr. Buske was originally granted 350,000 options, the Company
and Mr. Buske have agreed to reduce the number to 50,000. Mr. Buske
is no longer employed by Decora Manufacturing.
(4) Options vest on a quarterly basis, with one-third vesting during each
fiscal year from the date of grant.
(5) The Company also paid the premium for term life insurance for the
benefit of Mr. Hevrony of $17,665.
27
<PAGE> 33
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. Hevrony, its
Chief Executive Officer which has been extended until May 31, 1997. The
extended agreement provides for an annual salary of $185,000 and a cash bonus
of up to $60,000 for the fiscal year ended March 31, 1995. The maximum of
$60,000 shall be paid if the Company's earnings per share from continuing
operations are twice the prior year's earnings. No bonus shall be paid unless
earnings per share exceed the prior year's amount ($.06 per share). In
addition, during August 1994, Mr. Hevrony received an option to purchase up to
400,000 shares at $2.00 per share. The options vest as follows: 150,000 vest
if the share price is $3.00 or more for 30 consecutive days and 250,000 shall
vest if the share price is $4.00 or more for 30 consecutive days any time until
May 31, 1997. None of these options are vested at this time. The employment
agreement shall terminate upon breach of a material term of the agreement or
upon the permanent disability of Mr. Hevrony. In the event of termination
without cause (as defined in such agreement), Mr. Hevrony is entitled to
receive compensation for the remainder of the term of the agreement (through
May 31, 1997) and an additional 24 month period.
The Company has entered into a three year employment agreement with Mr.
Tattersall which initially provides for minimum annual compensation in the
amount of $130,000. In addition, such agreement provides for an annual bonus
of up to half his salary contingent upon certain performance criteria. Upon
termination without cause, Mr. Tattersall is entitled to receive compensation
for the greater of 12 months or the remainder of the term of his agreement.
The Company has entered into a three year employment agreement with Mr. DeCoste
which initially provided for minimum annual compensation in the amount of
$90,000. During fiscal 1994, such amount was increased to $125,000. In
addition, such agreement provides for an annual bonus of up to $37,500
contingent upon certain performance criteria. Upon termination without cause,
Mr. DeCoste is entitled to receive compensation and health and medical benefits
for a period of one year from the date of termination.
The Company has entered into a three year employment agreement with Mr. Burditt
which provides for a minimum annual compensation in the amount of $90,000. In
addition, such agreement provides for an annual bonus in the amount of $27,000.
Upon termination without cause, Mr. Burditt is entitled to receive any earned
but unpaid bonuses on a pro-rata basis, plus compensation in the amount of
twelve months during the first year of the term, nine months compensation
during the thirteenth to eighteenth month of the term and the lesser of six
months or until the end of the term if terminated after the eighteenth month.
28
<PAGE> 34
OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK PRICE
GRANTED TO EXERCISE PRICE APPRECIATION FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION -------------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 0 5 10%
- ------------------------- ------- ------------ ------ ------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Nathan Hevrony 400,000(2) 89% $2.00 8/14/97 $ -0- $126,100 $264,800
Walter Buske 50,000(3) 11% $1.20 3/31/98 $7,500 $ 9,460 $ 19,860
</TABLE>
_______________________
(1) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed
rates of appreciation only, compounded on an annual basis. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock and overall stock conditions. The
amounts reflected in this table may not necessarily be achieved.
(2) Options were granted at $2.00 per share. The options vest as follows:
150,000 vest if the share price is $3.00 or more for 30 consecutive
days and 250,000 shall vest if the share price is $4.00 or more for 30
consecutive days any time until May 31, 1997 at which time such
options expire. None of these options are vested at this time.
(3) In July 1994, up to 350,000 options were granted at $1.35 per share.
80,000 options were vested on the date of grant. The others were
scheduled to vest as follows: 85,000 on July 5, 1995; 85,000 on July
15, 1996; and 100,000 if certain revenue increased were achieved.
However, in connection with Mr. Buske's departure from the Company,
the number of options vested was reduced to 50,000, exercisable at
$1.20 per share exercisable until July 1997.
AGGREGATED MARCH 31, 1995 YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
---------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(3)
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Nathan Hevrony 750,000 400,000 $ -0- $ -0-
Timothy Burditt 75,000(1) 25,000 $ -0- $ -0-
Richard DeCoste 62,497(1)(2) 6,255 $ -0- $ -0-
Walter Buske 50,000 -0- $ -0- $ -0-
- -----------------------
</TABLE>
(1) Options were granted at 85% of market value (closing bid price for the
Company's Common Stock as reported by NASDAQ) at date of grant.
(2) Options have a term of ten years, subject to termination upon the
termination of employment. Unvested options are subject to
acceleration upon a consolidation or merger in which the Company is
not the surviving corporation or which results in the acquisition of
substantially all of the Company's
29
<PAGE> 35
outstanding stock by a single person or entity (unless the terms of
such agreement specifically provide for the assumption of such
options), or in the event of the sale or transfer of substantially
all of the Company's assets.
(3) Value of unexercised in-the-money options was calculated using the
average of the bid and asked price for the Company's stock on March
31, 1995.
During fiscal 1995 none of the executive officers exercised any outstanding
stock options. The only unexercised options held by such executive officers as
of March 31, 1995, are shown in the table above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 15, 1995, certain information with
respect to the Common Stock of the Company which may be deemed to be
beneficially owned by each stockholder who is known by the Company to own more
than 5% of the outstanding Common Stock, by each director of the Company and by
all directors and officers as a group.
<TABLE>
<CAPTION>
NAME AND PERCENT
ADDRESS OF COMMON OTHER OF
BENEFICIAL OWNER(1) STOCK SECURITIES TOTAL CLASS
- ----------------- ------- ---------- --------- -----
<S> <C> <C> <C> <C>
Cumberland Associates(7) 1,607,000 -0- 1,607,000 5.2%
1114 Avenue of the Americas
New York, NY 10036
Nathan Hevrony 753,750 750,000(2) 1,503,750 4.6%
1 Mill Street
Fort Edward, NY 12828
Gabriel Thomas -0- 412,000(2) 412,000 1%
1 Mill Street
Fort Edward, NY 12828
Roger Grafftey-Smith 375,000 262,000(2) 637,000 2.0%
1 Mill Street
Fort Edward, NY 12828
Stephen H. Verchick -0- 75,000(2) 75,000 (4)
21550 Oxnard Street
Suite 300
Woodland Hills, CA 91367
</TABLE>
30
<PAGE> 36
<TABLE>
<S> <C> <C> <C> <C>
Ronald Artzer -0- 50,000(2) 50,000 (4)
315 Mullins Street
Mullins, South Carolina 29574
Timothy N. Burditt -0- 100,000(2) 100,000 (4)
1 Mill Street
Fort Edward, NY 12828
John Tattersall -0- 50,000(2) 50,000 (4)
1 Mill Street
Fort Edward, NY 12828
Richard DeCoste -0- 68,745(2) 68,745 (4)
1 Mill Street
Fort Edward, NY 12828
Frank J. Nolfi, Jr. -0- -0- -0- (5)
1 Mill Street
Fort Edward, NY 12828
Robert W. Johnson, IV(6) 926,909(3) 1,207,353(2)(5) 2,134,262 6.6%
The Johnson Company
630 Fifth Avenue, Suite 918
New York, NY 10111
All directors and officers as
a group including the named
persons (9 persons) 1,138,750 2,097,745 3,236,495 9.9%
- ---------------------------
</TABLE>
(1) Unless otherwise indicated, each person included in the table has sole
investment power and sole voting power with respect to the securities
beneficially owned.
(2) The amounts shown reflect shares of common stock underlying stock
options, convertible notes or warrants which are exercisable within 60
days of June 15, 1995.
(3) Mr. Johnson disclaims beneficial interest in 40,000 shares which are
held by a trust for which he is a trustee.
(4) Each of these persons owns less than 1% of the outstanding common
stock of the Company.
(5) Includes 882,353 shares issuable upon the conversion of the Johnson
Note.
(6) Pursuant to the terms of a Note and Warrant Agreement, dated
November 3, 1992, by and between the Company and Mr. Johnson, the
Company is obligated to name Mr. Johnson as a director nominee.
Mr. Johnson has indicated to the Company that he does not intend to
exercise such right at the present time.
(7) According to a Schedule 13D dated June 13, 1995 filed by Cumberland
Associates, each of the general partners of Cumberland Associates may
also be deemed the beneficial owner of all of the shares reported as
beneficially owned by Cumberland Associates. Such general partners
include K. Tucker Andersen, Richard Reiss, Jr., Oscar S. Schafer,
Bruce G. Wilcox, Glenn Krevlin, Andrew Wallach and Eleanor Poppe. The
Schedule 13D states that Cumberland Associates has sole dispositive
power over 1,172,000 shares, shares dispositive power over 435,000
shares, and has no voting power with respect to any of the shares.
31
<PAGE> 37
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1994, the Company issued options to Stephen Verchick, a director of the
Company, to purchase 75,000 shares of common stock and to Ronald Artzer, also a
director, an option to purchase 50,000 shares of common stock both at an
exercise price of $1.25 per share, exercisable for five years.
In January 1995, the Company entered into a consulting agreement with Gabriel
Thomas, a director of the Company where Mr. Thomas is paid $75,000 per annum
for consulting services which includes assistance with European operations. In
July 1995, the Company issued Mr. Thomas an option to purchase 150,000 shares
of common stock at an exercise price of $1.25 per share, exercisable for three
years in connection with various consulting services in connection with
European operations.
PLAN OF DISTRIBUTION AND USE OF PROCEEDS
The Company will issue certain shares, within seven business days of the
effectiveness of its registration statement, in settlement of litigation with
the Rabinowitz family, the former owners of its discontinued Yorkville
Industries, Inc. subsidiary (the "Settlement Shares") as follows: (i) 768,307
shares of common stock; (ii) the number of shares of its common stock
determined by dividing $587,250 by the average of the closing bid price for the
60 consecutive trading days prior to the effective date of the registration
statement but in no event less than 475,000 shares; and (iii) in the event that
the average closing bid price during the 30 consecutive trading days before the
effective date of the registration statement, and the 30 consecutive trading
days after the effective date of the registration statement do not exceed
$587,250, the Company will issue the number of additional shares of its common
stock necessary to achieve a net sales value of $587,250 for the shares issued
described in subparagraph (ii) above. The Settlement Shares will be issued to
members of the Rabinowitz family as settlement of amounts owed to them by the
Company for the purchase of Yorkville which occurred in December 1989. In
connection with such settlement which was finalized in July 1994, the Company
agreed to register such Settlement Shares under the Act. This Prospectus was
prepared pursuant to the foregoing contractual commitment to register the
Settlement Shares. The Company will bear all costs and expenses of the
registration of the Shares under the Act and certain state securities laws,
other than fees of counsel (if any) retained by the Security Holders.
The Settlement Shares will be issued in settlement of claims against the
Company. No cash will be paid to the Company, although the Security Holders
have a judgment of $1,587,000 which will be satisfied by issuance of shares
under this registration statement. Further, as part of the settlement with the
Security Holders, the Company has agreed to pay up to $7,500 of their brokerage
commissions for the sale of Shares. The Security Holders have agreed with the
Company that they may sell only as many Shares as Rule 144 of the Act would
permit.
32
<PAGE> 38
DESCRIPTION OF SECURITIES
GENERAL
The Company's authorized capital stock consists of 45,000,000 shares of Common
Stock, $.01 par value per share and 5,000,000 shares of Preferred Stock, $.01
par value per share.
COMMON STOCK
Holders of Common Stock are entitled to one vote, either in person or by proxy,
for each share held of record by them on all matters submitted to a vote of
stockholders. Except as otherwise provided by law, action can be taken by a
majority of shares entitled to vote at a meeting. Holders of Common Stock are
entitled to dividends when, as and if declared by the Board of Directors out of
funds legally available therefor, subject to the prior rights of the holders of
any Preferred Stock. In the event of liquidation or dissolution and winding up
of the Company, holders of Common Stock are entitled to share ratably in the
assets of the Company remaining after payment of liabilities and after
provision has been made for each class of stock, including any Preferred Stock
outstanding at that time, that has preference over the Common Stock. Holders
of Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption or sinking fund provisions applicable to
the Common Stock. All of the outstanding shares of Common Stock are, and, when
issued, the Option Shares and Warrant Shares of Common Stock offered under this
Prospectus will be, fully paid and nonassessable.
PREFERRED STOCK
Shares of Preferred Stock may be issued without stockholder approval. The
Board of Directors is authorized to issue such shares in one or more series and
to fix the rights, preferences, powers, qualifications, limitations and
restrictions thereof, including dividend rights and rates, conversion rights,
voting rights, terms of redemption, redemption prices, liquidation preferences
and the number of shares constituting any series or the designation of such
series, without any vote or action by the stockholders. As of the date of this
Prospectus, the Company has no current plans for the issuance of any shares of
Preferred Stock. However, any Preferred Stock that may be issued in the future
could rank prior to the Common Stock offered hereby with respect to dividend
rights and rights on liquidation. The Board of Directors may, without
stockholder approval, issue Preferred Stock with voting and conversion rights
that could adversely affect the voting power of holders of the Common Stock
offered hereby or create impediments to persons seeking to gain control of the
Company, although there is no present intention to do so. See "Certain
Factors."
TRANSFER AGENT
The transfer agent for the Common Stock is American Stock Transfer & Trust
Company, New York, New York.
33
<PAGE> 39
LEGAL MATTERS
Certain legal matters in connection with the issuance of the securities offered
hereby, will be passed upon for the Company by Miller & Holguin, Attorneys at
Law, 2029 Century Park East, Suite 1060, Los Angeles, California 90067, counsel
for the Company. Miller & Holguin and/or its principals are the beneficial
owners of 787,857 shares of the Company's Common Stock and the beneficial
owners of an option to purchase 150,000 shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements of Decora Industries, Inc. included in
this prospectus, have been audited by Price Waterhouse LLP, independent
accountants, as stated in their report appearing herein, and are included in
reliance on their report given on the authority of that Firm as experts in
accounting and auditing.
34
<PAGE> 40
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS: PAGE
- --------------------- ----
<S> <C>
THE FOLLOWING CONSOLIDATED FINANCIAL STATEMENTS
OF DECORA INDUSTRIES, INC., AND REPORT OF INDEPENDENT
ACCOUNTANTS ARE FILED AS PART OF THIS REPORT:
REPORT OF INDEPENDENT ACCOUNTANTS F-2
CONSOLIDATED BALANCE SHEET AT MARCH 31,
1995 AND 1994 F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1995,
1994 AND 1993 F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1995,
1994 AND 1993 F-6
CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY (DEFICIT) FOR THE YEARS ENDED
MARCH 31, 1995, 1994 AND 1993 F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8
FINANCIAL STATEMENT SCHEDULES:
- ------------------------------
</TABLE>
SCHEDULES NOT LISTED ABOVE HAVE BEEN OMITTED BECAUSE THEY ARE NOT REQUIRED OR
ARE NOT APPLICABLE, OR THE REQUIRED INFORMATION IS SHOWN IN THE FINANCIAL
STATEMENTS OR NOTES THERETO.
F-1
<PAGE> 41
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Decora Industries, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
shareholders' equity (deficit) listed in the Index appearing under Items
14(a)(1) and (2) on Page F-1 present fairly, in all material respects, the
financial position of Decora Industries, Inc. and its subsidiaries at March 31,
1995 and 1994 and the results of their operations and their cash flows for each
of the three years in the period ended March 31, 1995, in conformity with
generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Syracuse, New York
June 29, 1995
F-2
<PAGE> 42
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 309,000 $ 320,000
Accounts receivable, less allowance for
doubtful accounts of $189,000
and $71,000 (Note 11) 2,941,000 3,907,000
Inventories (Notes 1 and 3) 4,874,000 3,008,000
Prepaid expenses and other current assets 503,000 364,000
---------------- ----------------
Total current assets 8,627,000 7,599,000
Property and equipment, net (Notes 1 and 4) 7,646,000 7,898,000
Notes receivable (Note 2) 1,560,000 -
Intangibles, net (Notes 1 and 2) 11,788,000 12,314,000
Net non-current assets of discontinued operations -
ComTel (Note 2) - 2,115,000
Deferred income taxes (Note 8) 1,400,000 -
Other assets - 97,000
---------------- ----------------
Total Assets $ 31,021,000 $ 30,023,000
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 43
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,840,000 $ 3,749,000
Accrued liabilities 1,791,000 1,949,000
Current portion of long-term debt (Note 5) 3,157,000 875,000
Net current liabilities of discontinued
operations - ComTel (Note 2) 601,000 511,000
---------------- ----------------
Total current liabilities 8,389,000 7,084,000
Long-term debt (Note 5) 15,006,000 11,314,000
Liabilities settled in refinancing (Note 13) - 6,284,000
Net non-current liabilities of discontinued
operations - Yorkville (Note 2) 1,520,000 1,339,000
Other non-current liabilities 285,000 -
---------------- ----------------
Total liabilities 25,200,000 26,021,000
---------------- ----------------
Warrants in subsidiary (Note 5) 1,425,000 1,425,000
---------------- ----------------
Shareholders' equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized - -
Common stock, $.01 par value; 45,000,000 and
35,000,000 shares authorized; 30,718,000 and
29,859,000 shares issued and outstanding (Note 6) 307,000 299,000
Additional paid-in capital 28,288,000 27,588,000
Accumulated deficit (24,199,000) (25,310,000)
---------------- ----------------
Total shareholders' equity 4,396,000 2,577,000
---------------- ----------------
Commitments and contingencies (Notes 9 and 10)
---------------- ----------------
Total Liabilities and Shareholders' Equity $ 31,021,000 $ 30,023,000
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 44
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995 1994 1993
<S> <C> <C> <C>
Revenues (Note 11) $ 40,414,000 $ 39,955,000 $ 38,543,000
Cost of goods sold 28,798,000 29,569,000 30,104,000
---------------- ----------------- ----------------
Gross profit 11,616,000 10,386,000 8,439,000
Marketing, general and administrative
expense 7,721,000 6,194,000 5,332,000
---------------- ----------------- ----------------
Operating income 3,895,000 4,192,000 3,107,000
Interest expense 2,658,000 2,451,000 2,514,000
---------------- ----------------- ----------------
Income from continuing
operations before taxes 1,237,000 1,741,000 593,000
Provision (benefit) for taxes (Notes 1 and 8) (1,171,000) 112,000 (30,000)
---------------- ----------------- ----------------
Income from continuing operations 2,408,000 1,629,000 623,000
---------------- ----------------- ----------------
Discontinued operations (Note 2):
Income (loss) from operations (875,000) (1,269,000) 68,000
Provision for discontinued operations (422,000) (212,000) -
---------------- ----------------- ----------------
Income (loss) from discontinued operations (1,297,000) (1,481,000) 68,000
---------------- ----------------- ----------------
Net income $ 1,111,000 $ 148,000 $ 691,000
================ ================= ================
Income (loss) per common share (Note 1):
Continuing operations $ 0.08 $ 0.06 $ 0.02
Discontinued operations (0.04) (0.05) 0.01
---------------- ----------------- ----------------
Income per common share $ 0.04 $ 0.01 $ 0.03
================ ================= ================
Average shares of common stock used in
computation of income per share (Note 1) 30,357,000 29,690,000 27,587,000
================ ================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 45
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,111,000 $ 148,000 $ 691,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,623,000 1,534,000 1,966,000
Amortization of debt discount 489,000 261,000 184,000
Loss on disposal of fixed assets 75,000 - 9,000
Provision for loss on disposal of
discontinued operations 422,000 212,000 -
Stock issued for services 176,000 - -
Deferred income tax benefit (1,400,000) - -
Net changes in current assets and
liabilities, exclusive of acquisitions and
dispositions of subsidiaries (Note 12) (1,724,000) 555,000 (463,000)
---------------- ----------------- ----------------
Net cash provided by operating activities 772,000 2,710,000 2,387,000
---------------- ----------------- ----------------
Cash flows from investing activities:
Proceeds from sale of discontinued operations 1,090,000 - -
Additions to notes receivable (1,560,000) - -
Cash of discontinued operations (180,000) (66,000) -
Purchase of fixed assets (920,000) (1,275,000) (1,298,000)
Increase (decrease) in liabilities - discontinued
operations 1,054,000 (376,000) (1,787,000)
---------------- ----------------- ----------------
Net cash used in investing activities (516,000) (1,717,000) (3,085,000)
---------------- ----------------- ----------------
Cash flows from financing activities:
Proceeds from additional borrowings 226,000 1,050,000 5,131,000
Repayment of debt (875,000) (2,600,000) (6,168,000)
Proceeds from exercise of stock options 50,000 - 228,000
Proceeds from issuance of common stock - - 1,207,000
Stock issued in connection with
debt restructuring 150,000 230,000 150,000
Stock issued to pay interest expense 182,000 133,000 -
Stock issued in acquisition - 400,000 -
Reduction of warrants in subsidiary - (200,000) (125,000)
Other - (52,000) 42,000
---------------- ----------------- ----------------
Net cash provided by (used in)
financing activities (267,000) (1,039,000) 465,000
---------------- ----------------- ----------------
Net decrease in cash (11,000) (46,000) (233,000)
Cash at beginning of period 320,000 366,000 599,000
---------------- ----------------- ----------------
Cash at end of period $ 309,000 $ 320,000 $ 366,000
================ ================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 46
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------------------
ADDITIONAL
PAR PAID-IN ACCUMULATED
SHARES VALUE CAPITAL DEFICIT
<S> <C> <C> <C> <C>
Balance at March 31, 1992 25,856,000 $ 259,000 $ 23,012,000 $ (26,149,000)
Common shares issued in
private placements 782,000 8,000 1,199,000 -
Common shares issued in
debt restructuring 1,691,000 17,000 1,853,000 -
Interest paid in common shares 90,000 1,000 179,000 -
Stock options exercised 733,000 7,000 221,000 -
Common shares issued in
litigation settlement 94,000 1,000 126,000 -
Other 143,000 1,000 240,000 -
Net income - - - 691,000
---------- ---------------- ----------------- ----------------
Balance at March 31, 1993 29,389,000 294,000 26,830,000 (25,458,000)
Interest paid in
common shares 96,000 1,000 132,000 -
Common shares issued in
acquisition 200,000 2,000 398,000 -
Common shares issued in
debt restructure 174,000 2,000 228,000 -
Net income - - - 148,000
---------- ---------------- ----------------- ----------------
Balance at March 31, 1994 29,859,000 299,000 27,588,000 (25,310,000)
Interest paid in
common shares 258,000 2,000 180,000 -
Conversion of debentures 131,000 1,000 149,000 -
Common shares issued in debt
restructuring 125,000 1,000 149,000 -
Stock options exercised 50,000 1,000 49,000 -
Common shares issued to
settle outstanding obligations 295,000 3,000 173,000 -
Net income - - - 1,111,000
---------- ---------------- ----------------- ----------------
Balance at March 31, 1995 30,718,000 $ 307,000 $ 28,288,000 $ (24,199,000)
========== ================ ================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 47
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Decora Industries, Inc. (the "Company") is a holding company primarily
engaged in the development, manufacture, and sale of consumer decorative
products and of specialty industrial products, utilizing its proprietary
pressure-sensitive, self-adhesive, release and protective technologies.
The Company operates through its wholly-owned subsidiary, Decora
Manufacturing. In April 1994, management decided to discontinue the
operations of a second wholly-owned subsidiary, ComTel Industries, Inc.
("ComTel"), which manufactured, installed and serviced telecommunications
equipment and systems (see Note 2). Accordingly, the continuing
operations of the Company now comprise the various divisions of Decora
Manufacturing, which constitutes a single significant business segment.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Decora
Industries, Inc., its operating subsidiary and the discontinued
subsidiary. All significant intercompany accounts and transactions have
been eliminated in consolidation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating fair value disclosure for financial instruments.
Notes receivable
The carrying amount of the Company's notes receivable approximates fair
value, which is estimated by discontinuing the future cash flows using
current interest rates at which similar loans would be made to borrowers
with similar credit ratings for the same remaining maturities.
Long-term debt
The carrying amount, which approximates fair value of the Company's
senior subordinated notes, is based on discounting future cash flows
using interest rates at which similar loans would be made to borrowers
with similar credit ratings for the same remaining maturities. The
carrying amount of the Company's remaining debt approximates fair value.
Warrants in subsidiary
The carrying amount approximates fair value of the Company's obligation
for the warrants in subsidiary. The determination of the carrying amount
of these warrants is more fully described in Note 5.
CASH AND CASH EQUIVALENTS
The Company invests surplus cash in highly liquid debt instruments which
have original maturities of less than three months and are considered to
be cash equivalents.
F-8
<PAGE> 48
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
SERVICE AND PRODUCT REVENUES
Revenues from sales of products and services are recognized when products
are shipped and services are performed.
F-9
<PAGE> 49
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method)
or market. Cost includes materials, labor and manufacturing overhead.
DEPRECIATION
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, generally five to thirty years.
INTANGIBLES
The excess of the aggregate purchase price over the fair market value of
the net assets of businesses acquired has been recorded as goodwill and
is being amortized on a straight-line basis over forty years. Trademarks
are being amortized over twenty years. At each balance sheet date, the
Company evaluates the recoverability of its intangible assets based on
estimated future gross cash flows. Based upon its most recent analysis,
the Company believes that there was no impairment of its intangible
assets at March 31, 1995.
INCOME PER SHARE
Income per share of common stock is based on the average number of shares
and equivalents of common stock outstanding during each period. Fully
diluted income per share is not presented for each of the periods since
the reduction from primary income per share is less than 3%.
INCOME TAXES
Income taxes are provided based on the liability method of accounting
pursuant to the Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS 109"). Deferred income taxes are
recorded to reflect expected future tax consequences of events that have
been recognized in a company's financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying amounts and tax
bases of assets and liabilities using enacted tax rates in the years in
which the differences are expected to reverse.
RESEARCH AND DEVELOPMENT
Company-sponsored research and development costs related to both present
and future products are expensed currently. Research and development
expenses amounted to $1,067,000, $1,364,000 and $1,639,000 in fiscal
1995, 1994 and 1993, respectively.
2. DISCONTINUED OPERATIONS
ComTel Industries, Inc. - In April 1994, management of the Company
decided to divest its telecommunications services and manufacturing
operations ("ComTel"). In its March 31, 1994 consolidated financial
statements, the Company included a provision for discontinued operations
of $212,000, which reflected the then expected loss on disposal of the
related assets of ComTel.
F-10
<PAGE> 50
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
On June 28, 1994, the Company sold the El Paso division of its
telecommunications business for $840,000 cash and assumption by the buyer
of the long-term lease on a facility. The transaction resulted in a loss
approximating $212,000 with respect to the book value of the related
assets at that date.
On March 31, 1995, the Company sold the telecommunications assets of
ComTel for $1,810,000 (consisting of cash of $250,000 and notes
receivable of $1,560,000). In addition, the purchaser assumed $1,700,000
of the Company's liabilities. The notes receivable bear interest at 7%
with interest only accruing during the first three years and level
interest and principal payments due thereafter until maturity on March
31, 2002. The notes are secured by the assets of the purchaser and are
guaranteed by the purchaser's parent company. The transactions resulted
in a gain approximating $118,000 with respect to the book value of the
related assets at that date.
On June 14, 1995, the Company completed the sale of the fixed assets and
inventory related to the manufacturing division of ComTel's business.
The selling price was $1,370,000 (consisting of $1,100,000 cash and a
note for $270,000) plus the assumption of $75,000 of liabilities. The
note receivable bears interest at 10% payable semi-annually, and will be
repaid quarterly until December 1995 based on usage of purchased
inventory. After certain adjustments, the remaining balance will be
payable three years thereafter. In addition, in conjunction with the
sale, claims on ComTel's assets with respect to a $300,000 note payable
to a customer were forgiven except for $50,000 (Note 5) which is to be
paid from the proceeds of the note receivable. The transactions resulted
in a loss approximating $540,000 with respect to the book value of the
related assets at that date.
Certain liabilities of the ComTel businesses, which were not guaranteed
by the Company, were not assumed by the buyers of those business units.
As a result, the Company is in the process of settling these liabilities
for less than face value and expects to be able to do so. Certain
remaining notes and accounts receivable were not sold to the buyers, and
the Company expects that losses will be incurred on a portion of such
receivables, which are provided for at March 31, 1995.
While the Company remains obligated for certain net liabilities of its
former ComTel business, no operations or employees remain and no further
losses are expected to be incurred with respect to the ComTel operations.
The results of operations of ComTel have been reported as discontinued
operations in the accompanying financial statements and consist of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Revenues $ 9,221,000 $ 11,603,000 $ 13,378,000
Operating Income (Loss) $ (875,000) $ (1,269,000) $ 360,000
Net Income (Loss) $ (1,297,000) $ (1,481,000) $ 68,000
</TABLE>
F-11
<PAGE> 51
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The net assets and liabilities of these operations have been included in
net assets or liabilities of discontinued operations based on the
appropriate balance sheet classifications.
The composition of net assets of discontinued operations for ComTel are
as follows:
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
Cash $ 180,000 $ 66,000
Receivables 437,000 1,582,000
Inventories 1,279,000 3,423,000
Property and equipment, net 1,108,000 2,587,000
Other assets 51,000 283,000
Current portion of long-term debt (Note 5) (1,806,000) (3,143,000)
Other current liabilities (1,850,000) (2,439,000)
Long-term liabilities - (755,000)
----------- -----------
Net assets (liabilities) of discontinued
operations $ (601,000) $ 1,604,000
=========== ===========
Net non-current assets $ - $ 2,115,000
Net current liabilities
(601,000) (511,000)
----------- -----------
Net assets (liabilities) of discontinued
operations $ (601,000) $ 1,604,000
=========== ===========
</TABLE>
Yorkville Industries, Inc. - In January 1992, the Company sold
substantially all of Yorkville's inventory and other fixed assets to an
unrelated third party for approximately $325,000. Certain product lines,
compatible with other ongoing businesses of the Company, were retained.
The trademark associated with these product lines is included in the
financial statements and is being amortized over twenty years. The
remaining assets of Yorkville have been liquidated and the proceeds used
to reduce the obligation to Yorkville's former secured lender, Chase
Manhattan Bank ("Chase"). Concurrent with the sale, Yorkville ceased
operations. Yorkville had been acquired by the Company in December 1989.
F-12
<PAGE> 52
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The Company had entered into a repayment and forbearance agreement with
Chase for the Yorkville debt which had previously been guaranteed by the
Company and a binding settlement pursuant to a court stipulation with
the former owners of Yorkville (the "Former Yorkville Owners") requiring
cash payments and the registration and issuance of the common stock of
the Company to the Former Yorkville Owners. Pursuant to the Refinancing
and Settlement Transaction completed on July 22, 1994 (described in Note
13), the Chase obligation was fully satisfied, and the remaining
obligation to the Former Yorkville Owners consists of registering and
issuing no less than 875,000 shares of common stock of the Company to
the Former Yorkville Owners by June 30, 1995 with an aggregate minimum
value of $1,587,000. (See Note 13 for a description of the remaining
obligation.) The present value of the remaining payments (cash and
stock) which had been due under the forbearance and settlement
agreements were paid in full from the proceeds of the Refinancing and
Settlement Transaction described in Note 13 and are included in the net
liabilities of discontinued operations.
The net liabilities of Yorkville have been included in net non-current
liabilities of discontinued operations based on the applicable balance
sheet classifications. The composition of net liabilities relating to
Yorkville is as follows:
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
Cash $ - $ 2,000
Receivables - 60,000
Accrued liabilities - (125,000)
Due to Chase Manhattan Bank - (3,885,000)
Due to Former Yorkville owners (1,520,000) (1,911,000)
---------------- ----------------
(1,520,000) (5,859,000)
Less amounts settled (Note 13) - 4,520,000
---------------- ----------------
Net liabilities of discontinued operations $ (1,520,000) $ (1,339,000)
================ ================
Net non-current liabilities $ (1,520,000) $ (1,339,000)
================ ================
</TABLE>
F-13
<PAGE> 53
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
3. INVENTORIES
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
Inventories consist of:
Raw materials $ 2,593,000 $ 1,803,000
Work-in-process 1,250,000 814,000
Finished goods 1,031,000 391,000
---------------- ----------------
$ 4,874,000 $ 3,008,000
================ ================
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
Land and buildings $ 4,020,000 $ 3,885,000
Vehicles and related equipment 33,000 38,000
Machinery and equipment 7,632,000 7,038,000
Furniture and fixtures 322,000 285,000
Leasehold improvements 617,000 617,000
---------------- ----------------
12,624,000 11,863,000
Less accumulated depreciation 4,978,000 3,965,000
---------------- ----------------
$ 7,646,000 $ 7,898,000
================ ================
</TABLE>
F-14
<PAGE> 54
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
5. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
1995 1994
<S> <C> <C>
Decora Industries, Inc. Credit Facility (a) $ - $ 564,000
Decora Manufacturing Debt (b) 14,625,000 9,500,000
Decora Manufacturing Line of Credit (b) 1,704,000 1,194,000
ComTel Debt (c) - -
Convertible Notes (d) 2,050,000 2,200,000
Note Payable to Former Director (e) - 1,200,000
---------------- ----------------
18,379,000 14,658,000
Less: Amounts due within one year (3,157,000) (875,000)
Amounts Settled (a and e) (Note 13) - (1,764,000)
Unamortized Debt Discount (216,000) (705,000)
---------------- ----------------
$ 15,006,000 $ 11,314,000
================ ================
</TABLE>
Amounts maturing within the next five years are: $3,157,000, $7,036,000,
$2,849,000, $2,832,000 and $2,505,000.
(a) The amount owed on a note with InterEast Capital Limited ("IECL"), which
had previously been extended to February 1994, had been in default since
that date. This balance was repaid from the proceeds of the Refinancing
and Settlement Transaction described in Note 13.
(b) Both the Decora Manufacturing term loan and the line of credit facility
were extended and modified in July 1994 as part of the Refinancing and
Settlement Transaction described in Note 13. The loan bears interest at
9.52% and is secured by certain of Decora Manufacturing's accounts
receivable, inventory and property and equipment. Decora Manufacturing
also has a revolving line of credit of up to $6 million secured by
various accounts receivable, inventory and equipment. The amount
outstanding under the facility bears interest at prime plus 1 1/4%.
Availability under this credit facility is limited by specified
percentages of receivables and inventories.
F-15
<PAGE> 55
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
In addition to the term loan, Decora Manufacturing issued $7 million of
14% senior subordinated notes of which interest on the notes is payable
semi-annually. On April 1, 1995, the repayment terms of the notes were
extended to include a payment of $4 million due on April 15, 1996 and
$1.5 million due on April 15, 1997 and 1998. Warrants were issued which
are exercisable by April 15, 1998 (or upon the public offering of the
shares of Decora Manufacturing, if earlier) into 20% of the equity of
Decora Manufacturing for a nominal cash payment. If there has been no
public offering of the shares of Decora Manufacturing by April 15, 1997,
these warrants can then be "put" to the Company for a cash payment based
upon earnings of Decora Manufacturing. The date of such put was extended
from April 15, 1995 to April 15, 1997 with the consent of the lender as
part of the Refinancing and Settlement Transaction described in Note 13.
At March 31, 1995, the warrants were valued at $1,425,000. Changes in
the value of the warrants (based upon results of operations and
financial position of Decora Manufacturing) are charged or credited to
interest expense. During the years ended March 31, 1995, 1994 and 1993,
$0, $200,000 and $125,000 were credited, respectively. The note is
recorded net of unamortized discount of $216,000 and $646,000 at March
31, 1995 and 1994, respectively.
(c) In connection with the acquisitions of the Siemens divisions, ComTel
issued promissory notes for $1,375,000. The balances on these notes at
March 31, 1995 and 1994 were $50,000 and $755,000, respectively, and
these amounts were included in long-term liabilities of discontinued
operations. During fiscal 1995, the notes were renegotiated and Siemens
relinquished all claims against the assets of ComTel for consideration
of $50,000 which is to be paid in fiscal 1996.
ComTel has a revolving credit facility which provides for borrowings of
up to $2,500,000 and had a $750,000 term loan at March 31, 1995. Both
credit facilities were secured by certain of its fixed assets and
substantially all of its inventory and receivables. As part of the
transaction relating to the June 1994 sale of its El Paso facility,
ComTel repaid $550,000 of the term loan. The remainder of the term loan
was repaid during fiscal 1995. Amounts outstanding against the credit
line at March 31, 1994 were $1,800,000. As part of the transaction
related to the sale of its telecommunication assets, ComTel repaid
$250,000 of the line of credit balance. As part of the transaction
relating to the sale of the manufacturing division, ComTel repaid
$800,000 of the line of credit balance subsequent to March 31, 1995. In
June 1995, the remaining balance of $750,000 was repaid with a borrowing
from the Decora Manufacturing revolving line of credit facility. The
term loan and the line of credit amounts are included in net current
liabilities of discontinued operations.
(d) On November 3, 1992, the Company borrowed $1,500,000 from a private
lender and issued a convertible note. As part of the transaction, the
Company also issued 89,076 shares of its common stock, warrants to
purchase 225,000 shares of common stock at $1.40 per share and warrants
for an additional 100,000 shares of common stock at prices contingent
upon the future market price of the Company's common stock. The
convertible note is due November 3, 1995, and bears interest at 12% per
annum, payable in the form of the Company's common stock. In
F-16
<PAGE> 56
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
June 1993, the Company borrowed $550,000 from a private lender and issued
a convertible note. On March 15, 1995, the note was extended to December
31, 1995, and is convertible into shares of the company's common stock
computed at 40% of the market price on the date of conversion. Interest
is payable at the rate of 12%.
At March 31, 1994, the Company had a convertible note in the principal
amount of $150,000 payable to a private investor. In June 1994, the note
was converted to 132,000 shares of the Company's common stock.
(e) The amount of $1,200,000 owed to a former director which had been in
default since October 1993 was satisfied through a payment of $1,014,000
($800,000 principal and $214,000 of legal fees and interest) from the
proceeds of the Refinancing and Settlement Transaction described in Note
13.
6. COMMON STOCK
At March 31, 1995, the Company had an aggregate of 4,838,000 shares of
common stock reserved for: (1) Options for the purchase of 4,013,000
shares of common stock, and (2) exercise of warrants for common stock of
450,000 at $0.75 per shares, 275,000 at $1.40 per share and 100,000 at a
range of $0.50-$1.40 per share. On October 5, 1988, the shareholders of
the Company approved the Decora Industries, Inc. 1988 Employee Stock
Purchase Plan pursuant to which a total of 500,000 shares of the
Company's common stock may be issued to participants during the term of
the Plan at an issue price of 85% of fair market value at the date of
purchase. No shares have been purchased pursuant to the Plan.
7. STOCK OPTIONS
The Company has a Stock Option Plan covering the directors and employees
of the Company and its subsidiaries adopted in 1987 ("1987 Plan") under
which 1,700,000 shares of common stock are available for grant. The Plan
is administered by a committee of the Board of Directors of the Company
who are not covered by the Plan. All options granted under the 1987 Plan
terminate either five years or ten years after the date of grant and
those granted vest quarterly subsequent to the grant date over a
three-year period unless modified by the Company. Options for 730,000
shares of common stock have been exercised to date.
F-17
<PAGE> 57
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The following summarizes the Company's stock option activity for the
years ended March 31, 1995 and 1994:
<TABLE>
<CAPTION>
MARCH 31, 1995 MARCH 31, 1994
NUMBER OF PRICE NUMBER OF PRICE
OPTIONS PER SHARE OPTIONS PER SHARE
<S> <C> <C> <C> <C>
Beginning balance 3,999,000 $.50 - $1.86 3,999,000 $.50 - $2.25
Options granted 1,175,000 $1.03 - $2.00 1,075,000 $1.03 - $1.86
Options exercised (50,000) $1.00 - -
Options expired (1,111,000) $.75 - $1.86 (1,075,000) $.85 - $2.25
---------- ------------ ---------- ------------
Ending balance 4,013,000 $.50 - $2.00 3,999,000 $.50 - $1.86
========== ============ ========== ============
Exercisable 3,406,000 3,145,000
========== ==========
</TABLE>
8. INCOME TAXES
The provision (benefit) for income taxes charged to continuing
operations for the years ended March 31, 1995, 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current tax expense (benefit):
Federal $ (3,000) $ 31,000 $ -
State 232,000 81,000 (30,000)
-------------- ------------ ---------
Total current 229,000 112,000 (30,000)
Deferred tax benefit (1,400,000) - -
-------------- ------------ ---------
Provision (benefit) for income taxes $ (1,171,000) $ 112,000 $ (30,000)
============== ============ =========
</TABLE>
F-18
<PAGE> 58
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Deferred tax liabilities (assets) are comprised of the following at
March 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Depreciation $ 244,000 $ 158,000
Discontinued operations 378,000 388,000
Organization cost amortization 137,000 81,000
----------- -----------
759,000 627,000
----------- -----------
Net operating loss carryforwards (6,178,000) (6,654,000)
Inventory valuation allowance (81,000) (127,000)
Loss on sale of ComTel assets (154,000) -
Deferred compensation liability (106,000) (101,000)
Other (219,000) (86,000)
----------- -----------
(6,738,000) (6,968,000)
----------- -----------
Deferred tax assets valuation allowance 4,579,000 6,341,000
----------- -----------
Deferred taxes, net $(1,400,000) $ -
=========== ===========
</TABLE>
The provision (benefit) for income taxes for the three years ended March
31, 1995 differs from the amount of income tax determined by applying
the applicable U.S. statutory federal income tax rate to pretax income
from continuing operations as a result of the following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Pretax income at statutory rate $ 13,000 $ 106,000 $ 225,000
State tax expense (benefit) 232,000 81,000 (30,000)
Effect of net operating loss (16,000) (75,000) (225,000)
Change in valuation allowance (1,400,000) - -
----------- ----------- -----------
Provision (benefit) for income taxes $(1,171,000) $ 112,000 $ (30,000)
=========== =========== ===========
</TABLE>
Approximately $17,652,000 of the company's loss carryforwards remain
available at March 31, 1995. Their use is limited to future taxable
earnings of the Company. The carryforwards expire over the period 1999
through 2007.
F-19
<PAGE> 59
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Management believes that it is more likely than not that it will
generate taxable income sufficient to realize a portion of the tax
benefit associated with future deductible temporary differences and the
net operating loss carryforwards prior to their expiration. This belief
is based upon, among other factors, changes in operations that have
occurred during 1994 and 1995. Specifically, cost savings associated
with capital investments in and strategic realignment of Decora
Manufacturing have improved operating results. As described in Note 2,
the Company divested itself of its ComTel subsidiary, which had
generated significant operating losses in 1994 and 1995.
Management believes that the valuation allowance is appropriate given
the current estimates of future taxable income. If the Company is unable
to generate sufficient taxable income in the future through operating
results, increases in the valuation allowance will be required through a
charge to expense. However, if the Company achieves sufficient
profitability to utilize a greater portion of the deferred tax asset,
the valuation allowance will be reduced through a credit to income.
9. COMMITMENTS
COMPENSATING BALANCE
Under an agreement with the lending bank at March 31, 1995, the Company
maintained on deposit a $200,000 compensating balance, which represented
an additional security interest pledged to the bank for payment of a
note of a discontinued subsidiary and performance of certain obligations
pursuant to the note guarantee agreement.
10. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, the ultimate
resolution of which, in the opinion of management of the Company, will
not have a material impact on the financial condition or results of
operations of the Company.
11. BUSINESS AND CREDIT CONCENTRATIONS
Decora Manufacturing's primary customer is Rubbermaid Inc., who
accounted for $37,764,000 (93%), $37,327,000 (94%) and $37,255,000 (97%)
of net sales in fiscal 1995, 1994 and 1993, respectively. Gross accounts
receivable with Rubbermaid at March 31, 1995, 1994 and 1993 were
$1,601,000 (63%), $2,806,000 (81%) and $1,969,000 (89%), respectively.
The Company believes there are no significant credit risk in existence
with respect to these accounts receivable.
F-20
<PAGE> 60
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
12. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in current assets and liabilities, exclusive of acquisitions and
dispositions of subsidiaries, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
(Increase) decrease in
accounts receivable $ 966,000 $(1,055,000) $(1,167,000)
Increase in inventory (1,866,000) (306,000) (690,000)
(Increase) decrease in other assets (42,000) 322,000 340,000
Increase (decrease) in
accounts payable (909,000) 1,342,000 1,046,000
Increase in accrued liabilities 127,000 252,000 8,000
----------- ----------- -----------
$(1,724,000) $ 555,000 $ (463,000)
=========== =========== ===========
</TABLE>
Supplemental cash flow information is as follows:
<TABLE>
<S> <C> <C> <C>
Cash paid during the year for interest $ 1,731,000 $ 1,519,000 $ 2,215,000
=========== =========== ===========
Cash paid during the year for
income taxes $ 235,000 $ 133,000 $ 175,000
=========== =========== ===========
</TABLE>
13. REFINANCING AND SETTLEMENT TRANSACTION
On July 22, 1994, the Company and its subsidiary, Decora Manufacturing,
entered into several transactions to repay four major creditors of the
Company. The transactions and the effect upon each creditor is described
below.
Effective July 1994, the borrowing transaction resulted in an increase
in the amount outstanding under the term loan from $2,000,000 to
$8,000,000. In addition, Decora Manufacturing obtained a commitment for
up to an additional $1,000,000 to finance capital improvements. The
terms of the line-of-credit facility (Note 5) were also modified and the
expiration of the facility was extended to July 31, 1996. The additional
net proceeds from the borrowing ($6,000,000) were advanced by Decora
Manufacturing to the Parent Company (Decora Industries, Inc.) for the
purpose
F-21
<PAGE> 61
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
of repaying certain creditors as described below. The repayment of the
creditors was effected as follows:
1. Under a Forbearance Agreement with Chase Manhattan Bank ("Chase")
relating to the Company's former Yorkville Industries, Inc.
subsidiary ("Yorkville"), a payment of $2,200,000 was due on
February 1, 1994. Since that payment was not made, Chase demanded
payment of the entire amount due (approximately $3,885,000). Chase
received $3,380,000 from the proceeds of the Refinancing and
Settlement Transaction and has released all claims against the
Company.
2. To comply with the settlement terms reached in November 1992 with
the former owners of Yorkville (the "Former Yorkville Owners"), the
Company was obligated to register with the Securities and Exchange
Commission and issue to the Former Yorkville Owners its common
shares valued at approximately $1,587,000. The Company was unable to
register the securities due to matters pertaining to other creditors
as described herein. In addition, pursuant to the settlement terms
with the Former Yorkville Owners, monthly payments were continuing
to such owners and to Chase. As part of the Refinancing and
Settlement Transaction, the Company paid $751,000 to the Former
Yorkville Owners to decrease the monthly payment obligations and has
also obtained an extension of the effective date of the registration
requirements. The transaction (and related settlement with Chase)
also released the Former Yorkville Owners' collateral then being
held by Chase and concurrently the obligation of the Company to
indemnify the Former Yorkville Owners if such collateral had been
sold by Chase.
After the Settlement and Repayment Transaction, the only remaining
obligation of the Company to the Former Yorkville Owners is the
registration and issuance to them of shares of the Company's common
shares having an aggregate minimum value of $1,587,000 by June 30,
1995. The Company filed the registration statement, but it was not
effective by that date. Accordingly, on July 5, 1995, a notice of
default was received from the Former Yorkville Owners. The Company
has at least until July 25, 1995 to cure. The Company believes that
if it is unable to cure, a reasonable extension can be procured from
the Former Yorkville Owners.
3. The balance of a note due to IECL of approximately $564,000 was paid
in full from the proceeds of the Refinancing and Settlement
Transaction (see Note 5).
4. The note payable to the former director was satisfied through a
payment of $1,014,000 from the proceeds of the Refinancing and
Settlement Transaction (see Note 5).
F-22
<PAGE> 62
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
5. In addition to repayment of the creditors, the repayment terms of
the increased term loan ($8,000,000) to Decora Manufacturing were
also modified to provide for four quarterly payments of $125,000
from August 31, 1994 to May 31, 1995; an additional fifteen
quarterly payments of $333,000 from August 31, 1995 through February
28, 1999 and a final payment of $2,505,000 on May 31, 1999.
The debt which was settled as reflected in the accompanying consolidated
balance sheet at March 31, 1994 was as follows:
<TABLE>
<S> <C>
Amount due Chase Manhattan Bank $ 3,885,000
Note payable to former director 1,200,000
Monthly cash payments due former
Yorkville owners (at present value) 635,000
Amount due IECL 564,000
----------------
Total debt settled and refinanced $ 6,284,000
================
</TABLE>
The resulting gain from the Refinancing and Settlement Transaction, net
of certain costs, is not considered to be material in relation to the
consolidated results of operations of the Company.
14. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1995
1ST 2ND 3RD 4TH YEAR
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 11,017 $ 10,545 $ 8,955 $ 9,897 $ 40,414
Gross profit $ 2,857 $ 2,785 $ 3,026 $ 2,948 $ 11,616
Income from continuing
operations $ 543 $ 547 $ 216 $ 1,102 $ 2,408
Discontinued operations:
Income (loss) from operations $ (90) $ 2 $ (195) $ (592) $ (875)
Provision for discontinued
operations $ - $ - $ - $ (422) $ (422)
Net income $ 453 $ 549 $ 21 $ 88 $ 1,111
Income (loss) per share:
Continuing operations $ .02 $ .02 $ .01 $ .03 $ .08
Discontinued operations - - (.01) (.03) (.04)
---------- ---------- -------- --------- ----------
</TABLE>
F-23
<PAGE> 63
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Income per share $ .02 $ .02 $ - $ - $ .04
========== ========== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1994
1ST 2ND 3RD 4TH YEAR
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 10,910 $ 9,536 $ 8,835 $ 10,674 $ 39,955
Gross profit $ 2,662 $ 2,435 $ 2,496 $ 2,793 $ 10,386
Income from continuing
operations $ 507 $ 262 $ 374 $ 486 $ 1,629
Discontinued operations:
Income (loss) from operations $ 41 $ 191 $ (38) $ (1,463) $ (1,269)
Provision for discontinued
operations $ - $ - $ - $ (212) $ (212)
Net income (loss) $ 548 $ 453 $ 336 $ (1,189) $ 148
Income (loss) per share:
Continuing operations $ .02 $ .01 $ .01 $ .02 $ .06
Discontinued operations - .01 - (.06) (.05)
---------- ---------- -------- ---------- -----------
Income (loss) per share $ .02 $ .02 $ .01 $ (.04) $ .01
========== ========== ======== ========== ===========
</TABLE>
F-24
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Company estimates that expenses in connection with the distribution
described in this Registration Statement will be as shown below. All expenses
incurred with respect to the distribution will be paid by the Company. See
"Plan of Distribution and Use of Proceeds."
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 565.73
Printing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Fees and expenses for qualification
under state securities laws . . . . . . . . . . . . . . . . . . . . . . . 3,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $57,565.73
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits the Registrant's
Board of Directors to indemnify any person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding in which such person is made a party by
reason of his being or having been a director, officer, employee or agent of
the Registrant, in terms sufficiently broad to permit such indemnification
under certain circumstances for liabilities (including reimbursement for
expenses incurred) arising under the Securities Act of 1933, as amended (the
"Act"). The statute provides that indemnification pursuant to its provisions
is not exclusive of other rights of indemnification to which a person may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise.
The Registrant's Certificate of Incorporation (Exhibit 3.1 hereto) provides for
indemnification of its directors, officers, employees and other agents to the
maximum extent permitted by law. The Registrant has obtained directors and
officers' liability insurance that may cover, among other things, liabilities
under the federal securities laws.
The Registrant's Bylaws (Exhibit 3.2 hereto) provide for mandatory
indemnification of directors and officers of the Company, and those serving at
the request of the Company as directors, officers, employees, or agents of
other entities (collectively, "Agents") to the maximum extent permitted by law.
The Bylaws provide that such indemnification shall be a contract right between
each Agent and the Company.
The Company's Certificate of Incorporation provides that a director of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
II-1
<PAGE> 65
The Company has purchased a directors and officers liability insurance policy
which provides up to one million dollars of insurance coverage for certain
actions against directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Company believes that the issuances of securities pursuant to the
foregoing transactions were all either exempt from registration under the Act
by virtue of Section 4(2) thereof as transactions not involving any public
offerings, or were not subject to the registration requirements of the Act by
virtue of Rule 903 of Regulation S promulgated under the Act. In each case
under Section 4(2), the investor confirmed to the Company his investment
intent, and the Company had reason to believe that the investor qualified as an
accredited investor for purposes of the Act. In each case under Rule 903, the
offers and sales were made in offshore transactions, without any directed
selling efforts, to investors which certified that they were not U.S. persons.
Securities Issued to Employees, Directors and Consultants.
<TABLE>
<CAPTION>
TITLE OF EXEMPTION
DATE SECURITIES AMOUNT PURCHASERS CONSIDERATION CLAIMED
---- ---------- ------ ---------- ------------- -------
<S> <C> <C> <C> <C> <C>
July 15, 1992 Option 250,000 Officer N/A (services (1)
rendered)
July 15, 1992 Option 15,000 Employee N/A (services (1)
rendered)
July 15, 1992 Option 40,000 Employee N/A (services (1)
rendered)
July 27, 1992 Option 250,000 Director N/A (services (1)
rendered)
July 27, 1992 Option 50,000 Employee N/A (services (1)
rendered)
September 29, 1992 Common Stock 142,857 Consultants Settlement of (1)
amounts due for
services rendered
in the amount of
$200,000
January 11, 1993 Option 75,000 Officer N/A (services (1)
rendered)
January 15, 1993 Option 25,000 Employee N/A (services (1)
rendered)
May 5, 1993 Option 250,000 Director N/A (services (1)
rendered)
May 5, 1993 Option 60,000 Consultants N/A (services (1)
rendered)
July 1, 1993 Option 100,000 Officer N/A (services (1)
rendered)
August 29, 1993 Option 40,000 Consultant N/A (services (1)
rendered)
October 8, 1993 Option 200,000 Consultants N/A (services (1)
rendered)
December 1, 1993 Option 250,000 Consultant N/A (services (1)
rendered)
</TABLE>
II-2
<PAGE> 66
<TABLE>
<S> <C> <C> <C> <C> <C>
March 31, 1994 Common Stock 150,000 Consultant Settlement of (1)
amounts due for
services rendered
in the amount of
$135,000
March 31, 1994 Option 275,000 Employee N/A (services (1)
rendered)
July 15, 1994 Option 350,000 Employee N/A (services (1)
rendered)
July 15, 1994 Option 75,000 Director N/A (services (1)
rendered)
July 15, 1994 Option 50,000 Director N/A (services (1)
rendered)
August 15, 1994 Option 400,000 Employee N/A (services (1)
rendered)
August 22, 1994 Common Stock 50,000 Employee N/A (exercise of (1)
previously issued
option)
June 28, 1995 Option 200,000 Director N/A (services (1)
rendered)
July 6, 1995 Option 150,000 Director N/A (services (1)
rendered)
Securities Issued in Private Placements and/or in Connection with Financings.
----------------------------------------------------------------------------
TITLE OF EXEMPTION
DATE SECURITIES AMOUNT PURCHASERS CONSIDERATION CLAIMED
---- ---------- ------ ---------- ------------- -------
March 31, 1992 Warrant 550,000 InterEast Capital N/A (consideration (1)
Limited for financing)
May 13, 1992 Common Stock 39,250 Private, accredited N/A (exercise of (1)
purchasers in private warrants issued in
placement connection with
prior debt)
June 4, 1992 Common Stock 30,000 Abraxas Development SA N/A (exercise of (1)
warrants issued in
connection with
prior debt)
July 2, 1992 Common Stock 830,089 Non-U.S. accredited $1,162,125 (2)
investors
July 2, 1992 Common Stock 192,000 Abraxas Development S.A. Conversion of prior
advances in the (1)
</TABLE>
II-3
<PAGE> 67
<TABLE>
<S> <C> <C> <C> <C> <C>
amount of
$144,000
July 2, 1992 Common Stock 182,667 Transinvest Limited Cancellation of (1)
prior debt in the
amount of $137,000
July 6, 1992 Common Stock 142,857 Private, accredited $200,000 (1)
purchaser in private
placement
November 3, 1992 Common Stock 89,076 Robert W. Johnson IV N/A (partial (1)
consideration for
loan)
November 3, 1992 Common Stock 90,000 Robert W. Johnson IV Prepaid interest of (1)
$160,000
November 3, 1992 Convertible Note 882,353 Robert W. Johnson IV $1,500,000 (1)
November 3, 1992 Warrant 225,000 Robert W. Johnson IV N/A (issued in (1)
consideration for
financing)
November 3, 1992 Warrant 100,000 Robert W. Johnson IV N/A (issued in (1)
consideration for
financing)
November 25, 1992 Common Stock 550,000 InterEast Capital N/A (exercise of (1)
Limited warrant issued in
connection with
prior financing)
November 25, 1992 Common Stock 860,000 InterEast Capital Conversion of prior (1)
Limited debt in the amount
of $1,200,000
December 10, 1992 Common Stock 23,250 Sanbarco N/A (exercise of (1)
warrants issued in
prior financing)
December 15, 1992 Common Stock 10,000 Private, accredited $10,000 (1)
purchaser in private
placement
December 18, 1992 Common Stock 383,334 Private, accredited $552,000 (1)
purchasers in private
placement
May 14, 1993 Common Stock 200,000 Sun Financial Group, Consideration valued (1)
Inc. at $400,000 in
connection with the
acquisition of
division)
July 1, 1993 Convertible Note (3) Non-U.S. investors $550,000 (2)
Warrant 100,000 Non-U.S. investors N/A (partial (2)
July 1, 1993 consideration for
loan of $550,000)
July 26, 1993 Warrant 50,000 InterEast Capital N/A (issued in (1)
Limited consideration for
</TABLE>
II-4
<PAGE> 68
<TABLE>
<S> <C> <C> <C> <C>
financing)
July 26, 1993 Convertible Note 402,857 InterEast Capital $564,000 (1)
Limited
November 3, 1993 Common Stock 95,755 Robert W. Johnson IV Interest payment of (1)
$160,000
June 9, 1994 Common Stock 130,595 Transinvest Limited Conversion of debt (1)
in the amount of
$182,833
August 29, 1994 Common Stock 125,458 Private, Accredited $150,000
purchaser in private (1)
placement
October 5, 1994 Common Stock 50,108 Non-U.S. Investor Interest payment of (2)
$33,000
June 1, 1994 Warrant 50,000 Non-U.S. investors N/A (extension of (2)
loan)
November 14, 1994 Common Stock 112,327 Robert W. Johnson IV Interest payment of (1)
$180,000
February 15, 1995 Common Stock 48,175 Non-U.S. Investor Interest payment of (2)
$33,000
Securities Issued in Settlement of Litigation.
- ---------------------------------------------
TITLE OF EXEMPTION
DATE SECURITIES AMOUNT PURCHASERS CONSIDERATION CLAIMED
---- ---------- ------ ---------- ------------- -------
July 10, 1992 Common Stock 24,000 Plaintiff in lawsuit N/A (court-approved (1)
settlement of
litigation)
July 10, 1992 Common Stock 18,000 Plaintiff in lawsuit N/A (court-approved (1)
settlement of
litigation)
July 10, 1992 Common Stock 13,500 Plaintiff in lawsuit N/A (court-approved (1)
settlement of
litigation)
July 10, 1992 Common Stock 4,500 Plaintiff in lawsuit N/A (court-approved (1)
settlement of
litigation)
July 13, 1992 Warrant 450,000 Plaintiff in lawsuit N/A (court-approved (1)
settlement of
litigation)
September 29, 1992 Common Stock 182,217 Plaintiffs in lawsuit N/A (court-approved (1)
</TABLE>
II-5
<PAGE> 69
<TABLE>
<S> <C> <C> <C> <C> <C>
settlement of
litigation)
December 3, 1992 Common Stock 33,846 Plaintiffs in lawsuit N/A (court-approved (1)
settlement of
litigation)
July 22, 1994 Common Stock 125,000 Plaintiffs in lawsuit N/A (settlement of (1)
litigation)
N/A (settlement of
November 18, 1994 Common Stock 20,000 Plaintiffs in lawsuit litigation) (1)
</TABLE>
_________________________________________________
(1) Exempt pursuant to Section 4(2) of the Securities Act regarding
transactions not involving public offerings. In each case under Section 4(2),
the investor confirmed to the Company his investment intent, and the Company
had reason to believe that the investor qualified as an accredited investor for
purposes of the Act.
(2) Exempt pursuant to Rule 903 of Regulation S. In each case under
Rule 903, the offers and sales were made in offshore transactions, without any
directed selling efforts, to investors which certified that they were not U.S.
persons.
(3) Number of shares to be issued upon conversion is subject to
fluctuations in the trading price of the Company's stock.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
(3) Articles of Incorporation and By-Laws
3.1 Certificate of Incorporation filed on March 27, 1992.(8)
3.2 By-laws.(8)
(4) Instruments Defining the Rights of Security Holders
4.1 Certificate of Incorporation (see Exhibit 3.1).
4.2 Form of Specimen Certificate.
(5) Opinion re Legality
5.1 Opinion of Miller & Holguin as to certain securities law
matters.
(10) Material Contracts
10.1 Utilitech, Incorporated, 1987 Stock Option Plan.(1)
II-6
<PAGE> 70
10.2 Management Agreement dated as of April 18, 1990 by and between
Utilitech and Decora Manufacturing.(2)
10.3 Loan and Security Agreement dated as of April 18, 1990 by and
between Decora Manufacturing, Utilitech and Norstar Bank of
Upstate NY ("Norstar").(2)
10.4 Mortgage dated as of April 18, 1990 by and between Decora
Manufacturing and Norstar.(2)
10.5 Guaranty of Utilitech to Norstar dated as of April 18, 1990.(2)
10.6 Secured Revolving Line of Credit Agreement dated as of April
18, 1990 by and between Decora Manufacturing and Norstar.(2)
10.7 Form of Warrant to Purchase Common Stock of Decora
Manufacturing expiring April 15, 1998 dated as of April 18,
1990 by and between Decora and CIGNA Mezzanine Partners II,
L.P., CIGNA Property and Casualty Insurance Company and Zande
and Co.(2)
10.8 Forms of 14% Senior Subordinated Notes due April 15, 1998
dated as of April 18, 1990 in the amounts of $3,206,480.21,
$1,327,732.26, $1,138,055.27 and $1,327,732.26 to CIGNA
Mezzanine Partners II, L.P., CIGNA Property and Casualty
Property and Casualty Insurance Company and Zande and Co.(2)
10.9 Securities Purchase Agreement dated as of April 15, 1990 by
and between Utilitech, Decora Manufacturing and Purchasers of
14% Senior Subordinated Notes due 1998 and Warrants to
Purchase Common Stock of Decora Manufacturing.(2)
10.10 Agreement and Plan of Merger by and between Decora Industries,
Inc. and Utilitech, Incorporated dated March 3, 1992.(3)
10.11 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Nathan Hevrony.(4)
10.12 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Roger Grafftey-Smith.(4)
10.13 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Gabriel Thomas.(4)
10.14 Note and Warrant Purchase Agreement by and between Decora
Industries, Inc. and Robert W. Johnson IV, dated November 3,
1992.(5)
10.15 Convertible Negotiable Promissory Note by and between Decora
Industries, Inc. and Robert W. Johnson IV, dated November 3,
1992.(5)
10.16 Series A Warrant to Purchase Common Stock of Decora
Industries, Inc., dated November 3, 1992 issued to Robert W.
Johnson IV.(5)
10.17 Series B Warrant to Purchase Common Stock of Decora
Industries, Inc., dated November 3, 1992 issued to Robert W.
Johnson IV.(5)
II-7
<PAGE> 71
10.18 Settlement and Release Agreement dated April 19, 1993 among
Decora Industries, Inc., Yorkville Industries, Inc. and
certain members of the Rabinowitz Family.(6)
10.19 License Agreement dated August 9, 1991, by and between the
Company and John Smith.(7)
10.20 Loan and Security Agreement, in the amount of $1,000,000,
dated September 28, 1992, by and between ComTel Industries,
Inc., ComTel Metals, Inc., Decora Manufacturing and Fleet Bank
of New York.(7)
10.21 Term Note, in the amount of $1,000,000, executed by ComTel
Industries, Inc. and ComTel Metals, Inc. in connection with
the Loan and Security Agreement.(7)
10.22 Secured Revolving Working Capital Line of Credit Agreement, in
the amount of $2,500,000 dated September 28, 1992, by and
between ComTel Industries, Inc. and Fleet Bank of New York.(7)
10.23 Secured Working Capital Promissory Note, in the amount of
$1,500,000 executed by ComTel Industries, Inc. in connection
with the Working Capital Line of Credit Agreement dated as of
September 28, 1992.(7)
10.24 Option Agreement dated as of May 5, 1993, by and between
Arnold Zimmerman and the Company.(7)
10.25 Form of Option Agreement dated as of January 11, 1993, by and
between Richard A. DeCoste and the Company.(7)
10.26 Form of Option Agreement dated as of July 15, 1992, by and
between Richard G. Winslow and the Company.(7)
10.27 Asset Purchase Agreement date May 14, 1993 by and among ComTel
Industries, Inc., the Company and Sun Financial Group, Inc.(7)
10.28 Employment Agreement, dated as of July 1, 1993, by and between
the Company and Timothy J. Burditt.(7)
10.29 1988 Employee Stock Purchase Plan.(7)
10.30 Amendment Agreement dated as of July 3, 1993 by and between
the Company and InterEast Capital.(8)
10.31 Second Amendment to Secured Revolving Line of Credit Agreement
dated as of July 29, 1993 by and between Decora and Fleet Bank
of New York (successor to Norstar).(8)
10.32 Revision to Secured Promissory Note (originally dated July 5,
1990, in the principal amount of $850,000), effective
September 28, 1992, by and between ComTel Metals, Inc. and
Siemens Stromberg-Carlson.(8)
10.33 Subordination Agreement, dated September 28, 1992, by and
among ComTel, ComTel Metals, Inc., Siemens Stromberg-Carlson
and Fleet Bank of New York.(8)
II-8
<PAGE> 72
10.34 Labor Agreement, effective June 9, 1992, by and between Decora
Manufacturing and Local #13 United Paperworkers International
Union.(8)
10.35 Asset Purchase Agreement by and between Fujitsu Business
Communications, Inc. and ComTel Industries, Inc. dated as of
December 10, 1993.(8)
10.36 Manufacturing Agreement dated as of February 18, 1994, by and
Between Decora Industries, Inc., Decora Incorporated and
Rubbermaid Incorporated.(8)
10.37 Promissory Note in the amount of $8,500,000 by and between
Decora Incorporated and Fleet Bank of New York dated July 20,
1994.(8)
10.38 Amendment No. 1 to Loan and Security Agreement between Decora
Incorporated and Fleet Bank of New York dated July 20, 1994.(8)
10.39 Promissory Note in the amount of $1,000,000 by and between
Decora Incorporated and Fleet Bank of New York dated July 20,
1994.(8)
10.40 Loan and Security Agreement in the amount of $1,000,000 by and
between Decora Incorporated and Fleet Bank of New York dated
July 20, 1994.(8)
10.41 Revolving Line of Credit Note in the amount of $6,000,000 by
and between Decora Incorporated and Fleet Bank of New York
dated July 20, 1994.(8)
10.42 Third Amendment to Secured Revolving Line of Credit Agreement
by and between Decora Incorporated and Fleet Bank of New York
dated July 20, 1994.(8)
10.43 Asset Purchase Agreement by and among ComTel Metals, Inc.,
ComTel Industries, Inc. and Keptel, Inc. dated June 28,
1994.(8)
10.44 Amendment to License Agreement dated March 31, 1994 by and
among Decora Industries, Inc., Decora Incorporated and John R.
Smith.(8)
10.45 Assignment of Ownership dated June 30, 1994 by and among
Decora Industries, Inc., Decora Incorporated and John R. Smith
relating to License Agreement.(8)
10.46 Form of InterEast Warrant dated May 4, 1994 to purchase common
stock of Decora.(8)
10.47 Warrant to Confidesa AG to Purchase 100,000 Shares of Common
Stock dated June 29, 1993.(8)
10.48 Form of Warrant to Confidesa AG to Purchase 50,000 shares of
Common Stock dated June 1994.(8)
10.49 Form of Convertible Promissory Note dated June 1994, in the
amount of $550,000 by and between Confidesa AG and Decora
Industries, Inc.(8)
10.50 Letter of Fleet Bank to Decora Industries dated July 29, 1994
regarding the extension of the line of credit of ComTel
Industries, Inc.(8)
II-9
<PAGE> 73
10.51 Amendment to Securities Purchase Agreement dated as of July
19, 1994 by and between Decora, Incorporated and Cigna
Mezzanine Partners, Inc., Cigna Property and Casualty and
Insurance Company of North America.(8)
10.52 General Mutual Releases, Settlement Agreement and Covenants
for Peace from Further Litigation, Proceedings, Claims,
Purported Advocacy of Claims and Unwanted Publicity, by and
between Jacqueline B. Cotsen and Decora Industries, Inc.,
dated July 20, 1994.(8)
10.53 Assignment Agreement by and among Chase Manhattan Bank, N.A.,
Decora Industries, Inc., and Winslow Bank Limited, dated July
20, 1994.(8)
10.54 Restated Settlement and Release Agreement by and between
Stanley Rabinowitz, Milton Rabinowitz, the Estate of Solomon
Rabinowitz, the Estate of Clara Rabinowitz, Sherri Rabinowitz
Sussman, Suzanne Rabinowitz, Jeffrey Rabinowitz, Laurence
Rabinowitz and Barbie Rabinowitz Lieber, on the one hand, and
Decora Industries, Inc., and Yorkville Industries, Inc., on
the other hand, dated July 20, 1994.(8)
10.55 Agreement and Release by and between InterEast Capital Limited
and Decora Industries, Inc., dated July 20, 1994.(8)
10.56 Promissory Note in the amount of $6,000,000 dated as of July
20, 1994 by and between Decora Industries as borrower and
Decora Incorporated as lender.(8)
10.57 Option Agreement dated as of July 15, 1994, by and between
Decora Industries, Inc. and Walter E. Buske.(8)
10.58 Form of Employment Agreement dated as of June 1, 1994 by and
between Decora Industries, Inc. and Nathan Hevrony.(8)
10.59 Form of Option Agreement dated as of July 5, 1994 by and
between Decora Industries, Inc. and Stephen Verchick.(8)
10.60 Form of Option Agreement dated as of July 5, 1994 by and
between Decora Industries, Inc. and Ronald Artzer.(8)
10.61 Form of Option Agreement dated as of August 15, 1994 by and
between Decora Industries, Inc. and Nathan Hevrony.(9)
10.62 Employment Agreement effective as of August 1, 1994 between
the Company and Walter Buske.(9)
10.63 Letter dated November 18, 1994 from Fleet Bank to Richard J.
Winslow, President, ComTel Industries, Inc. re extension of
revolving working capital line of credit in the amount of
$2,000,000 until December 31, 1994.(9)
10.64 Letter dated November 18, 1994 from Fleet Bank to Richard J.
Winslow, President, ComTel Industries, Inc. re extension of
revolving working capital line of credit in the amount of
$2,000,000 until January 31, 1995.(9)
II-10
<PAGE> 74
10.65 Registration Rights Agreement dated as of April 19, 1993 by
and between Decora Industries, Inc. and members of the
Rabinowitz family.(10)
10.66 Modification, Extension and Restatement Agreements by and
between Fleet Bank and ComTel.(10)
10.67 Amendment to Securities Purchase Agreement dated as of April
1, 1995, by and among Decora, Incorporated and Cigna Mezzanine
Partners II, L.P., Cigna Property and Casualty Insurance
Company and Insurance Company of North America.(10)
10.68 Manufacturing Agreement dated April 12, 1995 by and among
Decora Industries, Inc., Decora, Incorporated and Rubbermaid
Incorporated.(11)(12)
10.69 Asset Purchase Agreement dated as of March 31, 1995 by and
between ComTel Systems Corporation and ComTel Industries,
Inc.(12)
10.70 Secured Promissory Note I dated as of March 31, 1995 in the
amount of $850,000 by and between ComTel Systems Corporation,
as Debtor, and ComTel Industries, Inc., as Lender.(12)
10.71 Secured Promissory Note II dated as of March 31, 1995 in the
amount of $710,000 by and between ComTel Systems Corporation,
as Debtor, and ComTel Industries, Inc., as Lender.(12)
10.72 Agreement of Purchase and Sale of Assets dated June 13, 1995,
by and between DMX Integration, Inc. and ComTel Metals,
Inc.(12)
10.73 Secured Promissory Note dated June 13, 1995, in the amount of
$270,809.90 by and between DMX Integration, Inc., as Debtor
and ComTel Metals, Inc., as Lender.(12)
10.74 Guaranty of Datamax Corporation dated June 13, 1995.(12)
10.75 Form of Employment Agreement dated June 28, 1995 by and
between John Tattersall and Decora Incorporated.(12)
10.76 Form of Option Agreement dated June 28, 1995 by and between
John Tattersall and Decora Industries, Inc.(12)
10.77 Form of Option Agreement dated July 6, 1995 by and between
Gabriel Thomas and Decora Industries, Inc.(12)
(22) Subsidiaries of the Registrant(9)
(24) Consents of Experts and Counsel
24.1 Consent of Price Waterhouse LLP.
24.2 Consent of Miller & Holguin (contained in Exhibit 5.1).
24.3 Power of Attorney (13).
II-11
<PAGE> 75
________________________
Notes
(1) Previously filed as Exhibits to the Company's Annual
Report on Form 10-K for the fiscal year ended March
31, 1988.
(2) Previously filed as Exhibits to the Company's Report
on Form 8-K dated April 18, 1990.
(3) Previously filed as Exhibit to the Company's Report
on Form 8-K dated April 6, 1992.
(4) Previously filed as Exhibits to the Company's Report
on Form 10-K for the fiscal year ended March 31,
1992.
(5) Previously filed as Exhibits to the Company's Report
on Form 8-K dated November 5, 1992.
(6) Previously filed as Exhibit to the Company's Report
on Form 8-K dated April 19, 1993.
(7) Previously filed as Exhibit to the Company's Report
on Form 10-K for the fiscal year ended March 31,
1993.
(8) Previously filed as Exhibit to the Company's Report
on Form 10-K for the fiscal year ended March 31,
1994.
(9) Previously filed as Exhibit to the Company's Report
on Form 10-Q for the fiscal quarter ended December
31, 1994.
(10) Previously filed as Exhibit to the Company's Report
on Form 8-K dated March 2, 1995.
(11) Confidential treatment requested.
(12) Previously filed as Exhibit to the Company's Report
on form 10-K for the fiscal year ended March 31,
1995.
(13) Included on page II-15 of this Registration Statement
as originally filed on June 28, 1995.
(B) FINANCIAL STATEMENT SCHEDULES
Not Applicable.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
II-12
<PAGE> 76
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(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.
(4) 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 of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-13
<PAGE> 77
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
EDWARD, STATE OF NEW YORK ON JULY 18, 1995.
DECORA INDUSTRIES, INC.
By: /s/ Nathan Hevrony
-----------------------
Nathan Hevrony
Chief Executive Officer
II-14
<PAGE> 78
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director July 18, 1995
- --------------------------
Roger Grafftey-Smith
* Director July 18, 1995
- -----------------------------
Gabriel Thomas
NATHAN HEVRONY Chief Executive Officer July 18, 1995
- ---------------------------
Nathan Hevrony and Director (Principal
Executive Officer)
* Director July 18, 1995
- --------------------------
Stephen H. Verchick
* Director July 18, 1995
- ------------------------------
Ronald Artzer
* Executive Vice President, July 18, 1995
- -----------------------------
Timothy Burditt Administration and Finance
(Principal Financial and
Accounting Officer)
*By: NATHAN HEVRONY
-----------------------
Nathan Hevrony
Attorney-in-fact
</TABLE>
II-15
<PAGE> 1
EXHIBIT 4.2
FORM OF SPECIMEN CERTIFICATE
NUMBER SHARES
NY 6129
[LOGO]
DECORA INDUSTRIES, INC.
COMMON STOCK
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 243593 10 0
THIS CERTIFIES THAT
is the record holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF
COMMON STOCK OF $.01 PAR VALUE OF
DECORA INDUSTRIES, INC.
transferable on the books of the Corporation by the holder hereof in
person or by duly authorized attorney upon surrender of this Certificate
properly endorsed.
This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
INDUSTRIES,
DECORA INC.
CORPORATE
[SEAL]
DELAWARE
1992
Dated:
/s/ Thomas J. Burns /s/ Nathan Hevrony
------------------------ -----------------------
Vice President Finance Chief Executive Officer
and Secretary
Countersigned and Registered:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York)
Transfer Agent and Registrar
By
----------------------------
Authorized Officer
<PAGE> 2
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT __________ Custodian ___________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of survivorship under Uniform Gifts to Minors
and not as tenants in common
Act ____________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, __________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________ shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
___________________________________________________________________. Attorney
to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated __________________________
_______________________________________________________________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular, without
alteration or enlargement or any change whatever.
<PAGE> 1
EXHIBIT 5.1
[MILLER & HOLGUIN LETTERHEAD]
July 18, 1995
Decora Industries, Inc.
1 Mill Street
Fort Edward, New York 12828
Re: Registration Statement on Form S-1
Registration No. 33-60653
----------------------------------
Ladies and Gentlemen:
Our opinion has been requested in connection with the above-referenced
registration statement (the "Registration Statement") filed with the Securities
and Exchange Commission by Decora Industries, Inc., a Delaware corporation (the
"Company"). The Registration Statement relates to the issuance of up to
1,640,769 shares of the Company's Common Stock (the "Shares") to certain
individuals in settlement of debt obligations and litigation between the Company
and the former owners of a discontinued subsidiary of the Company.
We have examined such corporate records and other documents and
have made such examinations of law as we have deemed relevant. Based on and
subject to the above, it is our opinion that the Shares are duly authorized
and, when issued as contemplated under the terms of the settlement described in
the Registration Statement, will be legally issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement.
We are delivering this opinion to the Company, and no person other than
the Company may rely upon it.
Very truly yours,
Miller & Holguin
MILLER & HOLGUIN
DII\S-1010B5.L14
<PAGE> 1
EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated June 29, 1995 relating
to the financial statements of Decora Industries, Inc. which appears in such
Prospectus. We also consent to the references to us under the headings
"Selected Financial Data" and "Experts" appearing on pages 4, 9 and 34 in
such Prospectus. However, it should be noted that Price Waterhouse LLP has
not prepared or certified such "Selected Financial Data."
PRICE WATERHOUSE LLP
Syracuse, New York
July 18, 1995
