As filed with the Securities and Exchange Commission on June 20, 2000
Registration No. 333-87965
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Pollution Research and Control Corp.
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(Exact name of registrant as specified in its charter)
California
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(State or other jurisdiction of incorporation or organization)
95-2746949
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(I.R.S. Employer Identification No.)
506 Paula Avenue, Glendale, California 91201
(818) 247-7601
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(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Albert E. Gosselin, Jr.
506 Paula Avenue, Glendale, California 91201
(818) 247-7601
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(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Please send copies of all correspondence to:
PATRICIA CUDD, ESQ.
Cudd & Associates
1120 Lincoln Street, Suite #1507
Denver, Colorado 80203
Telephone: (303) 861-7273
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed
Title of Each Maximum Proposed Maximum Amount of
Class of Securities Amount to Offering Price Aggregate Offering Registration
To be Registered Be Registered Per Share (1) Price(1) Fee
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<S> <C> <C> <C> <C>
Common Stock, no par value 100,000 $2.41 $241,000 $48.20
Common Stock, no par value, 64,000 $2.41 154,240 $30.85
underlying options(2)
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TOTAL 164,000 $2.41 $395,240(2) $79.05(3)
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457. Pursuant to Rule 457(c), based upon 100,000 shares of
Common Stock being offered by a Selling Shareholder, 64,000 shares of
Common Stock underlying options and the average of the high and low sales
prices of the Common Stock on the NASDAQ SmallCap Market System on June 13,
2000, of $2.41.
(2) Represents the shares of Common Stock underlying four options, one of which
options is exercisable to purchase 25,000 shares of Common Stock at an
exercise price of $1.00 per share on or prior to February 25, 2002, and
three of which options are exercisable to purchase 14,500 shares, 14,500
shares, and 10,000 shares, of Common Stock, respectively, at an exercise
price of $1.38 per share on or prior to March 22, 2002.
(3) The sum of $163.44 was paid in conjunction with the filing of the
Post-Effective Amendment No. 1 to the Registration Statement on Form S-3,
File Number 333-87965, filed on March 23, 2000.
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The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
DOCUMENTS INCORPRATED BY REFERENCE:
The contents of the Registration Statement on Form S-3, File Number 333-87965,
filed on September 28, 1999, the Post-Effective Amendment No. 1 to the
Registration Statement on Form S-3 filed on March 23, 2000, and certain exhibits
to this Post-Effective Amendment No. 2 to the Registration Statement on Form
S-3, as set forth in the Exhibit Index located at page 24, are incorporated
herein by reference.
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SUBJECT TO COMPLETION
164,000 Shares of Common Stock, no par value
POLLUTION RESEARCH AND CONTROL CORP.
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This Prospectus relates to an aggregate of 164,000 shares of common stock,
no par value per share (the "Common Stock"), of Pollution Research and Control
Corp. (the "Company" or "PRCC"), including (i) 25,000 shares of Common Stock
underlying an outstanding option exercisable at an exercise price of $1.00 per
share on or prior to February 25, 2002, and (ii) an aggregate of 39,000 shares
of Common Stock underlying three outstanding options exercisable to purchase
14,500 shares, 14,500 shares, and 10,000 shares, of Common Stock, respectively,
at an exercise price of $1.38 per share on or prior to March 22, 2002. The
outstanding options are hereinafter referred to, collectively, as the "Options."
The shareholder of 100,000 shares of Common Stock and the holders of Options who
exercise such Options so as to acquire up to an aggregate of 64,000 underlying
shares of Common Stock are hereinafter collectively referred to as the "Selling
Shareholders." Information regarding the Selling Shareholders is set forth in
this Prospectus under "Selling Shareholders." Information regarding the holders
of the Options and the circumstances under which they may exercise their
respective Options so as to acquire the underlying shares of Common Stock, is
set forth herein under "Description of Securities."
The shares of Common Stock were issued by the Company on February 23, 2000.
The Options exercisable to purchase 25,000 shares, and an aggregate of 39,000
shares, of Common Stock were granted by the Company on February 25, 2000, and
March 22, 2000, respectively. With respect to the shares of Common Stock
issuable upon the exercise of the Options and otherwise, said shares of Common
Stock may be offered and sold to the public from time to time by the Selling
Shareholders, or by pledgees, donees, transferees or other successors to the
Selling Shareholders, in each case in open market transactions, in private or
negotiated transactions or in a combination of such methods of sale, at fixed
prices, at prices then prevailing on the NASDAQ SmallCap Market System at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. To the extent required at the time of a particular offer of
Common Stock by the Selling Shareholders, a supplement to this Prospectus will
be distributed that will set forth the number of shares of Common Stock being
offered and the terms of the offering, including the name or names of any
underwriters, dealers, brokers or agents, the purchase price paid by any
underwriter for shares of Common Stock purchased from the Selling Shareholders,
any discounts, commissions and other items constituting compensation from the
Selling Shareholders and any discounts, commissions or concessions allowed or
re-allowed to dealers, including the proposed selling price to the public.
The Selling Shareholders reserve the sole right to accept and, together
with any agent of the Selling Shareholders, to reject in whole or in part any
proposed purchase of the shares of Common Stock. The Selling Shareholders will
pay any sales commissions or other seller's compensation applicable to such
transactions. The Selling Shareholders and agents who execute orders on their
behalf may be deemed to be underwriters as that term is defined in Section 2(11)
of the Securities Act of 1933, as amended (the "Securities Act"), and a portion
of any proceeds of sales and discounts, commissions or other seller's
compensation may be deemed to be underwriting compensation for purposes of the
Securities Act. (See "Plan of Distribution.") This Prospectus also covers such
additional shares of Common Stock as may be issuable to the Selling Shareholders
in the event of a stock dividend, stock split, recapitalization or other similar
change in the Common Stock.
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The Company will not receive any of the proceeds from the sale of the
shares of Common Stock by the Selling Shareholders. Prior to such sale of Common
Stock, however, the Company will have received up to a maximum of $78,820 ($1.00
to $1.38 per share) in cash from the exercise of the Options on or prior to
their respective expiration date(s) on February 25, 2002, or March 22, 2002. The
Company has agreed to pay all costs of the registration of the shares of Common
Stock underlying the Options and otherwise being offered by the Selling
Shareholders. Such costs, fees and disbursements are estimated to be
approximately $16,073.
SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN
THE SHARES OF COMMON STOCK.
The Company's Common Stock is traded over-the-counter and is quoted on the
NASDAQ National Market System under the symbol "PRCC." On June 13, 2000, the
last sale price of the Common Stock on the NASDAQ National Market System was
$2.31.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is June __, 2000.
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TABLE OF CONTENTS
Page
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Available Information..................................................... 5
Incorporation of Certain Documents by Reference........................... 5
The Company............................................................... 6
The Offering.............................................................. 7
Use of Proceeds........................................................... 8
Risk Factors.............................................................. 8
Plan of Distribution...................................................... 14
Market Information........................................................ 15
Selling Security Holders.................................................. 15
Description of Securities................................................. 16
Legal Matters............................................................. 18
Experts................................................................... 18
AVAILABLE INFORMATION
The Company is subject to the informational and reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at its principal offices at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and 7 World Trade Center, Suite 1300, New York, New York 10048, and
on the Commission's website at www.sec.gov. Copies of these materials can also
be obtained at prescribed rates from the Public Reference Section of the
Commission at its principal offices in Washington, D.C., set forth above.
Additional information with respect to this offering may be provided in the
future by means of supplements or "stickers" to the Prospectus.
The Company has filed a Registration Statement on Form S-3 (including all
amendments and supplements thereto, the "Registration Statement") with the
Commission under the Securities Act with respect to the shares of Common Stock
underlying the Options and otherwise offered hereby. This Prospectus, which
forms a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the Exhibits filed
therewith, certain parts of which have been omitted in accordance with the rules
and regulations of the Commission. Statements contained herein concerning the
provisions of such documents are not necessarily complete and, in each instance,
reference is made to the Registration Statement or to the copy of such document
filed as an Exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
Copies of the Registration Statement and the Exhibits thereto can be obtained
upon payment of a fee prescribed by the Commission or may be inspected free of
charge at the public reference facilities and regional offices referred to
above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999, and the Company's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2000, which were previously filed with the Commission
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(File No. 0-14266), are incorporated by reference in this Prospectus and the
Registration Statement of which it is a part.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the shares of Common Stock, shall be deemed to be
incorporated by reference herein and to be part hereof from the respective dates
of the filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus and the Registration Statement of which it is a
part to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus or the Registration Statement of which
it is a part.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or
verbal request of such person, a copy of any or all of the documents
incorporated herein by reference, other than exhibits to such documents.
Requests should be addressed to: Secretary, Pollution Research and Control
Corp., 506 Paula Avenue, Glendale, California 91201; telephone number (818)
247-7601.
THE COMPANY
The Company has been engaged in the business of, primarily, designing,
manufacturing and marketing electronic analytical instruments used to detect and
measure various types of air pollution, such as "acid rain," "ozone depletion"
and "smog episodes" through its wholly-owned subsidiary, Dasibi Environmental
Corp. ("Dasibi"), for the past approximately twenty-eight years. Although it is
the smallest competitor in the marketplace, management believes that the Company
has the most complete "in-house" line of instrumentation. The Company's products
are generally used to measure air pollution levels in geographic areas that
range in size from small industrial sites to entire states or countries. The
Company also supplies computer-controlled calibration systems that verify the
accuracy of its instruments, data loggers to collect and manage pollutant
information and final reporting software for remote centralized applications. At
the core of this instrumentation are three software systems, including a data
logger system that permits the analysis of air samples at remote locations, a
central station system that allows the compilation of data at a central site and
a predictive pollutant monitoring model, which is currently under development
and which management believes is useful for predicting future levels of
pollutants across a geographic area. The Company's instruments have been sold to
over 300 customers worldwide, including industrial manufacturers; Federal,
state, city, local and foreign governmental agencies; major industrial
companies; and educational and research institutions in over thirty countries.
These customers use the Company's products principally for environmental
protection compliance programs. Dasibi has an installed base of equipment in
over thirty countries.
Since 1993, the Company has experienced intense price competition in its
core business of air pollutant monitoring systems that has reduced both sales
and operating margins. In response to these factors, the Company acquired two
companies outside its core business, each of which businesses has been
discontinued. Since January 1998, the Company has explored additional markets
outside the United States in which to sell its pollution monitoring and control
devices, concentrating, primarily, on the People's Republic of China. On June
10, 1998, Dasibi was awarded, on a designated vendor basis, an approximate $5.2
million contract to install air pollution monitoring systems in eleven cities in
the People's Republic of China. Essential completion of the contract and
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shipment of the products by Dasibi during the five-month period ended November
30, 1999, implemented Phase I of the Nationwide Urban Air Quality Network
conceived by China's State Environmental Protection Agency ("SEPA") to address
air quality in the People's Republic of China through its ultimate goal of a
nationwide network of air pollution monitoring stations in over 600 Chinese
cities.
On April 17, 2000, the Company finalized a contract for Phase II of SEPA's
Nationwide Urban Air Quality Network involving an additional thirty-three cities
in the People's Republic of China. The contract, valued at approximately $13.5
million, will also be performed by Dasibi. It is anticipated, without assurance,
that shipments under the Phase II contract will commence in July 2000 and that
all payments to Dasibi will be made by letter of credit drawn on China
Construction Bank. Financing for Phase II is expected to be available from two
of the banks that financed the successfully completed Phase I contract. Again,
Dasibi is expected to assist the People's Republic of China in obtaining
ten-year financing at a 3.9% interest rate from the U.S. Export-Import Bank,
N.A. (the "Ex-Im Bank"). The Ex-Im Bank, in accordance with its customary
practice, is expected to guarantee, and Imperial Bank is expected to provide,
100% of the financing.
The 161% increase in the Company's revenue for the year ended December 31,
1999, is attributable to the Company's successful completion of the Phase I
contract for the installation of air pollution monitoring systems in eleven
Chinese cities. Management believes, but cannot assure, that the Company is
well-positioned for substantial additional business in China, and that future
awards and shipments to China may result in further employment opportunities for
U.S. citizens. In this regard, the Company doubled its workforce in the
performance of the Phase I contract and is again expected to double its
workforce from forty-five to approximately one hundred employees during the
performance of the Phase II contract finalized in April 2000. It is anticipated
that its designated vendor status will give the Company a competitive advantage
in the award of future contracts with the Chinese government. In May 2000, the
Company's Board of Directors approved letters of intent with SEPA proposing the
organization of a joint venture to manufacture the Company's products in the
People's Republic of China. In addition to the proposed joint venture to
manufacture Company products on-site in China, the Company is engaged in ongoing
discussions with the eleven cities subject to the Phase I contract regarding the
installation of monitoring stations in addition to those required by the Phase I
contract.
A wholly-owned subsidiary of the Company, formerly known as "Logan Medical
Devices, Inc.," changed its name to "Aeron Systems, Inc.," and "Dasibi China,
Inc.," on June 25, 1999, and March 17, 2000, respectively. Dasibi China, Inc.,
commenced start-up business in April 2000 after the discontinuance of its prior
business activities in February 1998. (See "RISK FACTORS - 4. Losses on
Discontinuance of Operations and Disposition of Nutek and LRL" below.)
The Company's principal executive offices are located at 506 Paula Avenue,
Glendale, California 91201, and its telephone number is (818) 247-7601. The
Company's Common Stock is traded in the over-the-counter market and reported on
the NASDAQ National Market System under the symbol "PRCC."
THE OFFERING
Shares of Common Stock......................... 100,000 shares of Common Stock
Shares of Common Stock Underlying Options...... 64,000 shares of Common Stock*
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*Includes (i) 25,000 shares of Common Stock underlying an option
exercisable at an exercise price of $1.00 per share on or prior to February 25,
2002, and (ii) an aggregate of 39,000 shares of Common Stock underlying three
options exercisable to purchase 14,500 shares, 14,500 shares, and 10,000 shares,
of Common Stock, respectively, at an exercise price of $1.38 per share on or
prior to March 22, 2002.
USE OF PROCEEDS
The Company will receive no proceeds from the sale of the shares of Common
Stock underlying the Options, but will receive proceeds upon the exercise of the
Options. If all of the outstanding Options are exercised at exercise prices of
$1.00 or $1.38 per share of Common Stock, the proceeds to the Company will be
approximately $78,820. The Company will use the proceeds from the exercise of
the Options for working capital.
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in and incorporated into this Prospectus and the
Registration Statement of which it is a part, the following factors before
purchasing the shares of Common Stock offered hereby.
1. Dependence Upon Phase II Contract with SEPA and Future China Business.
Since January 1998, the Company has focused its business primarily on the air
pollution market of the People's Republic of China. The approximate $5.2 million
in revenue realized by the Company from the successful completion of the
contract for Phase I of SEPA's Nationwide Urban Air Quality Network awarded, on
a designated vendor basis, to Dasibi on June 10, 1998, resulted in an
approximate 161% increase in the Company's net revenue for the year ended
December 31, 1999 ($7,314,975), as compared to net revenue for the year ended
December 31, 1998 ($2,807,511). The approximate $13.5 million price of the Phase
II contract finalized with SEPA on April 17, 2000, for the installation of air
pollution monitoring systems in an additional thirty-three cities in the
People's Republic of China, is approximately 2.6 times greater than the price of
the Phase I contract. In addition, in May 2000, the Company's Board of Directors
approved letters of intent with SEPA proposing the organization of a joint
venture to manufacture the Company's products in the People's Republic of China.
Further, the Company is conducting ongoing discussions with the eleven cities
subject to the Phase I contract regarding the installation of monitoring
stations in addition to those required by the Phase I contract. Management
believes, but cannot assure, that the Company's designated vendor status will
give it a competitive advantage in the award of future contracts with the
Chinese government and that it is well-positioned for substantial additional
business in China. However, failure to complete the Phase II contract to the
satisfaction of SEPA or failure to achieve significant future business in China
for any reason whatsoever would have a material adverse effect on the Company
and its prospects.
2. Liquidity and Capital Resources. The Company has experienced cash
shortages from time to time preventing it from paying its operating expenses on
a timely basis and forcing management to raise funds from private and public
equity and debt financing and bank loans. However, the Company's access to
capital has been severely restricted since it has no access to bank lines of
credit presently and because of the low market value of the Company's Common
Stock combined with its unstable operating performance. When capital has been
obtained, it has been necessarily costly. Financing in the form of Federal- or
state-guaranteed loans, which has generally been unavailable, involves extremely
high management fees; non-guaranteed loans demand extremely high interest rates
and related loan fees; and equity and debt placements require significant
discounts and incentives. The Company's working capital declined from $1,346,211
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at December 31, 1999, to $915,709 at March 31, 2000. During the year ended
December 31, 1999, the Company raised an aggregate of $731,375 in capital from
private placements resulting in the issuance of a total of 848,331 shares of
Common Stock and the grant of warrants exercisable to purchase an aggregate of
438,331 shares of Common Stock. Also, during 1999, the Company borrowed a total
of $1,100,000; $300,000 of which amount represents loans from three unaffiliated
individuals at interest rates of 11% or 12% per annum whose maturation dates
have been re-negotiated to June 24, 2001, and $575,000 of which is the balance
of two convertible debt instruments ($225,000 of the $300,000 face amount of one
of which has been converted to 119,108 shares of Common Stock at prices in a
range from $1.20 to $2.25 per share), as follows: (i) 18%-$500,000 face amount
debenture due December 31, 2000, convertible into shares of Common Stock at the
lesser of $2.25 or 80% of the market price of the Common Stock on the date of
conversion; and (ii) 12%-$75,000 face amount convertible debenture due December
31, 2000, convertible into the Company's Common Stock at the lesser of $2.25 or
80% of the market price of the Common Stock on the conversion date. Management
believes, but cannot assure, that these loans can be restructured if necessary.
For the three months ended March 31, 2000, the Company's "net cash used in
operating activities" was $283,817, primarily, because of a net operating loss
of $739,841. Cash increased by $445,589 (208%), from $214,206 as of December 31,
1999, to $659,795 as of March 31, 2000, as a result of additional sales of
Common Stock and borrowings by the Company totaling $779,000 ($283,817 of which
amount was applied to operating activities). Of the sum of $779,000, $500,000
represents the face amount of a 12% convertible debenture due February 23, 2001,
convertible into the Company's Common Stock at the lesser of $2.00 or 85% of the
market price of the Common Stock on the conversion date. While the Company
believes that cash flow from the contract for Phase II of SEPA's Nationwide
Urban Air Quality Network anticipated to extend into 2001, together with
additional funding from private sources for equity and/or debt financing, will
be sufficient to permit the Company to continue in operation for the foreseeable
future, there can be no assurance that such funding will be sufficient to
satisfy the Company's cash requirements and, if additional financing is
required, that it will be available on acceptable terms, if at all.
3. Depressive Effect of High Operating and Financing Costs upon Operational
Performance. The contracts awarded to the Company for Phase I and Phase II of
SEPA's Nationwide Urban Air Quality Network have required a departure from the
self-sustaining, break-even level of operation demonstrated to sustain the
Company's "base" core business of approximately $2,600,000 in revenue with a
minimum total staff of approximately twenty-five. The Company doubled its staff
to approximately forty-five employees and otherwise increased operating expenses
in order to perform the Phase I contract. The Company is again increasing
staffing (by again doubling its workforce from forty-five to approximately one
hundred employees), training and other operating expenses in anticipation of the
commencement in July 2000 of shipments under the Phase II contract, and in order
to maintain a consistent quality control and manufacturing schedule. This is
necessary with respect to staffing, in particular, because the highly
competitive market for technical personnel, as it has existed in the United
States for the past approximately twenty-one months, prevents the Company from
"ramping-up" in periods of peak activity and scaling down afterwards. Each of
seven of the twelve months in 1999 and each month to date in 2000 has been
characterized by high fixed expenses and resultant operating losses; which
staggered monthly profit-loss performance is expected to continue for the
foreseeable future until such time, if ever, as the Company realizes a steady
flow of revenue from business in China. Accordingly, the Company can be expected
to incur operating losses during the last three quarters of 2000 and in any
quarter thereafter in which it fails to make product shipments to the People's
Republic of China under the Phase II contract or otherwise. In addition to high
fixed operating expenses, the high financing costs being experienced by the
Company have the effect of further depressing its operational performance.
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4. Decline in Net Revenues/Substantial Losses Prior to 1999. During each of
the last four years commencing with the year ended December 31, 1996, with the
exception of the Company's last year ended December 31, 1999, in which it
realized net income of $1,125,637, the Company has recognized a net loss. During
the 1996, 1997 and 1998 years, revenue decreased from approximately $8.8 million
to less than $3 million as a result of the discontinued operations of two
subsidiaries and significant competitive price pressure for the Company's
instruments, thus forcing PRCC to lower its domestic and foreign bids, reducing
the number of the Company's bid awards and reducing the profit margin on the
bids awarded to the Company. The Company's gross profit also steadily decreased
from 46% and 41% of net revenue in fiscal 1996 and 1997, respectively, to
approximately 35% of net revenue in fiscal 1998. As a result, the Company
suspended major new product development efforts and scaled back its efforts to
improve or modify existing technologies in response to the competitive price
pressures. The substantial improvement in the results of operations for 1999 is
attributable to the Company's award and successful completion of the contract
for Phase I of SEPA's Nationwide Urban Air Quality Network. Comparable, or
possibly more favorable, operating results for 2000 and future years are
expected to be substantially dependent upon the successful performance by the
Company of the Phase II China contract and the generation of additional future
business in China and/or other countries that do not have substantial air
pollution monitoring systems. While the Company's net revenues increased
approximately 161% to $7,314,975 during the year ended December 31, 1999, as
compared to $2,807,511 for the year ended December 31, 1998, because of the
product shipments under the Phase I contract, income from continuing operations
increased to $1,125,637 for 1999, in comparison to a loss of $(527,197) for
1998, because of the recognition of benefit from income taxes. There can be no
assurance that the Company will successfully complete the contract for Phase II
of SEPA's Nationwide Urban Air Quality Network awarded to it in April 2000;
obtain other business in China and/or other countries; or be capable of
sustaining its return to profitability.
5. Losses on Discontinuance of Operations and Disposition of Nutek and LRL.
Nutek Corp. ("Nutek"), a wholly-owned subsidiary of the Company that filed for
protection under Chapter 11 of the U.S. Bankruptcy Act in April 1998, ceased
operations in July 1998 following a ruling that it was insolvent. The revenues
generated by Nutek accounted for approximately 48% of the Company's consolidated
net revenues for the fiscal year ended December 31, 1997. The assets of Nutek
were auctioned in July 1998 to satisfy amounts owed to a secured lender. The
Company realized losses from the discontinuance ($115,301) and the disposition
($1,072,986) of Nutek during the fiscal year ended December 31, 1998. Further, a
default judgment in the amount of approximately $766,709, which was subsequently
reduced to $449,810, was entered against PRCC in an action by the secured lender
in the U.S. District Court for the Northern District of Texas, Dallas Division,
to recover the deficiency from the auction of Nutek's assets. The parties
entered into that Compromise, Settlement and Release Agreement on August 12,
1999, pursuant to which the Company paid the secured lender $9,000 and an
additional $450,000, together with interest at the rate of twelve per cent,
before February 1, 2000. Additionally, the Company issued the secured lender
100,000 restricted shares of Common Stock which are covered by the Registration
Statement of which this Prospectus forms a part and granted the lender a warrant
exercisable to purchase 20,000 shares of Common Stock at an exercise price of
$.75 per share during the three-year terminating on August 11, 2002. On May 17,
2000, the secured lender acknowledged full satisfaction of and released the
judgment and the judgment lien(s).
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Effective February 28, 1998, Logan Medical Devices, Inc. ("LMD"), a
wholly-owned subsidiary of the Company, returned all of the shares of common
stock of Logan Research, Ltd. ("LRL"), a United Kingdom corporation engaged in
the design, manufacture and marketing of medical instrumentation, owned by LMD
and received in exchange all shares of LMD owned by LRL. In addition, the
Company was released from liability on a promissory note payable to LRL in the
principal amount of $300,000 that had accrued interest of $47,250. The Company
had previously advanced funds in the amount of $160,000 to LRL that it is making
no effort to recoup. The Company realized a gain in the amount of $154,575 on
the disposition. The revenue generated by LRL accounted for 7% of the Company's
consolidated net revenues for the 1997 fiscal year.
6. Governmental Approval. The Company is required to obtain approval by the
U.S. Environmental Protection Agency of new air pollution monitoring instruments
it produces before such instruments can be sold in the United States. Currently,
all air pollution monitoring instruments that the Company sells in the United
States have received EPA approval. If the EPA were to change its regulations or
requirements, there could be no assurance that the Company's products would
comply with such standards or that the Company would be able to comply with such
modified requirements. With the exception of Germany, no foreign country
requires governmental approval of air pollution monitoring instruments. There
can be no assurance that additional regulations will not be adopted by other
foreign governments. Failure to meet any future regulation could have a material
adverse effect on the Company and render certain of the Company's products
obsolete.
7. Dependence On Legislation and Regulation. The products developed and
manufactured by the Company monitor air pollutants in accordance with standards
established generally by Federal, state, local and foreign governmental
agencies. Changes in legislation or regulations or a relaxation of standards
determined by such agencies could adversely affect the market for the Company's
products or render certain of the Company's products obsolete.
8. Competition. The Company is the smallest competitor in the ambient air
pollution instrumentation market. There are other established firms in the same
field, both in the United States and in foreign countries, which have
substantially greater experience and financial and personnel resources than the
Company. Therefore, the Company is subject to the effects of better-financed
competitors and their research and development efforts and price competition.
Although the Company is not aware of any other company that competes with it in
all of its product lines, all of its competitors have resources substantially
greater than those of the Company. There are also smaller companies that
specialize in a limited number of the types of products manufactured by the
Company. The Company's primary competitors in the domestic market are Thermo
Instrument Systems, Inc. and Monitor Labs, Inc. In the foreign market, the
Company's primary competitors are Thermo Instrument Systems, Monitor Labs,
Environment S.A. of France and Horiba Instruments. All of the Company's
competitors also offer a wider range of equipment, monitoring additional
pollutants, than does PRCC.
9. Technological Obsolescence; Limited Research and Development. The
Company's future success will depend on its ability to enhance its current
products, reduce product costs and develop and introduce new products that keep
pace with technological developments in response to evolving customer
requirements and governmental regulations. Failure of the Company to anticipate
or respond adequately to technological development or introduction could result
in a loss of future revenue and impair the Company's competitiveness. The
Company, since early 1994, has sharply limited its product development efforts.
For the foreseeable future, management expects to limit research and development
to software development and efforts to refine and improve its present products.
11
<PAGE>
10. Risks of Foreign Sales. During the last three fiscal years, foreign
sales have represented approximately 55% to 70% of the Company's total revenue
and are expected to represent at least such amounts of the Company's future
sales. Foreign sales are subject to numerous risks, including political and
economic instability in foreign markets, restrictive trade policies of foreign
governments, inconsistent product regulation by foreign agencies or governments,
the imposition of product tariffs and other trade barriers and the burdens of
complying with a wide variety of international and U.S. export laws and
differing regulatory requirements. To the extent that foreign sales are
transacted in a foreign currency, PRCC would be subject to the risk of losses
due to foreign currency fluctuations and difficulties associated with accounts
receivable collection. Because the Company is required to provide financing in
connection with the contract for Phase II of SEPA's Nationwide Urban Air Quality
Network, it bears the risk of realizing reduced margins from the Phase II
contract if the financing is below market at closing. Further, PRCC may
experience difficulties in managing or overseeing the technical and training
operations required to be conducted in China.
11. Reliance on Certain Suppliers. While PRCC manufactures many components
and subsystems used in its products, other components, including packaging
materials, integrated circuits, microprocessors and minicomputers, are purchased
on a non-contractual basis from unaffiliated suppliers. The Company is not
dependent upon any one supplier for any raw material or component that it
purchases, and the Company believes there are available alternative sources for
such raw materials and components. The Company is currently dependent, however,
on a limited number of vendors with respect to the availability and quality of
certain key instrument components, such as printed circuit board designs and
lamps. A vendor's inability to supply these components to PRCC in a timely
fashion, or to the Company's satisfaction, would affect the Company's ability to
deliver its instruments on time and could damage the Company's reputation.
12. Limited Marketing Capability and other Resources. The Company's success
depends in large part upon its ability to identify and adequately penetrate the
markets for its products. Most of the Company's competitors have much larger
budgets for marketing, advertising and promotion. The Company has historically
lacked the financial, personnel and other resources required in order to compete
with its larger, better-financed competitors in marketing products. Through the
year ended December 31, 1998, the Company's revenue had shrunk and the Company
had reduced its staff to approximately twenty and operated without a bank line
of credit. There can be no assurance that the Company's return to profitability,
with the award in 1998, and the successful completion in 1999, of the Phase I
China contract, can be sustained as a result of the award to the Company in
April 2000 of the contract for Phase II of SEPA's Nationwide Urban Air Quality
Network, the generation of other business in China and/or other foreign
countries lacking substantial air pollution monitoring systems and/or otherwise.
13. Dependence on Key Personnel. The Company's success depends in part upon
its ability to attract and/or retain highly skilled management, technical and
marketing personnel. Loss of the services of Mr. Albert E. Gosselin, Jr.,
President and Chairman of the Board of Directors of PRCC, could adversely affect
the development of the Company's business and its ability to realize or sustain
profitable operations. The Company does not maintain key-man life insurance on
any of its personnel and has no present plans to obtain such insurance.
14. Limited Protection of Intellectual Property and Proprietary Rights. The
Company regards all or portions of the designs and technologies incorporated
into its products as proprietary and attempts to protect them with a combination
of trademark and trade secret laws. It has generally been the Company's policy
to proceed without patent protection. It may be possible for unauthorized third
parties to copy certain portions of the Company's products or to "reverse
engineer" or otherwise obtain and use to the Company's detriment information
12
<PAGE>
which the Company regards as proprietary. Moreover, the laws of some foreign
countries do not afford the same protection to the Company's proprietary rights
as do U.S. laws. There can be no assurance that any of the Company's efforts to
protect its proprietary technology will be adequate or that the Company's
competitors will not independently develop technologies that are substantially
equivalent or superior to the Company's technologies.
15. Absence of Products Liability Insurance. The Company does not maintain
products liability insurance. In the event that PRCC experiences a material
liability as a result of a products liability claim, such a liability could have
a material adverse effect on the Company.
16. No Dividends. The Company has never paid dividends on the shares of its
Common Stock and does not intend to pay any dividends in the foreseeable future.
17. Possible Volatility of Stock Price. The trading price of the Company's
Common Stock has from time to time fluctuated widely and in the future may be
subject to similar fluctuations in response to quarter-to-quarter variations in
the Company's operating results, announcements of technological innovations or
new products by the Company or its competitors, general conditions in the air
pollution monitoring industry in which the Company competes and other events or
factors. In addition, in recent years broad stock market indices, in general,
and the securities of technology companies, in particular, have experienced
substantial price fluctuations. Such broad market fluctuations also may
adversely affect the future trading price of the Common Stock. In addition,
sales of substantial amounts of shares of Common Stock in the public market
following this offering could adversely affect the future trading price of the
Common Stock. (See "MARKET INFORMATION.")
18. Possible Dilutive Effect and Other Disadvantages of Outstanding
Warrants, Options and Debentures. As of the date hereof, there are an aggregate
of 1,547,831 shares of Common Stock reserved for issuance upon the exercise of
outstanding options and warrants currently exercisable at prices in a range from
$1.20 to $6.51. Additionally, the outstanding Debentures are convertible, based
upon the conversion price per share of $1.93 or $2.00 applicable as of the date
hereof, into 548,237 shares of Common Stock. To the extent that the trading
price of the Common Stock at the time of the exercise of any such options or
warrants or the conversion of the Debentures exceeds the exercise or conversion
price, such exercise or conversion will have a dilutive effect on the Company's
shareholders.
19. Potential Anti-Takeover and Other Effects of Issuance of Preferred
Stock Rights May Be Detrimental to Common Shareholders. The Company is
authorized to issue up to 20,000,000 shares of preferred stock, $.01 par value
per share (the "Preferred Stock"); of which none are currently issued and
outstanding. The issuance of Preferred Stock does not require approval by the
shareholders of the Company's Common Stock. The Board of Directors, in its sole
discretion, has the power to issue Preferred Stock in one or more series and
establish the dividend rates and preferences, liquidation preferences, voting
rights, redemption and conversion terms and conditions and any other relative
rights and preferences with respect to any series of Preferred Stock. Holders of
Preferred Stock may have the right to receive dividends, certain preferences in
liquidation and conversion and other rights, any of which rights and preferences
may operate to the detriment of the shareholders of the Company's Common Stock.
Further, the issuance of any Preferred Stock having rights superior to those of
the Company's Common Stock may result in a decrease in the value or market price
of the Common Stock and, additionally, could be used by the Board of Directors
as an anti-takeover measure or device to prevent a change in control of the
Company. (See "DESCRIPTION OF SECURITIES - Preferred Stock.")
13
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock may be offered and sold from time to time by the
Selling Shareholders or by pledgees, donees, transferees or other successors in
interest. The Selling Shareholders will act independently of the Company in
making determinations with respect to the timing, manner and size of each offer
or sale. Such sales may be made on the over-the-counter market or otherwise at
prices and at terms then prevailing or at prices related to the then current
market prices, or in negotiated transactions.
The Selling Shareholders may sell shares of Common Stock in any of the
following ways: (i) through dealers; (ii) through agents; or (iii) directly to
one or more purchasers. The distribution of the shares of Common Stock may be
effected from time to time in one or more transactions (which may involve
crosses or block transactions) in the over-the-counter market. Any such
transaction may be effected at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at negotiated prices or at
fixed prices. The Selling Shareholders may effect such transactions by selling
shares of Common Stock to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
Selling Shareholders and/or commissions from purchasers of shares of Common
Stock for whom they may act as agent. The Selling Shareholders and any
broker-dealers or agents which participate in the distribution of Common Stock
by them might be deemed to be underwriters and any discounts, commissions or
concessions received by any such broker-dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act.
In offering the shares of Common Stock, the Selling Shareholders and any
broker-dealers and any other participating broker-dealers which execute sales
for the Selling Shareholders may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales, and any profits
realized by the Selling Shareholders and the compensation of such broker-dealers
may be deemed to be underwriting discounts and commissions. In addition, any
shares of Common Stock covered by this Prospectus which qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
Prospectus.
Rule 10b-2 under the Exchange Act prohibits persons who are participating
in or financially interested in a distribution of securities from making
payments to another person for the solicitation of a third party to purchase the
securities that are the subject of the distribution, except that Rule 10b-2 does
not apply, among other exceptions, to brokerage transactions not involving the
solicitation of customer orders. Rule 10b-6 under the Exchange Act prohibits
participants in a distribution from bidding for or purchasing, for an account in
which the participant has a beneficial interest, any of the securities that are
the subject of the distribution. Rule 10b-7 governs bids and purchases made in
order to stabilize the price of a security in connection with a distribution of
the security.
The public offering of the Common Stock by the Selling Shareholders will
terminate on the date on which all shares of Common Stock offered hereby have
been sold by the Selling Shareholders, or on such earlier date on which the
Company files a post-effective amendment which de-registers all shares of Common
Stock then remaining unsold.
The Company will pay certain expenses incidental to the offering and sale
of the shares of Common Stock to the public estimated to be approximately
$16,073. The Company will not pay for, among other expenses, selling expenses,
underwriting discounts or fees and expenses of counsel for the Selling
Shareholders.
To the extent required at the time a particular offer of Common Stock by
the Selling Shareholders is made, a supplement to this Prospectus will be
distributed which will set forth the number of shares of Common Stock being
14
<PAGE>
offered and the terms of the offering, including the name or names of any
underwriters, dealers, brokers or agents, the purchase price paid by any
underwriter for shares of Common Stock purchased from the Selling Shareholders,
any discounts, commissions and other items constituting compensation from the
Selling Shareholders and any discounts, commissions or concessions allowed or
re-allowed to dealers, including the proposed selling price to the public.
The Company will not receive any of the proceeds from the sale of shares of
Common Stock by the Selling Shareholders.
MARKET INFORMATION
The Company's Common Stock is traded over-the-counter and reported on the
NASDAQ National Market System under the symbol "PRCC." Set forth below are the
high and low closing bid quotations in the over-the-counter market for the
Common Stock as reported by the relevant market makers for fiscal years l999 and
1998 and the quarter ended March 31, 2000. The high and low closing bid
quotations for the Common Stock in the over-the-counter market reported by the
relevant market makers on June 13, 2000, were $2.31 and $2.50, respectively.
Quotations represent inter-dealer quotations, without adjustment for retail
mark-ups, mark-downs or commissions, and may not necessarily represent actual
transactions.
Fiscal 2000 Fiscal 1999 Fiscal 1998
Quarter Ended High Bid Low Bid High Bid Low Bid High Bid Low Bid
------------- ------------------- ------------------- -------------------
Common Stock:
March 31 $4.22 $1.41 $2.00 $.88 $4.52 $2.52
June 30 2.38 1.06 3.13 2.48
September 30 3.87 1.81 2.25 .26
December 31 2.91 1.56 1.25 .56
As of June 13, 2000, the approximate number of shareholders of record of
the Company's Common Stock was 1,100. The Company has never paid or declared any
dividends on its Common Stock and does not anticipate paying dividends in the
foreseeable future.
The Company cannot predict the market price for the Common Stock upon the
commencement or the completion of this offering. Since the market for the
Company's Common Stock is thinly traded, sales of the shares of Common Stock
could cause the Common Stock to trade at levels lower than would otherwise be
anticipated.
SELLING SHAREHOLDERS
Of the 164,000 shares of Common Stock being offered hereby, 100,000 shares
of Common Stock are being offered by Brittanica Associates Limited, a British
Virgin Islands corporation; 25,000 shares of Common Stock may be offered by Mr.
Anthony Reneau upon the exercise of an option at an exercise price of $1.00 per
share on or prior to February 25, 2002; and 64,000 shares of Common Stock may be
offered, collectively, by three individuals, including Mr. Mike Hamdan, Ms. Paz
Laroya and Mr. Robert Klein, upon the exercise of options exercisable to
purchase 14,500 shares, 14,500 shares, and 10,000 shares, of Common Stock,
respectively, at an exercise price of $1.38 per share on or prior to March 22,
2002.
The table below indicates the name of the Selling Shareholder, any material
relationship it, he or she has had to the Company within the last three years,
the number and percentage of shares of Common Stock owned by the Selling
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<PAGE>
Shareholder prior to this offering, the number of shares being offered for sale
by the shareholder and the number of shares of Common Stock and the percentage
of the total shares of Common Stock outstanding that will be held if all shares
offered are sold. (See " Description of Securities - Common Stock Offered by the
Selling Shareholder" and "- Common Stock That May Be Offered by the
Optionholders.")
<TABLE>
<CAPTION>
Shares Shares Shares
Owned Owned Owned
Selling Relationship Prior to Being After
Shareholders to Company Offering Per Cent Offered Offering Per Cent
------------ ---------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Brittanica Associates 13.56% 650,000(1) 13.56 100,000(1) 550,000(2) 11.48
Limited shareholder
Anthony Reneau N/A 25,000 0.00 25,000(3) -0- 0.00
Mike Hamdan N/A 14,500 0.00 14,500(4) -0- 0.00
Paz Laroya N/A 14,500 0.00 14,500(4) -0- 0.00
Robert Klein N/A 10,000 0.00 10,000(4) -0- 0.00
----------
</TABLE>
(1) Includes 100,000 shares of Common Stock issued on February 23, 2000 in
consideration and as incentive for lending the sum of $500,000 to the Company;
an aggregate of 300,000 shares of Common Stock underlying two warrants
exercisable on or prior to February 23, 2003, one of which is exercisable to
purchase 100,000 shares of Common Stock at an exercise price of $2.25 per share
and the other of which is exercisable to purchase 200,000 shares at an exercise
price of $4.50 per share; and 250,000 shares of Common Stock underlying the 12%
Subordinated Convertible Debenture Due February 23, 2001, assuming the
conversion thereof on June 13, 2000, at the conversion price of $2.00 per share.
(2) Includes an aggregate of 300,000 shares of Common Stock underlying two
warrants exercisable on or prior to February 23, 2003, one of which is
exercisable to purchase 100,000 shares of Common Stock at an exercise price of
$2.25 per share and the other of which is exercisable to purchase 200,000 shares
at an exercise price of $4.50 per share; and 250,000 shares of Common Stock
underlying the 12% Subordinated Convertible Debenture Due February 23, 2001,
assuming the conversion thereof on June 5, 2000, at the conversion price of
$2.00 per share.
(3) Represents shares of Common Stock underlying an option exercisable at
an exercise price of $1.00 per share on or prior to February 25, 2002.
(4) Represents shares of Common Stock underlying an option exercisable on
or prior to March 22, 2002, at an exercise price of $1.38 per share.
DESCRIPTION OF SECURITIES
Capital Stock
-------------
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, no par value per share (the "Common Stock") and 20,000,000 shares
of preferred stock, $.01 par value per share (the "Preferred Stock").
16
<PAGE>
Common Stock. All shares of Common Stock have equal voting rights and, when
validly issued and outstanding, are entitled to one vote per share in all
matters to be voted upon by shareholders. The shares of Common Stock have no
preemptive, subscription, conversion or redemption rights and may be issued only
as fully-paid and nonassessable shares of Common Stock. Cumulative voting in the
election of directors is permitted; however, cumulative voting may occur only if
a shareholder announces his intention to cumulate his votes prior to the voting,
in which case all shareholders may cumulate their votes. In the event of
liquidation of the Company, each shareholder is entitled to receive a
proportionate share of the Company's assets available for distribution to
shareholders after the payment of liabilities. All shares of the Company's
Common Stock issued and outstanding are fully-paid and nonassessable. Holders of
the shares of Common Stock are entitled to share pro rata in dividends and
distributions with respect to the Common Stock, as may be declared by the Board
of Directors out of funds legally available therefor. As of June 13, 2000, there
were 4,242,802 shares of Common Stock issued and outstanding held of record by
approximately 1,100 shareholders. The Common Stock is traded over-the-counter
and reported on the NASDAQ National Market System under the symbol "PRCC."
Holders of shares of Common Stock are entitled to share pro rata in
dividends and distributions with respect to the Common Stock when, as and if
declared by the Board of Directors out of funds legally available therefor. The
Company has not paid any dividends on its Common Stock and currently intends to
retain earnings, if any, to finance the development and expansion of its
business. Future dividend policy is subject to the discretion of the Board of
Directors and will depend upon a number of factors, including future earnings,
capital requirements and the financial condition of the Company.
Preferred Stock. Shares of Preferred Stock may be issued from time to time
in one or more series as may be determined by the Board of Directors. The voting
powers and preferences, the relative rights of each such series and the
qualifications, limitations and restrictions thereof shall be established by the
Board of Directors, except that no holder of Preferred Stock shall have
preemptive rights. The Company has no outstanding Preferred Stock, and the Board
of Directors does not plan to issue any for the foreseeable future unless the
issuance thereof shall be in the best interests of the Company.
Common Stock Offered by the Selling Shareholder
-----------------------------------------------
On February 23, 2000, the Company issued an aggregate of 100,000 shares of
Common Stock to Britannica Associates Limited ("Brittanica"), a British Virgin
Islands corporation, in consideration and as incentive for lending the sum of
$500,000 to the Company in accordance with the terms and conditions of the 12%
Subordinated Convertible Debenture Due February 23, 2001, dated February 16,
2000, in the face amount of $500,000. The terms of the transaction are more
fully described in the Agreement for Sale of Shares of Common Stock dated
February 23, 2000, with Brittanica, a copy of which is incorporated herein by
reference to Exhibit 4.2 to the Post-Effective Amendment No. 1 filed March 23,
2000, to the Registration Statement on Form S-3 (Registration No. 333-87965)
filed September 28, 1999.
Common Stock That May Be Offered by the Optionholders
-----------------------------------------------------
On February 25, 2000, the Company granted an option to Mr. Anthony Reneau
exercisable to purchase 25,000 shares of Common Stock at an exercise price of
$1.00 per share on or prior to February 25, 2002. The terms and conditions of
the option are more fully described in the Option to Purchase 25,000 Shares of
Common Stock of Pollution Research and Control Corp. from February 25, 2000 Void
after 5:00 P.M., Los Angeles Time, on February 25, 2002, of Mr. Reneau, a copy
of which is attached as Exhibit 4.0 to this Post-Effective Amendment No. 2 to
the Registration Statement on Form S-3 (Registration No. 333-87965) filed
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<PAGE>
September 28, 1999, and is incorporated herein by this reference. The foregoing
brief description of certain provisions of the option is qualified in its
entirety by the more detailed provisions of the Option to Purchase 25,000 Shares
of Common Stock of Pollution Research and Control Corp. from February 25, 2000
Void after 5:00 P.M., Los Angeles Time, on March 22, 2002.
On March 22, 2000, the Company granted options exercisable on or prior to
March 22, 2002, to purchase an aggregate of 39,000 shares of Common Stock at an
exercise price of $1.38 per share to the following individuals, as follows: (i)
Mr. Mike Hamdan - 14,500 shares; (ii) Ms. Paz Laroya - 14,500 shares; and (iii)
Mr. Robert Klein - 10,000 shares. All of the foregoing are employees of the
Company. The terms and conditions of Mr. Hamdan's option are more fully
described in the Option to Purchase 14,500 Shares of Common Stock of Pollution
Research and Control Corp. from March 22, 2,000 Void after 5:00 P.M., Los
Angeles Time, on March 22, 2002 (the "Hamdan Option"), a copy of which is
incorporated herein by reference to Exhibit 4.3 to the Post-Effective Amendment
No. 1 filed March 23, 2000 (the "Post-Effective Amendment No. 1"), to the
Registration Statement on Form S-3 (Registration No. 333-87965) filed September
28, 1999 (the "Registration Statement"). The terms and conditions of Ms.
Laroya's option are more fully described in the Option to Purchase 14,500 Shares
of Common Stock of Pollution Research and Control Corp. from March 22, 2000 Void
after 5:00 P.M., Los Angeles Time, on March 22, 2002 (the "Laroya Option"), a
copy of which is incorporated herein by reference to Exhibit 4.4 to the
Post-Effective Amendment No. 1 to the Registration Statement. The terms and
conditions of Mr. Klein's option are more fully described in the Option to
Purchase 10,000 Shares of Common Stock of Pollution Research and Control Corp.
from March 22, 2000 Void after 5:00 P.M., Los Angeles Time, on March 22, 2002
(the "Klein Option"), a copy of which is incorporated herein by reference to
Exhibit 4.5 to the Post-Effective Amendment No. 1 to the Registration Statement.
The foregoing brief description of certain provisions of the options is
qualified in its entirety by the more detailed provisions of the Hamdan Option,
the Laroya Option and the Klein Option.
Transfer Agent and Registrar
----------------------------
OTR, Inc., 1130 Southwest Morrison, Suite #250, Portland, Oregon 97205, is
the Transfer Agent and Registrar for the Common Stock.
LEGAL MATTERS
Certain legal matters in connection with the validity of the issuance of
the shares of Common Stock being offered hereby will be passed upon for the
Company by Cudd & Associates, 1120 Lincoln Street, Suite #1507, Denver, Colorado
80203. Patricia Cudd, Esq., the sole proprietor of Cudd & Associates, owns
10,000 shares of Common Stock of the Company and an option exercisable to
purchase 10,000 shares of the Company's Common Stock at an exercise price of
$4.00 per share on or prior to March 31, 2003. These shares of Common Stock,
including the shares underlying Ms. Cudd's option, are not included in the
shares of Common Stock covered by the Registration Statement of which this
Prospectus forms a part.
EXPERTS
The financial statements of the Company are incorporated herein by
reference to the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1999. Such financial statements have been audited by AJ.
Robbins, P.C., Certified Public Accountants and Consultants, independent
auditors, as stated in their report that is incorporated herein by reference.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
--------------------------------------------
The following is an itemized statement of the expenses incurred in
connection with this Registration Statement and the issuance and distribution of
the shares of Common Stock being registered hereby. All such expenses will be
paid by the Company.
Securities and Exchange Commission registration fee............. $ 73
Legal fees and expenses......................................... 10,000
Accounting fees and expenses.................................... 1,500
Blue sky fees and expenses...................................... 500
Transfer agent fees and expenses................................ 500
Printing, electronic filing and engraving expenses.............. 1,500
Miscellaneous expenses.......................................... 2,000
-------
TOTAL........................................................... $16,073
All of the above items except the Securities and Exchange Commission
registration and fee are estimates.
Item 15. Indemnification of Directors and Officers.
------------------------------------------
The Company's Articles of Incorporation, as amended, provide for (i) the
elimination of directors' liability for monetary damages for certain breaches of
their fiduciary duties to the Company and its shareholders as permitted by
California law; and (ii) permit the indemnification by the Company to the
fullest extent under California law. At present, there is no pending litigation
or proceeding involving a director or officer of the Company as to which
indemnification is being sought. Section 317 of the California Corporations
Code, as amended, provides for the indemnification of the officers, directors
and controlling persons of a corporation as follows:
"(a) For the purposes of this section, "agent" means any person who is or
was a director, officer, employee or other agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee,
or agent of another foreign or domestic corporation, partnership, joint venture,
trust, or other enterprise, or was a director, officer, employee, or agent of a
foreign or domestic corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation; "proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative; and
"expenses" includes without limitation attorneys' fees and any expenses of
establishing a right to indemnification under subdivision (d) or paragraph (3)
of subdivision (e).
(b) A corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the corporation to procure a judgment in its favor,
an action brought under Section 9243, or an action brought by the Attorney
General pursuant to Section 9230) by reason of the fact that such person is or
was an agent of the corporation, against expenses, judgments, fines, settlements
and other amounts actually and reasonably incurred in connection with such
proceeding if such person acted in good faith and in a manner such person
believed to be in the best interests of the corporation and, in the case of a
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<PAGE>
criminal proceeding, had no reasonable cause to believe the conduct of such
person was unlawful. The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which the person believed to be in the best interests of the
corporation or that the person had reasonable cause to believe that the person's
conduct was unlawful.
(c) A corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action by or in the right of the corporation, or brought under Section
9243, or brought by the Attorney General pursuant to Section 9230, to procure a
judgment in its favor by reason of the fact that such person is or was an agent
of the corporation, against expenses actually and reasonably incurred by such
person in connection with the defense or settlement of such action if the person
acted in good faith, in a manner in which such person believed to be in the best
interests of the corporation and with such care, including reasonable inquiry,
as an ordinary prudent person in a like position would use under similar
circumstances. No indemnification shall be made under this subdivision:
(1) In respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation in the performance
of such person's duty to the corporation, unless and only to the extent
that the court in which such proceeding is or was pending shall determine
upon application that, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for the expenses
which such court shall determine;
(2) Of amounts paid in settling or otherwise disposing of a threatened
or pending action, with or without court approval; or
(3) Of expenses incurred in defending a threatened or pending action
which is settled or otherwise disposed of without court approval unless it
is settled with the approval of the Attorney General.
(d) To the extent that an agent of a corporation has been successful on the
merits in defense or any proceeding referred to in subdivision (b) or (c) or in
defense of any claim, issue or matter therein, the agent shall be indemnified
against expenses actually and reasonably incurred by the agent in connection
therewith.
(e) Except as provided in subdivision (d), any indemnification under this
section shall be made by the corporation only if authorized in the specific
case, upon a determination that indemnification of the agent is proper in the
circumstances because the agent has met the applicable standard of conduct set
forth in either subdivision (b) or (c) by:
(l) A majority vote of a quorum consisting of directors who are not
parties to such proceedings;
(2) Approval of the members (Section 5034), with the persons to be
indemnified not being entitled to vote thereon; or
(3) The court in which such proceeding is or was pending upon
application made by the corporation or the agent or the attorney or other
person rendering services in connection with the defense, whether or not
such application by the agent, attorney or other person is approved by the
corporation.
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(f) Expenses incurred in defending any proceeding may be advanced by the
corporation prior to the final disposition of such proceeding upon receipt of an
undertaking by or on behalf of the agent to repay such amount unless it shall be
determined ultimately that the agent is entitled to be indemnified as authorized
in this section.
(g) No provision made by a corporation to indemnify its or its subsidiary's
directors or officers for the defense of any proceeding, whether contained in
the articles, bylaws, a resolution of members or directors, an agreement or
otherwise, shall be valid unless consistent with this section. Nothing contained
in this section shall affect any right to indemnification to which persons other
than such directors and officers may be entitled by contract or otherwise.
(h) No indemnification or advance shall be made under this section, except
as provided in subdivision (d) or paragraph (3) of subdivision (e), in any
circumstances where it appears that::
(1) It would be inconsistent with a provision of the articles, bylaws,
a resolution or the members or an agreement in effect at the time of the
accrual of the alleged cause of action asserted in the proceeding in which
the expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or
(2) It would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
(i) A corporation shall have power to purchase and maintain insurance on
behalf of any agent of the corporation against any liability asserted against or
incurred by the agent in such capacity or arising out of the agent's status as
such whether or not the corporation would have the power to indemnify the agent
against such liability under the provisions of this section; provided, however,
that a corporation shall have no power to purchase and maintain such insurance
to indemnify any agent of the corporation for a violation of Section 9243.
(j) This section does not apply to any proceeding against any trustee,
investment manager or other fiduciary of an employee benefit plan in such
person's capacity as such, even though such person may also be an agent as
defined in subdivision (a) of the employer corporation. A corporation shall have
power to indemnify such trustee, investment manager or other fiduciary to the
extent permitted by subdivision (f) or Section 207."
Item 16. Exhibits.
---------
The Exhibit Index appears on page 24.
Item 17. Undertakings.
-------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
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(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that the undertakings set forth in paragraphs
(a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Post-Effective
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Glendale, State of
California, on June 13, 2000.
Date: June 13, 2000 POLLUTION RESEARCH AND CONTROL CORP.
(Registrant)
By: /s/ Albert E. Gosselin, Jr.
-------------------------------
Albert E. Gosselin, Jr., President,
Chief Executive Officer and Chairman
of the Board Directors
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacities and on the date indicated.
Date: June 13, 2000 /s/ Albert E. Gosselin, Jr.
---------------------------
Albert E. Gosselin, Jr., President, Chief
Executive Officer, Chairman of the Board
Directors (Principal Executive Officer)
and Attorney-in-Fact for Gary L. Dudley,
Marcia A. Smith, Craig E. Gosselin and
Barry Soltani, Directors
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EXHIBIT INDEX
The following Exhibits are filed as part of this Post-Effective Amendment
No. 2 to the Registration Statement on Form S-3 or are incorporated herein by
reference.
Item
Number Description
------ -----------
4.1 Agreement for Sale of Shares of Common Stock dated February 23,
2000, between Pollution Research and Control Corp. and Britannica
Associates Limited. (Incorporated by reference to Exhibit 4.2 to the
Post-Effective Amendment No. 1 to the Form S-3 Registration
Statement, File Number 333-87965, filed on March 23, 2000.)
4.2* Option to Purchase 25,000 Shares of Common Stock of Pollution
Research and Control Corp. from February 25, 2000 Void After 5:00
P.M., Los Angeles Time, on February 25, 2002, of Anthony Reneau.
4.3 Option to Purchase 14,500 Shares of Common Stock of Pollution
Research and Control Corp. from March 22, 2000 Void After 5:00 P.M.,
Los Angeles Time, on March 22, 2002, of Mike Hamdan. (Incorporated
by reference to Exhibit 4.3 to the Post-Effective Amendment No. 1 to
the Form S-3 Registration Statement, File Number 333-87965, filed on
March 23, 2000.)
4.4 Option to Purchase 14,500 Shares of Common Stock of Pollution
Research and Control Corp. from March 22, 2000 Void After 5:00 P.M.,
Los Angeles Time, on March 22, 2002, of Paz Laroya. (Incorporated by
reference to Exhibit 4.4 to the Post-Effective Amendment No. 1 to
the Form S-3 Registration Statement, File Number 333-87965, filed on
March 23, 2000.)
4.5 Option to Purchase 10,000 Shares of Common Stock of Pollution
Research and Control Corp. from March 22, 2000 Void After 5:00 P.M.,
Los Angeles Time, on March 22, 2002, of Robert Klein. (Incorporated
by reference to Exhibit 4.5 to the Post-Effective Amendment No. 1 to
the Form S-3 Registration Statement, File Number 333-87965, filed on
March 23, 2000.)
5.0* Opinion and Consent of Cudd & Associates.
23.1 Consent of Cudd & Associates (included in Exhibit 5.0 hereto).
23.2* Consent of A.J. Robbins, P.C., Certified Public Accountants and
Consultants, independent auditors.
------------------
* Filed herewith.
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