As filed with the Securities and Exchange Commission on October 30, 1997.
Registration No. 333-33933
=================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------
Precision Standard, Inc.
(Exact name of registrant as specified in its charter)
Colorado 84-0985295
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1225 17th Street, Suite 1800
Denver, Colorado 80202
(303) 292-6565
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
---------------------------------
With copies to:
MATTHEW L. GOLD, PRESIDENT S. LEE TERRY, JR., Esq.
Precision Standard, Inc, Gorsuch Kirgis L.L.C.
1225 17th Street, Suite 1800 1401 17th Street, Suite 1100
Denver, Colorado 80202 Denver, Colorado 80202
(303) 292-6565 (303) 299-8900
(303) 298-0215 Fax
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
----------------------------------
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes effective when
warranted by market conditions and other factors.
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 Amount to Offering Aggregate Amount of
Class of Securities be Price Per Offering Registration
to be Registered Registered Share(1) Price(1) Fee
--------------------------------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Common Stock, $.0001
par value per share 5,215,753 $1.2815 $6,683,987.47 $2,025.45
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee. The price of $1.2815 per share is the last sale price
reported by The Nasdaq Stock Market on August 14, 1997.
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.
SUBJECT TO COMPLETION, DATED OCTOBER 30, 1997
[LOGO TO BE
INSERTED]
PRECISION STANDARD, INC.
5,215,743 Shares
-------------------------
This Prospectus relates to the offer and sale of 5,215,753 shares
(the "Shares") of the common stock, $.0001 par value per share (the
"Common Stock") of Precision Standard, Inc. (the "Company") by certain
shareholders of the Company (the "Selling Shareholders"). The Shares may
be sold from time to time by the Selling Shareholders, through ordinary
brokerage transactions in negotiated transactions or otherwise, at fixed
prices which may be changed, at market prices prevailing at the time of
sale or at negotiated prices. The Shares represent 41% of the outstanding
Common Stock of the Company. See - "Selling Shareholders" and "Plan of
Distribution."
Matthew L. Gold, who serves as President, Chief Executive Officer and
Chairman of the Board of the Company has effective voting control over
8,836,630 shares, or 67%, of the outstanding Common Stock on a fully
diluted basis. Accordingly, Mr. Gold could control the outcome of all
matters requiring a vote, including the election of directors. There are
no other executive officers of the Company, nor do any insiders own more
than 1% of the Company's outstanding shares of Common Stock.
The Company will not receive any of the proceeds from the sale of the
Shares. The Company has agreed to bear certain expenses in connection
with the registration of the Shares being offered and sold by the Selling
Shareholders. See "Use of Proceeds."
The Company's Common Stock is traded on The Nasdaq Stock Market --
National Market under the symbol "PCSN". On October 28, 1997, the last
reported sale price of the Company's Common Stock was $0.875.
THESE ARE SPECULATIVE SECURITIES.
SUCH SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGE 4.
- --------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representation other than those contained in the Prospectus in connection
with the offering made hereby, and if given or made, such information or
representation must not be relied upon as having been authorized by the
Company or by the Selling Shareholders. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances
create any implication that the information herein is correct as of any
time subsequent to the date hereof.
--------------------------------------------
The date of this Prospectus is October 30, 1997
AVAILABLE INFORMATION
Precision Standard, Inc. (the "Company") has filed with the
Securities and Exchange Commission (the "Commission") a Registration
Statement on Form S-3 (the "Registration Statement" ) under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the Common
Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules thereto or
incorporated by reference therein. Such information, including exhibits
and schedules to the Registration Statement incorporated by reference
therein, can be inspected and copied at the Public Reference Section of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street N.W.,
Washington, D.C. 20549. Statements made in this Prospectus as to the
contents of any contract or any other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy
of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information
with the Commission. All such information may be inspected and copied at
the public reference facilities maintained by the Commission at its
principal office at Room 1024, Judiciary Plaza, 450 Fifth Street N.W.,
Washington, D.C. 20549, and at the following regional offices of the
Commission: 1801 California Street, Suite 4800, Denver, Colorado 80202-
2648; Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can also be obtained from
the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also maintains a site on the World Wide Web at
http://www.sec.gov/edgarhp.htm that contains reports, proxy and
information statements and other information concerning registrants that
file electronically with the Commission. The Common Stock is traded on
the Nasdaq National Market. Information filed by the Company with Nasdaq
may be inspected at the offices of The Nasdaq Stock Market at 1735 K
Street, N.W., Washington, D.C. 20006.
This Prospectus incorporates by reference documents which are not
presented herein or delivered herewith. Copies of these documents (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference) are available to any person, including any
beneficial owner, to whom this Prospectus is delivered, on written or oral
request, without charge, directed to Matthew L. Gold, President, Precision
Standard, Inc., 1225 Seventeenth Avenue, Suite 1800, Denver, Colorado
80202, telephone number 303/292-6565.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference
(Commission File No. 0-13829):
1. Annual Report on Form 10-K for the year ended December 31, 1996,
filed March 31, 1997 and Form 10-K/A filed October 30, 1997; together with
the Report of Independent Public Accountants which includes an explanatory
paragraph that describes the Company's ability to continue as a going
concern as described in Note 18 to the financial statements.
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997,
filed May 15, 1997 and Form 10-Q/A filed October 29, 1997;
3. Quarterly Report on Form 10-Q for the quarter ended June 30, 1997,
filed August 14, 1997 and Form 10-Q/A filed October 29, 1997;
4. Form 8-A (Commission File No. 0-13829) filed on August 26, 1985
pursuant to Section 12(g) of the Exchange Act;
5. Current Reports on Form 8-K dated December 30, 1996 filed January 6,
1997, Amendment No. 1 to Form 8-K dated December 30, 1996 on Form 8-K/A
filed January 13, 1997, and Form 8-K dated January 14, 1997 filed January
21, 1997.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the termination of the offering
shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such reports and documents. Any
statement contained in a document incorporated or deemed to be
incorporated by reference herein prior to the date hereof shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
A copy of the documents incorporated by reference other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference in the information contained in this Prospectus), may be
obtained upon request without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered
upon the written or oral request of such person. Requests for such copies
should be made to Precision Standard, Inc., 1225 Seventeenth Street, Suite
1800, Denver, Colorado 80202, Attention: Matthew L. Gold, President,
telephone number 303/292-6565. In addition, such materials filed
electronically by the Company with the Commission are available at the
Commission's World Wide Web site at http://www.sec.gov/edgarhp.htm.
RISK FACTORS
An investment in the Company involves a high degree of risk. In
addition to the other information set forth in this Prospectus,
prospective investors should carefully consider the following risk factors
when evaluating an investment in the Company.
POTENTIAL ADVERSE IMPACT ON TRADING MARKET. While the Company's
Common Stock is traded on the Nasdaq National Market, there has recently
been a relatively low volume of trading in those shares. Consequently,
the price at which the shares trade may be highly volatile. The Shares
being offered hereby represent 41.4% of the Company's outstanding Common
Stock. Given the historic low volume of trading, sale of these Shares in
the market could materially and adversely affect the market price of the
Company's securities. Although the Common Stock is traded on the Nasdaq
National Market, there is no assurance that it will remain eligible to be
included on The Nasdaq Stock Market.
DEPENDENCE ON KEY PERSONNEL. The success of the Company is highly
dependent upon the efforts and active participation of Matthew L. Gold.
The loss of the services of Mr. Gold could adversely affect the Company
and its business. The Company may also require the services of additional
executive personnel in the future. There can be no assurance that the
Company will be able to retain these individuals or to attract qualified
individuals to replace the loss of any key personnel or to satisfy
additional executive personnel requirements. The Company does not carry
key man life insurance on any of its personnel.
COMPETITION. The aircraft maintenance and modification services
industry is highly competitive. The Company competes with a large number
of other aircraft maintenance and modification services companies as well
as other companies which design and manufacture aerial target systems,
rocket launch vehicles and guidance systems, aircraft cargo handling
systems and precision springs and components. Many of these competitors
have far greater financial and other resources and more established
reputations than the Company. There can be no assurance that the
Company's services and products will successfully compete with the
services and products of others. Competitive factors include quality,
marketing strategy, price, bidding on government contracts, design, and
customer service.
LIQUIDITY AND CAPITAL RESOURCES. In February 1996, the Company
received $8.1 million from the U.S. Government as settlement of the
Request for Equitable Adjustment ("REA") related to specific late
government furnished material on the Company's 1990 KC-135 contract. In
October 1996, the Company reached an agreement with the U.S. Government
with respect to all outstanding Requests for Equitable Adjustment on both
its 1990 and 1995 KC-135 contracts. The Company and the Government
negotiated to resolve all disputes associated with the Government's
untimely provision of government furnished material, the incidence of
major structural repair work greatly in excess of that contemplated at the
time of the contract formation, post contract increases in inspection
requirements, consequent delay and disruption costs and other associated
costs. The Company believes that the factors cited above caused the
Company to incur at least $34.8 million in additional costs up to the date
of the settlement with the Government. Pursuant to the terms of the
settlement agreement, the Company received $25.0 million in cash from the
U.S. Government in October of 1996. In March 1997, the Company and Bank
of America National Trust and Saving Association ("Bank of America")
negotiated the terms and conditions of amendments to the credit and
warrant agreements between them. See "Selling Shareholders." Further, in
August 1997, the Company obtained a new revolving credit facility which
provides for borrowing by the Company of up to $20 million. Currently,
the total amount which the Company can borrow from all sources of third
party credit agreements is $20 million, the availability of which varies
according to the Company's level of certain liquid assets, including
accounts receivable and inventory. As of September 29, 1997, the Company
has drawn $14.8 million on this credit facility. Because there can be no
assurance that the Company will be able to increase the availability under
this facility in the future, the Company may continue to experience cash
flow and liquidity problems. See "Selling Shareholders."
The Company's liquidity position was adversely effected by the work
stoppage of the United Auto Worker (UAW) employees at the Company's
Birmingham facility which ended March 31, 1997. The Company incurred more
than $6.6 million in incremental strike related costs during the UAW work
stoppage. These amounts are primarily attributable to the high cost of
contract labor, training, housing and transportation costs for replacement
workers, as well as increased security costs during the strike period.
While the Company believes that the new revolving credit facility, the
renegotiation of the credit and warrant agreements, together with its
revenues from operations, will provide sufficient liquidity for the
Company to continue its operations for the remainder of 1997, additional
capital resources may be required at or before that time. Moreover, there
can be no assurance that such additional capital resources will be
available to the Company.
FINANCING RISKS. While the Company has recently entered in to a debt
financing arrangement with a new lender, the Company has in the past been
in non-compliance with certain loan covenants as a result of previously
unanticipated losses from operations. If such losses continue, the
Company may be in violation of such covenants once again and one or both
of its lenders may elect to declare the Company's loans to be in default.
Any such declaration of a default may have a seriously adverse effect on
the Company.
EFFECT OF CONTINUING LOSSES. The Company experienced unanticipated
losses in the first six months of 1997. The Company's cash resources
continued to be strained primarily due to additional costs incurred in
connection with the work stoppage of the Company's United Auto Workers
employees at the Birmingham, Alabama facility which ended on March 31,
1997, excessive costs on the KC-135 program, delayed redelivery of KC-135
aircraft, and losses incurred on various commercial aircraft maintenance
contracts performed at the Company's Dothan, Alabama and Copenhagen,
Denmark facilities. Cash available at January 1, 1997 was used to fund
$0.6 million for the Company's operations, $0.3 million for capital
improvements, and $0.2 million for payments on various capital leases in
the first six months of 1997. Additionally, the Company paid $0.6 million
in interest and $0.2 million in taxes. Selling, general and
administrative expense (SG&A) increased from $7.9 million in the first six
months of 1996 to $10.4 million in 1997 and increased as a percentage of
sales from 13% in 1996 to 15% in 1997. SG&A increased primarily due to
outside legal/consultant fees associated with refinancing of debt, labor
negotiations and other matters. While management plans to improve
profitability by reducing overhead expenses and staff and renegotiation of
KC-135 contract terms for 1997 and 1998 to include more work hours and
dollars in basic fixed prices as well as downside protection in the event
of cost overruns, there can be no assurance that the Company will be able
to do so.
RAW MATERIALS. The Company purchases a variety of raw materials,
including aluminum sheets and plates, extrusion, alloy steel and forgings.
Except as noted below with respect to materials supplied by the U.S.
Government, the Company experienced no significant shortages of raw
material essential to its business during 1996 and does not anticipate any
shortages of critical commodities over the longer term; although this is
difficult to assess because many factors causing such possible shortages
are outside its control. The Company procures many components, parts and
equipment items from various domestic companies. The Company faces some
dependence on suppliers for certain types of parts involving highly
technical processes; however, this risk has lessened in the past few years
as additional high technology suppliers have entered the market. The
Company does not believe this dependence has significance for its business
as a whole; rather, any adverse consequence that might result from a
failure of a sole supplier to provide a particular part would be felt on
an individual contract basis.
A significant portion of the equipment and components used by the
Company in the fulfillment of its services under U.S. Government contracts
is furnished without charge to the Company by the Government. The Company
is dependent upon Government Furnished Material ("GFM") to meet delivery
schedules, and untimely receipt of such material adversely affects
production schedules and contract profitability. The Company has
encountered late delivery of GFM in 1993, 1994, 1995 and 1996 and as a
result, has experienced a disruption in scheduled work and severely
diminished profitability. This led to the Company making Requests for
Equitable Adjustment from the Government. See "Liquidity and Capital
Resources" above. The Company and the Government are working on ways to
minimize the likelihood of a repetition of such delays in the future, but
there can be no assurances that such delays will not recur.
STCS, PMAS, PATENTS AND COPYRIGHTS. The Company holds 120 FAA-issued
Supplementary Type Certificates ("STCs") which authorize it to perform
certain modifications to aircraft. The modifications include air-stair
installation, the conversion of commercial aircraft from passenger-to-
freight or passenger-to-Quick Change configurations and ground proximity
and wind shear warning systems. STCs are not patentable; rather, they
indicate a procedure that is acceptable to the FAA to perform a given air-
worthiness modification. The Company develops its STCs either internally
or under licensing agreements with the original equipment manufacturer.
The Company also holds FAA-issued Parts Manufacturing Approvals ("PMAs")
which give it authorization to manufacture parts of its own design or that
of other manufacturers related to its cargo handling system. The Company
holds numerous other PMAs which give the Company authority to manufacture
certain parts used in the conversion of aircraft from passenger-to-
freighter and passenger-to-Quick Change configurations. The Company holds
two active utility patents and three active design patents related to the
Hayes Targets product line. Three of the patents (one utility expiring in
2001 and two designs expiring in 1998) concern infrared augmentation. The
second utility patent is a British patent (expiring in 1997) and concerns
visual augmentation. The remaining design patent (expiring in 1998)
concerns a portable ground scoring unit developed for the purpose of
scoring ground-based target emplacements on ground-to-air gunnery ranges.
In addition, during 1996, the Company obtained a design patent for a
permanent door sill designed for use in cargo configurations. All of the
patents except the British patent are U.S. patents. Although the Company
does not believe that the expiration or invalidation of any or all of
these patents would have a material adverse impact upon its financial
condition, there is no assurance that the Company will be able to protect
its STCs, PMA or patents from conflicting uses or claims of ownership.
The Company holds copyrights to the computer software developed in-house
for the operation of the Power Drive Unit System and Cargo Door Electro-
Mechanical System used in the conversion of commercial aircraft, as well
as copyrights to the software for the development of the control computer
codes for the TLX-1 sea-skimming, height-keeping tow target, and the TMX
class maneuvering target. These copyrights are not registered and will
begin to expire after the year 2028.
ENVIRONMENTAL COMPLIANCE. The Company is required to comply with
environmental regulations at the federal, state and local levels. The
regulations apply especially to the stripping, cleaning and painting of
aircraft. Complying with environmental regulations has not had a material
effect on the Company's capital expenditures, earnings and competitive
position. However, there can be no assurance that the cost of compliance
will not become material in the future.
The Company has been designated as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and Liability
Act for contamination associated with a site near its Clearwater, Florida
facility. It is difficult to estimate the total clean up costs and to
predict the method that will be used to allocate such costs among the
responsible parties. While the Company does not believe that the
resolution of this matter will have a material adverse effect on the
Company's financial position, results of operations or cash flows, there
can be no assurance that this will be the case. In June 1997, the Alabama
Department of Environmental Management, on behalf of the Environmental
Protection Agency, conducted an inspection of electrical equipment located
at the Company's Pemco Aeroplex Birmingham facility for possible releases
of PCB-containing material from such equipment. Test results show that
additional clean up is required at certain sites. The cost of such clean
up is estimated to be $25,000 or less.
HEAVY RELIANCE ON GOVERNMENT CONTRACTS. In 1996, 64% of the Company's
business consisted of U.S. Government contracts, including the KC-135
contract which accounted for approximately 42% of the Company's 1996
revenues. In 1997, 51% of the Company's business has consisted of U.S.
Government contracts. As a Government contractor, the Company is
routinely subject to audits, reviews and investigations by the Government
related to its negotiation and performance of Government contracts and its
accounting for such contracts. Under certain circumstances, a contractor
can be suspended or debarred from eligibility for Government contracts
awards. The Government may, in certain cases, also terminate existing
contracts, recover damages and impose other sanctions and penalties. The
loss of the KC-135 contract or other Government contracts could have a
materially adverse effect on the Company. Recent U.S. budget constraints,
combined with a shift in the nation's national security objectives, have
resulted in a downsizing of the U.S. defense industry. However, since
fewer Government funds have been made available for the acquisition of new
equipment, the demand for maintenance, modification, and life extension
programs (such as the type of services provided by the Company) for U.S.
Government aircraft has continued, and, therefore, the Company has not
been adversely impacted by this trend.
LEGAL PROCEEDINGS. The Company generally will continue to be
involved in legal proceedings in the ordinary course of business. A
significant judgment against the Company could have a material adverse
effect in the Company's business, financial condition and future
prospects. The Company is currently a party to various legal proceedings
which have arisen in the ordinary course of business. No assurance can be
given with respect to the outcome of these legal proceedings and the
effect such outcomes may have on the Company. See "Litigation."
CONTROL BY INSIDERS. Matthew L. Gold, who serves as President, Chief
Executive Officer and Chairman of the Board of the Company, has effective
voting control over 8,836,630 shares, or 67% of the outstanding Common
Stock of the Company on a fully diluted basis. Accordingly, Mr. Gold
could control the outcome of all matters requiring a vote, including the
election of directors. Currently, there are no other executive officers
of the Company, nor do any other insiders own more than 1% of the
Company's outstanding shares of Common Stock.
DIVIDENDS. The Company has never paid cash dividends on its Common
Stock and currently intends to continue its policy of retaining its
earnings to support the growth and development of its business.
Furthermore, pursuant to the Company's Second Amended and Restated Credit
Agreement dated December 31, 1996, the Company's Second Amended and
Restated Senior Subordinated Loan Agreement dated December 31, 1996, as
amended August 7, 1997 with Bank of America, the Company is prohibited
from paying any dividends other than stock dividends. Pursuant to the
Company's Accounts Receivable Management and Security Agreement dated
August 8, 1997 with the Company's new primary lender, the Company is
prohibited from declaring dividends of any kind. See "The Company".
FOREIGN OPERATIONS. The Company engages in business in foreign
countries, including Denmark. At June 30, 1997, eight percent of the
Company's revenues were attributable to foreign operations. While
fluctuations in the currency exchange rates could have an impact on the
Company's revenues from foreign operations, there are limited intercompany
currency transactions from which exposure to currency conversion gains or
losses could arise.
DILUTION FROM WARRANT EXERCISE. Since 1988, Bank of America has held
a warrant to purchase 4,215,753 shares of the Company's common stock.
These shares comprise a portion of the shares being registered herein.
While the Company believes the market value of the stock already reflects
the dilution that will occur upon the exercise or redemption of the
warrant, it is possible that the redemption or exercise of the warrant for
shares of the Company's stock, will have a dilutive effect on the net
tangible value of the shares of the Company's stock held by other
shareholders of the Company. Moreover, the sale of such shares by the
warrant holder or its assignees could have an adverse impact on the market
price of the Company's stock on NASDAQ.
QUALIFICATION OF AUDITOR'S OPINION. The opinion of independent
public accountants with respect to the Company's audited financial
statement is qualified subject to the effects, if any, on the financial
statements of the outcome of the uncertainty regarding the Company's
continuation as a going concern. While the Company believes that it can
overcome the numerous difficulties it has faced over the past few years
and continue its operations in the future, there can be no assurance that
it will be able to do so.
FORWARD LOOKING STATEMENTS. Statements contained herein concerning
anticipated results of operations and the Company's intent to take certain
actions in the future are forward looking statements, the accuracy of
which cannot be guaranteed by the Company. These forward looking
statements are subject to a variety of business risks and other
uncertainties, including but not limited to the effect of economic
conditions, the impact of competitive products and pricing, new product
development, the actual performance of work under contract, customer
contract awards and actions with respect to utilization and renewal of
their contracts and the results of financing efforts.
THE COMPANY
Precision Standard, Inc., a Colorado corporation (the "Company"), is
a diversified aviation and aerospace company with executive offices in
Denver, Colorado. The Company is composed of three operating groups: the
Government Services Group, located primarily in Birmingham, Alabama; the
Commercial Services Group, located in Dothan, Alabama and Copenhagen,
Denmark; and the Manufacturing and Overhaul Group with facilities in
Alabama, California, Florida and Denmark. The Company's offices are
located at 1225 Seventeenth Street, Suite 1800, Denver, Colorado 80202.
The Company's telephone number is 303/292-6565.
The Company provides aircraft maintenance and modification services
for the government and military customers through its Government Services
Group. These services include complete airframe inspection, maintenance,
repair and custom airframe design and modification. For its military
customers, the Company specializes in providing Programmed Depot
Maintenance and Schedule Depot Level Maintenance on large transport
aircraft and helicopters. The Company has a long, successful history of
providing high-quality maintenance, modification, and integration work on
a broad range of military aircraft including the KC-135, C-130, C-9, P-3,
T-34, A-10, F-16, and U.S. Navy helicopters.
The Commercial Services Group provides aircraft maintenance and
modification services on a contract basis to the owners and operators of
large commercial aircraft. The Company has broad experience in modifying
commercial aircraft and providing value-added technical solutions and
holds numerous, proprietary STCs (Supplemental Type Certificates). The
Company also provides commercial aircraft maintenance varying in scope
from a single aircraft serviced over a few days to multi-aircraft
contracts lasting several years. The Company is able to offer full range
maintenance support services to airlines coupled with the related
engineering and technical services required by these customers.
The Company's Manufacturing and Overhaul Group designs and
manufactures a wide array of proprietary aerospace products including
aerial tow targets; various space systems, such as guidance control
systems and launch vehicles; aircraft cargo-handling systems; and
precision parts and components for aircraft. In addition, the
Manufacturing and Overhaul Group provides engine nacelle overhaul and
repair and operates an aircraft parts distribution company.
Stated below is the percentage of revenues attributable to Government
Services, Commercial Services, and Manufacturing and Overhaul for the last
three years.
1994 1995 1996
----- ----- -----
Government Services 55% 48% 49%
Commercial Services 26% 33% 26%
Manufacturing and Overhaul 19% 19% 25%
The KC-135 and C-130(1) Program Depot Maintenance and drop-in maintenance
contracts accounted for the following percentage of revenues during the
last three fiscal years:
1994 1995 1996
----- ----- -----
KC-135 49% 41% 42%
C-130(1) 6% 7% 4%
(1) The C-130 contract was re-solicited by the Government and was awarded
to another service provider in April 1997. Therefore, the Company's
subsidiary, Pemco Aeroplex, Inc., is no longer the service provider for C-
130 Programmed Depot Maintenance.
FINANCING ARRANGEMENTS
Bank of America National Trust and Savings Association ("Bank of
America") had been the Company's primary lender since 1988, making funds
available to the Company through a Credit Agreement, providing for a term
credit facility and a revolving credit facility (the "Credit Agreement"),
and a Senior Subordinated Loan Agreement (the "Loan Agreement"). In
connection with these agreements, the Company issued to Bank of America a
warrant to purchase shares of the Company's Common Stock (the "Warrant").
4,215,753 of the shares being registered herein may be issued for the
exercise of the Warrant by Bank of America or, in the alternative,
redemption of the Warrant by the Company. On August 8, 1997, the Company
entered into a three-year revolving credit facility with a new primary
lender that allows the Company to borrow up to $20 million. This new loan
is expected to provide the Company with greater flexibility. As part of
this transaction, the Company fully repaid the Credit Agreement with Bank
of America and a portion of its Senior Subordinated loan under the Loan
Agreement. The Warrant and approximately $7.2 million of the Senior
Subordinated loan under the Loan Agreement currently remain outstanding.
The loans from both lenders are collateralized by substantially all
of the Company's assets and have various financial covenants. The amount
of funds available to borrow under the new revolving credit facility is
tied to percentages of accounts receivables and inventory of domestic
operations only. Interest on the new revolving credit facility accrues at
the prime rate plus 1.5% with provisions for reductions in the interest
rate based on specific operating performance targets.
The Credit Agreement, the Loan Agreement and the Warrant were each
amended as of December 31, 1996. At the time of such amendments, no funds
were outstanding under the revolving credit facility and $5.0 million of
principal was outstanding under the term loan facility. As amended, the
Credit Agreement provided for 6 installments of $100,000 to be paid
against the principal amount during 1997 with the $4.4 million balance due
January 31, 1998. The Loan Agreement, as amended, provided that the $7.2
million principal balance be repaid in sixteen equal quarterly
installments commencing September 30, 1997. The Loan Agreement was
further amended on August 8, 1997 in connection with the Company obtaining
the revolving credit facility with its new primary lender. As amended all
scheduled principal amortization for the portion of the Senior
Subordinated loan that remains in place has been deferred for the three-
year term of the new revolving credit facility. The Senior Subordinated
loan will be repaid over five installments commencing on August 31, 2000,
due each subsequent quarter through June 30, 2001.
The Warrant, as amended, permits the Bank to purchase from the
Company 4,215,753 shares of the Company's Common Stock at an aggregate
purchase price of $0.237205492 per share, subject to certain adjustments
for changes in the Company's Common Stock and for dilutive issuances
dating back to 1988. The Company believes that no events that would
trigger a material adjustment in the number of shares issuable upon
exercise of the Warrant have occurred. Certain compensation related stock
transactions have occurred, but all such transactions have been made at
not less than the fair market value on the date of the transaction.
Although the Company's determination of fair market value in accordance
with its option plans may not be exactly equal to the average market value
specified in the Warrant for determining dilutive issuances, it is
unlikely that there is any material difference.
The Company is required to repurchase the Warrant over a period of
six quarters beginning August 31, 1997 with cash or by the issuance of
Common Stock with a value equal to the redemption price. The redemption
price for three-eighths of the total Shares which was due on August 31,
1997 and all future installments is the higher of (i) $1.1135 per Share,
such amount being equal to the difference between the average market price
of the Common Stock for the 30 trading days following the date which was
15 trading days prior to the date the Company filed its financial results
for the third quarter of 1996 and the exercise price, or (ii) the
difference between the average market price of the Common Stock for the 25
trading days preceding the date which is five trading days prior to the
date on which the redemption is actually paid. In addition, interest
accrues on the unpaid installments in the form of cash and shares of
Common Stock. The amount of interest is equal to the sum of (i) $75,000
in cash (or the number of shares which is the result of dividing $75,000
by the average market price of the Common Stock for the 25 trading days
immediately preceding the date which is five trading days prior to August
31, 1997, or $1.4537 per share), payable immediately, plus (ii) .0004 of a
share of Common Stock per unredeemed Warrant share per day from the
respective installment date until the redemption is made. Such interest
is paid quarterly 10 days after the last day of each calendar quarter.
Such interest may be paid in the form of Common Stock only if such stock
is then registered and freely tradable; otherwise, the cash equivalent
must be paid, calculated as the market value of the stock as of the last
day of the calendar quarter. The Company may exercise its right to
repurchase the Warrant with shares of Common Stock, only if the Shares
when issued are the subject of an effective registration statement and
immediately publicly tradeable. While the Company presently intends to
exercise its right to repurchase the Warrant with shares of common stock,
it may elect to repurchase all or a portion of the Warrant with cash. The
first installment of the repurchase due August 31, 1997 has not yet been
paid.
The Company may exercise its right to repurchase the Warrant with
shares of Common Stock, only if the Shares when issued are the subject of
an effective registration statement and immediately publicly tradable. By
registering for sale hereunder the 4,215,753 Shares underlying the
Warrant, the Company is preparing to repurchase the Warrant with Common
Stock. The Company may, however, elect to repurchase all or a portion of
the Warrant with cash.
Matthew L. Gold has been Chairman of the Board, President and Chief
Executive Officer of the Company since January 1987. In connection with
the Warrant, Mr. Gold agreed that he would not sell any Shares or other
securities of the Company held by him or any affiliate during any of the
periods beginning 35 trading days prior to each installment date and
ending on each installment date unless such transaction does not exceed
1,000 Shares or an equivalent number of other securities of the Company on
each trading day. Mr. Gold has effective voting control over 8,836,630
shares, or 67.2%, of the outstanding Common Stock on a fully diluted
basis. Accordingly, Mr. Gold could control the outcome of all matters
requiring a vote, including the election of directors. There are no other
executive officers of the Company, nor do any insiders own more than 1% of
the Company's outstanding shares of Common Stock.
LITIGATION
On June 27, 1997, the Company's Pemco Aeroplex subsidiary was served
with a civil complaint filed by the United States of America in US
District Court for the Middle District of Alabama, Northern Division. The
complaint alleged violation of the False Claims Act ("FCA") and contract
claims based on mistake of fact and unjust enrichment with respect to the
1991 sale of certain C-130 aircraft wings by the U.S. Government to Pemco,
and sought $1.5 million as the alleged value of the wings and treble
damages under the FCA. On July 25, 1997, Pemco filed a motion to dismiss
the complaint based on failure to allege facts which establish a cause of
action, and other grounds. The case was dismissed on September 3, 1997
for failure to state a claim under the FCA and lack of jurisdiction.
A purported class action was brought against the Company and its
Pemco Aeroplex subsidiary on behalf of those persons hired as replacement
workers during the strike by Pemco's United Auto Worker union employees
and who were terminated upon settlement of such strike. On June 3, 1997,
Pemco was served with the complaint in BRADLEY V. PEMCO AEROPLEX, INC.
filed in the Circuit Court of Jefferson County, Alabama. On July 9, 1997,
the plaintiff filed an amended complaint alleging fraud, breach of
contract, and civil conspiracy seeking damages and equitable relief
against Pemco and adding the Company as a defendant. The Company was
served with the amended complaint on July 16, 1997. Pemco has filed its
answer denying all allegations. The Company believes the plaintiffs'
claims have no factual basis and will vigorously defend the case.
In AMERICAN INTERNATIONAL AIRWAY, INC. v. GATX CAPITAL CORPORATION,
et al., U.S.D.C., N.D. Cal., the owner of two aircraft converted under a
Supplementary type Certificate for 747 cargo conversions owned by GATX and
others, sued GATX and various other defendants seeking damages. As a
result of an Airworthiness Directive issued by the FAA in January 1996,
aircraft which had been so converted were restricted to carrying reduced
payloads. The Company's Pemco Aeroplex subsidiary has been named as one
of seven defendants in the case because of allegedly improper engineering
work performed in the 1980's by its predecessor, Hayes International. The
complaint, which was served on Pemco on February 5, 1997, alleges
violations of the Racketeer Influenced and Corrupt Organization Act
(RICO), conspiracy, and negligence against Pemco. Pemco has filed a
motion to dismiss the complaint. Pemco believes the allegations made
against it have no factual basis and intends to vigorously defend this
claim.
In GATX/AIRLOG COMPANY, et al. v. PEMCO AEROPLEX, INC., the owners of
a Supplementary Type Certificate ("STC") for Boeing 747 cargo conversion
sued the Company's Pemco Aeroplex subsidiary, successor to Hayes
International which had performed engineering for the STC development and
the FAA application for GATX/Airlog, seeking damages and indemnity for
claims arising from an Airworthiness Directive issued by the FAA in
January 1996 restricting the amounts of cargo aircraft converted pursuant
to the STC could carry. The complaint which was filed in US District
Court for the Northern District of California and served on July 14, 1997,
alleges fraudulent and negligent misrepresentation, professional
negligence, breach of contract, implied indemnity, equitable indemnity,
and contribution by Pemco Aeroplex with respect to GATX/Airlog's alleged
liability to owners of converted aircraft. The Company believes it has no
liability to the plaintiffs and that it will ultimately prevail.
On August 8, 1997, the Company's Pemco Aeroplex subsidiary was served
as a defendant in TOWER AIR, INC v. GATX CAPITAL CORPORATION, et al. The
action, which was brought by the owner of a Boeing 747 aircraft converted
under a STC for 747 cargo conversion, owned by GATX and others, sued a
number of defendants seeking damages. As a result of an Airworthiness
Directive issued by the FAA in January 1996, aircraft which had been so
converted were restricted to carrying reduced amounts of cargo. The
Company's Pemco Aeroplex subsidiary has been named as a defendant in the
case because of engineering work performed in the late 1980's by its
predecessor, Hayes International, and because the aircraft was allegedly
converted under the STC by Pemco. The complaint, which was filed in the
Supreme Court of the State of New York, County of New York, alleges fraud
and deceit, negligent misrepresentation, and negligence against Pemco and
seeks payment of damages. On September 29, 1997, Pemco filed a motion to
dismiss the case based on lack of jurisdiction and forum non conveniens.
Pemco also filed a declaratory relief action in U.S. District Court for
the Northern District of California seeking a declaration that Pemco has
no liability to Tower Air.
In Birmingham Airport Authority v. Pemco Aeroplex, Inc., filed
October 7, 1997 in Circuit Court, Jefferson County, Alabama, the
Birmingham Airport Authority ("BAA") is seeking a declaratory judgment.
(In its complaint, BAA seeks a declaratory judgment that no agreement
regarding the extension of the base has been reached by the parties.)
Pemco operates an aircraft service facility at the Birmingham Airport on
land leased from BAA. It is the Company's position that Pemco and BAA
have negotiated a 20-year extension of the lease which otherwise would
expire on September 30, 2000 and agreed to by both parties. The Company
believes that the lease has been extended and will vigorously defend the
case.
Various claims alleging employment discrimination, including race,
sex, age and disability, have been made against the Company and its
subsidiary, Pemco Aeroplex, Inc., by current and former employees at its
Birmingham and Dothan, Alabama facilities in proceedings before the Equal
Employment Opportunity Commission and before state and federal courts in
Alabama. Workers' compensation claims brought by employees of Pemco
Aeroplex, Inc. are also pending in Alabama state court. The Company
believes that no one of these claims is material to the Company as a whole
and that such claims are more reflective of the general increase in
employment-related litigation in the U.S. and Alabama than of any actual
discriminatory employment practices by the Company or any subsidiary.
Except for workers' compensation benefits as provided by statute, the
Company believes these claims have no factual basis and intends to
vigorously defend itself in all litigation arising therefrom.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
of Common Stock offered by the Selling Shareholders. The Company has
agreed to bear certain expenses in connection with the registration of the
Shares offered and sold by the Selling Shareholders, estimated to be
$20,000. The Selling Shareholders have agreed to pay all commissions and
other compensation to any securities broker-dealers through whom they sell
any of the Shares.
THE SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
Selling Shareholders and the Shares offered by the Selling Shareholders
pursuant to this Prospectus. None of the Selling Shareholders within the
past three years has had any material relationship with the Company or any
of its affiliates except as described below.
<TABLE>
<CAPTION>
Shares to be Beneficially
Owned on Completion
Name of No. of Shares No. of Shares of the Offering
Selling Beneficially Being ---------------------
Shareholder Owned Offered Number % of Class
------------ ------------ --------- ------- ----------
<S> <C> <C> <C> <C>
Bank of America 4,215,753(1) 4,215,753 -0- -0-
National Trust and
Savings Association
Matthew L. Gold 8,836,630(2) 1,000,000 7,836,630(2) 62.2%
</TABLE>
(1) Represents Shares issuable upon the exercise of a Warrant to purchase
Common Stock issued to Bank of America National Trust and Savings
Association, the Company's primary lender (the "Bank"). The Shares may be
sold by the Bank or any other wholly-owned subsidiary of BankAmerica
Corporation to which the Shares may be transferred prior to public resale.
Additional discussion of this affiliation with the Company is described
below.
(2) Includes options to purchase 620,000 Shares. Mr. Gold serves as
President, Chief Executive Officer and Chairman of the Board of the
Company.
Bank of America National Trust and Savings Association ("Bank of
America") had been the Company's primary lender since 1988, making funds
available to the Company through a Credit Agreement, providing for a term
credit facility and a revolving credit facility (the "Credit Agreement"),
and a Senior Subordinated Loan Agreement (the "Loan Agreement"). In
connection with these agreements, the Company issued to Bank of America a
warrant to purchase shares of the Company's Common Stock (the "Warrant").
4,215,753 of the shares being registered herein may be used for the
exercise of the Warrant by Bank of America or, in the alternative,
redemption of the Warrant by the Company. On August 8, 1997, the Company
entered into a three-year revolving credit facility with a new primary
lender that allows the Company to borrow up to $20 million. This new loan
is expected to provide the Company with greater flexibility. As part of
this transaction, the Company fully repaid the Credit Agreement with Bank
of America and a portion of its Senior Subordinated loan under the Loan
Agreement. The Warrant and approximately $7.2 million of the Senior
Subordinated loan under the Loan Agreement currently remain outstanding.
The Credit Agreement, the Loan Agreement and the Warrant were each
amended as of December 31, 1996. At the time of such amendments, no funds
were outstanding under the revolving credit facility and $5.0 million of
principal was outstanding under the term loan facility. As amended, the
Credit Agreement provided for 6 installments of $100,000 to be paid
against the principal amount during 1997 with the $4.4 million balance due
January 31, 1998. The Loan Agreement, as amended, provided that the $7.2
million principal balance be repaid in sixteen equal quarterly
installments commencing September 30, 1997. The Loan Agreement was
further amended on August 8, 1997 in connection with the company obtaining
the revolving credit facility with its new primary lender. As amended all
scheduled principal amortization for the portion of the Senior
Subordinated loan that remains in place has been deferred for the three-
year term of the new revolving credit facility. The senior Subordinated
loan will be repaid over five installments commencing on August 31, 2000,
due each subsequent quarter through June 30, 2001.
The Warrant, as amended, permits the Bank to purchase from the
Company 4,215,753 shares of the Company's Common Stock at an aggregate
purchase price of $0.237205492 per share, subject to certain adjustments
for changes in the Company's Common Stock and for dilutive issuances
dating back to 1988. The Company believes that no events that would
trigger a material adjustment in the number of shares issuable upon
exercise of the Warrant have occurred. Certain compensation related stock
transactions have occurred, but all such transactions have been made at
not less than the fair market value on the date of the transaction.
Although the Company's determination of fair market value in accordance
with its option plans may not be exactly equal to the average market value
specified in the Warrant for determining dilutive issuances, it is
unlikely that there is any material difference.
The Company is required to repurchase the Warrant over a period of
six quarters beginning August 31, 1997 with cash or by the issuance of
Common Stock with a value equal to the redemption price. The redemption
price for three-eighths of the total Shares which was due on August 31,
1997 and all future installments is the higher of (i) $1.1135 per Share,
such amount being equal to the difference between the average market price
of the Common Stock for the 30 trading days following the date which was
15 trading days prior to the date the Company filed its financial results
for the third quarter of 1996 and the exercise price, or (ii) the
difference between the average market price of the Common Stock for the 25
trading days preceding the date which is five trading days prior to the
date on which the redemption is actually paid. In addition, interest
accrues on the unpaid installments in the form of cash and shares of
Common Stock. The amount of interest is equal to the sum of (i) $75,000
in cash (or the number of shares which is the result of dividing $75,000
by the average market price of the Common Stock for the 25 trading days
immediately preceding the date which is five trading days prior to August
31, 1997, or $1.4537 per share), payable immediately, plus (ii) .0004 of a
share of Common Stock per unredeemed Warrant share per day from the
respective installment date until the redemption is made. Such interest
is paid quarterly 10 days after the last day of each calendar quarter.
Such interest may be paid in the form of Common Stock only if such stock
is then registered and freely tradable; otherwise, the cash equivalent
must be paid, calculated as the market value of the stock as of the last
day of the calendar quarter. The Company may exercise its right to
repurchase the Warrant with shares of Common Stock, only if the Shares
when issued are the subject of an effective registration statement and
immediately publicly tradeable. While the Company presently intends to
exercise its right to repurchase the Warrant with shares of common stock,
it may elect to repurchase all or a portion of the Warrant with cash. The
first installment of the repurchase due August 31, 1997 has not yet been
paid.
The Company may exercise its right to repurchase the Warrant with
shares of Common Stock, only if the Shares when issued are the subject of
an effective registration statement and immediately publicly tradable. By
registering for sale hereunder the 4,215,753 Shares underlying the
Warrant, the Company is preparing to repurchase the Warrant with Common
Stock. The Company may, however, elect to repurchase all or a portion of
the Warrant with cash.
Matthew L. Gold has been Chairman of the Board, President and Chief
Executive Officer of the Company since January 1987. In connection with
the Warrant, Mr. Gold agreed that he would not sell any Shares or other
securities of the Company held by him or any affiliate during any of the
periods beginning 35 trading days prior to each installment date and
ending on each installment date unless such transaction does not exceed
1,000 Shares or an equivalent number of other securities of the Company on
each trading day. Mr. Gold has effective voting control over 8,836,630
shares, or 67.2%, of the outstanding Common Stock on a fully diluted
basis. Accordingly, Mr. Gold could control the outcome of all matters
requiring a vote, including the election of directors. There are no other
executive officers of the Company, nor do any insiders own more than 1% of
the Company's outstanding shares of Common Stock.
PLAN OF DISTRIBUTION
All of the Shares offered hereby are being sold by the Selling
Shareholders. The Shares will be offered by the Selling Shareholders from
time to time (i) at market prices prevailing on the Nasdaq National Market
at the time of offer and sale, or at prices related to such prevailing
market prices and (ii) in negotiated transactions, or (iii) a combination
of such methods of sale. The Selling Shareholders may effect such
transactions by offering and selling the Shares directly to or through
securities broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions, or commissions from
the Selling Shareholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agent or to whom the Selling Shareholders may
sell as principal, or both (which compensation as to a particular broker-
dealer might be in excess of customary commissions).
The Selling Shareholders and any broker-dealers who act in connection
with the sale of the Shares hereunder may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933 (the
"Securities Act") and any commissions received by them and profit on any
resale of the Shares as principal might be deemed to be underwriting
discounts and commissions under the Securities Act. The Company has
agreed to indemnify the Selling Shareholders against certain liabilities,
including liabilities under the Securities Act as underwriters or
otherwise.
The Company has advised the Selling Shareholders that they and any
securities broker-dealers or others who may be deemed to be statutory
underwriters will be subject to the Prospectus delivery requirements under
the Securities Act. Under applicable rules land regulations under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") any
person engaged in a distribution of any of the Shares may not
simultaneously engage in market activities with respect to the Common
Stock for the applicable period under Regulation M prior to the
commencement of such distribution. In addition and without limiting the
foregoing, the Selling Shareholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation Rules 10b-5 and Regulation M, which
provisions may limit the timing of purchases and sales of any of the
Shares by the Selling Shareholders. All of the foregoing may affect the
marketability of the Common Stock.
In the absence of this Registration Statement, Mr. Gold who is an
executive officer, Director and an "affiliate" of the Company would be
able to sell his Shares only subject to the limitations of Rule 144
promulgated under the Securities Act of 1933 ("Rule 144"). The Bank, to
the extent that it may acquire more than 10% of the Company's Common Stock
pursuant to the redemption of the Warrant with shares of Common Stock by
the Company, may be deemed to be an "affiliate" of the Company. In
general, under Rule 144 as currently in effect, an "affiliate" of the
Company, or a person who has beneficially owned shares which are
"restricted securities" for at least one year, is entitled to sell within
any three-month period a number of shares that does not exceed the greater
of: (i) one percent (1%) of the then outstanding shares of Common Stock of
the Company, or (ii) the average weekly trading volume of the Common Stock
during the four calendar weeks preceding a sale by such person. Sales
under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information
about the Company. Under Rule 144, however, a person who is not, and for
the three months prior to the sale of such shares has not been, an
affiliate of the Company is free to sell shares which are "restricted
securities" which have been held for at least two years without regard to
the limitations contained in Rule 144. Neither Mr. Gold nor the Bank will
be subject to the foregoing restrictions when selling their Shares
pursuant to this Prospectus.
Under Section 16 of the Exchange Act, executive officers, Directors,
and 10% or greater shareholders of the Company will be liable to the
Company for any profit realized from any purchase and sale (or any sale
and purchase) of Common Stock within a period of less than six months.
TRANSFER AGENT
The Transfer Agent and Registrar for the shares of Common Stock is
American Securities Transfer & Trust, Inc., 1825 Lawrence Street, Suite
444, Denver, Colorado 80202.
LEGAL MATTERS
The validity of the securities to be offered hereby will be passed
upon for the Company by Gorsuch Kirgis L.L.C., Denver, Colorado, counsel
for the Company.
EXPERTS
The financial statements and schedules incorporated by reference
herein and in the Registration Statement as of December 31, 1996 and for
the year then ended have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto,
and are included herein in reliance upon the authority of said firm as
experts in giving said reports. Reference is made to said reports which
include an explanatory paragraph that describes the going concern issue
discussed in Note 18 to the financial statements. The financial
statements of the Company as of December 31, 1995 and for each of the two
years in the period ended December 31, 1995 have been incorporated by
reference herein and in the Registration Statement in reliance upon the
report of Coopers & Lybrand LLP, independent public accountants, also
incorporated by reference herein and upon the authority of said firm as
experts in accounting and auditing.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table shows the estimated expenses to be incurred in
connection with the issuance of the securities being registered by the
Company:
Securities and Exchange Commission Filing $ 2,205
Printing and Mailing Costs and Fees 1,000
Accounting Fees and Costs 2,000
Legal Fees and Costs 12,000
Blue Sky fees and Expenses 0
Miscellaneous 2,975
------
Total Costs $ 20,000
======
All of the above expenses except the SEC registration fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Colorado Business Corporation Act (the "Act") provides at Article
109 for indemnification by a corporation of officers and directors in
connection with civil proceedings brought against them by reason of their
position with the corporation if the person being indemnified conducted
himself or herself in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation.
In any criminal proceeding, indemnification is permitted where the person
had no reasonable cause to believe that his or her conduct was unlawful.
Indemnification is required (unless limited by a corporation's Articles of
Incorporation) where the officer or director is wholly successful, on the
merits or otherwise, in the defense of any proceeding. The Act also
establishes procedures by which persons seeking indemnification can obtain
cost advances from the corporation and procedures by which indemnification
determinations can be made.
Article X of the Company's Amended and Second Restated Articles of
Incorporation requires the Company to indemnify to the fullest extent
permitted by applicable law against all liability and expense (including
attorneys' fees) incurred by reason of the fact that a person is or was a
director or officer of the Company if the person seeking indemnification
acted in good faith and in a manner reasonably believed to be in the best
interest of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Indemnification by the Company is also required in connection with
derivative actions where the party seeking indemnification is found to
have acted in good faith and in a manner he reasonably believed to be in
the best interest of the Company. Finally, indemnification is required
where the officer or director seeking indemnification has been successful
on the merits in the defense of the action. The Articles also contain
provisions setting forth procedures by which parties seeking
indemnification may obtain payment in advance of expenses incurred by
them.
The above discussion of the Company's Amended and Second Restated
Articles of Incorporation is intended to be only a summary and is
qualified in its entirety by the full text of the foregoing.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers or persons controlling the Registrant pursuant to the
foregoing provisions, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
ITEM 16. EXHIBITS
4.1a Amended and Second Restated Articles of Incorporation of the
Company. (1)
4.1b Articles of Amendment to the Articles of Incorporation. (2)
4.2 Amended and First Restated Bylaws of the Company. (1)
4.3 Specimen Certificate for Common Stock. (1)
4.4 Second Amended and Restated Credit Agreement between Precision
Standard, Inc. and Bank of America National Trust and Savings Association
entered into as of December 31, 1996. (3)
4.5 Second Amended and Restated Senior Subordinated Loan Agreement
between Precision Standard, Inc. and Bank of America National Trust and
Savings Association entered into as of December 31, 1996. (3)
4.6 Amended and Restated Warrant issued by Precision Standard, Inc.
to the Bank of America National Trust and Savings Association entered into
as of December 31, 1996. (3)
4.7 First Amendment to Second Amended and Restated Senior
Subordinated Loan Agreement between Precision Standard, Inc. and Bank of
America National Trust and Savings Association entered into as of August
8, 1997.(4)
4.8 Accounts Receivable Management and Security Agreement between
Precision Standard, Inc. and BNY of the Americas entered into as of August
8, 1997.(4)
5 Opinion of Gorsuch Kirgis L.L.C. (5)
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Gorsuch Kirgis L.L.C. is contained in their opinion
which is Exhibit 5.
(1) Filed as exhibits to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988 (No. 0-13829), and incorporated by
reference herein.
(2) Filed as an exhibit to the Company's Registration Statement on Form S-
8 (No. 33-79676) and incorporated by reference herein.
(3) Filed as exhibits to the Company's Form 10-Q for the period ended
March 31, 1997 (No. 0-13829) and incorporated by reference herein.
(4) Filed as exhibits to the Company's Form 10-Q for the period ended
June 30, 1997 (No. 0-13829) and incorporated by reference herein.
(5) Previously filed as an exhibit to this Registration Statement on Form
S-3 (No. 333-33933).
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers or persons controlling the Registrant pursuant to the
foregoing provisions, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
i) to include any prospectus required by section 10(a)(3) of the
Securities Act;
ii) to reflect in the prospectus any facts or events 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 change in volume and
price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective Registration Statement; and
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)(i) and (a)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in the Registration
Statement.
(b) That for the purpose of determining any liability under the
Securities Act each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) 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.
(d) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as a part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be a part of
this Registration Statement as of the time it was declared effective.
(e) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
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.
(f) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to section 15(d) of the Exchange
Act) 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, State of Colorado, on
the 29th day of October, 1997.
PRECISION STANDARD, INC.
By:/s/Matthew L. Gold
Matthew L. Gold, President
(Principal 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:
SIGNATURE TITLE DATE
- --------- ------ -----
/s/Matthew L. Gold Chairman, President October 29, 1997
Matthew L. Gold Chief Executive Officer
and Director (Principal
Executive Officer)
/s/Richard J. Hendricks Vice President-Finance October 29, 1997
Richard J. Hendricks (Principal Financial
and Accounting Officer)
/s/Donald C. Hannah Director October 29, 1997
Donald C. Hannah
/s/George E.R. Kinnear II Director October 29, 1997
George E.R. Kinnear II
/s/J. Ben Shapiro, Jr. Director October 29, 1997
J. Ben Shapiro, Jr.
/s/Thomas C. Richards Director October 29, 1997
Thomas C. Richards
EXHIBIT INDEX
Exhibit Method of Filing
- ------- ----------------
23.1 Consent of Coopers & Lybrand
L.L.P. Filed herewith electronically
23.2 Consent of Arthur Andersen
LLP. Filed herewith electronically
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Precision Standard, Inc. on Form S-3 of our report dated March 31,
1996, except for Notes 6, 7, and 13 as to which the date is April 15,
1996, on our audits of the consolidated financial statements and financial
statement schedules of Precision Standard, Inc. as of December 31, 1995,
and for the years ended December 31, 1995 and 1994. We also consent to
the reference to our firm under the caption "Experts."
/s/Coopers & Lybrand L.L.P.
Birmingham, Alabama
October 27, 1997
ARTHUR
ANDERSEN
Arthur Andersen LLP
Suite 3100
1225 17th Street
Denver CO 80202-5531
303 295 1900
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our
report dated March 31, 1997(except with respect to the matter
discussed in Note 18, as to which the date is October 27, 1997),
included in Precision Standard, Inc.'s Form 10-K for the year
ended December 31, 1996, and to all references to our Firm
included in this registration statement.
/s/Arthur Andersen LLP
Denver, Colorado
October 27, 1997
