<PAGE>
As filed with the Securities and Exchange Commission on November 1, 1996
Registration No. 33-_____
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TECHDYNE, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1709103
- -------------------------------------- ----------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
JOSEPH VERGA, Sr. Vice President,
Secretary and Treasurer
2230 West 77th Street 2230 W. 77th Street
Hialeah, Florida 33016 Hialeah, Florida 33016
(305) 556-9210 (305) 556-9210
(Address, including zip code and (Name, address, including zip code
telephone number, including area code, and telephone number, including
of registrant's principal executive offices) area code, of agent for service)
It is requested that copies of notices and communications be sent to:
LAWRENCE E. JAFFE, ESQ.
777 Terrace Avenue
Hasbrouck Heights, N.J. 07604
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement as
determined by market conditions.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class Amount to Be Offering Price Aggregate Amount of
of Securities to be Registered Registered Per Unit (1)(2) Offering Price (1)(2) Registration Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value .......... 1,000,000 (1)(2) $5.00 $5,000,000 $1,724*
Common Stock, $.01 par value .......... 100,000 (1)(3) $8.25 $ 825,000 $ 284*
Common Stock, $.01 par value .......... 100,000 (1)(3) $6.60 $ 660,000 $ 228*
- ------------------------------------------------------------------------------------------------------------------------------------
Minimum Fee ........................... $ 100(4)
Total ............................................................................................................... $2,336*
====================================================================================================================================
</TABLE>
<PAGE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457. Represents (i) 1,000,000 shares issuable under the
Company's Redeemable Common Stock Purchase Warrants ("Warrants")
exercisable through September 12, 1998 at $5.00 per share registered under
the Company's September, 1995 security offering registered on Form SB-2,
Registration No. 33-94998-A ("Form SB-2 Registration"); (ii) 100,000 shares
of Common Stock issuable upon exercise at $6.60 per share of the
Underwriter's Purchase Warrant registered under the Company's Form SB-2
Registration; and (iii) 100,000 shares of Common Stock issuable upon
exercise of Warrants exercisable at $8.25 per share through September 12,
2000 pursuant to the Underwriter's Purchase Warrant registered under the
Form SB-2 Registration, which Purchase Warrant is exerciseable at $.25 per
Warrant.
(2) Represents 1,000,000 shares of Common Stock issuable upon exercise of the
Warrants previously registered on the Company's Form SB-2 Registration. See
Notes (1) and (3). This Registration Statement covers, in addition, such
indeterminate number of shares of Common Stock as may be issued upon
exercise of the Warrants by reason of adjustment of the exercise price of
the Warrants in certain contingencies as outlined in the Prospectus.
(3) Reserved for issuance upon exercise of the Underwriter's Purchase Warrant
and under the Warrants obtainable upon exercise of the Underwriter's
Purchase Warrant together with such indeterminate number of Warrants and/or
Common Stock as may be issuable pursuant to the anti-dilution provision of
the Underwriter's Purchase Warrant or the Warrants.
(4) Minimum fee as per Section 6(b) of the Securities Act of 1933.
* Filing fees were paid with respect to all the Warrants and underlying
Common Stock at the time of filing the Company's Form SB-2 Registration.
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus included
in the Registration Statement is a combined prospectus and relates to
Registration No. 33-94998-A previously filed by the Registrant on Form SB-2 and
declared effective on September 13, 1995.
---------------
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>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH STATE.
<PAGE>
Preliminary Prospectus Dated November 1, 1996
Subject to Completion
TECHDYNE, INC.
1,200,000 Shares of Common Stock
($.01 par value)
The 1,200,000 shares of Common Stock are being offered pursuant to the
1,000,000 outstanding Redeemable Common Stock Purchase Warrants ("Warrants")
sold to Warrant holders in the Company's registered securities offering of
Warrants and Common Stock, $.01 par value (the "Common Stock") in September,
1995 (the "1995 Offering"), and 200,000 shares of Common Stock are being offered
by the underwriter (the "Representative") of the Company's 1995 Offering of
which 100,000 shares underly Warrants obtainable under the Representative's
Purchase Warrant which Warrants are exerciseable through September 12, 2000 at
an exercise price of $8.25 per share. The Warrants are exerciseable into Common
Stock at an exercise of $5.00 per share through September 12, 1998. The Warrants
are subject to redemption by the Company at $.10 per Warrant under certain
conditions including a trading price of $7.50 per share for 15 consecutive
trading days prior to notice of redemption. See "Description of
Securities-Warrants".
No commissions are to be paid upon exercise of the Warrants except, subject
to certain contingencies with respect to the 1,000,000 outstanding Warrants sold
in the 1995 Offering which, if satisfied, would provide the Representative a fee
of 5% of the exercise price of each Warrant. See "Plan of Distribution".
Proceeds from the exercise of the Warrants and the Representative's Purchase
Warrant are payable to the Company. See "Use of Proceeds".
The Common Stock and Warrants are to be listed for trading on the Nasdaq
National Market on November 6, 1996 under the symbols "TCDN" and "TCDNW",
respectively. The bid and asked quotations as reported by Nasdaq on October 30,
1996 for the Common Stock were $7.13 and $7.38, respectively, and for the
Warrants were $2.38 and $2.83, respectively. Medicore, Inc., the parent of the
Company (the "Parent") currently owns 63.6% of the Company's outstanding Common
Stock (73.9% upon inclusion of a demand convertible promissory Company note (the
"Techdyne Note") held by the Parent).
The exercise price and the other terms of the Warrants were initially
determined by negotiation between the Company and the Representative based upon
the then current market price of the Common Stock (September, 1995) and general
market conditions at that time. See "Market for the Company's Securities".
However, the exercise price of the Warrants is not to be deemed indicative of
the value of the Common Stock.
-----------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVESTMENT THEREIN INVOLVES
A HIGH DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE
DISCUSSION UNDER "RISK FACTORS". SEE PAGE 7.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
The date of this Prospectus is _____, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company and its Parent and its affiliate, Dialysis Corporation of
America ("DCA"), a 67.2% owned subsidiary of the Parent, are subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and in accordance therewith each files reports and other information with
the Securities and Exchange Commission (the "Commission"). Information
concerning the Company, its Parent and DCA, and their respective directors and
officers, their remuneration and options granted to them, their principal
holders of securities and any material interests of such persons in transactions
with them, as of particular dates, is set forth in information and proxy
statements and annual reports distributed to security holders and filed with the
Commission. Such reports, proxy statements and other information may be
inspected without charge at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the regional offices of the Commission, Region 1, Northeast
Regional Office, 7 World Trade Center, Suite 1300, New York, New York 10048 and
Region 3, Midwest Regional Office, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. The Commission also maintains a Web
site that contains reports, proxy and information regarding registrants that
file electronically with the Commission at http:\www.sec.gov. Copies of all or
any part of such materials may be obtained upon payment of fees prescribed by
the Commission from the Public Reference Section of the Commission at its
principal office in Washington, D.C., and its regional offices as set forth
above.
The Company has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement under the Securities Act of
1933 (the "Securities Act"), with respect to the securities offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement, including the schedules and exhibits filed as a part
thereof, which may be obtained from the Commission upon payment of the fees
prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1995 ("1995 Form 10-K"), the Company's Quarterly Reports on Form 10-Q for the
Quarters ended March 31, 1996 and June 30, 1996 ("June 1996 Form 10-Q") each of
which has been filed by the Company with the Commission, are incorporated herein
by reference.
All documents filed by the Company with the Commission pursuant to Section
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 securities offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
in this Prospectus shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any document incorporated by reference in this Prospectus, other than exhibits
to any such document. Requests for such documents should be directed to
Techdyne, Inc., 2230 W. 77th Street, Hialeah, Florida 33016, Attention: Joseph
Verga, Sr. Vice President, Secretary and Treasurer, telephone number (305)
556-9210; or Techdyne, Inc., 777 Terrace Avenue, Hasbrouck Heights, New Jersey
07604, Attention: I. Bernard Leff, telephone number (201) 288-8220.
2
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the detailed information and
financial statements and notes thereto appearing elsewhere or incorporated by
reference in this Prospectus.
The Company
Techdyne, Inc. ( the "Company") is an international contract manufacturer
of electronic, electro-mechanical and plastic insert and injection molded
products, primarily manufactured to customer specifications and designed for
original equipment manufacturers ("OEMs") and distributors in the data
processing, telecommunications and instrumentation industries. Custom-designed
products primarily include conventional and molded cables and wire harnesses and
to a more limited extent, printed circuit boards ("PCBs") and electro-mechanical
assemblies. The Company is also engaged in horizontal injection molding and
vertical insert molding for in-house production of medical and electronic
components. See "Business".
The Company custom designs and assembles over 800 components and finished
products for approximately 75 accounts, primarily OEMs and their suppliers. For
the six months ended June 30, 1996, approximately 47% of sales were domestic and
53% were effected by the Company's wholly owned subsidiary, Techdyne (Scotland)
Limited ("Techdyne (Scotland)") in the European market and to a limited extent
in the Middle East. See "Business-Foreign Operations".
Included among its customers are several Fortune 100 companies. For the
year ended December 31, 1995 approximately 55% of the Company's sales were made
to numerous locations of two major customers, Compaq Computer Corporation
("Compaq") (36%) and Avid Technology, Inc. ("Avid") (19%). For the six months
ended June 30, 1996, Compaq accounted for 47 % of the Company's sales and IBM
accounted for 13% of its sales. As a result of a change in the product produced
for Avid, and not based on quality or service, the Company lost a majority of
its sales to that customer. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations". Services and products are
marketed through an in-house marketing staff of nine persons, in conjunction
with approximately 30 independent manufacturers sales representatives, and
through trade shows and brochures.
The Company maintains 50,000 square feet of manufacturing, warehouse and
office facilities in Hialeah, Florida, (domestic headquarters) and in Austin and
Houston, Texas, with a small sales office in Massachusetts. Its overseas
operations, headquartered in Livingston, Scotland, consist of a 31,000 square
foot facility. See "Business-Property". The Company employs approximately 240
people of which approximately 100 are employed at Techdyne (Scotland).
The Company experienced substantial growth in 1995 which has eased for
the first half of 1996 with consolidated revenues decreasing 15% compared to the
same period of 1995 and domestic revenues having decreased 39% and
European-based revenues having increased 32% for the six months ended June 30,
1996 compared to the same period last year. The backlog at June 30, 1996 was
approximately $6,900,000. See "Business-Backlog" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations". Management's
strategy is to expand marketing and sales activities, establishing additional
satellite manufacturing facilities to better serve customers throughout the
United States, and develop new products for the ever increasing high technology
industries in which the Company is involved. See "Use of Proceeds" and
"Business".
3
<PAGE>
The Company was incorporated in Florida in 1976 under the name DAK
Industries, Incorporated. It was acquired by its Parent in 1982, and completed a
public offering in 1985. The Parent owns 63.6% (73.9% if the Techdyne Note is
included) of the Company's outstanding shares. The Company established its
subsidiary in Scotland in 1987. Techdyne (Scotland) is engaged in similar
operations as the Company for the European and Middle Eastern markets. Unless
otherwise noted, Techdyne and its subsidiary shall be referred to collectively
as the "Company".
The Company's executive offices are located at 2230 West 77th Street,
Hialeah, Florida 33016. The Company's telephone number is (305)556-9210.
The Offering
Common Stock:
Offered...............................1,200,000(1)
Outstanding...........................4,288,819(2)
Trading Symbols
Nasdaq National Market
Common Stock.....................TCDN
Warrants.........................TCDNW
- ----------
(1) Includes (i) 1,000,000 shares of Common Stock offered pursuant to
outstanding Warrants; and (ii) 200,000 shares of Common Stock offered by
the Representative of the 1995 Offering of which 100,000 shares underly
Warrants obtainable under the Representative's Purchase Warrant which
Warrants are exercisable at $8.25 per share through September 12, 2000, and
the Common Stock under the Representative's Purchase Warrants obtainable at
$ 6.60 per share.
(2) Does not include (i) 250,000 shares of Common Stock reserved for issuance
under the 1994 Stock Option Plan (the "1994 Plan"); (ii) 142,500 shares of
Common Stock reserved for issuance under a 1995 grant of options to the
directors of the Company; (iii) 10,000 shares of Common Stock reserved for
issuance under an option granted to counsel ( see "Legal Matters"); (iv)
approximately 1,689,000 shares of Common Stock reserved for issuance under
the Techdyne Note; (v) 1,000,000 shares of Common Stock reserved for
issuance upon exercise of the Warrants; and (vi) 200,000 shares of Common
Stock reserved for issuance under the Representative's Purchase Warrant
and the Warrants contained therein. See "Description of Securities".
4
<PAGE>
Use of Proceeds.........................The Company will not receive any
proceeds from the sale of the Warrants
or Common Stock by the Selling Security
Holder and will only receive proceeds
upon the exercise of the Warrants.
Assuming all the presently outstanding
Warrants are exercised, the Company
would realize approximately $6,510,000
less expenses of this offering estimated
at $30,000. The net proceeds are
expected to be used for (i) new
satellite facilities; (ii) expand
existing products; (iii) upgrade plant
and equipment; (iv) hire additional
sales personnel; and (v) for working
capital. See "Use of Proceeds".
There is no assurance when or if any of
the Warrants will be exercised by a
Warrant holder.
Dividends...............................The Company's board of directors
determines the timing and amount of
dividends; no dividends have been paid
to date; future dividends, if any, will
depend, among other things, upon the
Company's future earnings, capital
requirements and financial condition.
See "Dividend Policy".
Price Range of Securities...............Common Stock at October 30, 1996 closed
at $7.25. Warrants at October 30, 1996
closed at $2.75. See "Market for the
Company's Securities".
Risk Factors............................Investment in these securities involves
a high degree of risk. See "Risk
Factors".
5
<PAGE>
Summary Consolidated Financial Information
The summary consolidated financial information set forth below is derived
from the more detailed consolidated financial statements and notes thereto
appearing elsewhere in this Prospectus or incorporated herein by reference. All
information should be read in conjunction with the consolidated financial
statements of the Company and the notes contained elsewhere in this Prospectus
or incorporated herein by reference.
(In thousands, except per share data)
<TABLE>
<CAPTION>
Operating Results: Six Months Ended June 30, Fiscal Year Ended December 31,
------------------------- ---------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues ....................... $13,137 $15,465 $30,424 $20,536 $15,288 $15,566 $14,872
Net income (loss) .............. 519 936 1,315 719 1 (776) (1,334)
Net income per share(1)......... .11 .30 .38 .24 -- (.26) (.44)
Weighted average shares
outstanding and equivalents ... 4,695,930 3,117,402 3,466,139 3,042,910 3,042,910 3,042,910 3,042,910
</TABLE>
June 30, 1996
---------------------------------
Actual Adjusted(2)
------ -----------
Balance Sheet Data: (unaudited)
Working capital ........................ $ 5,805 $ 12,285
Total assets ........................... 12,621 19,101
Long-term debt(3) ...................... 3,550 3,550
Total liabilities ...................... 8,079 8,079
Accumulated deficit .................... (2,754) (2,754)
Shareholders' equity ................... 4,542 11,022
- ----------
(1) The information in this table has been retroactively restated to reflect a
5-for-3 stock split in the Common Stock in June, 1994.
(2) Adjusted to reflect the exercise of the Warrants for shares of Common
Stock. See "Prospectus Summary-The Offering-Note (1)". These figures assume
the complete exercise of the Warrants. However, there is no basis for a
determination as to the extent that such Warrants will be exercised, and
there is no assurance that any Warrants will be exercised.
(3) Includes advances from Parent.
6
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. BEFORE MAKING AN INVESTMENT IN THE COMPANY, PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREIN SHOULD GIVE CAREFUL CONSIDERATION TO THE FOLLOWING
RISK FACTORS AFFECTING THE BUSINESS OF THE COMPANY AND ITS SECURITIES, TOGETHER
WITH OTHER INFORMATION IN THIS PROSPECTUS.
Risk Factors Relating to the Business of the Company
1. Dependence on Major Customers. A substantial portion of the Company's
business is with divisions of three major customers, Compaq, IBM and Motorola,
which customers accounted for approximately 47%, 13% and 8%, respectively, of
the Company's sales for the six months ended June 30, 1996. Although the Company
has maintained a good and long-standing relationship with these customers, the
loss of any of them would have a materially adverse affect on the Company. No
assurance can be given that such customers will continue to use the Company for
the design and manufacture of their products. There are no long-term contracts
with any customers. Substantially all of the Company's sales and reorders are
subject to competitive bids. See "Business-Marketing and Sales".
2. Secured Loans-Existence of Liens on Significant Portion of Assets. All of the
Company's assets have been pledged as collateral to secure the Company's
indebtedness. The Parent has guaranteed the principal, interest and costs
relating to any default and has secured the loan with mortgages on its
properties in Florida under lease to the Company. The Parent has also
subordinated to the lender $2,500,000 due it from the Company, subordinated the
Company's lease payments in the event of a default, and assigned the lease
payments to the lending bank, provided that the Parent may collect the rents
until occurrence of a default, if any. In the event the Company defaults on
payment of its obligations, including the making of required payments of
principal and interest, the Company's indebtedness could be declared immediately
due and payable and, in certain cases, the Company's assets could be foreclosed
upon. Although the Company's assets are pledged to secure outstanding
indebtedness, thereby making them unavailable to secure additional debt
financing, which could adversely affect the Company's ability to borrow in the
future, the Company has recently executed a commitment letter for extending and
refinancing its current bank loan under similar terms to its existing credit
facility. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations".
3. Competition. Manufacture and assembly of electro-mechanical and electronic
components is a highly competitive industry characterized by a diversity and
sophistication of products and components. The Company competes with major
electronics firms and, to a lesser extent, divisions of large concerns with
substantially greater financial and technical resources and personnel than the
Company. In addition, there are several offshore manufacturers with lower labor
rates, and therefore, lower product costs. The Company's customers could elect
to manufacture in-house the products they presently purchase from the Company,
which would have a negative affect on the Company. See "Business-Competition".
4. Dependence on Key Employees. The continued services of Thomas K. Langbein,
Chairman of the Board of Directors and Chief Executive Officer, Barry Pardon,
President, Joseph Verga, Sr. Vice President, Secretary-Treasurer, and John
Grieve, Managing Director and Vice President of European Operations, are
essential to the Company . Mr. Pardon has an employment agreement with the
Company, Mr. Langbein has an employment agreement with the Parent, and Mr.
Grieve has an employment agreement with Techdyne (Scotland). Joseph Verga has no
employment agreement with the Company or its affiliates. The loss of these
individuals would have a materially adverse affect upon the Company. The Company
does not have nor has any immediate plans to obtain "key-man" insurance.
7
<PAGE>
5. Absence of Continuing Parent Financial Support. The Company was acquired by
its Parent in 1982 and since that date has been a majority-owned subsidiary of
the Parent. The Company had been dependent on its Parent for substantial
financial support, as well as for various services until October, 1995 when the
Company completed its 1995 Offering. Advances from the Parent include the
Techdyne Note with accrued interest amounting to approximately $2,955,000 at
September 30, 1996, convertible into Common Stock of the Company at the option
of the Parent at a conversion ratio of $1.75 per share, and net of an advance
receivable. The Parent and the Company have entered into a two-year renewable
management services agreement, with its Parent providing certain administrative,
bookkeeping and accounting services. Other than such services provided for
compensation, the Parent will no longer continue to provide direct financial
support to the Company. The Parent will, however, continue to guaranty certain
of the Company's financing facilities and, in connection therewith, continue to
mortgage certain of its properties under the lease to the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
6. Material Factors Relating to Operation of the Business. As an international
contract manufacturer of precision electronic, electro-mechanical and plastic
insert and injection molded products for OEM's in the data processing,
telecommunications and instrumentation industries, the Company's existing and
future operations are and will be influenced by several factors including
technological developments, the ability of the Company to efficiently meet the
design and production requirements of its customers, and the market acceptance
of its customer's products. Further factors impacting the success of the
Company's operations are increases in expenses associated with continued sales
growth, the ability of the Company to control costs, management's ability to
evaluate new orders to target satisfactory profit margins, the capacity of the
Company to develop and manage the introduction of new products and competition.
Quality control is also essential to the Company's operations, since customers
demand strict compliance with design and product specifications. Any adverse
change in the Company's quality and process controls would adversely affect its
relationship with customers and ultimately its revenues and profitability. See
"Business-Quality and Process Control".
Risk Factors Relating to the Securities and the Offering
1. Controlling Shareholders; Potential Conflict of Interest. Assuming full
exercise of the Warrants there will be an additional 1,200,000 shares of Common
Stock outstanding, which will represent approximately 22% of the outstanding
stock. Assuming full exercise of the Warrants, the Parent, inclusive of its
Common Stock obtainable upon conversion of the Techdyne Note, would own
approximately 62% of the Company and, therefore, could still be able to control
the Company. Absent any significant exercise of the Warrants, the Parent, which
presently owns 63.6% of the Company (73.9 % including conversion of the Techdyne
Note), will be able to elect all of the Company's directors and otherwise
control the Company. Shareholders do not have cumulative voting and, therefore,
other than the Parent, will be unable to elect any directors of the Company.
Three of the Company's directors are directors of the Parent and Thomas K.
Langbein, Chairman of the Board of Directors and Chief Executive Officer of the
Company also is Chairman of the Board of Directors, Chief Executive Officer and
President of the Parent and owns approximately 17 % of the voting shares of the
Parent. Therefore , these individuals will have a significant influence on all
matters on which shareholders are entitled to vote. Compensation for these
common executive personnel and certain other administrative services, facilities
and other central operating costs provided by the Parent to the Company are
subject to a management services agreement and are charged on the basis of
direct usage when identifiable, or on the basis of time spent. The amount of
expenses allocated by the Parent to the Company for such corporate overhead
totaled approximately $204,000 for the six month period ended June 30, 1996 and
$408,000 for the year ended December 31, 1995.
8
<PAGE>
Additionally, there have been past transactions between the Company and the
Parent and its directors, including loans, financing guarantees (see Risk Factor
No. 2 under "Risk Factors Relating to the Business of the Company," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources"), in 1990 the sale of property by
the Company to the Parent ($1,300,000 less two mortgages on the properties of
approximately $256,000 assumed by the Parent) which properties are leased to the
Company at $130,000 per year on a net, net basis ( reduced by $36,000 for the 12
months ending March 31, 1997 see "Business-Property" and Note 4 to "Notes to
Consolidated Financial Statements" to the Company's 1995 Form 10-K and Note 5 to
"Notes to Consolidated Condensed Financial Statements" to the June, 1996 Form
10-Q incorporated herein by reference), and insurance coverage (Mr. D'Amore,
director of the Company obtained $9,700 in commissions for general liability
insurance coverage in 1995, and George Langbein, an independent sales
representative for the Company and brother of the Chairman of the Board, sold
group health insurance to several executives of the Company and the Parent). The
Company believes that these transactions were on terms at least as favorable to
it as could have been obtained from unaffiliated third parties. Related party
transactions are disclosed to the board who decides whether the transactions are
in the best interests of the Company and on terms no less favorable than could
be obtained from unaffiliated third parties. However, there can be no assurance
that any further conflicts of interest will be resolved in favor of the Company.
2. Possible Volatility of Share Price. The Common Stock traded on Nasdaq from
1985 through February, 1992 at which time, due to its failure to meet the
listing requirements of Nasdaq, the Common Stock ceased trading on Nasdaq or in
any interdealer quotation medium. In November, 1994, the Common Stock commenced
trading on the NASD's OTC Bulletin Board. Approximately 1,485,000 shares of
Common Stock trade on Nasdaq. Announcements concerning the Company or its
competitors, including operating results, substantial shares eligible for future
sale (see Risk Factor No. 4 under "Risk Factors Relating to the Securities and
the Offering"), or technological innovations may have a significant impact on
the market price of the Company's securities. As a result of these factors, the
price of the Common Stock and Warrants may fluctuate significantly.
3. Dividends Unlikely. The holders of Common Stock are entitled to receive
dividends when, as and if declared by the board of directors out of funds
legally available therefor. To date, the Company has not paid any cash
dividends. The board does not intend to declare any cash dividend in the
foreseeable future and earnings, if any, will be used to finance the capital
requirements of the Company.
4. Market Overhang from Outstanding Options, Warrants and the Techdyne Note. The
Company has a 1994 Plan pursuant to which options had been granted in 1994 to 84
employees and directors currently for 179,200 shares of Common Stock exercisable
at $1.00 per share through May 24, 1999. Options for an additional 152,500
shares of Common Stock were granted in 1995, including options for 142,500
shares to directors exercisable at $1.75 per share through February 26, 2000.
The Techdyne Note is presently convertible into approximately 1,689,000 shares
of Common Stock (approximately 39% of the outstanding shares). In addition, the
Parent directly owns 2,727,797 shares of Common Stock. The Representative holds
an option which is exercisable through September 12, 2000 entitling the
Representative to obtain 100,000 Warrants exercisable into Common Stock at $8.25
per share and 100,000 shares of Common Stock at an exercise price of $6.60 per
share. Holders of options, Warrants and the Parent's Techdyne Note are likely to
exercise and convert them when, in all likelihood, the Company could obtain
additional capital on terms more favorable than those provided by the options,
Warrants and the Techdyne Note. During the exercise and conversion term of such
securities, the holders thereof are given an opportunity to profit from the rise
in the market price of the Company's Common Stock, with the resultant dilution
of the interests outstanding, and they may adversely affect the terms on which
the Company could obtain additional capital. Furthermore, the sale of Common
Stock issuable to the holders of such options, Warrants and the Techdyne Note,
as well as the Parent's substantial direct ownership of Common Stock of the
Company, or merely the potential of such sales, could have an adverse effect on
the market price of the Company's securities. See Risk Factor No. 2 under "Risk
Factors Relating to the Securities and the Offering".
9
<PAGE>
5. Shares Available for Future Sale. The Parent owns 2,727,797 shares of Common
Stock or 63.6% of the outstanding shares (73.9% upon inclusion of the Techdyne
Note). Of the Parent's ownership, approximately 1,889,000 shares of Common Stock
obtained and obtainable upon exercise of the Techdyne Note are "restricted
securities" as that term is defined by Rule 144 promulgated under the Securities
Act. In addition, there are outstanding options to purchase 179,200 shares of
Common Stock under the 1994 Plan exerciseable at $1.00 per share held by
employees, officers, directors and counsel to the Company, and options to
purchase 152,500 shares of Common Stock exerciseable at $1.75 per share held by
officers, directors, and counsel to the Company. The option shares are to be
registered in the immediate future by the Company on behalf of the selling
shareholders. A substantial portion of the shares are saleable without a
registration statement based upon a Rule under the Securities Act which allows
for the issuance of the options and subsequent exercise and resale by
non-affiliates of the Company 90 days after the Company became a reporting
company under the Exchange Act, which the Company became in October, 1995.
As to the Parent's shares, 2,527,797 shares of Common Stock are not
"restricted". However, the Parent is deemed an "affiliate" (control person) of
the Company as defined in Rule 144 and may only sell its non-restricted shares,
absent registration, in accordance with the provisions of Rule 144, exclusive of
the two-year holding period applicable to "restricted" shares. See "Shares
Eligible for Future Sale". Rule 144 entitles each person holding restricted
securities for a period of two years and affiliates who own non-restricted
securities of the Company, to sell every three months in ordinary brokerage
transactions an amount of shares which does not exceed the greater of 1% of the
Common Stock outstanding, or, since the Shares are trading on Nasdaq, the
average weekly trading volume on Nasdaq during the four calendar weeks prior to
the sale. Any substantial sales pursuant to Rule 144, including the potential
sale of the Parent's Common Stock of the Company, may have an adverse effect on
the market price of the Common Stock, and may hamper the Company's ability to
arrange subsequent equity or debt financing or effect the terms and timing of
such financing. See "Shares Eligible for Future Sale".
6. Determination of Warrant Exercise Price. The exercise price and other terms
of the Warrants were determined through negotiations between the Company and the
Representative and bear no relationship to the Company's assets, book value per
share , or other generally accepted criteria of value. The exercise price of the
Warrants should not be considered as indicative of its value.
7. Relationship of the Representative to Trading; Possible Limitations on Market
Making Activities. The Representative underwrote the Company's 1995 Offering and
is one of the market-makers with respect to the trading of the Common Stock and
Warrants. The Representative also has the right to act as the Company's
exclusive agent in connection with any further solicitation of holders of
Warrants to exercise their Warrants. Unless granted an exemption by the
Commission from Rule 10b-6 under the Exchange Act, the Representative and any
other soliciting broker/dealer will be prohibited from engaging in any
market-making activities or solicited brokerage activities with regard to the
Company's securities during the periods prescribed by exemption (xi) to Rule
10b-6 (two business days) before the solicitation of the exercise of any Warrant
until the later of the termination of such solicitation activity or the
termination of any right the Representative or any broker/dealer may have to
receive a fee for the solicitation of Warrants. As a result, the Representative
or any other soliciting broker/dealer may be unable to continue to make a market
for the Company's securities during certain periods while the Warrants are
exercisable. Such limitation, while in effect, could impair the liquidity and
market price of the Company's securities.
8. Potential Adverse Effect of Redemption of Warrants. Under certain
circumstances, the Warrants may be redeemed by the Company, prior to their
expiration, at a redemption price of $.10 per Warrant, upon not less than 30
days' prior written notice to the holders of such Warrants. Redemption of the
Warrants could force the holders to exercise the Warrants and pay the exercise
price at a time when it may be disadvantageous for the holders to do so, to sell
the Warrants at the then current market price when they might otherwise wish to
hold the Warrants, or to accept the redemption price, which is likely to be
substantially less than the market value of the Warrants at the time of
redemption. If and during such time that the Company does not maintain an
effective registration statement or other
10
<PAGE>
qualification covering the Common Stock issuable upon exercise of the Warrants,
then the Warrant holder will be unable to exercise the Warrant should the
Warrant be called for redemption by the Company. See Risk Factor No. 9 under
"Risk Factors Relating to the Securities and the Offering" and "Description of
Securities-Warrants".
9. Necessity of Continuing Post-Effective Amendments to the Company's
Registration Statement and State Blue Sky Registration; Exercise of Warrants.
The Warrants were not knowingly sold to purchasers in jurisdictions in which the
Warrants were not registered or otherwise qualified for sale. However,
purchasers may buy Warrants in the aftermarket or may move to jurisdictions in
which the Warrants and the Common Stock underlying the Warrants are not so
registered or qualified. In this event, the Company would be unable to issue
Common Stock to those persons desiring to exercise their Warrants unless the
Warrants and underlying Common Stock are qualified for sale in jurisdictions in
which such purchasers reside or an exemption from such qualification exists in
such jurisdictions. There can be no assurance that the Company will be able to
effect any required qualification.
The Warrants are not exercisable unless the Company maintains a current
Registration Statement on file with the Commission. Although the Company has
agreed to file appropriate post-effective amendments to the Registration
Statement containing this Prospectus or other appropriate Registration
Statements covering the securities in this Prospectus, and to maintain a current
Registration Statement on file with the Commission relating to the Warrants and
underlying Common Stock, there can be no assurance that such will be
accomplished or that the Warrants will continue to be so registered. See
"Description of Securities-Warrants".
10. Underwriters Influence on Market for Securities. Inasmuch as a substantial
amount of the Common Stock and Warrants sold in the 1995 Offering were
distributed to customers of the Representative of that Offering, and since such
customers may be expected to engage in transactions for the sale or purchase of
the Common Stock and/or Warrants, the Representative, to the extent it acts as a
market maker, may be expected to execute a substantial portion of the
transactions in the Common Stock and Warrants. Therefore the Representative may
be, for the foreseeable future, a dominating influence, and thereafter, a factor
of decreasing importance in the market for the Common Stock and Warrants.
USE OF PROCEEDS
Assuming exercise of all the Warrants, the Company would realize net
proceeds of approximately $6,480,000 after deducting expenses of the offering
estimated at approximately $ 30,000. The net proceeds do not include a 5%
commission that may be due the Representative of the 1995 Offering for each
Warrant exercised which could aggregate up to $250,000. See "Plan of
Distribution".
The Company plans to use the proceeds primarily for (i) new satellite
facilities (there are presently no contracts for or pending construction or
aquisition for such satellites, see "Business-Property-Planned Facilities");
(ii) development of new products including low to medium volume surface mount
printed circuit boards ("PCBs") and new custom designed products (see
"Business-Products and Services"); (iii) upgrading plant and equipment (see
"Business-Manufacturing and Supplies"); (iv) hiring additional marketing and
direct sales personnel (see "Business-Marketing and Sales"); and (v) working
capital.
There is no assurance when, or if any, of the Warrants will be exercised by
Warrant holders and, therefore, there can be no assurance that the Company will
realize any proceeds.
None of the expenditures allocated to the above categories is a firm
commitment by the Company. These are the current plans of the Company . Future
events may make shifts in the allocation of funds necessary or desirable.
Although the Company has no current plans or intentions to reallocate the
proceeds that may result from the exercise of the Warrants, management, subject
to the approval of the board of directors, may reallocate the proceeds in such
manner it deems appropriate.
11
<PAGE>
Pending use of the proceeds, if any, from the exercise of the Warrants, the
Company may invest such funds in short term investments of high quality bank
time deposits, certificates of deposit, or similar investments.
MARKET FOR THE COMPANY'S SECURITIES
The Company's Common Stock traded on Nasdaq from 1985, when it first went
public, until February, 1992 when the Company ceased satisfying the capital and
surplus requirements for continued listing and trading on Nasdaq. In November,
1994, the Common Stock commenced trading on the NASD OTC Bulletin Board under
the symbol "TCDN". The Common Stock traded approximately $1.00 bid, $1.50 asked,
through December 31, 1994. On October 2, 1995, upon completion of the Company's
1995 Offering of Common Stock and Warrants, both securities commenced trading on
Nasdaq Small Cap Market under the symbols "TCDN" and "TCDNW", respectively, and
on the Boston Stock Exchange under the symbols "TDN" and "TDNW", respectively.
The securities traded very inactively on the Boston Stock Exchange. The Common
Stock and Warrants are scheduled to be listed for trading on the Nasdaq National
Market on November 6, 1996 and shall be delisted from the Boston Stock Exchange.
The table below indicates the high and low bid prices by quarter for the
Company's Common Stock for the year and one-half period ended June 30, 1996,
with the period through September 30, 1995 reported by the NASD OTC Bulletin
Board, and the prices thereafter reported by Nasdaq.
COMMON STOCK
1995 Bid Price
---- ---------
High Low
---- ---
1st Quarter $1.63 $1.00
2nd Quarter $3.75 $1.50
3rd Quarter $6.75 $3.13
4th Quarter $7.25 $5.38
1996
----
1st Quarter $8.00 $5.94
2nd Quarter $9.88 $6.50
3rd Quarter $9.50 $6.38
On October 30, 1996, the closing price of the Common Stock was $7.25.
The Warrants commenced trading on the Nasdaq Small Cap Market on October 2,
1995 upon completion of the Company's 1995 Offering of Warrants and Common
Stock. The Warrants are scheduled to be listed for trading on the Nasdaq
National Market on November 6, 1996. The Warrants trade on Nasdaq under the
symbol "TCDNW". The Warrants traded very inactively on the Boston Stock
Exchange and are to be delisted from that exchange on the date trading
commences on the Nasdaq National Market.
The table below indicates the high and low bid prices by quarter for the
Warrants from commencement of trading in the last quarter of 1995 through the
first half of 1996 as reported by Nasdaq.
12
<PAGE>
WARRANTS
1995 Bid Price
---- ---------
High Low
---- ---
4th Quarter $4.13 $2.00
1996
----
1st Quarter $3.13 $2.25
2nd Quarter $4.50 $2.50
3rd Quarter $4.63 $2.38
On October 30, 1996, the closing price of the Warrants was $2.75.
Bid and asked prices are without adjustment for retail mark-ups, mark-downs
or commissions and may not necessarily represent actual transactions.
On October 30, 1996, the Company had 71 shareholders of record and 8
Warrant holders of record. Based upon notifications for an Annual Meeting held
in June, 1996, the Company estimates there are approximately 830 beneficial
owners of the Common Stock and approximately 560 beneficial owners of the
Warrants.
DIVIDEND POLICY
The Company has not paid , nor does it have any present plans to pay cash
dividends on its Common Stock in the immediate future. In February, 1996, the
Company refinanced its credit facilities with a Florida bank, including three
loan arrangements, one of which restricts the payment of dividends except if
such does not exceed 30% of the Company's net income in any year. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". The Company's board of directors would determine the timing and
amount of any dividends, if such were to be granted in the future. Such future
dividends, if any, will depend not only on the bank financing limitations, but
also the Company's future earnings, capital requirements and financial
condition.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the three years
ended December 31, 1995 and for the year ended December 31, 1991 are derived
from the consolidated financial statements audited by Ernst & Young LLP,
independent certified public accountants. The selected consolidated financial
data for the year ended December 31, 1992 are derived from unaudited financial
statements. Similarly, the consolidated financial data for the six month periods
ended June 30, 1996 and 1995, have not been audited, and reflect in the opinion
of management , all adjustments (which include only normal recurring
adjustments), necessary to present fairly the information set forth herein. The
results of operations for the six-month period ended June 30, 1996 are not
necessarily indicative of results for the fiscal year ending December 31, 1996.
This data is qualified in its entirety by reference to and should be read in
conjunction with the Consolidated Financial Statements and Notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" which are included or incorporated elsewhere in this Prospectus.
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended June 30, Years Ended December 31,
------------------------- -----------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues ....................... $13,137 $15,465 $30,424 $20,536 $15,288 $15,566 $14,872
Net Income(loss) ............... 519 936 1,315 719 1 (776) (1,334)
Income(loss) per
common share .................. .11 .30 .38 .24 -- (.26) (.44)
Weighted average
shares outstanding
and equivalents ............... 4,695,930 3,117,402 3,466,139 3,042,910 3,042,910 3,042,910 3,042,910
</TABLE>
CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1996 December 31,
------------------------------ --------------------------------------------------------------
Actual Adjusted(1) 1995 1994 1993 1992 1991
------ --------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital ................ $5,805 $12,285 $4,921 $2,988 $1,909 $1,572 $1,570
Total assets ................... 12,621 19,101 12,879 8,741 5,543 5,237 5,747
Long term debt(2) .............. 3,550 3,550 3,415 5,823 4,806 4,695 3,542
Total liabilities .............. 8,079 8,079 9,216 9,865 7,284 6,957 6,573
Shareholder's
equity(deficit) ............... 4,542 11,022 3,663 (944) (1,741) (1,720) (626)
</TABLE>
- ----------
(1) Adjusted to reflect the exercise of the Warrants for shares of Common
Stock. See "Prospectus Summary--The Offering". These figures assume
the complete exercise of the Warrants. However, there is no basis for a
determination as to the extent, if any, that such Warrants will be
exercised, and there is no assurance that any Warrants will be exercised.
(2) Includes advances from Parent.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Six Months Ended June 30, 1996 compared to Six Months Ended June 30, 1995.
Consolidated revenues decreased approximately $2,328,000 (15%) for the six
months ended June 30, 1996 compared to the same period of the preceding year.
Domestic revenues decreased $4,011,000(39%) and European-based revenues
increased during $1,683,000 (32%) for the six months ended June 30, 1996
compared to the same period of the preceding year.
Approximately 74% of the Company's consolidated sales for the six months
ended June 30, 1996 were made to four customers of which Compaq accounted for
47% and IBM for 13%. The other customers accounted for less than 10% of the
Company's sales during the six month period ended June 30, 1996. The loss of, or
substantially reduced sales to any of these customers would have an adverse
effect on the Company's operations if such sales are not replaced. The Company
had domestic sales of $5,653,000 to another major customer in 1995. As a result
of a change in product for that customer, and not based on quality of service,
the Company lost a majority of its sales to that customer during 1996. Sales to
that customer amounted to $198,000 for the six months ended June 30, 1996
compared to $3,419,000 for the same period of the preceding year. The Company is
pursuing new business development to replace these lost sales, although there
can be no assurance as to the success of such efforts.
Revenues of Techdyne (Scotland) continue to be highly dependent on sales to
Compaq which accounted for approximately 89% of the sales of Techdyne (Scotland)
for the six months ended June 30, 1996 and 81% for the same period of the
preceding year. While the Company believes that Techdyne (Scotland) will
maintain significant sales to Compaq, the bidding for Compaq orders has become
more competitive which the Company anticipates will result in substantially
reduced Compaq sales and lower profit margins on remaining Compaq sales.
Techdyne (Scotland) is pursuing new business development to replace substantial
reductions in Compaq business which began in the third quarter of 1996, and to
pursue cost reduction efforts to remain competitive on Compaq business. However,
there can be no assurance as to the success of such efforts.
Cost of goods sold as a percentage of sales remained relatively stable,
increasing to 86% for the six months ended June 30, 1996 compared to 84% for the
same period of the preceding year. The increase was largely attributable to the
decrease in sales to a major customer noted above which had relatively higher
margins.
Selling, general and administrative expenses remained relatively stable
increasing $25,000 during the six months ended June 30, 1996 compared to the
same period of the preceding year.
Interest expense decreased by $57,000 for the six months ended June 30,
1996 compared to the same period of the preceding year due primarily to a
decrease in interest on the intercompany advances from the Parent. The prime
rate was 8.25% at June 30, 1996 and 8.5% at December 31, 1995.
1995 Compared to 1994
Consolidated revenues increased approximately $9,889,000 (48%) for the year
ended December 31, 1995 compared to the preceding year. Domestic revenues
increased $5,459,000 (43%) and the European-based revenues increase $4,430,000
(56%) for the year ended December 31, 1995 compared to the same period of the
preceding year.
The increase in domestic revenues compared to the preceding year, in
addition to an overall net increase in sales to existing customers, reflects
continuing new customer development efforts and additional revenues resulting
15
<PAGE>
from an increased level of customer service made possible through the Company's
Houston, Texas manufacturing facility and recently established Austin, Texas
facility.
Revenues of Techdyne (Scotland) continue to be highly dependent upon sales
to Compaq which accounted for approximately 86 % of the sales of Techdyne
(Scotland) for the year ended December 31,1995 and 80% for the preceding year.
Sales by Techdyne (Scotland) to Compaq increased $4,280,000 (68%) for the year
ended December 31, 1995 compared to the preceding year. While the Company
believes that Techdyne (Scotland) will maintain substantial sales to Compaq, the
bidding for Compaq orders has become more competitive which the Company
anticipates may result in some loss of Compaq business and result in lower
profit margins on Compaq sales. Techdyne (Scotland) intends to pursue new
business development efforts to replace anticipated reductions in Compaq
business and to pursue cost reduction efforts to remain competitive on Compaq
business. However, there can be no assurance as to the success of such efforts.
Approximately 80% of the Company's consolidated sales for the year ended
December 31, 1995 were made to five customers, two of which were major
customers, Compaq (36%) and Avid (19%). The other three customers each accounted
for less than 10% of the Company's sales. The loss of, or substantially reduced
sales to, any of these customers would have an adverse effect on the Company's
operations if such sales were not replaced. The Company has sales of $5,653,000
to Avid for 1995. As a result in the change in product produced for Avid which
accounted for a substantial portion of the sales to that customer, the Company
anticipates a loss of a majority of its sales to Avid during the next year. The
Company intends to pursue new business development efforts to replace these lost
sales, although there can be no assurance as to the success of such efforts.
Costs of goods sold as a percentage of sales remained relatively stable,
increasing to 85% for the year ended December 31, 1995 compared to 84% for the
preceding year. The increase in sales revenues, along with improved
manufacturing efficiencies and overall cost reduction efforts, resulted in an
increase in operating profits of $929,000 for the year ended December 31, 1995
compared to the preceding year.
Selling, general and administrative expenses increased $492,000 (26%)
during the first half of 1995 compared to the preceding year. This increase was
primarily due to the increase in support activities associated with the 48%
increase in overall sales revenues between the periods, including increase in
administrative personnel, related benefits and sales commissions. Selling,
general and administrative expenses as a percentage of sales decreased to 8% for
the year ended December 31, 1995 compared to 9% for the preceding year as a
result of cost containment efforts in selling, general and administrative
expenses and associated economies of scale.
Interest expense increased by $90,000 for the year ended December 31, 1995
compared to the preceding year due to the mortgage associated with Techdyne
(Scotland's) purchase of its manufacturing facility, previously leased, and an
increase in average interest rates. The prime rate was 8.5% at December 31, 1995
and December 31, 1994.
1994 Compared to 1993
Revenues increased approximately $5,248,000 (34%) for the year ended
December 31, 1994 compared to the preceding year. Domestic revenues increased
$3,502,000 (38%) and European-based revenues increased $1,746,000 (28%) for the
year ended December 31, 1994 compared to the preceding year.
The increase in domestic revenues for the year ended December 31, 1994
compared to the preceding year, in addition to an overall net increase in sales
to existing customers, reflects new customer development efforts in general and
additional revenues resulting from an increased level of customer service made
possible through the Company's Houston, Texas manufacturing facility.
The revenues of Techdyne (Scotland) were highly dependent on sales to
Compaq which accounted for approximately 80% of the sales of Techdyne (Scotland)
for the year ended December 31, 1994 compared to 76% for the preceding year.
Sales by Techdyne (Scotland) to Compaq increased $1,681,000 (36%) for the year
ended December 31, 1994 compared to the preceding year.
16
<PAGE>
Approximately 80% of the Company's consolidated sales for the year ended
December 31, 1994 were made to numerous locations of five customers. Customers
generating in excess of 10% of sales included Compaq, which accounted for 39%,
and IBM, which accounted for 16% of the Company's consolidated sales. The loss
of any of these customers would have an adverse effect on the Company's
operations.
Interest and other income decreased by $8,000 for the year ended December
31, 1994 compared to the preceding year largely as a result of a decrease in
miscellaneous revenues.
Cost of goods sold as a percentage of sales decreased to 84% for the year
ended December 31, 1994 compared to 86% for the preceding year largely as a
result of improved margins related to product mix, including new customer sales,
and cost reduction efforts.
Selling, general and administrative expanses decreased by $96,000 for the
year ended December 31, 1994 compared to the preceding year largely as a result
of improved product mix, including new customer sales and cost reduction
efforts.
Interest expense increased by approximately $65,000 for the year ended
December 31, 1994 compared to the preceding year primarily as a result of
increased interest rates and higher average outstanding borrowings including the
Techdyne (Scotland) mortgage. The prime rate was 8.5% and 6% at December 31,
1994 and December 31, 1993, respectively.
Liquidity and Capital Resources
Working capital totaled $5,805,000 at June 30, 1996 increasing $884,000
(15%) during the first six months of 1996 which included a substantial reduction
in current debt as a result of the Company's bank refinancing and the litigation
settlement proceeds. The significant reductions in inventories and accounts
payable are a result of reduced purchasing activity largely resulting from
anticipated reductions in Techdyne (Scotland) sales to Compaq.
Included in the changes in components of working capital was an increase of
$786,000 in cash and cash equivalents, which included net cash provided by
operating activities of $936,000 net cash used in investing activities of
$283,000 (including $330,000 from additions to property plant and equipment) and
net cash provided by financing activities of $135,000 (resulting largely from
proceeds of the bank refinancing of $181,000 and payments on long-term debt of
$77,000.)
In February 1996 , the Company refinanced its bank loan agreement with a
different Florida bank. The new financing provides for a $2,000,000 line of
credit, due on demand, secured by the Company's accounts receivable, inventory,
furniture, fixtures and intangible assets. There were no amounts outstanding
under this line of credit at June 30, 1996 and no amounts have been drawn down
on this line as of June 30, 1996. This credit facility is being renegotiated to
be extended and with certain favorable modifications. A $712,500 term loan which
had a remaining principal balance of $703,000 at June 30, 1996 is secured by two
buildings and land owned by the Parent. The second term loan for $200,000 which
had a remaining principal balance of $187,000 at June 30, 1996 is secured by the
Company's tangible personal property, goods and equipment. The Parent has
guaranteed these loans and has subordinated $2,500,000 due form the Company,
provided that the Company may make payments to the Parent on this subordinated
debt from the funds from the Company's 1995 Offering and from earnings. The
Company has further agreed that in the event that it should sell its interest in
Techdyne (Scotland), which is not anticipated, 50% of the selling price would be
used to repay the $712,500 term loan facility. See Note 9 to "Notes to
Consolidated Financial Statements" to the Form 10-K and Note 3 to "Notes to
Consolidated Condensed Financial Statements" to the June 1996 Form 10-Q
incorporated herein by reference.
The Company has outstanding borrowings of $145,000 from a local bank with
the interest payable monthly and the notes maturing April, 1997. Techdyne
(Scotland) has a line of credit with a Scottish bank, with a U.S. dollar
equivalency of approximately $308,000 at June 30, 1996 and had an option for
additional funding which provided a total line of $620,000 at December 31, 1995.
The Company has decided not to utilize this option for additional
17
<PAGE>
funding. The line of credit is secured by the assets of Techdyne (Scotland) and
guaranteed by the Company. This line of credit operates as an overdraft
facility. No amounts were outstanding under this line of credit as of June 30,
1996 or December 31, 1995.
In July, 1994, Techdyne (Scotland) purchased the facility housing its
operations for approximately $730,000, obtaining a 15-year mortgage which had a
U.S. dollar equivalency of approximately $579,000 at June 30, 1996 and $591,000
at December 31, 1995.
Given its current level of working capital, and its refinanced bank loan,
management believes current levels of working capital are adequate to
successfully meet the liquidity demands for at least the next twelve months.
Inflation
Inflationary factors have not had a significant effect on the Company's
operations. The Company attempts to pass on increased costs and expenses by
increasing selling prices when and where possible and by developing different
and improved products for its customers that can be sold at targeted profit
margins.
18
<PAGE>
GLOSSARY OF TERMS
Burn-in Units --- powered test units for running
furnished products through multi-hour
testing.
Cable ---jacketed assembly of electrical
conductors insulated from each other and
twisted together around a central core.
CAD (Computer Aided Design) ---a process by which products are
designed and or modified on computer.
Electro-Mechanical ---an assembly or product that includes
both electrical and mechanical
components.
Harness --- prefabricated wiring with insulation
and terminals for connection with other
components.
Horizontal Injection Molding ---injection molded plastic parts.
Mechanical Assembly ---an assembly that does not include
electrical or electronic components.
Printed Circuit Board Assembly ---electronic assembly consisting of
basic printed circuit board with
electronic components (diodes,
resistors, capacitors and transistors)
inserted and wave soldered.
Ribbon Cable Assemblies ---flat extruded conductors with
mass-terminated connectors.
Surface Mount Printed Circuit Board ---a fabrication technique where there
are no holes through the circuit board
assembly; integrated circuits and other
components are mounted on pads or
soldered directly on the surface of the
circuit board, thereby allowing more
components to be mounted on a given size
board.
Vertical Molding ---insert molding of plastic with one or
more metal (electronic or otherwise)
components.
19
<PAGE>
BUSINESS
General
The Company is an international contract manufacturer of electronic,
electro-mechanical and plastic insert and injection molded products, primarily
manufactured to customer specifications and designed for OEMs and distributors
in the data processing, telecommunications and instrumentation industries. Many
of its customers are Fortune 100 companies.
Custom-designed products primarily include conventional and molded cables
and wire harnesses, and to a more limited extent PCBs and electro-mechanical
assemblies. The Company also manufactures complete finished assemblies.
Manufacturing is accomplished in accordance with Underwriters Laboratories
specifications and Canadian Standards Association requirements, if applicable.
In 1995, the Company received its ISO 9002 quality assurance designation which
its subsidiary held since 1991. See "Business-Manufacturing and Supplies".
The Company also is engaged in horizontal injection and vertical insert
molding for in-house production of medical and electronic components. Medical
products produced for the Company's medical supply operations include the
Medi-Lance(TM), Medi-Let and Lady Lite(TM)lancets, the latter developed for
women's use. See "Medical Products" below.
Services and products are marketed through an in-house marketing staff of
nine persons, in conjunction with approximately 30 independent manufacturers
sales representatives, and through trade shows, brochures and catalogues.
The Company was incorporated in Florida in 1976 originally under the name
DAK Industries, Incorporated. It was acquired by the Parent in 1982 and raised
approximately $3,600,000 in a public offering of common stock in 1985. The
Parent, a Nasdaq National Market company, owns 63.6% of the Company's Common
Stock (73.9% if include the Techdyne Note held by the Parent). The Company
established its European operations in 1987 through its subsidiary Techdyne
(Scotland), which is engaged in similar operations as the Company for the
European and Middle Eastern markets. Unless otherwise noted, Techdyne and its
subsidiary shall be referred to collectively as the "Company".
Products and Services
Approximately 800 products, including complete turnkey finished products,
sub-assemblies, molded and non-molded cable assemblies, wire harnesses, PCBs,
injection molded and electronic assembly products, are manufactured by the
Company for OEM customers.
Cable and Harness Assemblies
A cable is an assembly of electrical conductors insulated from each other
and twisted around a central core and jacketed. Cables may be molded or
non-molded.
20
<PAGE>
The Company maintains a large assortment of standard tooling for
D-Subminiature ("D-Subs"), Din connectors and phono connectors. D-Subs are
connectors which are over-molded with the imprint of the customer's name and
part number. Din connectors are circular connectors with from two to four pairs
of wires used for computer keyboards. Today's computers are multi-media,
providing audio as well as video, such as the CD-ROM. The phono connector
provides for the audio in the computer.
Flat ribbon cable or ribbon cable assemblies are cables with wires
(conductors) on the same plane with connectors at each end. Flat ribbon cables
are used in computer assemblies and instrumentation.
Discrete cable assemblies are wires with contacts and connectors. Harnesses
are prefabricated wiring with insulation and terminals ready to be attached to
connectors.
The cable and harness assembly products serve customers in the data
processing, telecommunications and instrumentation industries.
Printed Circuit Board Assemblies
PCB assemblies are electronic assemblies consisting of a basic printed
circuit laminate with electronic components including diodes, resistors,
capacitors and transistors, inserted and wave soldered. PCBs may be used either
internally within the customer's products or in peripheral devices. The variety
of PCBs produced by the Company include through-hole assemblies, low and medium
volume surface mount PCB assemblies, and mixed technology PCBs. Through-hole
assemblies are standard rigid boards with components on one side and solder pads
on the other side. Surface mount circuit assemblies are components with no leads
which are soldered to pads on the surface of the PCB. The mixed technology PCB
combines both through-hole and surface mount.
Contract Manufacturing Products
Contract manufacturing involves the manufacture of complete finished
assemblies with all sheet metal, power supplies, fans, PCBs as well as complete
sub-assemblies for integration into an OEM's finished product. These products
can be totally designed and manufactured by the Company through its
computer-aided design ("CAD") system, engineering and supply procurement.
Alternatively, the customer may provide specifications and the Company will
assist in the design and engineering or just manufacture to the customer's
specifications. Contract manufacturing products include rack assemblies for data
processing and video editing and custom disk drive enclosures for OEMs. Contract
manufacturing also involves complete sub-assemblies for inclusion in a
customer's finished product such as speaker and lock-key assemblies and diode
assemblies that consist of wire, connectors and diodes that are over-molded,
packaged and bar coded for distribution.
Medical Products
The Company produces lancets for its Parent, which company manufactures and
distributes medical supplies. A lancet is a small sharp pointed instrument used
to prick the finger to draw blood for laboratory testing. Lancets produced by
the Company are vertical insert molded disposable products distributed under the
trade names Medi-Lance(TM)and Lady Lite(TM)and under the name Medi-Let.
Reworking and Refurbishing
Customers provide the Company with materials and sub-assemblies acquired
from other sources which the customer has determined requires modified design or
engineering changes. The Company redesigns, reworks, refurbishes and repairs
these materials and sub-assemblies. The reworking and refurbishing contracts
account for less than approximately 5% of the Company's business, but is a
growth segment of the Company's operations.
21
<PAGE>
Manufacturing and Supplies
Components and products are custom designed and developed to fit specific
customer requirements and specifications. The Company's industrial, electrical
and mechanical engineers work in close liaison with its customer's engineering
department from inception through design, prototypes, production and packaging.
Typically, the customer will provide the Company with detailed
specifications. The Company's engineering staff reviews and structures the bill
of materials for purchasing, coordinates manufacturing instructions and
operations, and reviews inspection criteria with the quality control department.
The engineering staff also determines any special capital equipment
requirements, tooling and dies, which must be acquired.
In many instances, the Company becomes involved early in the design
process. It works with customer product engineers from the initial sketch
concept, or design, and uses its CAD system to produce the finished design.
The Company maintains a large assortment of standard tooling. New
manufacturing jobs may require new tooling and dies, but most presses and
related equipment are standard.
The Company maintains modern state-of-the-art equipment at all of its
facilities for crimping, stripping, terminating, soldering, sonic welding and
sonic cleaning which permits the Company to produce conventional and complex
molded cables. In assembly of PCBs, the Company owns state-of-the-art equipment,
including automatic pick-and-place machines, wave soldering machines, vapor
degreasers, infrared ovens, screen printers, automatic lead forming and cutting
machines, and in-line and off-line component lead cutters and equipment. The
Company operates simultaneous production and assembly lines for its diverse mix
of electrical and electro-mechanical products.
In addition to assembly operations, since 1994, the Company has become more
involved in contract manufacturing of moderate to high volume turnkey assemblies
and sub-assemblies, including injection molded and electronic assembly products.
See "Business - Products". Finished turnkey assemblies include the entire
finished product and the entire manufacturing process from design and
engineering to purchasing raw materials, manufacturing and assembly of the
component parts, testing, packaging and delivery of the product to the customer.
By contracting assembly production, OEMs are able to keep pace with continuous
and complex technological changes and improvements by making rapid modifications
to their products without costly retooling and without any extensive capital
investments for new or altered equipment.
The Scottish manufacturing facility, located in Livingston, Scotland,
focuses mainly on the electronics industry producing primarily molded cables,
wire harnesses and electro-mechanical assemblies, incorporating multifaceted
design and production capabilities. Scotland provides availability of educated
labor, favorable government financial programs such as regional development
grants in which Techdyne (Scotland) participates, and traditional bank financing
which this subsidiary obtained in the form of a continued line of credit and a
mortgage on property it acquired for its operations. See "Business-Property" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources". Government regulation is minimal
and does not adversely impact Techdyne (Scotland)'s operations. Techdyne
(Scotland) files separate income tax returns in the United Kingdom. Techdyne
(Scotland) currently markets its products in the United Kingdom, Ireland,
Germany and to a limited extent Israel, and it is paid in the local currency,
the pound sterling. Foreign currency transaction gains and losses, which are
included in results and operations, are not material. See "Business-Foreign
Operations".
The Company has introduced "supplier partnerships" to meet customers'
needs. This involves the Company accomplishing the in-house manufacturing
requirements of the customer. Through EDI (electronic data interchange) the
customer conveys its needs on a weekly basis based on a rolling quarterly
forecast.
Product liability insurance coverage, part of the Company's general
liability insurance includes basic coverage of an aggregate of $1,000,000 per
occurrence and in the aggregate, and an umbrella policy for $5,000,000
22
<PAGE>
per occurrence and in the aggregate. The Company has never had a product
liability claim and management is of the opinion that such product liability
insurance is adequate based upon experience and industry standards.
Materials used in the Company's operations consist of metals, electronic
components such as cable, wire, resistors, capacitors, diodes, PCBs and plastic
resins. These materials are readily available from a large number of suppliers
and manufacturers. The Company has not experienced any significant disruptions
from shortages of materials or delivery delays of its suppliers and believes
that its present sources and the availability of its required materials are
adequate. The Company has a computerized system of material requirements
planning, purchasing, sales and marketing functions.
Operational improvements implemented several years ago have improved the
overall efficiency of manufacturing, particularly in the area of inventory
management, including purchasing which is geared more closely to current needs
resulting in reduced obsolescence problems. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
Quality and Process Control
Quality control is essential to the Company's operations since low-cost and
high quality production are primary competitive standards and are vital to the
services of the Company. See "Business - Competition". Product, components,
assemblies and sub-assemblies manufactured by the Company are thoroughly
inspected visually and electronically to assure all components are to strict
specifications and are functional and safe. Management believes it is one of the
manufacturers of choice for the major Fortune 100 companies who are its
customers based upon its excellent record of quality production. The Company's
extremely low product return rate (less than 50 parts per million ("PPM"))
attests to its dedication to quality. The Company is working toward its goal of
10 PPM product return by the end of 1996.
Strict process controls are also standard operating procedure. Process
controls deal with the controls relating to the entire manufacturing process.
The Company strives for a CPK (process capabilities) of two, i.e., twice as
critical as customer tolerances.
During the course of initial qualification and production cycles, new and
existing customers inspect the Company and its operations. Over the years the
Company's product and manufacturing quality has received excellent ratings. In
1985, 1990 and 1993, the Company received quality awards from IBM with certain
others out of a field of 1,200 manufacturers, and in 1993, the Company was one
of two manufacturers receiving the gold IBM award for quality.
The Company received in 1995 from Underwriters' Laboratories, an
independent quality assurance organization, its ISO 9002 quality assurance
designation which is the international standard of quality with respect to all
systems of operations, including, among others, purchasing, design, engineering,
processes, manufacturing, sales, inventory control and quality. Techdyne
(Scotland) received its BS 5750 quality assurance designation in 1991 from
British Standards Institute. These quality BS assurance designations are only
provided to those manufacturers which exhibit stringent quality and process
control assurances after extensive evaluation and auditing by these independent
quality assurance organizations.
Marketing and Sales
Domestic sales are generated by four regional sales managers covering the
Northeast, Southeast, West and Southwest regions of the United States. There are
also two in-house marketing personnel, including Barry Pardon, the President of
the Company. Mr. Pardon established the national sales structure and is
responsible for marketing, customer service, and maintaining selected customer
accounts. The regional sales managers have five independent manufacturer
representative agencies who employ approximately 30 salesmen. Sales are also
generated through brochures and trade shows.
23
<PAGE>
The manufacturer sales representatives, primarily marketing electronic and
similar high technology products, are retained under exclusive sales
representative agreements for specific territories and are paid on a commission
basis. The sales representatives cannot represent any other person engaged in
the business of manufacturing services similar to those of the Company, nor
represent any person who may be in competition with the Company. The agreements
further prohibit the sales representative from disclosing trade secrets or
calling on customers of the Company for one year from termination of their
agreement.
Techdyne (Scotland) has three in-house sales personnel who market its
products, primarily ribbon and discreet cable assemblies and electro-mechanical
products, as well as engaged in rework and refurbishing products (see "Business
- - Products - Reworking and Refurbishing") for customers in Scotland, England,
Ireland, Germany and the Middle East.
Substantially all of the Company's sales and reorders are effected through
competitive bidding. Most sales are accomplished through purchase orders with
specific quantity price and delivery terms. Some production, such as its
supplier partnerships (see "Business - Manufacturing and Supplies"), are
accomplished under open purchase orders with components released against
customer requests.
The customer base consists primarily of Fortune 100 companies. In 1995,
approximately 80% of the Company's sales were made to five customers, two of
which were major customers, Compaq and Avid. For the first six months of 1996,
approximately 74% of the Company's consolidated sales were made to four
customers, including Compaq (47%) and IBM (13%) with the other two customers
each accounting for less than 10% of such sales. As a result in a change in
product produced for Avid, the Company lost a majority of its sales to that
customer in 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations". Other major OEMs utilizing the Company's
manufacturing services are Toshiba Corporation, Telxon, Panasonic, OKI, EMC and
Wang. Techdyne (Scotland) has developed strong links with its customers such as
Compaq and OKI, with a substantial portion of its sales, approximately 89% to
Compaq, for the six months ended June 30, 1996. However, competition in Europe
for business with Compaq has intensified and the Company anticipates
substantially reduced sales and lower profit margins on Compaq sales. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". A loss of any major customer is not anticipated, but if such should
occur it would necessarily have a materially adverse affect on the Company. See
Risk Factor No. 2 to "Risk Factors Relating to the Business of the Company".
Backlog
On June 30, 1996, the Company's backlog of orders amounted to approximately
$6,900,000, of which approximately $2,450,000 was represented by the Company's
two major customers, domestically and overseas. Management believes, based on
past experience and relationships with its customers and knowledge of its
manufacturing capabilities, that substantially all of its backlog orders are
firm and will be filled within this fiscal year. The purchase orders within
which the Company performs do not provide for cancellation, although the Company
will accommodate its customers and their needs. Over the last several years
cancellations have been minimal and management does not believe that any
significant amount of the backlog orders will be canceled. There is no assurance
that the backlog data is a reliable indicator of future sales.
Patents and Trademarks
The Company does not have nor does it rely on patents or trademarks to
establish or protect its market position. Dependency is placed more on design,
engineering, manufacturing cost, quality and marketing.
24
<PAGE>
Capital Expenditures
During each of the three years in the period ended December 31, 1995, the
capital expenditures were approximately:
Capital Expenditures
--------------------------------------------------------
Land, Buildings Machinery
Year Ended and Leasehold and
December 31 Improvements Equipment Total
----------- --------------- --------- -----
1995 ............ $207,903 $322,766 $ 530,669
1994 ............ 759,087 293,519 1,052,606
1993 ............ 16,711 171,558 188,269
Foreign Operations
The following is summarized financial information for the Company's foreign
operations. All significant intercompany accounts and transactions have been
eliminated.
Year Ended December 31,
------------------------------------------------
1995 1994 1993
---- ---- ----
Net Sales and Other Income
United States ........ $18,113,978 $12,654,945 $ 9,152,774
Europe(1)............ 12,310,380 7,880,738 6,135,289
----------- ----------- -----------
$30,424,358 $20,535,683 $15,288,063
=========== =========== ===========
Net Income (Loss)
United States ........ $ 318,896 $ 152,722 $ (201,514)
Europe(1)............. 996,422 566,158 202,568
----------- ----------- -----------
$1,315,318 $ 718,880 $ 1,054
=========== ============ ===========
Identifiable Assets(2) December 31,
-------------------------------------------
1995 1994 1993
---- ---- ----
United States ........ $ 6,277,221 $ 4,830,839 $ 3,594,963
Europe(1) ............ 6,601,880 3,910,579 1,947,904
----------- ----------- -----------
$12,879,101 $ 8,741,418 $ 5,542,867
=========== =========== ===========
The Company will be continuing its efforts to expand its foreign sales
throughout Europe. Expansion of its Scottish production facility by 3,500 square
feet was recently completed. In the near term, the Company anticipates expanded
foreign sales primarily in the United Kingdom and Western Europe.
- ----------
(1) Techdyne (Scotland) sales are primarily to customers in the United Kingdom.
The balance of the sales were made to Germany where sales were initiated in
1994, and minimally to the Middle East.
(2) Includes assets directly identifiable with the applicable operations.
25
<PAGE>
Competition
The Company experiences substantial competition from many areas including
divisions of large electronic and high-technology firms as well as from numerous
smaller, specialized companies. Competitive price advantages may also be
available to competitors with less expensive off-shore operations. Management
believes the primary competitive factors to be price, quality of production,
prompt customer service, timely delivery, engineering expertise and technical
assistance to customers. Among this mix of competitive standards, management
believes it is competitive with respect to delivery time, quality, cost and
customer service. Management also believes its competitive position is enhanced
through its European manufacturing and marketing operations through Techdyne
(Scotland). See "General", "Manufacturing and Supplies" and "Foreign Operations"
under the caption "Business".
Due to the number and variety of competitors, reliable data relative to the
Company's competitive position in the electronic components and assembly
industry is difficult to develop and is not known.
Employees
The Company currently employs approximately 243 full-time people. Of these
approximately 97 are employed in its Florida facilities located in Hialeah, of
which three are employed in marketing, including its President, four in
engineering, 77 in manufacturing and production, and 13 are engaged in
administrative, accounting, warehousing and support activities. The Company's
Houston, Texas facility employs approximately 34 persons, of which one is in
marketing, 29 are in manufacturing and production, and four are in
administration, accounting, warehousing and support activities. The Austin,
Texas manufacturing facility presently employs 11 full-time persons and
approximately 14 temporary personnel. The Company maintains a small office in
Massachusetts with one marketing person. Its Scottish subsidiary employs
approximately 100 people of which 82 are in production and the balance in
administrative, accounting and support activities.
In addition, to its full-time employees, the Company regularly utilizes the
services of temporary workers, retained through local agencies. Presently the
Company employs approximately 37 such workers. Many of these temporary workers,
upon fulfilling in excess of 320 hours of service, may be employed on a
full-time basis as needed.
The Company has no unions and believes its relationships with its employees
is good.
Property
In 1990, the Company sold to its Parent two facilities in Hialeah, Florida
and a parcel of land used for parking located across the street from its
executive and administrative offices. One facility is a two level 16,000 square
foot building, which consists of executive and administrative offices
(approximately 5,000 square feet), engineering (approximately 2,000 square
feet), and prototype and production assemblies and plastic injection molding
(approximately 9,000 square feet). Adjacent to that facility is the second
building, consisting of 12,000 square feet which houses the warehouse and
inspection segments of the Company's operations.
These properties were sold to the Parent for a partial reduction of the
indebtedness owed to the Parent of $1,300,000, less the two mortgages on the
properties of approximately $256,000, assumed by the Parent. The Parent leases
the properties to the Company. See below, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
26
<PAGE>
The following chart summarizes the properties leased by the Company.
<TABLE>
<CAPTION>
Space Property Landlord Term Rent
- ----- -------- -------- ---- ----
<C> <C> <C> <C> <C>
16,000 sq. ft 2230 W 77th St. Medicore 5 yrs. to $130,000/yr.
(exec. offs., mfg.) Hialeah, FL (Parent) March 31, 2000 plus taxes, utilities,
insurance (net, net)(1)
12,000 sq. ft 2200 W 77th St. Medicore 5 yrs. to $130,000/yr.
(warehouse) Hialeah, FL (Parent) March 31, 2000 plus taxes, utilities,
insurance (net, net)(1)
2,700 sq. ft 2235 W 77th St. Megabrella Two yrs. to $15,600 yr.
(production) Hialeah, FL Inc. Dec. 31, 1996, (plus taxes)
2 one year renewals escalating to
$18,000/yr. during
renewals
11,000 sq. ft 9742 and 9754 George 5 yrs. $68,400/yr.
(mfg. & offices) Whithorn Drive Whimpey to Dec. 14, 1996 (escalating approx.
Houston, TX(2) of Texas $1,280/yr.)
200 sq. ft 200 Turnpike Rd. MMP Realty month $250/month
(office) Southborough, MA Trust to plus heat,
month electricity and
Janitorial
6,825 sq. ft 800 Paloma Dr. AmorRon 3 yrs. $45,000/yr.
(offices,mfg.) Round Rock, (Austin) Park Ltd. to April 14, 1998; plus taxes,
TX(3) one three year utilities,
renewal insurance (net, net)
</TABLE>
- ----------
(1) The $130,000 per year rental is the aggregate for both properties, 2230
West 77th Street, Hialeah, Florida and 2200 West 77th Street, Hialeah,
Florida with adjacent parking. For the 12 month period commencing April 1,
1996, the Parent reduced the rent by $36,000 per year.
(2) Right (i) of first refusal to lease space in adjacent building when
available; (ii) to locate to larger available space within Lessor's
property; and (iii) to terminate the lease after December 14, 1994 by
paying three months rent and forfeiting the $3,175 security deposit.
(3) Right of first refusal to lease adjacent space (approximately 5,400 sq.
ft.).
27
<PAGE>
In July, 1994, Techdyne (Scotland) purchased the 27,000 square foot
facility it had been leasing in Livingston, Scotland. The purchase was
accomplished for approximately $730,000 with a 15-year mortgage which has a U.S.
dollar equivalency of approximately $579,000 at June 30, 1996. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations". This
facility was recently expanded by approximately 3,500 square feet. See
"Business-Foreign Operations".
The Company maintains state-of-the-art manufacturing, quality control
testing and packaging equipment at all of its facilities in Florida, Texas and
Scotland.
The Company believes that its equipment and facilities are adequate for its
current operations.
Planned Facilities
The Company, in 1995, constructed a facility in Round Rock, Texas, a
smaller town adjacent to the more familiar city of Austin, Texas. This new
satellite facility consists of administrative and sales offices, manufacturing
and engineering facilities. Approximately $100,000 of the proceeds from the 1995
Offering were reserved for additional manufacturing equipment as operations in
that region progressed.
The Company's strategic plan has been and continues to be expansion through
satellite facilities to obtain new customers or better serve existing customers.
The establishment of these satellite facilities is dictated by the extent of
additional or new business to be generated by existing and potential new
customers, and the availability of appropriate facilities. The Company
anticipates such satellite facilities would each consist of from 5,000 to 10,000
square feet, and would include sales, manufacturing, engineering and
administrative offices. These proposed facilities are estimated to cost
approximately $350,000 to construct, including leasehold improvements, basic
manufacturing equipment, furniture and fixtures, with a limited amount to be
reserved for working capital. Establishment of such facilities is expected to
take approximately three months to become operational once a lease is executed.
The Company has no site plans or leases for any such facilities. There can be no
assurance that such satellite facilities will be established or, if so, that the
same might be constructed in other locations. See "Use of Proceeds".
Litigation
The Company is not involved in or subject to any claims or litigation.
28
<PAGE>
MANAGEMENT
Directors and Officers
The officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company Position Held Since
---- --- ------------------------- -------------------
<S> <C> <C> <C>
Thomas K. Langbein 50 Chairman of the Board and 1982
Chief Executive Officer 1990
Barry Pardon 45 President and Director 1991
1990
Joseph Verga 45 Senior Vice President, Secretary 1988
Treasurer and Director 1990
Daniel R. Ouzts 49 Vice President-Finance, Controller and 1986
Principal Financial Officer 1996
Peter D. Fischbein 57 Director 1985
Anthony C. D'Amore 65 Director 1984
</TABLE>
Thomas K. Langbein was financial consultant to the Parent until 1980, when
he became Chairman of the Board of Directors, Chief Executive Officer and
President of the Parent. Mr. Langbein is also an officer and director of most of
the Parent's subsidiaries. Mr. Langbein was Chairman of the Board of Directors
of the Company in 1985, formerly having been the Vice President and Treasurer.
Peter D. Fischbein was appointed Chairman of the Board in 1990 until 1991, when
Mr. Langbein reassumed that position. In 1990, Mr. Langbein was appointed as
President and Chief Executive Officer and Mr. Langbein relinquished the
Presidency to Barry Pardon in November, 1991. Mr. Langbein is also a director
Techdyne (Scotland). He is Chief Executive Officer and Chairman of the Board of
DCA. In 1971, Mr. Langbein organized and currently is the President, sole
director and owner of Todd & Company, Inc. ("Todd"), a broker-dealer registered
with the Commission and the NASD. Mr. Langbein devotes most of his time to the
affairs of the Company, the Parent and DCA.
Barry Pardon joined the Company in November, 1980 as national sales manager
and initiated the independent manufacturer representatives sales force. Mr.
Pardon became Vice President of Marketing in 1981, was appointed Executive Vice
President (Marketing) in 1988 and was appointed President in November, 1991. Mr.
Pardon is a director of Techdyne (Scotland).
Joseph Verga joined the Company in 1979 as purchasing agent. In 1980, he
became production control manager and Vice President, in 1981 the operations
manager, and in 1983 was elected a director and appointed Secretary of the
Company. In 1985 he was appointed Treasurer and in 1988 was made Senior Vice
President of Operations.
Daniel R. Ouzts joined the Parent in 1980 as Controller of its plasma
division, and in 1983 became controller of the Parent. He became Vice President
of Finance of the Company and the Parent in 1986 and holds that position with
DCA since 1995. He was appointed Principal Financial Officer in October, 1996.
Mr. Ouzts is a certified public accountant.
Peter D. Fischbein is an attorney who has been practicing law since 1965.
He was appointed Chairman of the Board of the Company in 1990 and relinquished
that position to Thomas K. Langbein in November, 1991. Mr. Fischbein is a
director of the Parent. He is a general partner of several limited partnerships
engaged in real estate development.
29
<PAGE>
Anthony C. D'Amore is director of the Parent and is registered as a
part-time account executive with Todd, but has not been active in the brokerage
business for many years. Mr. D'Amore was the owner of an insurance agency, the
A.C. D'Amore Agency, Inc., which he sold in 1992, and from whom the Company, the
Parent and subsidiaries purchased much of the insurance at rates competitive
with unaffiliated parties. Mr. D'Amore continues to receive commissions with
respect to insurance placed with the Company and the Parent.
The term of office for directors and officers of the Company is one year.
The Board has a stock option committee consisting of Messrs. Langbein, Fischbein
and Verga and has an audit committee consisting of Messrs. Fischbein and D'Amore
who are also on the audit committee of the Parent. The audit committee meets at
least quarterly. It is responsible for recommending independent auditors to
serve the Company, reviewing the independent accountant's reports, the services
and results of audit of such accountants, and reviewing the scope, results and
adequacy of the internal control procedures. No director or other participant in
this program has received any compensation for acting as such. There is no
family relationship between any of the officers and directors of the Company.
SELLING SECURITY HOLDER
The only Selling Security Holder offering Common Stock included in the
Prospectus is the Representative, Joseph Dillon & Company, Inc., which firm
underwrote the 1995 Offering of Common Stock and Warrants. The Representative's
Purchase Warrant and underlying securities, including 100,000 shares of Common
Stock and 100,000 Warrants, were registered in the Company's 1995 Offering, Form
SB-2 Registration. The Representative's Purchase Warrant includes 100,000 shares
of Common Stock obtainable at an exercise price of $6.60 per share, and 100,000
Warrants which Warrants are obtainable at an exercise price of $.25 per Warrant,
and each Warrant exercisable into Common Stock at $8.25 per share. The Common
Stock obtainable by the Representative represents approximately 4.5% of the
outstanding Common Stock. The 100,000 Warrants obtainable by the Representative
upon exercise of the Representative's Purchase Warrant represents approximately
9% of the outstanding Warrants.
The Company retained the Representative at the time of the 1995 Offering as
financial consultant for a period of 18 months through March 12, 1997 at a
monthly fee of $3,000 or an aggregate of $54,000 paid in October 1995, the
closing of the 1995 Offering. Pursuant to that agreement the Representative
provides general financial advisory services to the Company on an "as needed"
basis with respect to possible future financing or acquisitions by the Company
and related matters. The consulting agreement does not require the
Representative to provide any minimum number of hours of consulting services to
the Company.
For a period of three years from the 1995 Offering through September 12,
1998, the Company has agreed to invite a designee of the Representative to
attend all meetings of the Board of Directors of the Company. Such designee will
be entitled to the same notices and communications sent by the Company to its
directors and to attend director's meetings, but will not be entitled to vote or
be compensated therefor. To date no such designee has attended any board
meetings.
The Representative owns an option to purchase 200,000 shares of common
stock, $.01 per value, of the Parent (approximately 3.5% of the outstanding
shares) at an exercise price of $1.25 per share exerciseable through September
30, 1997. The closing sales price of the Parent's common stock on October 30,
1996 was $4.00.
The Representative with two other brokerage firms, in April, 1996,
completed a firm commitment public offering of 1,150,000 units, each unit
consisting of one share of common stock and two redeemable warrants at a per
unit price of $3.75 for net proceeds of approximately $3,445,000 for DCA, an
approximately 67% owned subsidiary of the Parent. The Representative also acts
as a market-maker of the Parent's and DCA's common stock and of DCA warrants,
has been retained as financial consultant by DCA for 18 months through October
16, 1997 for an aggregate of $54,000 paid in April, 1996 at the completion of
the unit offering, and has the right to have a designee of the Representative to
attend all DCA board meetings for three years through April 16, 1999 as is the
case with the Company as discussed above, such designee not entitled to vote
or be compensated.
Similar to the fees payable to the Representative by the Company upon the
exercise of the Warrants, DCA has agreed that for three years through April 16,
1999, it will pay the Representative a fee of 5% of the exercise price
30
<PAGE>
of the DCA warrants now trading on Nasdaq under the same conditions as those
imposed with respect to the exercise of the Company's Warrants. See "Plan of
Distribution".
The Selling Security Holder is aware of Rule 10b-6 promulgated under
Section 10(b) of the Exchange Act, which prohibits persons engaged in a
distribution of securities from bidding for or purchasing (inducing others to
bid for or purchase) such securities that are being distributed, or securities
of the same class or any right to purchase the securities being distributed,
until they have completed their distribution. The purpose of Rule 10b-6 is to
prevent persons with a financial interest in a distribution from affecting the
integrity of the independent pricing mechanisms of the market for the securities
"in distribution".
For purposes of Rule 10b-6, "distribution" has been defined broadly,
distinguishing the concept from ordinary trading transactions by the magnitude
of the offering and the presence of special selling efforts and selling methods.
The definition applies to "shelf offerings" of securities as is the case of
secondary offerings by selling security holders from time to time in the open
market at current market prices. Whether sales by the Selling Security Holder
are deemed to be a distribution under Rule 10b-6 depends among other factors, on
the amount of securities registered, the public float, the trading volume and
the presence of any special selling efforts. If it is determined that a
distribution exists, the bidding for and the purchasing prohibitions of Rule
10b-6 will apply to those securities being distributed by those persons
participating in the distribution.
The Selling Security Holder shall be deemed to be engaged in a distribution
from the time it determines to proceed with the shelf-registered offering. Since
there may be extended periods during which there are no selling efforts under an
effective shelf-registered offering, the Commission believes it is unnecessary
to subject issuers, broker-dealers, selling security holders and other persons
who may be deemed participating, to the strict prohibitions of bidding for,
purchasing or inducing others to purchase the securities subject to the
distribution throughout the life of the shelf registration. Exception (xii) of
Rule 10b-6 allows for bids for or purchases by an issuer or other person on
whose behalf a distribution is being made, or an affiliated purchaser of
securities that are the subject of the distribution prior to two business days
before the commencement of offers or sales of the securities to be distributed
if the security is $5.00 or more and there is a minimum public float of 400,000
shares, and the bids or purchases are not for the purpose of creating actual, or
apparent, active trading in or raising the price of such security. Therefore,
for at least two days prior to any sales by such persons, neither the Company
nor such persons should be bidding for or purchasing any such securities which
are part of the distribution.
Nothing herein is deemed a determination as to whether this
shelf-registered offering by the Selling Security Holder is a distribution,
whether such Selling Security Holder may be deemed an underwriter, whether for
Rule 10b-6 purposes, or otherwise, at what point the prohibition against bidding
for or purchasing the securities commences or relaxes, or whether the Selling
Security Holder's market activities are to create actual or apparent trading to
artificially affect the independent market forces or prices of the Company's
securities and are therefore otherwise manipulative. These matters are the
responsibility of the Selling Security Holder and the broker-dealers
participating in the sales of the securities and should be discussed with their
advisors. The Selling Security Holder is a broker-dealer registered with the
Commission and a member of the NASD and, is, therefore, knowledgeable with
respect to Rule 10b-6 and other regulations of the federal securities laws and
has entered into an agreement with the Company to the effect that it understands
its obligations under the Exchange Act and will abide by the provisions of Rule
10b-6, among other regulations.
DESCRIPTION OF SECURITIES
General
The Company has an authorized capital of 10,000,000 shares of Common Stock,
$.01 par value, of which 4,288,819 shares are currently outstanding. The issued
and outstanding shares of Common Stock are fully paid and non-assessable, and
all the shares of Common Stock underlying the Warrants, when issued, will be
fully paid and non-assessable.
31
<PAGE>
Holders of the shares are entitled to one vote per share on all matters
submitted to a vote of the shareholders and do not have cumulative voting rights
in the election of directors. Since cumulative voting is not allowed, the
Parent, which owns 63.6% (73.9% including the Common Stock underlying the
Techdyne Note) of the outstanding shares, can elect all the directors, and the
holders of less than a majority of the shares can independently elect none of
the directors. The Parent would continue to control the Company even assuming
the full exercise of the Warrants. See Risk Factor No.1 under "Risk Factors
Relating to the Securities and the Offering".
Holders of the Common Stock are entitled to share pro rata in such
dividends as may be declared by the board of directors out of funds legally
available. See "Dividend Policy". On any dissolution, liquidation or winding-up
of the Company, the holders of Common Stock will be entitled to share pro rata
in all distributions made after the payment of or provision for the payment of
all debts and prior claims. There are no preemptive rights or conversion
privileges applicable to the Common Stock.
Continental Stock Transfer & Trust Company, New York, New York, serves as
transfer agent for the Common Stock and as Warrant agent for the Warrants.
Warrants
The Warrants were issued pursuant to a Warrant Agreement between the
Company and Continental Stock Transfer & Trust Company in the 1995 Offering and
are in registered form. Each Warrant entitles its holder to purchase, at any
time through September 12, 1998, one share of Common Stock at an exercise price
of $5.00 per share, subject to adjustment in accordance with the anti-dilution
and other provisions referred to below.
The Warrants may be redeemed by the Company at any time prior to their
expiration, at a redemption price of $.10 per Warrant, on not less than 30 day's
prior written notice to the holders of such Warrants, provided that the closing
high bid price of the Common Stock on Nasdaq, or the last sale price per share
of the Common Stock, if listed in Nasdaq National Market or on a national
exchange, is at least 150% ($7.50 per share, subject to adjustment) of the
exercise price of the Warrants for a period of 15 consecutive trading days
ending on the fifth day prior to the date of the notice of the redemption is
given. Holders of Warrants shall have exercise rights until the close of the
business day preceding the date fixed for redemption. The exercise price of the
Warrants should in no event be regarded as an indication of any future market
price of the Common Stock or Warrants.
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of the Warrants are subject to adjustment upon the occurrence
of certain events, including stock dividends, stock splits, combinations or
reclassification of the Common Stock. The Warrants do not confer upon the
holders any voting or any other rights as shareholders of the Company.
The Company will pay the Representative a fee of five percent of the
exercise price of each Warrant exercised, a portion of which fee may be allowed
to the dealer who solicited the exercise. See "Plan of Distribution".
The Company is required to have a current Registration Statement on file
with the Commission and to effect appropriate qualifications under the laws and
regulations of the states in which the holders of Warrants reside in order to
comply with applicable laws in connection with the exercise of Warrants and the
sale of Common Stock issued upon such exercise. The Company, therefore, is
required to file a new Registration Statement or a post-effective amendment to
its Registration Statement when subsequent events require such registration or
amendment in order to continue the registration of the Common Stock underlying
the Warrants and to take appropriate action under state securities laws. There
can be no assurance that the Company will be able to keep its Registration
Statement current or to effect appropriate action under applicable state
securities laws. Its failure to do so may restrict the ability of the Warrant
holders to exercise the Warrants and resell or otherwise dispose of the
underlying Common Stock, whether pursuant to redemption of the Warrants or
otherwise. See Risk Factor Nos. 8 and 9 under "Risk Factors Relating to the
Securities and the Offering".
32
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The Company has 4,288,819 shares of Common Stock outstanding assuming the
Warrants and Representative's Purchase Warrant and underlying Warrants are not
exercised. Of the Parent's beneficial ownership of the Company, 2,527,797 shares
of Common Stock (approximately 62%) are available for sale without compliance
with the registration requirements of the Securities Act under certain
circumstances and upon satisfaction of the conditions of Rule 144, except the
two-year holding period. See Risk Factor No. 1 under "Risk Factors Relating to
the Securities and the Offering". The officers and directors of the Company
beneficially own approximately 7% of the Common Stock (directly or shares
underlying their options and Warrants) and the Representative owns approximately
4.5% of the shares. See "Selling Security Holder". The Techdyne Note provides
the Parent an option to immediately convert the Techdyne Note into approximately
1,689,000 shares of Common Stock at September 30, 1996 (approximately 39% of the
currently outstanding shares ). These shares would be "restricted securities" as
that term is defined in Rule 144. This means such shares may be publicly sold
only if registered under the Securities Act or sold in accordance with an
applicable exemption from registration, such as Rule 144.
In general, under Rule 144 as currently in effect, a person, including an
"affiliate" of the Company (which term includes the Parent and executive
officers and directors of the Company) defined under the Securities Act as a
person who controls the issuer, who has beneficially owned restricted securities
for at least two years, and an affiliate holding freely tradable stock, as does
the Parent except for those approximately 1,889,000 shares of Common Stock
obtained and obtainable upon conversion of the Techdyne Note, is entitled to
sell (together with any person with whom such individual is required to
aggregate sales), within any three-month period, a number of shares which does
not exceed the greater of 1% of the total number of outstanding shares of the
same class, or if the Common Stock is trading on Nasdaq or a national stock
exchange, the average weekly trading volume of the shares during the four
calendar weeks preceding the sale. This means that the Parent could immediately
sell from its non-restricted shares at least 42,888 shares of Common Stock every
three-months under Rule 144. Control is defined in the Securities Act to mean
possession of the power to direct or cause the direction of the management and
policies of a person, including, but not limited to, effectuation of such
influence through the ownership of voting securities.
Sales under Rule 144 are also subject to satisfaction of certain additional
conditions, including the manner and method of sale, notice and the availability
of current public information about the Company.
Sales of substantial amounts of shares of Common Stock in the public market
under Rule 144, pursuant to this Prospectus or otherwise, could adversely affect
the prevailing market price of the Common Stock. This is particularly true under
the existing circumstances of the Company, since the amount of shares of Common
Stock available for trading, the "public float," is approximately 1,484,000
shares (approximately 35% of the Common Stock outstanding). See Risk Factor Nos.
1, 2 and 4 under "Risk Factors Relating to the Securities and the Offering".
PLAN OF DISTRIBUTION
The Common Stock underlying the Warrants will be offered and sold to the
present or any subsequent Warrant holder by the Company. The Warrants presently
held by the Selling Security Holder, and any Common Stock the Selling Security
Holder may obtain upon exercise of the Warrants, are being offered for sale by
the Selling Security Holder from time to time in the over-the-counter market
through the usual brokerage channels and transactions at the then prevailing
market prices, or at private sale or otherwise at negotiated prices related to
the prevailing market prices at the time of offer or sale or by a combination of
such methods. See "Market for the Company's Securities" and "Selling Security
Holder". The Selling Security Holder and any broker-dealer acting on its behalf
may be deemed underwriters within the meaning of the Securities Act and any
commissions received or profits realized by them may be deemed underwriting
commissions. The Company will receive none of the proceeds from the sale of the
securities by the Selling Security Holder. See "Use of Proceeds".
33
<PAGE>
The Selling Security Holder has agreed with the Company that any Warrants
and/or Common Stock to be offered by them to the public from time to time will
be offered and sold in compliance with the Securities Act and the Exchange Act.
The Selling Security Holder has agreed that it will not pay, directly or
indirectly, to any person any compensation for soliciting another to purchase
any Warrants or Common Stock, except for sales of these securities in ordinary
brokerage transactions in which the broker is paid no more than the usual and
customary commission for such transaction. However, the Company has agreed
pursuant to the underwriting agreement entered into in 1995 with respect to the
Company's 1995 Offering to pay the Representative a commission of 5% of the
exercise price of each Warrant exercised, provided (i) the market price of the
Common Stock on the date the Warrant is exercised is greater than the Warrant
exercise price on that date; (ii) the exercise of the Warrant is solicited by a
member of the NASD; (iii) the Warrant is not held in a discretionary account;
(iv) the disclosure of compensation arrangements were made both at the time of
the 1995 Offering and at the time of exercise of the Warrant; (v) the
solicitation of the exercise of the Warrant is not a violation of Rule 10b-6
promulgated under the Exchange Act; and (vi) the Representative is designated in
writing as the soliciting broker. Unless granted an exemption by the Commission
from Rule 10b-6 under the Exchange Act, the Representative and any other
soliciting broker-dealer will be prohibited from engaging in any market-making
activities or solicited brokerage activities with regard to the Company's
securities during the periods prescribed by exemption (xi) to Rule 10b-6 before
the solicitation of the exercise of any Warrant until the later of the
termination of such solicitation activity or the termination of any right the
Representative and any other soliciting broker-dealer may have to receive a fee
for the solicitation of the exercise of the Warrants. See "Selling Security
Holder".
The Representative has the right through September 12, 1998 to appoint a
non-voting, non-compensated designee to attend board meetings. The Company has
also retained the Representative through March 12, 1997 at a pre-paid $54,000
fee as its financial consultant. See "Selling Security Holder".
One or more supplements to the Prospectus will be filed under the
Securities Act to describe any material arrangement or modification in the sale
or resale of the Common Stock or Warrants.
LEGAL MATTERS
The validity of the Common Stock issuable upon exercise of the Warrants
will be passed upon by Lawrence E. Jaffe, Esq., 777 Terrace Avenue, Hasbrouck
Heights, New Jersey. Mr. Jaffe is counsel to the Company and counsel and
Secretary to its Parent and devotes a significant amount of his time and
receives a substantial portion of his fees for services rendered to the Parent
and to a lesser degree the Company, primarily in corporate and securities
matters. Fees paid to Mr. Jaffe by the Parent and the Company for 1995 totaled
approximately $184,000. Mr. Jaffe maintains his principal office at the premises
that the Parent utilizes for its New Jersey executive offices. He owns Company
options for 30,000 shares of Common Stock, of which one option is for 20,000
shares exercisable at $1.00 per share, and another option is for 10,000 shares
exercisable at $1.75 per share.
EXPERTS
The consolidated financial statements of Techdyne, Inc. at December 31,
1995 and 1994 and for each of the three years in the period ended December 31,
1995 included and incorporated by reference in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors as set
forth in their report thereon appearing elsewhere herein and in the
Registration Statement, and are included and incorporated by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
34
<PAGE>
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Information relating to indemnification of officers, directors, employees
and experts of the Company is incorporated herein by reference from the
Company's Prospectus dated September 13, 1995, Form SB-2, Registration No.
33-94998-A, page 43. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore unenforceable. In the event that a claim for indemnificaiotn
against such liabilities (other than the payment by the Company of expenses,
incurred or paid by a director, officer or controlling person of the Company 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 Company will, unless in the opinion of its counsel the latter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
35
<PAGE>
================================================================================
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any security other than the
Shares offered by this Prospectus, or an offer to sell or a solicitation of an
offer to buy the Shares to or from any person in any jurisdiction in which such
offer or solicitation would be unlawful. Neither the delivery of this Prospectus
nor any sale made hereunder at any time shall, under any circumstances, imply
that there has been no change in the business or affairs of the Company since
the date hereof or that the information in this Prospectus herein is correct as
of any time subsequent to its date.
TABLE OF CONTENTS
Page
----
Available Information ..................................................... 2
Incorporation of Certain Documents
By Reference ............................................................. 2
Prospectus Summary ........................................................ 3
Risk Factors .............................................................. 7
Use of Proceeds ........................................................... 11
Market For the Company's
Securities .............................................................. 12
Dividend Policy ........................................................... 13
Selected Consolidated
Financial Data .......................................................... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ............................................................ 15
Glossary of Terms ......................................................... 19
Business .................................................................. 20
Management ................................................................ 29
Selling Security Holder ................................................... 30
Description of Shares ..................................................... 31
Shares Eligible for Future Sale ........................................... 33
Plan of Distribution ..................................................... 33
Legal Matters ............................................................. 34
Experts ................................................................... 34
Indemnification For Securities
Act Liability ........................................................... 35
================================================================================
================================================================================
1,200,000 Shares of Common Stock
TECHDYNE, INC.
---------------------------------------
PROSPECTUS
---------------------------------------
, 1996
================================================================================
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following is a schedule of estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the Common Stock
being registered hereby, other than commissions that might be payable by the
Selling Security Holder to any broker or dealer that it might use to sell its
Warrants or Common Stock. See the Prospectus under the caption "Selling Security
Holder". The Selling Security Holder has no obligation for the expenses of this
offering; provided, however, that the Company is not responsible for any counsel
fees for counsel retained by the Selling Security Holder nor any selling
commissions incurred by the Selling Security Holder for its Warrants and/or
Common Stock, which such selling commissions and related expenses shall be the
sole responsibility of the Selling Security Holder.
Registration Fee $ 100
Printing and Engraving 5,000
Accounting Fees 5,000
Blue Sky Filing Fee and Expenses 1,000
Legal Fees and Expenses 18,000
Miscellaneous 900
--------
Total $ 30,000
Item 15. Indemnification of Directors and Officers
Reference is made to Part II, "Information Not Required In Prospectus",
Item 24, "Indemnification of Directors and Officers," and the last two
paragraphs of Item 28, "Undertakings" of the Company's Registration Statement on
Form SB-2, Registration No. 33-94998-A, filed July 26, 1995 and declared
effective September 13, 1995 ("Form SB-2 Registration") with regard to
indemnification of directors and officers and the Commission's position relating
thereto.
Item 16. Exhibits
4(a) Form of Common Stock Certificate*
(b) Form of Redeemable Common Stock Purchase Warrant*
(c) Form of Underwriter's (Representative's) Warrant*
(d) Form of Warrant Agreement between the Company,
Continental Stock Transfer & Trust Company
and Joseph Dillon & Co., Inc. (Representative)*
5 Opinion of Lawrence E. Jaffe, Esq. (including consent)
10(a) Service Agreement between Medicore, Inc. and the Company
23(a) Consent of Ernst & Young LLP (included on page II-4)
(b) Consent of Lawrence E. Jaffe, Esq. (included his opinion
of counsel filed as Exhibit 5)
- ----------
* Incorporated by reference to the Company's Form SB-2 Registration, Part II,
Item 27.
II-1
<PAGE>
Item 17. Undertakings
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;
(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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424 (b) if, in
the aggregate the changes in volume and price represent no more than
20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, That paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 of Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission 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 this 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.
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.
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 such 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 in the Act and will be governed by the final adjucation of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City Hialeah, State of Florida on the 1st day of November, 1996.
TECHDYNE,INC.
/s/ Thomas K. Langbein
By:_______________________________________
Thomas K. Langbein
Chairman of the Board of Directors
and Chief Executive Officer
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
--------- ----- ----
<C> <C> <C>
/s/ Thomas K. Langbein Chairman of the Board of November 1, 1996
- -------------------------- Directors and Chief
Thomas K. Langbein Executive Officer
/s/ Barry Pardon President and Director November 1, 1996
- --------------------------
Barry Pardon
/s/ Joseph Verga Senior Vice-President, November 1, 1996
- -------------------------- Secretary Treasurer and Director
Joseph Verga
/s/ Daniel R. Ouzts Vice-President, Principal November 1, 1996
- -------------------------- Financial Officer and Controller
Daniel R. Ouzts
/s/ Anthony C. D'Amore Director November 1, 1996
- --------------------------
Anthony C. D'Amore
/s/ Peter D. Fischbein Director November 1, 1996
- --------------------------
Peter D. Fischbein
</TABLE>
II-3
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" in the Registration Statement (Form S-3)
and related prospectus of Techdyne, Inc. for the registration of 1,200,000
shares of its common stock and to the incorporation by reference therein of our
report dated March 20, 1996, with respect to the consolidated financial
statements and schedules of Techdyne, Inc. included in its Annual Report (Form
10-K) for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
Ernst & Young LLP
October 28, 1996
Miami, Florida
II-4
<PAGE>
CONSENT OF COUNSEL
The consent of Lawrence E. Jaffe, Esq. is contained in his opinion filed as
Exhibit 5 to this Registration Statement.
II-5
<PAGE>
Registration No. 33-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------
TECHDYNE, INC.
(Exact name of registrant as specified in character)
--------------------------------------
EXHIBITS
<PAGE>
EXHIBIT INDEX
4(a) Form of Common Stock Certificate*
(b) Form of Redeemable Common Stock Purchase Warrant*
(c) Form of Underwriter's (Representative's) Warrant*
(d) Form of Warrant Agreement between the Company, Continental Stock
Transfer & Trust Company and Joseph Dillon & Co., Inc.
(Representative)*
5 Opinion of Lawrence E. Jaffe, Esq. (including consent)
10(a) Service Agreement between Medicore, Inc. and the Company
23(a) Consent of Ernst & Young LLP (included on page II-4)
(b) Consent of Lawrence E. Jaffe, Esq. (included his opinion of
counsel filed as Exhibit 5)
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* Incorporated by reference to the Company's Form SB-2 Registration, Part II,
Item 27.
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EXHIBIT 5
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LAWRENCE E. JAFFE
ATTORNEY AT LAW
777 TERRACE AVENUE
HASBROUCK HEIGHTS, NJ 07604
(201)288-8282
FAX (201)288-8208
October 31, 1996
Techdyne, Inc.
2230 W. 76th Street
Hialeah, Florida 33016
Re: Registration Statement-Form S-3
1,200,000 Shares of Common Stock
Gentlemen:
I have acted as counsel for Techdyne, Inc., a Florida Corporation (the
"Company") in connection with the preparation and filing by the Company of a
registration statement on Form S-3 (the "Registration Statement") relating to
the updating of the Company's registration statement on Form SB-2, Registration
No. 33-94998-A ("Form SB-2 Registration") declared effective by the Securities
and Exchange Commission ("Commission") on September 13, 1995, relating to the
offer and sale of 1,000,000 shares of common stock, $.01 par value (the "Common
Stock") issuable under the Company's Redeemable Common Stock Purchase Warrants
(the "Warrants"). The Warrants are exercisable into Common Stock through
September 12, 1998 at an exercise price of $5.00 per share. The Form SB-2
Registration also included the Underwriter's Purchase Warrant which is
exercisable through September 12, 2000 into 100,000 shares of Common Stock at an
exercise price of $6.60 per share and into Warrants exercisable at $.25 per
Warrant, such Warrants exercisable at $8.25 per share of Common Stock. I have
examined the Restated Certificate of Incorporation and By-laws and such other
corporate records of the Company and its subsidiary and such other documents as
I have deemed necessary, including the Registration Statement.
On the basis of the foregoing, I am of the opinion that the Common Stock
issuable upon the exercise of the Warrants and upon exercise of the
Underwriter's Purchase Warrant have been duly and validly authorized, and when
issued, delivered and paid for in a manner set forth in the Registration
Statement, will be fully paid and non-assessable and conform to the description
as contained in the Registration Statement.
I hereby consent to the reference to myself under the heading "Legal
Matters" in the Prospectus which is part of the Registration Statement, and to
the filing of the opinion as Exhibit 5 to the Registration Statement.
Very truly yours,
/s/ LAWRENCE E. JAFFE
LAWRENCE E. JAFFE
LEJ:vb
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EXHIBIT 10(a)
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MEDICORE, INC.
2337 WEST 76TH STREET
HIALEAH, FLA 33016
(305)558-4000
October 25, 1996
Techdyne, Inc.
2230 West 77th Street
Hialeah, FLA 33016
Re: Service Agreement
Gentlemen:
This will confirm our understanding as to the services that the undersigned,
Medicore, Inc. ("Medicore") has provided and shall continue to provide to you,
Techdyne, Inc. ("Techdyne"). Techdyne hereby retains Medicore to provide certain
administrative and financial services relating to accounting, books and records,
data processing, preparation and filing of tax reports and records with respect
to the operations of Techdyne, including, but not limited to, performing the
bookkeeping and other administrative acts necessary for billings, invoicing,
maintenance of general ledgers and records for payroll and shipping, accounts
receivable and insurance, and the preparation of accounting and financial
statements for Techdyne. Medicore shall have no responsibility to advance or
make any funds available for the operations of Techdyne, nor shall Medicore or
any of its employees sign any checks, agreements, contracts or similar documents
or instruments by, for or on behalf of Techdyne, nor shall Medicore have any
supervisory or managerial responsibilities or obligations on behalf of Techdyne
with respect to any of the records, financing or other operations of Techdyne,
all of which shall be the sole responsibility of Techdyne as more particularly
set forth below, except to the extent that such Medicore personnel are also
officers and/or directors of Techdyne and authorized by Techdyne to sign checks
for Techdyne or are otherwise employed by Techdyne in a managerial capacity; but
any act by such employee, officer or director of Techdyne, shall not be that of
Medicore, nor shall any liability for any act or omission of such person be
deemed that directed by or attributable to Medicore.
The term of this Service Agreement shall be for a period of two (2) years
from October 1, 1996 (the "Effective Date"); and provided that the party wishing
to terminate is not in default of this Agreement, such non-defaulting party
shall have the right to terminate this Agreement on sixty (60) days written
notice to the other.
In consideration for the services to be performed by Medicore as provided
herein, Techdyne agrees to and shall pay to Medicore Four Hundred Eight Thousand
($408,000) Dollars per annum payable in equal monthly installments of Thirty
Four Thousand ($34,000) Dollars with the first
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payment due on November 1, 1996 and thereafter each installment due on the first
day of each month subsequent thereto; provided Techdyne shall have a five (5)
day grace period.
Complete responsibility for Techdyne and its operations remain solely with
Techdyne and not that of Medicore or its employees or affiliates. This Service
Agreement and the services to be performed by Medicore are administrative and
not supervisory or managerial and are not to be construed in any manner as
providing or binding Medicore or its employees or affiliates with or to any
liability or responsibility whatsoever relating to Techdyne and its activities
and operations.
Medicore and its employees participating in this Service Agreement are
retained only for the purposes and to the extent set forth herein and its and
their relationship to Techdyne during the term of this Service Agreement shall
be that of independent contractor and nothing in this Service Agreement shall be
construed as equating any Techdyne employees or affiliates who may cooperate or
otherwise participate with Medicore employees or personnel who may otherwise be
affiliated with both Medicore and Techdyne in providing the service contemplated
herein as employees of Medicore nor shall any such Medicore employee be deemed
or equated with employees of or otherwise affiliated with Techdyne. These
employees or parties common to both Medicore and Techdyne shall be deemed acting
for the company then requiring his or her services under the circumstances and
shall not be deemed an agent or employee of the other company simply due to
their dual positions. Further, nothing herein shall be construed as establishing
a joint venture or partnership between Medicore and Techdyne. Medicore and its
employees participating in this Service Agreement are free to utilize their
entire time, energy and skill in such manner and for such purposes as they see
fit.
Medicore shall perform the services required herein from its present
facilities in Hialeah, Florida or such other locations which it now maintains or
to which it may move which it determines to best service the purposes of this
Service Agreement. Should any Medicore personnel be reasonably required to
travel to perform certain of the services contemplated herein, which travel
shall be undertaken at the option of Medicore, Techdyne will reimburse Medicore
for any out-of-pocket expenses in connection with such services and travel.
This Service Agreement shall not be assignable except with the prior
written consent of each of the parties hereto; provided, no consent shall be
required with respect to any transfer or assignment to the successor corporation
or persons resulting from a merger or consolidation or from a transfer of all or
substantially all of the assets of either party.
Any controversy or claim arising out or relating to this Service Agreement,
or the breach thereof, shall be settled by arbitration in the City of Hialeah in
accordance with the rules then obtaining of the American Arbitration
Association, and judgment upon the award rendered may be entered and enforced in
any court having jurisdiction thereof.
This Service Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their successors and assigns. Nothing in this Service
Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this Service Agreement to any other persons other
than the parties hereto and their respective successors and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligations or
liability of any third person to any party to this Service Agreement, nor shall
any provision herein give any third person any other rights against any party to
this Service Agreement.
2
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No waiver of the provisions hereof shall be effective unless in writing and
signed by the party to be charged with such waiver. No waiver shall be deemed a
continuing waiver or waivers in respect of any subsequent breach or default,
whether of similar or different nature unless expressly so stated in writing.
This Service Agreement shall be construed in accordance with the laws of
the State of Florida.
If this comports with your understanding please execute a copy of this
Service Agreement.
MEDICORE, INC.
By: /s/ Thomas K. Langbein
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THOMAS K. LANGBEIN
Chief Executive Officer
AGREED TO AND ACCEPTED BY:
TECHDYNE, INC.
By: /s/ Barry Pardon
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BARRY PARDON, President
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